UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________________________

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, ~~2020~~2021

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

For the transition period from to

Commission File Number 001-15283

Dine Brands Global, Inc.

(Exact name of registrant as specified in its charter)

Delaware

95-3038279

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

450 North Brand Boulevard,

91203-1903

Glendale,

(Address of principal executive offices)

(Zip Code)



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

______________________________________________________________

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



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

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

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

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

No ☒

As of April ~~24, 2020,~~28, 2021, the Registrant had ~~16,418,446~~17,157,339 shares of Common Stock outstanding.

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Dine Brands Global, Inc. and Subsidiaries

Index



		Page
PART I.	FINANCIAL INFORMATION	3
	Item 1—Financial Statements	3
	Consolidated Balance Sheets - March 31, ~~2020~~2021 (unaudited) and December 31, ~~2019~~2020	3
	Consolidated Statements of Comprehensive Income (unaudited) - Three Months Ended March 31, ~~2020~~2021 and ~~2019~~2020	4
	Consolidated Statements of Stockholders' Deficit (unaudited) - Three Months Ended March 31, ~~2020~~2021 and ~~2019~~2020	5
	Consolidated Statements of Cash Flows (unaudited) - Three Months Ended March 31, ~~2020~~2021 and ~~2019~~2020	6
	Notes to Consolidated Financial Statements (unaudited)	7
	Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations	2625
	Item 3—Quantitative and Qualitative Disclosures about Market Risk	42
	Item 4—Controls and Procedures	42
PART II.	OTHER INFORMATION	4243
	Item 1—Legal Proceedings	4243
	Item 1A—Risk Factors	4243
	Item 2—Unregistered Sales of Equity Securities and Use of Proceeds	43
	Item 3—Defaults Upon Senior Securities	43
	Item 4—Mine Safety Disclosures	43
	Item 5—Other Information	4443
	Item 6—Exhibits	44
	Signatures	45

Cautionary Statement Regarding Forward-Looking Statements

Statements contained in this Quarterly Report on Form 10-Q may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements involve known and unknown risks, uncertainties and other factors, which may cause actual results to be materially different from those expressed or implied in such statements. You can identify these forward-looking statements by words such as “may,” “will,” “would,” “should,” “could,” “expect,” “anticipate,” “believe,” “estimate,” “intend,” “plan,” “goal” and other similar expressions. You should consider our forward-looking statements in light of the risks discussed under the heading “Risk Factors,” as well as our consolidated financial statements, related notes, and the other financial information appearing elsewhere in this report and our other filings with the United States Securities and Exchange Commission. The forward-looking statements contained in this report are made as of the date hereof and Dine Brands Global, Inc. does not intend to, nor does it assume any obligation to, update or supplement any forward-looking statements after the date of this report to reflect actual results or future events or circumstances.

Factors that could cause actual results to differ materially from the projections, forecasts, estimates and expectations discussed in this Quarterly Report on Form 10-Q include, among other things: uncertainty regarding the duration and severity of the ongoing COVID-19 pandemic and its ultimate impact on our business; general economic conditions; our level of indebtedness; compliance with the terms of our securitized debt; our ability to refinance our current indebtedness or obtain additional financing; our dependence on information technology; potential cyber incidents; the implementation of restaurant development plans; our dependence on our franchisees; the concentration of our Applebee’s franchised restaurants in a limited number of franchisees; the financial health of our franchisees, including any insolvency or bankruptcy; credit risks from our IHOP franchisees operating under our previous IHOP business model in which we built and equipped IHOP restaurants and then franchised them to franchisees; insufficient insurance coverage to cover potential risks associated with the ownership and operation of restaurants; our franchisees’ and other licensees’ compliance with our quality standards and trademark usage; general risks associated with the restaurant industry; potential harm to our brands’ reputation; risks of food-borne illness or food tampering; possible future impairment charges; trading volatility and fluctuations in the price of our stock; our ability to achieve the financial guidance we provide to investors; successful implementation of our business strategy; the availability of suitable locations for new restaurants; shortages or interruptions in the supply or delivery of products from third parties or availability of utilities; the management and forecasting of appropriate inventory levels; development and implementation of innovative

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marketing and use of social media; changing health or dietary preference of consumers; risks associated with doing

business in international markets; the results of litigation and other legal proceedings; third-party claims with respect to intellectual property assets; delivery initiatives and use of third-party delivery vendors; our allocation of human capital and our ability to attract and retain management and other key employees; compliance with federal, state and local governmental regulations; risks associated with our self-insurance; natural disasters or other serious incidents; our success with development initiatives outside of our core business; the adequacy of our internal controls over financial reporting and future changes in accounting standards; and other matters in the “Risk Factors” section of this report and our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019,~~2020 and in our other filings with the Securities and Exchange Commission, many of which are beyond our control.

Fiscal Quarter End

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

Table of ~~2019 began on December 31, 2018 and ended on March 31, 2019.~~Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

Dine Brands Global, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share and per share amounts)

Assets March 31, 2020 December 31, 2019
(Unaudited)
Current assets:

Cash and cash equivalents $ 344,560
$ 116,043
Receivables, gross 85,321

140,007
Less: allowance for credit losses (4,906 )
(3,138 )
Receivables, net 80,415
136,869
Restricted cash 34,159
40,732
Prepaid gift card costs 27,563
36,077
Prepaid income taxes 7,039
13,290
Other current assets 6,254
3,906
Total current assets 499,990
346,917
Other intangible assets, net 572,449
575,103
Operating lease right-of-use assets 364,875
366,931
Goodwill 343,862
343,862
Property and equipment, net 211,835
216,420
Long-term receivables, gross 90,123
94,154
Less: allowance for credit losses (8,375 ) (8,155 )
Long-term receivables, net 81,748
85,999
Deferred rent receivable 68,759
70,308
Non-current restricted cash 16,400
15,700
Other non-current assets, net 25,552
28,271
Total assets $ 2,185,470
$ 2,049,511
Liabilities and Stockholders’ Deficit

Current liabilities:

Accounts payable 25,389
40,925
Gift card liability 120,187
159,019
Current maturities of operating lease obligations 72,508
72,815
Current maturities of finance lease and financing obligations 13,502
13,669
Accrued employee compensation and benefits 11,714
23,904
Dividends payable 12,739
11,702
Deferred franchise revenue, short-term 9,567
10,086
Other accrued expenses 24,972
25,792
Total current liabilities 290,578
357,912
Long-term debt 1,506,203
1,288,248
Operating lease obligations, less current maturities 355,160
359,025
Finance lease obligations, less current maturities 74,498
77,393
Financing obligations, less current maturities 35,944
37,682
Deferred income taxes, net 87,851
98,499
Deferred franchise revenue, long-term 56,046
56,944
Other non-current liabilities 15,567
15,582
Total liabilities 2,421,847
2,291,285
Commitments and contingencies

Stockholders’ deficit:

Preferred stock, $1 par value, 10,000,000 shares authorized; no shares issued or outstanding —
—
Common stock, $0.01 par value; shares: 40,000,000 authorized; March 31, 2020 - 24,917,498 issued, 16,421,273 outstanding; December 31, 2019 - 24,925,447 issued, 16,521,921 outstanding 249
249
Additional paid-in-capital 252,443
246,192
Retained earnings 70,769
61,653
Accumulated other comprehensive loss (58 ) (58 )
Treasury stock, at cost; shares: March 31, 2020 - 8,496,225; December 31, 2019 - 8,403,526 (559,780 ) (549,810 )
Total stockholders’ deficit (236,377 ) (241,774 )
Total liabilities and stockholders’ deficit $ 2,185,470
$ 2,049,511


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


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


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




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

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

See the accompanying Notes to Consolidated Financial Statements.

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Dine Brands Global, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended							Three Months Ended
	March 31,							March 31, 2021
	2020			2019					2021		2020
Revenues:							Revenues:
Franchise revenues:							Franchise revenues:
Royalties, franchise fees and other	$	83,314		$	96,296		Royalties, franchise fees and other		$	80,091	$	83,314
Advertising revenue	61,723			72,630
Advertising revenues							Advertising revenues		60,885		61,723
Total franchise revenues	145,037			168,926			Total franchise revenues		140,976		145,037
Company restaurant sales	31,300			35,735			Company restaurant sales		35,949		31,300
Rental revenues	29,009			30,711			Rental revenues		26,142		29,009
Financing revenues	1,538			1,810			Financing revenues		1,132		1,538
Total revenues	206,884			237,182			Total revenues		204,199		206,884
Cost of revenues:							Cost of revenues:
Franchise expenses:							Franchise expenses:
Advertising expenses	61,723			72,630			Advertising expenses		60,885		61,723
Bad debt expense (credit)	518			(467		)
Bad debt (credit) expense							Bad debt (credit) expense		(1,993)		518
Other franchise expenses	7,209			8,140			Other franchise expenses		6,051		7,209
Total franchise expenses	69,450			80,303			Total franchise expenses		64,943		69,450
Company restaurant expenses	30,332			31,538			Company restaurant expenses		32,884		30,332
Rental expenses:							Rental expenses:
Interest expense from finance leases	1,210			1,529			Interest expense from finance leases		962		1,210
Other rental expenses	21,323			21,095			Other rental expenses		19,996		21,323
Total rental expenses	22,533			22,624			Total rental expenses		20,958		22,533
Financing expenses	142			146			Financing expenses		128		142
Total cost of revenues	122,457			134,611			Total cost of revenues		118,913		122,457
Gross profit	84,427			102,571			Gross profit		85,286		84,427
General and administrative expenses	37,608			42,819			General and administrative expenses		39,911		37,608
Interest expense, net	15,172			15,393			Interest expense, net		16,496		15,172
Closure and impairment charges (credit)							Closure and impairment charges (credit)		2,010		(12)
Amortization of intangible assets	2,826			2,924			Amortization of intangible assets		2,688		2,826
Closure and impairment (credit) charges	(12		)	194
(Gain) loss on disposition of assets	(233		)	109
Income before income tax provision	29,066			41,132
Income tax provision	(6,738		)	(9,489		)

Loss (gain) on disposition of assets							Loss (gain) on disposition of assets		167		(233)
Income before income taxes							Income before income taxes		24,014		29,066
Income tax benefit (provision)							Income tax benefit (provision)		1,589		(6,738)
Net income	22,328			31,643			Net income		25,603		22,328
Other comprehensive income (loss) net of tax:
Other comprehensive income net of tax:							Other comprehensive income net of tax:

Foreign currency translation adjustment	—			(1		)	Foreign currency translation adjustment		(1)		0
Total comprehensive income	$	22,328		$	31,642		Total comprehensive income		$	25,602	$	22,328
Net income available to common stockholders:							Net income available to common stockholders:
Net income	$	22,328		$	31,643		Net income		$	25,603	$	22,328
Less: Net income allocated to unvested participating restricted stock	(748		)	(1,111		)	Less: Net income allocated to unvested participating restricted stock		(548)		(748)
Net income available to common stockholders	$	21,580		$	30,532		Net income available to common stockholders		$	25,055	$	21,580

Net income available to common stockholders per share:							Net income available to common stockholders per share:
Basic	$	1.33		$	1.76		Basic		$	1.52	$	1.33
Diluted	$	1.31		$	1.73		Diluted		$	1.51	$	1.31
Weighted average shares outstanding:							Weighted average shares outstanding:
Basic	16,263			17,343			Basic		16,460		16,263
Diluted	16,470			17,690			Diluted		16,630		16,470

See the accompanying Notes to Consolidated Financial Statements.

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Dine Brands Global, Inc. and Subsidiaries

Consolidated Statements of Stockholders' Deficit

(In thousands)

(Unaudited)


																										Three Months ended March 31, 2020
	Three Months ended March 31, 2019																									Common Stock															Accumulated Other Comprehensive Loss			Treasury Stock
	Common Stock										Accumulated Other Comprehensive Loss				Treasury Stock											Shares Outstanding			Amount				Additional Paid-in Capital				Retained Earnings							Shares			Cost				Total
Balance at December 31, 2019																				Balance at December 31, 2019					16,522		$	249			$	246,192			$	61,653			$	(58)			8,404		$	(549,810)			$	(241,774)
Adoption of credit loss accounting guidance																								Adoption of credit loss accounting guidance		—			—				—				(497)				—			—			—				(497)
Net income																								Net income		—			—				—				22,328				—			—			—				22,328
	Shares Outstanding		Amount		Additional Paid-in Capital			Retained Earnings							Accumulated Other Comprehensive Loss			Shares			Cost				Total
Balance at December 31, 2018	17,644		$	250	$	237,726		$	10,414		7,341			$				(450,603	)		$	(202,273	)
Adoption of ASC 842	—		—		—			(5,030		)	—				—		—				(5,030		)
Net income	—		—		—			31,643			—				—		—				31,643
Other comprehensive loss	—		—		—			—			(1		)		—		—				(1		)
Purchase of Company common stock	(151	)	—		—			—			—				151		(12,015		)		(12,015		)	Purchase of Company common stock		(460)			—				—				—				—			460			(26,527)				(26,527)
Reissuance of treasury stock	168		—		(667		)	—			—				(168	)	7,435				6,768			Reissuance of treasury stock		367			—				3,967				—				—			(368)			16,557				20,524
Net issuance of shares for stock plans	9		—		—			—			—				—		—				—			Net issuance of shares for stock plans		18			—				—				—				—			—			—				—
Repurchase of restricted shares for taxes	(19	)	—		(1,817		)	—			—				—		—				(1,817		)	Repurchase of restricted shares for taxes		(26)			—				(2,000)				—				—			—			—				(2,000)
Stock-based compensation	—		—		4,107			—			—				—		—				4,107			Stock-based compensation		—			—				4,038				—				—			—			—				4,038
Dividends on common stock	—		—		236			(12,439		)	—				—		—				(12,203		)	Dividends on common stock		—			—				246				(12,715)				—			—			—				(12,469)
Balance at March 31, 2019	17,651		$	250	$	239,585		$	24,588		$	(61	)		7,324		$	(455,183	)		$	(190,821	)

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


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

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

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

Three Months ended March 31, 2020
Common Stock Accumulated
Other
Comprehensive
Loss Treasury Stock
Shares
Outstanding Amount Additional
Paid-in
Capital Retained Earnings Shares Cost Total
Balance at December 31, 2019 16,522
$ 249
$ 246,192
$ 61,653
$ (58 ) 8,404
$ (549,810 ) $ (241,774 )
Adoption of credit loss accounting guidance (Note 3) —
—
—
(497 ) —
—
—
(497 )
Net income —
—
—
22,328
—
—
—
22,328
Purchase of Company common stock (460 ) —
—
—
—
460
(26,527 ) (26,527 )
Reissuance of treasury stock 367
—
3,967
—
—
(368 ) 16,557
20,524
Net issuance of shares for stock plans 18
—
—
—
—
—
—
—
Repurchase of restricted shares for taxes (26 ) —
(2,000 ) —
—
—
—
(2,000 )
Stock-based compensation —
—
4,038
—
—
—
—
4,038
Dividends on common stock —
—
246
(12,715 ) —
—
—
(12,469 )
Balance at March 31, 2020 16,421
$ 249
$ 252,443
$ 70,769
$ (58 ) 8,496
$ (559,780 ) $ (236,377 )

See the accompanying Notes to Consolidated Financial Statements.

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Dine Brands Global, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Three Months Ended
March 31,
2020 2019
Cash flows from operating activities:

Net income $ 22,328
$ 31,643
Adjustments to reconcile net income to cash flows provided by operating activities:
Depreciation and amortization 10,641
10,179
Non-cash stock-based compensation expense 4,038
4,107
Non-cash interest expense 655
1,118
Closure and impairment (credit) charges (12 ) 194
Deferred income taxes (10,491 ) (1,149 )
Deferred revenue (1,417 ) (1,877 )
(Gain) loss on disposition of assets (227 ) 109
Other (1,293 ) (2,099 )
Changes in operating assets and liabilities:
Accounts receivable, net 12,077
(3,210 )
Current income tax receivables and payables 6,443
(1,399 )
Gift card receivables and payables 11,693
(890 )
Other current assets (2,347 ) (2,570 )
Accounts payable (12,748 ) 1,826
Accrued employee compensation and benefits (12,190 ) (12,141 )
Other current liabilities 2,495
5,088
Cash flows provided by operating activities 29,645
28,929
Cash flows from investing activities:

Principal receipts from notes, equipment contracts and other long-term receivables 5,544
5,260
Net additions to property and equipment (5,084 ) (4,717 )
Proceeds from sale of property and equipment 6
400
Additions to long-term receivables (1,511 ) (395 )
Other (195 ) (100 )
Cash flows (used in) provided by investing activities (1,240 ) 448
Cash flows from financing activities:
Borrowing from revolving credit facility 220,000
—
Repayment of revolving credit facility —
(25,000 )
Dividends paid on common stock (11,451 ) (11,153 )
Repurchase of common stock (29,853 ) (10,802 )
Principal payments on finance lease obligations (2,981 ) (3,466 )
Proceeds from stock options exercised 20,524
6,768
Tax payments for restricted stock upon vesting (2,000 ) (1,817 )
Cash flows provided by (used in) financing activities 194,239
(45,470 )
Net change in cash, cash equivalents and restricted cash 222,644
(16,093 )
Cash, cash equivalents and restricted cash at beginning of period 172,475
200,379
Cash, cash equivalents and restricted cash at end of period $ 395,119
$ 184,286
Supplemental disclosures:

Interest paid in cash $ 16,446
$ 16,346
Income taxes paid in cash $ 10,818
$ 12,014


	Three Months Ended
	March 31,
	2021		2020
Cash flows from operating activities:
Net income	$	25,603	$	22,328
Adjustments to reconcile net income to cash flows provided by operating activities:
Non-cash closure and impairment charges (credit)	1,959		(12)
Depreciation and amortization	9,995		10,641
Non-cash stock-based compensation expense	3,094		4,038
Non-cash interest expense	712		655

Deferred income taxes	(8,267)		(10,491)
Deferred revenue	(1,565)		(1,417)

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

Other	(1,580)		(1,293)
Changes in operating assets and liabilities:
Accounts receivable, net	(4,323)		12,077
Current income tax receivables and payables	(552)		6,443
Gift card receivables and payables	(3,246)		11,693
Other current assets	(3,072)		(2,347)
Accounts payable	809		(12,748)
Accrued employee compensation and benefits	(6,968)		(12,190)

Accrued advertising	22,836		(4,719)
Other current liabilities	(5,037)		7,214
Cash flows provided by operating activities	30,565		29,645
Cash flows from investing activities:
Principal receipts from notes, equipment contracts and other long-term receivables	4,651		5,544
Net additions to property and equipment	(2,357)		(5,084)
Proceeds from sale of property and equipment	946		6
Additions to long-term receivables	0		(1,511)
Other	(110)		(195)
Cash flows provided by (used in) investing activities	3,130		(1,240)
Cash flows from financing activities:

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

Dividends paid on common stock	0		(11,451)
Repurchase of common stock	0		(29,853)
Principal payments on finance lease obligations	(2,621)		(2,981)
Proceeds from stock options exercised	19,484		20,524
Tax payments for restricted stock upon vesting	(1,220)		(2,000)
Tax payments for share settlement of restricted stock units	(9,711)		0
Cash flows (used in) provided by financing activities	(217,318)		194,239
Net change in cash, cash equivalents and restricted cash	(183,623)		222,644
Cash, cash equivalents and restricted cash at beginning of period	456,053		172,475
Cash, cash equivalents and restricted cash at end of period	$	272,430	$	395,119
Supplemental disclosures:
Interest paid in cash	$	17,240	$	16,446
Income taxes paid in cash	$	7,441	$	10,818
Non-cash conversion of accounts receivable to notes receivable	$	1,269	$	0

See the accompanying Notes to Consolidated Financial Statements.

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Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

1. General

The accompanying unaudited consolidated financial statements of Dine Brands Global, Inc. (the “Company” or “Dine Brands Global”) have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The operating results for the three months ended March 31, ~~2020~~2021 are not necessarily indicative of the results that may be expected for the twelve months ending December 31, ~~2020.~~2021.

The consolidated balance sheet at December 31, ~~2019~~2020 has been derived from the audited consolidated financial statements at that date but does not include all of information and footnotes required by U.S. GAAP for complete financial statements.

These consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

2. Basis of Presentation

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

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

Risks and Uncertainties

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

Table of ~~government restrictions put in place in various countries. Additionally, economies worldwide also have been negatively impacted by~~Contents

Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

2. Basis of Presentation (Continued)

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

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

~~Table of Contents~~

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

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

the COVID-19 pandemic may continue to materially impact the Company's financial condition, liquidity, or results of operations is highly uncertain.

The Company has taken several actions to mitigate the effects of the COVID-19 pandemic on its operations and its franchisees, as follows: (i) drew down $220 million from its revolving credit facility, leaving available remaining borrowing under the facility of approximately $2 million; (ii) terminated repurchases of common stock for the foreseeable future; (iii) the Company's Board of Directors decided not to declare a dividend for the second quarter of 2020; (iv) reduced discretionary costs, frozen new hiring and suspended the use of independent contractors; (v) temporarily furloughed certain team members across various functional groups at its restaurant support centers and company-operated restaurants and also curtailed the hours of substantially all of the hourly restaurant associates at company-operated restaurants; (vi) deferred franchisee payment of royalty, advertising and other fees, and lease obligations for up to two months on a case-by-case basis; (vii) deferred franchisee remodel and development obligations for up to 12 months; and (vii) engaged a national real estate firm to assist franchisees and the Company with landlord discussions regarding rent abatements, deferrals and other modifications to lease agreements.

~~Reclassifications~~

Certain 2019 amounts previously reported have been reclassified to conform to the presentation requirements of a newly adopted accounting standard on the measurement of current expected credit losses (See Note 3). Amounts reported in 2019 have not been restated.

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

Accounting Standards Adopted in the Current Fiscal Year

In ~~February 2016,~~December 2019, the Financial Accounting Standards Board (“FASB”) issued new guidance onintended to simplify the ~~measurement of current expected credit losses (“CECL”) on financial instruments. The new guidance has replaced~~accounting for income taxes, change the ~~incurred loss methodology of recognizing credit losses on financial instruments with a methodology that estimates the expected credit loss on financial instruments~~accounting for certain income tax transactions, and ~~reflects the net amount expected to be collected on the financial instrument.~~make other minor changes. The Company adopted ~~this change in accounting principle as of~~ the ~~first day~~new guidance at the beginning of the first fiscal quarter of ~~2020 using~~2021. Adoption did not have any material effect on the ~~modified retrospective method. Accordingly,~~consolidated financial ~~information for periods prior to the date of initial application has not been adjusted.~~statements.

Upon adoption of the new CECL guidance, the Company recognized an increase to its allowance for credit losses of $0.7 million. The Company recognized an adjustment to retained earnings upon adoption of $0.5 million, net of tax of $0.2 million.

Additional new accounting guidance became effective for the Company as of the beginning of fiscal ~~2020~~2021 that the Company reviewed and concluded was either not applicable to its operations or had no material effect on its consolidated financial statements in the current or future fiscal years.

Newly Issued Accounting Standards Not Yet Adopted

In ~~December 2019,~~March 2020, with an update in January 2021, the FASB issued ~~new~~ guidance ~~intended~~which provides optional expedients and exceptions for applying current U.S. GAAP to ~~simplify~~contracts, hedging relationships, and other transactions affected by the accounting for income taxes, change the accounting for certain income tax transactions, and make other minor changes. The Company will be required to adopt the new guidance beginning with its first fiscal quarter of 2021; early adoption in any interim period after issuancediscontinuation of the London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued. The guidance can be adopted immediately and is applicable to contracts entered into on or before December 31, 2022. We are currently evaluating our contracts that reference LIBOR and the potential effects of adopting this new guidance is permitted. The Company is currently assessing the impact this guidance will have on its consolidated financial statements but does not expect this standard to have a material effect on its financial statements. The Company does not intend to adopt the standard early.guidance.

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

4. Revenue Disclosures

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

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Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

4. Revenue Disclosures (Continued)

Franchising Activities

The Company owns, franchises and operates the Applebee's Neighborhood Grill & Bar^® (“Applebee's”) concept in the casual dining category of the restaurant industry and the Company owns and franchises the International House of Pancakes^® (“IHOP”) concept in the family dining category of the restaurant industry. The franchise arrangement for both brands is documented in the form of a franchise agreement and, in most cases, a development agreement. The franchise arrangement between the Company as the franchisor and the franchisee as the customer requires the Company to perform various activities to support the brands that do not directly transfer goods and services to the franchisee, but instead represent a single performance obligation, which is the transfer of the franchise license. The intellectual property subject to the franchise license is symbolic intellectual property as it does not have significant standalone functionality, and substantially all the utility is derived from its association with the Company’s past or ongoing activities. The nature of the Company’s promise in granting the franchise license is to provide the franchisee with access to the respective brand’s symbolic intellectual property over the term of the license. The services provided by the Company are highly interrelated with the franchise license and as such are considered to represent a single performance obligation.

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

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

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

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

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

In determining the amount and timing of revenue from contracts with customers, the Company exercises significant judgment with respect to collectibility of the amount; however, the timing of recognition does not require significant judgments as it is based on either the term of the franchise agreement, the month of reported sales by the franchisee or the date of product shipment, none of which require estimation. The Company does not incur a significant amount of contract acquisition costs in conducting franchising activities. The Company's franchising arrangements do not contain a significant financing component.

Company Restaurant Revenue

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

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Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

4. Revenue Disclosures (Continued)

The following table disaggregates franchise revenue by major type for the three months ended March 31, ~~2020~~2021 and ~~2019:~~2020:


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

Three Months Ended
March 31,
2020 2019
(In thousands)
Franchise Revenue:
Royalties $ 67,600
$ 78,730
Advertising fees 61,723
72,630
Pancake and waffle dry mix sales and other 12,848
14,431
Franchise and development fees 2,866
3,135
Total franchise revenue $ 145,037
$ 168,926

Accounts ~~receivable~~and other receivables from franchisees as of March 31, ~~2020~~2021 and December 31, ~~2019~~2020 were ~~$53.0~~$79.5 million (net of allowance of ~~$2.3~~$7.7 million) and ~~$63.5~~$76.3 million (net of allowance of ~~$0.7~~$11.4 million), respectively, and were included in receivables, net in the Consolidated Balance Sheets.

Changes in the Company's contract liability for deferred franchise and development fees during the three months ended March 31, ~~2020~~2021 are as follows:

Deferred Franchise Revenue (short- and long-term)
(In thousands)
Balance at December 31, 2019 $ 67,030
Recognized as revenue during the three months ended March 31, 2020 (2,699 )
Fees deferred during the three months ended March 31, 2020 1,282
Balance at March 31, 2020 $ 65,613


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

The balance of deferred revenue as of March 31, ~~2020~~2021 is expected to be recognized as follows:


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

(In thousands)
Remainder of 2020 $ 6,453
2021 9,113
2022 7,480
2023 6,887
2024 6,189
Thereafter 29,491
Total $ 65,613

5. Current Expected Credit Losses

Prior to the adoption of Accounting Standards Update No. 2016-13, Topic 326, Financial Instruments-Credit Losses (“CECL”), the Company recorded incurred loss reserves against receivable balances based on current and historical information, with delinquency status being the primary indicator of a deterioration in credit quality. The ~~recently adopted~~ CECL reserve methodology requires companies to measure expected credit losses on financial instruments based on the total estimated amount to be collected over the lifetime of the instrument. Under the CECL model, reserves may be established against financial asset balances even if the risk of loss is remote or has not yet manifested itself.

~~Upon adoption of the CECL methodology, the Company developed its estimated loss reserves in the following manner.~~ The Company ~~continued to record~~records specific reserves against account balances of franchisees deemed ~~“at-risk”~~at-risk when a potential loss is likely or imminent as a result of prolonged payment delinquency (greater than 90 days past due) and where notable credit deterioration has become evident. For financial assets that are not currently deemed ~~“at-risk,”~~at-risk, an allowance is recorded based

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

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

~~5. Current Expected Credit Losses (Continued)~~

on expected loss rates derived pursuant to the ~~following~~Company's CECL methodology that assesses four components - historical losses, current conditions, reasonable and supportable forecasts, and a reversion to history, if applicable.

~~Historical Losses~~

Historical loss rates over a five-year span from 2015 to 2019 were calculated for financial assets with common risk characteristics. The Company believes that the past five years provide a reasonable representation of the Company’s operations and performance through various business cycles, both favorable and unfavorable. The Company also determined historical loss rate data for each franchise brand concept was more relevant than a single blended rate.

Historical losses were determined based on the average charge off method. Under this method, net charge off loss rates (gross charge offs less recoveries divided by average asset balances for the period) were calculated on a quarterly basis commencing with the first quarter of 2015 through the fourth quarter of 2019. The individual quarterly loss rates were then averaged over 20 quarters to derive an overall average 5-year historical loss rates for each financial asset type. As of each measurement date subsequent to the initial adoption, the 5-year average loss rate will be based on the most recent 20 quarters. Historical loss rates are further adjusted by factors related to current conditions and forecasts of future economic conditions.

~~Current Conditions~~

The Company identified three metrics that it believes provide the most relevant reflection of the current risks inherent in the Company’s franchisee-based restaurant business, as follows: (1) delinquency status, (2) system-wide same-restaurant sales, and (3) four-wall EBITDA profitability. For each metric, restaurant-level data was aggregated at the franchisee level. Each metric was weighted equally at one-third for each individual franchisee, unless certain data is missing or not available as of the quarterly assessment date. On occasion, new restaurant openings, closures/ reassignments, or franchisee failure to submit requested information, can lead to unavailable or missing data. In these cases, the remaining one or two metrics that are available are weighted at 100% or equally at 50% each, respectively.

A separate scale or data range was established for each of the three metrics to gauge each franchisee’s score relative to a pre-determined set of performance expectations. The distribution spread for each metric is static and will not change from one period to the next. The distribution spreads do not reflect the system average; rather, the distribution ranges were determined based on performance levels that the Company believes characterize relative franchisee health.

Based on the range of historical loss rate percentages derived for the various asset categories, the Company has determined that the total adjustment factor to be allocated to the current conditions component of its CECL methodology will be a maximum of 25 basis points (0.25%) for the three months ended March 31, 2020.

During the second half of March 2020, the COVID-19 pandemic resulted in government-mandated restaurant closures in many areas both domestically and internationally. The restaurants that remained open were limited to off-premise sales channels (i.e. delivery and to-go) as dine-in operations were shuttered until further notice. As a result of these developments, system-wide sales decreased significantly. The initial current conditions adjustment factor was increased to account for the potential impact.

~~Reasonable and Supportable Forecasts~~

The third component in the CECL methodology involves consideration of macroeconomic conditions that can impact the estimate of expected credit losses in the future. The Company did not develop an internal methodology in this regard, rather, the Company utilizes existing, publicly accessible sources of economic data. The Company determined that forecasts of overall unemployment rate as well as consumer spending based on the personal consumption expenditure (PCE) index are two key macroeconomic factors that provide a meaningful outlook of expected consumer behaviors that impact the restaurant industry as well as franchisees' financial performance.

With respect to the unemployment rate, the Company analyzed annual historical data from the U.S. Bureau of Labor Statistics for the past 15 years to get a full view of the range of unemployment rates over a full economic cycle. With respect to consumer spending, the Company analyzed monthly historical data related to personal consumption expenditure (PCE) for the past ten years from 2010 to 2019 from the United States Bureau of Economic Analysis (BEA). The PCE measure is the

Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

5. Current Expected Credit Losses (Continued)

~~component statistic for consumption in gross domestic product collected by the BEA and is essentially a measure of goods and services targeted towards individuals and consumed by individuals.~~

~~Reversion to History~~

CECL requires a lifetime of losses calculated from the time of origination and are updated in each reported quarter for the losses expected over the remaining life of each asset, conditional on historical information, current conditions, and reasonable and supportable forecasts. Absent a reasonable forecast over the full lifetime of a financial asset, entities must forecast their losses over the time frame covered by reasonable and supportable forecasts. After that time period, entities must estimate future losses based on a reversion to unadjusted historical information. The Company has determined that reversion to history was not required since the remaining average lives of the Company’s financial assets are not exceedingly lengthy.

The Company considers its portfolio segments to be the following:

Accounts Receivable (Franchise-Related)

Most of the Company’s short-term receivables due from franchisees are derived from royalty, advertising and ~~advertising~~other franchise-related fees. In addition to royalties and advertising fees, the Company also bills certain IHOP franchisees for franchise notes, equipment notes, and rent payments. Accounts receivable balances also include billings for help desk support services provided to Applebee's and IHOP franchises by the Company’s information technology personnel. As

Gift Card Receivables

Gift card receivables consist primarily of ~~March 31, 2020, and December 31, 2019, total accounts receivable amounted to $54.0 million and $61.5 million, respectively, predominantly~~amounts due from ~~the Company’s domestic franchise operations, and to a much lesser extent, from restaurant locations outside the United States. The 5-year average historical loss rates~~third-party vendors. Receivables related to ~~accounts receivable balances were 0.19% for domestic IHOP franchisees~~gift card sales are subject to seasonality and ~~1.27% for domestic Applebee's franchisees~~usually peak around year end as a result of ~~March 31, 2020. For international accounts receivable, 5-year average historical loss rates were 1.0% and 0.32% for IHOP and Applebee's, respectively, as of March 31, 2020.~~the December holiday season.

Notes Receivable

Notes receivable balances primarily relate to the conversion of certain Applebee's franchisee accounts receivable to notes receivable, ~~and to a lesser degree,~~ cash loans to franchisees for working capital purposes, a note receivable in connection with the sale of IHOP company restaurants ~~in June 2017,~~ and IHOP franchise fee and other notes. The notes are typically collateralized by the franchise. Notes receivable totaled $29.8 million and $29.0 million as of March 31, 2020, and December 31, 2019, respectively. Due to the riskier nature of Applebee's notes that were converted from previously delinquent franchisee accounts receivable balances, aA significant portion of these notes have specific reserves recorded against them amounting to ~~$10.4~~$9.4 million as of March 31, ~~2020. The other notes receivable balances are lower risk in nature, with IHOP notes receivable experiencing no historical losses over the past five years.~~2021.

~~Direct Financing Leases Receivable~~

Direct financing lease receivables relate to IHOP franchise development activity prior to 2003 when IHOP typically leased or purchased the restaurant site, built and equipped the restaurant, then franchised the restaurant to a franchisee. IHOP provided the financing for leasing or subleasing the site. As of March 31, 2020 and December 31, 2019, the Company’s direct financing lease receivables totaled $31.3 million and $34.0 million, respectively. Direct financing leases at March 31, 2020, comprised 121 leases with a weighted average remaining life of 3.6 years, relate to locations that IHOP is leasing from third parties and subleasing to franchisees. The inherent risk in this portfolio is fairly low based on the 5-year average historical loss rate.

Equipment Leases Receivable

Equipment leases receivable also relate to IHOP franchise development activity prior to 2003. Equipment lease contracts are collateralized by the equipment in the restaurant. The estimated fair value of the equipment collateralizing these lease contracts are not deemed to be significant given the very seasoned and mature nature of this portfolio. As of March 31, 2020 and December 31, 2019, the Company’s equipment leases receivable totaled $54.2 million and $56.3 million, respectively. The fair values of equipment leases are not deemed to be significant given that this portfolio is very seasoned and at the tail end of its collective useful life. The weighted average remaining life of the Company’s equipment leases is ~~6.0~~5.2 years as of March ~~29, 2020. The inherent risk in this portfolio~~31, 2021.

Direct Financing Leases Receivable

Direct financing lease receivables relate to IHOP franchise development activity prior to 2003 when IHOP typically leased or purchased the restaurant site, built and equipped the restaurant, then franchised the restaurant to a franchisee. IHOP provided the financing for leasing or subleasing the site. Direct financing leases at March 31, 2021, comprised 85 leases with a weighted average remaining life of 4.1 years, and relate to locations that IHOP is ~~fairly low based on the 5-year average historical loss rate.~~leasing from third parties and subleasing to franchisees.

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

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

~~5. Current Expected Credit Losses (Continued)~~

Distributor Receivables

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


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

Dine Brands Global, Inc. and Subsidiaries

Notes to ~~$3.0 million and $5.3 million, respectively as of March 31, 2020 and December 31, 2019. The inherent risk in this portfolio is fairly low based on the 5-year average historical loss rate.~~Consolidated Financial Statements (Continued)

~~Gift Card Receivables~~

5. Current Expected Credit Losses (Continued)

Gift card receivables consist primarily of amounts due from third-party vendors. Receivables related to gift card sales are subject to seasonality and usually peak around year end as a result of the December holiday season. The Company’s gift card receivables amounted to $2.9 million and $46.6 million as of March 31, 2020 and December 31, 2019, respectively. The quick settlement periods and low risk nature of these assets have resulted in virtually no historical losses over the 5-year loss horizon.

Changes in the allowance for credit losses during the three months ended March 31, ~~2020~~2021 were as follows:

Accounts Receivable Notes receivable, short-term Notes receivable, long-term Lease Receivables Equipment Notes
Other⁽¹⁾
Total
(In thousands)
Balance, December 31, 2019 $ 0.7
$ 2.4
$ 8.2
$ —
$ —
$ —
$ 11.3
Increase due to CECL adoption 0.3
0.0
0.1
0.1
0.1
0.1
0.7
Bad debt expense for the three months ended March 31, 2020 0.1
0.2
(0.0 ) 0.1
0.1
0.0
0.5
Advertising provision adjustment 1.1
0.1
(0.2 ) —
—
—
1.0
Write-offs (0.0 ) (0.1 ) —
—
—
—
(0.1 )
Recoveries —
—
—
0.0
—
—
0.0
Balance, March 31, 2020 $ 2.2
$ 2.6
$ 8.1
$ 0.2
$ 0.2
$ 0.1
$ 13.4



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

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

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

The Company's primary credit quality indicator for all portfolio segments is delinquency. The delinquency status of receivables (other than accounts ~~receivable) at March 31, 2020 was as follows:~~

Notes receivable, short-term Notes receivable, long-term Lease Receivables Equipment Notes
Other⁽¹⁾
Total
(In millions)
Current $ 4.3
$ 4.9
$ 31.0
$ 53.5
$ 0.4
$ 94.1
30-59 days 0.1
—
0.2
0.1
—
0.4
60-89 days 0.1
—
0.0
0.1
—
0.2
90-119 days —
—
0.0
0.0
—
—
120+ days 1.0
19.3
—
0.5
—
20.8
Total $ 5.5
$ 24.2
$ 31.2
$ 54.2
$ 0.4
$ 115.5

⁽¹⁾~~Primarily distributor receivables,~~receivable, gift card receivables and ~~credit~~distributor receivables) at March 31, 2021 was as follows:



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

(1) Primarily credit card receivables

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

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

~~5. Current Expected Credit Losses (Continued)~~

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



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

Notes receivable, short and long-term Lease Receivables Equipment Notes Total
(In millions)
2020 $ 1.6
$ —
$ —
$ 1.6
2019 7.7
0.9
—
8.6
2018 13.7
—
—
13.7
2017 6.6
—
—
6.6
2016 —
1.4
—
1.4
Prior 0.2
29.0
54.2
83.4
Total $ 29.8
$ 31.3
$ 54.2
$ 115.3

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

6. Lease Disclosures

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

~~The~~ Company currently leases from third parties the real property on which approximately ~~600~~550 IHOP franchisee-operated restaurants and 1 Applebee's franchisee-operated restaurant are located; the Company (as lessor) subleases the property to the franchisees that operate those restaurants. The Company also leases property it owns to the franchisees that operate approximately 6055 IHOP restaurants and 1 Applebee's restaurant. The Company leases from third parties the real property on which 69 Applebee's company-operated restaurants are located. The Company also leases office space for its principal corporate office in Glendale, California and restaurant support centers in Kansas City, Missouri and Raleigh, North Carolina. The Company does not have a significant amount of non-real estate leases.

Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

6. Lease Disclosures (Continued)

The Company's existing leases/subleases related to IHOP restaurants generally ~~provided~~provide for an initial term of 20 to 25 years, with most having one or more five-year renewal options. Leases related to Applebee's restaurants generally have an initial term of 10 to 20 years, with renewal terms of five to 20 years. Option periods were not included in determining liabilities and right-of-use assets related to operating leases. Approximately ~~160~~240 of the Company's leases ~~contain provisions requiring additional~~met the sales levels that required variable rent payments to the Company (as lessor), based on a percentage of restaurant ~~sales.~~sales during the three months ended March 31, 2021. Approximately ~~250~~30 of the ~~Company's~~ leases ~~contain provisions requiring additional~~met the sales levels that required variable rent payments by the Company (as lessee), based on a percentage of restaurant ~~sales.~~sales during the three months ended March 31, 2021.

The ~~individual~~Company's lease ~~agreements do not provide information to determine~~cost for the ~~implicit interest rate in the agreements. The Company made significant judgments in determining the incremental borrowing rates that were used in calculating operating~~three months ended March 31, 2021 and 2020 was as follows:


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

Future minimum lease ~~liabilities~~payments under noncancelable leases as lessee as of ~~the adoption date. Due to the large number of leases, the Company applied a portfolio approach by grouping the leases based on the original~~March 31, 2021 were as follows:


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

The weighted average remaining lease term. The Company estimated the interest rate for each grouping primarily by reference to (i) yield rates on debt issuances by companies of a similar credit rating as the Company; (ii) U.S. Treasury ratesterm as of ~~the adoption date;~~March 31, 2021 was 7.2 years for finance leases and ~~(iii) adjustments~~9.2 years for ~~differences in years to maturity.~~operating leases. The weighted average discount rate as of March 31, 2021 was 10.2% for finance leases and 5.6% for operating leases.

Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

6. Lease Disclosures (Continued)

~~The Company's lease cost for the three months ended March 31, 2020 and 2019 was as follows:~~

Three Months Ended
March 31,
2020 2019
(In millions)
Finance lease cost:
Amortization of right-of-use assets $ 1.3
$ 1.3
Interest on lease liabilities 1.7
2.1
Operating lease cost 26.5
26.4
Variable lease cost 0.4
0.7
Short-term lease cost 0.0
0.0
Sublease income (26.6 ) (28.1 )
Lease cost $ 3.3
$ 2.4

~~Future minimum lease payments under noncancelable leases as lessee as of March 31, 2020 were as follows:~~

Finance
Leases

Operating
Leases
(In millions)
2020 (remaining nine months) $ 15.1
$ 75.5
2021 16.4
83.4
2022 14.7
75.9
2023 11.6
63.0
2024 9.4
57.6
Thereafter 55.7
177.6
Total minimum lease payments 122.8
532.9
Less: interest/imputed interest (35.6 ) (105.2 )
Total obligations 87.2
427.7
Less: current portion (12.7 ) (72.5 )
Long-term lease obligations $ 74.5
$ 355.2

The weighted average remaining lease term as of March 31, 2020 was 8.6 years for finance leases and 7.6 years for operating leases. The weighted average discount rate as of March 31, 2020 was 10.4% for finance leases and 5.7% for operating leases.

During the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, the Company made the following cash payments for leases:


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

Three months ended March 31,
2020 2019
(In millions)
Principal payments on finance lease obligations $ 3.0
$ 3.5
Interest payments on finance lease obligations $ 1.7
$ 2.0
Payments on operating leases $ 23.4
$ 22.9
Variable lease payments $ 0.1
$ 0.9

The Company's income from operating leases for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 was as follows:


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

Three months ended March 31,
2020 2019
(In millions)
Minimum lease payments $ 25.4
$ 25.7
Variable lease income 2.4
3.2
Total operating lease income $ 27.8
$ 28.9

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

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

~~6. Lease Disclosures (Continued)~~

Minimum payments to be received as lessor under noncancelable operating leases as of March 31, ~~2020~~2021 were as follows:



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

(In millions)
2020 (remaining nine months) $ 81.9
2021 103.1
2022 100.2
2023 95.9
2024 87.0
Thereafter 216.8
Total minimum rents receivable $ 684.7

The Company's income from direct financing leases for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 was as follows:


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

Three months ended March 31,
2020 2019
(In millions)
Interest income $ 1.0
$ 1.4
Variable lease income 0.2
0.4
Total operating lease income $ 1.2
$ 1.8

Minimum payments to be received as lessor under noncancelable direct financing leases as of March 31, ~~2020~~2021 were as follows:



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

(In millions)
2020 (remaining nine months) $ 10.8
2021 11.5
2022 8.2
2023 3.6
2024 1.3
Thereafter 2.4
Total minimum rents receivable 37.9
Less: unearned income (6.7 )
Total net investment in direct financing leases 31.3
Less: current portion (10.8 )
Long-term investment in direct financing leases $ 20.5

~~7. Long-Term Debt~~

~~At March 31, 2020 and December 31, 2019, long-term debt consisted of the following:~~

March 31, 2020 December 31, 2019
(In millions)
Series 2019-1 4.194% Fixed Rate Senior Secured Notes, Class A-2-I $ 700.0
$ 700.0
Series 2019-1 4.723% Fixed Rate Senior Secured Notes, Class A-2-II 600.0
600.0
Series 2019-1 Variable Funding Senior Notes Class A-1, variable interest rate of 3.39% at March 31, 2020 220.0
—
Debt issuance costs (13.8 ) (11.8 )
Long-term debt, net of debt issuance costs 1,506.2
1,288.2
Current portion of long-term debt —
—
Long-term debt $ 1,506.2
$ 1,288.2

Table of Contents

Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

7. Long-Term Debt ~~(Continued)~~

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


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

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

The Co-Issuers also ~~replaced their existing revolving financing facility, the 2018-1 Variable Funding Senior Notes, Class A-1 (“2018-1 Class A-1 Notes”), with~~entered into a ~~new~~ revolving financing facility, the 2019-1 Variable Funding Senior Notes, Class A-1 (the ~~“Revolver”~~“Credit Facility”), ~~on substantially the same terms as the 2018-1 Class A-1 Notes in order to conform the term of the Revolver to the anticipated repayment dates for the 2019 Class A-2 Notes. The Revolver~~that allows for drawings up to $225 million of variable funding notes and the issuance of letters of credit. The ~~Revolver~~Credit Facility and the 2019 Class A-2 Notes are referred to collectively herein as the “New Notes.” The New Notes were issued in a securitization transaction pursuant to which substantially all the domestic revenue-generating assets and domestic intellectual property held by the Co-Issuers and certain other special-purpose, wholly-owned indirect subsidiaries of the Company (the “Guarantors”) were pledged as collateral to secure the New Notes.

The Company used the majority of the net proceeds of the offering to repay the entire outstanding balance of approximately $1.28 billion of Series 2014-1 4.277% Fixed Rate Senior Notes, Class A-2 (the “2014 Class A-2 Notes”). The Company used the remaining proceeds of the offering to pay for transactions costs associated with the securitization refinancing transaction and for general corporate purposes.

~~2019 Class A-2 Notes~~

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

2019 Class A-2 Notes

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

Table of ~~September 30, 2014, amended~~Contents

Dine Brands Global, Inc. and ~~restated as of June 5, 2019.~~Subsidiaries

Notes to Consolidated Financial Statements (Continued)

7. Long-Term Debt (Continued)

As of March 31, ~~2020,~~2021, the Company's leverage ratio was ~~4.79x; accordingly, no~~7.02x. As a result, quarterly principal ~~payment~~payments on the 2019 Class A-2 Notes ~~will~~of $3.25 million continue to be ~~required during the second quarter of 2020.~~required. Exceeding the leverage ratio of 5.25x does not violate any covenant related to the New Notes.

~~Table of Contents~~

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

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

~~7. Long-Term Debt (Continued)~~

The Company may voluntarily repay the 2019 Class A-2 Notes at any ~~time,~~time; however, if the ~~Company repays the New~~2019 Class A-2 Notes are repaid prior to certain dates, itthe Company would be required to pay make-whole ~~or call redemption~~ premiums. As of March 31, ~~2020,~~2021, the make-whole premium associated with voluntary prepayment of the Class A-2-I Notes was approximately ~~$32~~$29 million; this amount declines progressively each quarter to zero in June 2022. As of March 31, ~~2020,~~2021, the make-whole premium associated with voluntary prepayment of the Class A-2-II Notes was approximately ~~$88~~$59 million; this amount declines progressively each quarter to zero in June 2024. In lieu of the applicable make-whole premiums above, a call redemption premium will be payable upon any redemption or refinancing in full of the New Notes at any time on or after the quarterly payment date in June 2022 and on or prior to the quarterly payment date in June 2023. The call redemption premium is the lesser of 101% times the outstanding principal amount of the Class A-2-II Notes, less the outstanding principal amount of the Class A-2-II, at the time of redemption or refinancing and the applicable make-whole premium otherwise payable on the Class A-2-II Notes.

The Company would also be subject to a make-whole premium in the event of a mandatory prepayment required following a Rapid Amortization Event or certain asset dispositions. The mandatory make-whole premium requirements are considered derivatives embedded in the New Notes that must be bifurcated for separate valuation. The Company estimated the fair value of these derivatives to be immaterial as of March 31, ~~2020,~~2021, based on the probability-weighted discounted cash flows associated with either event.

2019 Class A-1 Notes

The Co-Issuers ~~also~~ entered into the ~~Revolver~~Credit Facility that allows for drawings up to $225 million of variable funding notes and the issuance of letters of credit. The 2019 Class A-1 Notes were issued under the Indenture. Drawings and certain additional terms related to the Revolver are governed by the 2019 Class A-1 Note Purchase Agreement, dated June 5, 2019, among the Co-Issuers, certain special-purpose, wholly-owned indirect subsidiaries of the Company, each as a Guarantor, the Company, as manager, certain conduit investors, financial institutions and funding agents, and Barclays Bank PLC, as provider of letters credit, swingline lender and administrative agent (the “Purchase Agreement”).

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

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

At March 31, ~~2020,~~ ~~$2.8~~2021, $3.3 million was pledged against the ~~Revolver~~Credit Facility for outstanding letters of credit, leaving ~~$2.2~~$221.7 million available for borrowing. The letters of credit are used primarily to satisfy insurance-related collateral requirements. The maximum amount of the Revolver outstanding during the three months ended March 31, 2020 was $220.0 million and the weighted average interest rate for the period outstanding was 3.39%. It is anticipated that any principal and interest on the Revolver will be repaid in full on or prior to the quarterly payment date in June 2024, subject to two additional one-year extensions at the option of the Company upon the satisfaction of certain conditions.

Covenants and Restrictions

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

~~Table of Contents~~

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

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

~~7. Long-Term Debt (Continued)~~

are also subject to certain customary events of default, including events relating to non-payment of required interest, principal or other amounts due on or with respect to the New Notes, failure of the Securitization Entities to maintain the stated DSCR, failure to comply with covenants within certain time frames, certain bankruptcy events, breaches of specified representations and warranties and certain judgments.

Table of Contents

Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

7. Long-Term Debt (Continued)

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

•DSCR less than 1.75x - Cash Flow Sweeping Event

•DSCR less than 1.20x - Rapid Amortization Event

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

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

The Company's DSCR for the reporting period ended March 31, ~~2020~~2021 was ~~3.93x.~~approximately 3.45x.

Debt Issuance Costs

~~The Company~~Amortization of costs incurred ~~costs of approximately $12.9 million~~ in connection with the issuance of the 2019 Class A-2 ~~Notes. These debt issuance costs are being amortized using the effective interest method over the estimated life~~Notes of ~~each tranche of the 2019 Class A-2 Notes. Amortization costs of~~$0.5 million and $0.5 million were included in interest expense for the three months ended March 31, ~~2020.~~

~~The Company~~2021 and 2020, respectively. Amortization costs incurred ~~costs of approximately $0.2 million~~ in connection with the ~~replacement~~Company's Credit Facility and prior credit facility of ~~the 2018-1 Class A-1 Notes with the Revolver. These debt issuance costs have been added to the remaining unamortized costs of approximately $2.8~~$0.2 million ~~related to the 2018-1 Class A-1 Notes, the total of which costs is being amortized using the effective interest method over the estimated five-year life of the Revolver. Amortization costs of~~and $0.2 million were included in interest expense for the three months ended March 31, ~~2020.~~2021 and 2020, respectively.

At March 31, ~~2020,~~2021, total unamortized debt issuance costs of ~~$13.8~~$9.1 million are reported as a direct reduction of the ~~Revolver and~~ 2019 Class A-2 Notes in the Consolidated Balance Sheets. ~~That amount includes $2.6~~At March 31, 2021, total unamortized debt issuance costs of $2.0 million ~~of costs~~ related to the ~~Revolver that were~~Credit Facility and prior credit facility are classified as other long-term assets ~~as of December 31, 2019~~ because there ~~had been~~are no ~~borrowing~~borrowings outstanding against the ~~Revolver since it was established.~~Credit Facility.

For additional information on the 2019 Class A-2 Notes and the Revolver, refer to Note 8 of the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

~~Table of Contents~~

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

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

~~7. Long-Term Debt (Continued)~~

Maturities of Long-term Debt

~~Face-value maturities of long-term debt for each~~•The anticipated repayment date of the ~~next five years, assuming~~Class A-2-I Notes is June 2024.

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

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

(In millions)
2020 (remaining nine months) $ —
2021 —
2022 —
2023 —
2024 920.0
Thereafter 600.0
Total $ 1,520.0

5.25x.

8. Stockholders' Deficit

Dividends

During the three months ended March 31, 2020, the Company paid dividends on common stock of $11.5 million, representing a cash dividend of $0.69 per share declared in the fourth quarter of 2019, paid on January 10, 2020 to stockholders of record at the close of business on December 20, 2019. On February 20, 2020, the Company's Board of Directors declared a first quarter 2020 cash dividend of $0.76 per share of common stock. This dividend was paid on April 3, 2020 to stockholders of record at the close of business on March 20, 2020. Dividends payable at March 31, 2020 were $12.7 million.

Dividends declared and paid per share for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 were as follows:


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

Three months ended March 31,
2020
2019
Dividends declared per common share $ 0.76
$ 0.69
Dividends paid per common share $ 0.69
$ 0.63

Stock Repurchase Program

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

Dine Brands Global, Inc. and Subsidiaries

~~A summary of~~Notes to Consolidated Financial Statements (Continued)

8. Stockholders' Deficit (Continued)

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

Shares Cost of shares
(In millions)
Repurchased during the three months ended March 31, 2020 459,899
$ 26.5
Cumulative (life-of-program) repurchases 1,697,597
$ 129.8
Remaining dollar value of shares that may be repurchased n/a $ 70.2

Treasury Stock

Repurchases of the Company's common stock are included in treasury stock at the cost of shares repurchased plus any transaction costs. Treasury stock may be re-issued when stock options are exercised, when restricted stock awards are granted and when restricted stock units settle in stock upon vesting. The cost of treasury stock re-issued is determined using the first-in, first-out (“FIFO”) method. During the three months ended March 31, ~~2020,~~2021, the Company re-issued ~~367,200~~539,134 shares of treasury stock at a total FIFO cost of ~~$16.6~~$21.8 million.

~~Table of Contents~~

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

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

9. Income Taxes

As a result of the growing global impact from the COVID-19 pandemic, estimating a reliable annual effective tax rate for the year was not possible due to changes in estimated forecast having a significant impact on the annual effective tax rate. Since forecasting an annual effective tax rate under these circumstances would not provide a meaningful estimate, the Company believes that the actual year-to-date effective tax rate is the best estimate of the annual tax rate in accordance with U.S. GAAP. The Company’s income tax provision has been calculated utilizing its actual effective tax rate based on the actual year-to-date results for the three-month period ended March 31, 2020.

The Company's effective tax rate was (6.6)% (a tax benefit of $1.6 million on the pretax book income of $24.0 million) for the three months ended March 31, 2021, as compared to 23.2% for the three months ended March 31, ~~2020 as compared to 23.1%~~2020. The effective tax rate for the three months ended March 31, ~~2019.~~2021 was lower than the rate of the prior year period primarily due to the recognition of excess tax benefits on stock-based compensation.

The total gross unrecognized tax benefit as of March 31, ~~2020~~2021 and December 31, ~~2019~~2020 was ~~$7.7~~$2.5 million and ~~$7.6~~$2.2 million, respectively, excluding interest, penalties and related tax benefits. The Company estimates the unrecognized tax benefit as of March 31, ~~2020~~2021 may decrease over the upcoming 12 months by an amount up to ~~$1.5~~$0.8 million related to settlements with taxing authorities and expiring statutes of ~~limitations expirations and method changes.~~limitations. For the remaining liability, due to the uncertainties related to these tax matters, the Company is unable to make a reasonable estimate as to when cash settlement with a taxing authority will occur.

As of March 31, ~~2020,~~2021, accrued interest was ~~$2.7~~$0.9 million and accrued penalties were less than $0.1 million, excluding any related income tax benefits. As of December 31, ~~2019,~~2020, accrued interest was ~~$2.5~~$0.9 million and accrued penalties were less than $0.1 million, excluding any related income tax benefits. The Company recognizes interest accrued related to unrecognized tax benefits and penalties as a component of its income tax provision recognized in its Consolidated Statements of Comprehensive Income.

The Company files federal income tax returns and the Company or one of its subsidiaries file income tax returns in various state and international jurisdictions. With few exceptions, the Company is no longer subject to federal tax examinations by tax authorities for years before ~~2014~~2017 and state or non-United States tax examinations by tax authorities for years before 2011. The Company believes that adequate reserves have been provided related to all matters contained in the tax periods open to examination.

On March ~~27, 2020,~~11, 2021, the ~~Coronavirus Aid, Relief, and Economic Security~~American Rescue Plan Act of 2021 (“~~CARES~~ARP Act”) was ~~enacted.~~enacted in response to the COVID-19 pandemic. The Company ~~continues~~is continuing to evaluate the impact of the ~~CARES~~ARP Act, ~~and takes into consideration~~but at present does not expect the ARP Act would result in a material impact ~~it may have on its overall~~to our income tax benefit or provision.

Table of Contents

Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

10. Stock-Based Compensation

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

Three months ended March 31,
2020 2019
(In millions)
Total stock-based compensation expense:
Equity classified awards expense $ 4.1
$ 4.1
Liability classified awards (credit) expense (0.6 ) 1.0
Total pre-tax stock-based compensation expense 3.5
5.1
Book income tax benefit (0.9 ) (1.3 )
Total stock-based compensation expense, net of tax $ 2.6
$ 3.8



	Three months ended March 31,
			2021		2020
Total stock-based compensation expense:		(In millions)

Equity classified awards expense			$	3.1	$	4.1
Liability classified awards expense (credit)			1.5		(0.6)
Total pre-tax stock-based compensation expense			4.6		3.5
Book income tax benefit			(1.1)		(0.9)
Total stock-based compensation expense, net of tax			$	3.5	$	2.6

As of March 31, ~~2020~~,2021, total unrecognized compensation expense of ~~$19.4~~$23.6 million related to restricted stock and restricted stock units and ~~$4.7~~$4.6 million related to stock options are expected to be recognized over a weighted average period of ~~1.4~~1.7 years for restricted stock and restricted stock units and ~~1.6~~1.8 years for stock options.

~~Table of Contents~~

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

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

~~10. Stock-Based Compensation (Continued)~~

Fair Value Assumptions

The Company granted ~~167,969~~91,743 stock options during the three months ended March 31, ~~2020~~2021 for which the fair value was estimated using a Black-Scholes option pricing model. The following summarizes the weighted average assumptions used in the Black-Scholes model:



Risk-free interest rate	~~1.2~~0.5	%
~~Weighted average historical~~Historical volatility	~~30.5~~67.7	%
Dividend yield	~~3.5~~0	%
Expected years until exercise	~~4.6~~		4.5
~~Weighted average fair~~Fair value of options granted	$~~17.53~~39.85

Equity Classified Awards - Stock Options

Stock option balances at March 31, ~~2020~~,2021, and activity for the three months ended March 31, ~~2020~~2021 were as follows:


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

Shares
Weighted
Average
Exercise
Price

Weighted Average
Remaining
Contractual Term
(in Years)

Aggregate
Intrinsic
Value (in Millions)
Outstanding at December 31, 2019 1,217,438
$ 66.43

Granted 167,969
87.17

Exercised (270,024 ) 76.01

Expired (46,306 ) 113.72

Forfeited (7,139 ) 82.58

Outstanding at March 31, 2020 1,061,938
65.10
7.6 $ 0.0
Vested at March 31, 2020 and Expected to Vest 986,611
64.96
7.5 $ 0.0
Exercisable at March 31, 2020 418,654
$ 70.54
6.5 $ 0.0

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the closing stock price of the Company’s common stock on the last trading day of the first quarter of ~~2020~~2021 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on March 31, ~~2020~~.2021. The aggregate intrinsic value will change based on the fair market value of the Company’s common stock and the number of in-the-money options.

~~Equity Classified Awards - Restricted Stock and Restricted Stock Units~~

~~Outstanding balances as of~~ ~~March 31, 2020, and activity related to restricted stock and restricted stock units for the~~ ~~three months ended March 31, 2020~~ ~~were as follows:~~

Restricted
Stock

Weighted
Average
Grant Date
Fair Value

Stock-Settled Restricted
Stock Units

Weighted
Average
Grant Date
Fair Value
Outstanding at December 31, 2019 224,515
$ 70.52
357,807
$ 30.35
Granted 97,176
83.57
15,112
87.17
Released (66,826 ) 56.02
(30,032 ) 64.76
Forfeited (12,039 ) 80.87
—
—
Outstanding at March 31, 2020 242,826
$ 79.87
342,887
$ 29.11

2219

Table of Contents

Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

10. Stock-Based Compensation (Continued)

Equity Classified Awards - Restricted Stock and Restricted Stock Units

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


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

Liability Classified Awards - Cash-settled Restricted Stock Units

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

Cash-Settled Restricted
Stock Units

Weighted
Average
Fair Value
Outstanding at December 31, 2019 63,852
$ 85.63
Granted 517
85.41
Forfeited (7,597 ) 86.53
Outstanding at March 31, 2020 56,772
$ 34.51


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

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

For the three months ended March 31, 2021 and 2020, an expense of $1.4 million and ~~2019,~~ a credit of $1.3 ~~million and an expense of $0.6~~ million, respectively, was included as stock-based compensation expense related to cash-settled restricted stock units. At March 31, 2021 and December 31, 2020, liabilities of $0.8 million and $2.1 million, respectively, related to cash-settled restricted stock units were included as part of accrued employee compensation and benefits in the Consolidated Balance Sheets.

Liability Classified Awards - Long-Term Incentive Awards

The Company has granted cash long-term incentive awards (“LTIP awards”) to certain employees. Annual LTIP awards vest over a ~~three-year~~three-year period and are determined using multipliers from 0% to 200% of the target award based on ~~(i)~~ the total stockholder return of Dine Brands Global common stock compared to the total stockholder returns of a peer group of ~~companies and (ii) the percentage increase in the Company's adjusted earnings per share (as defined in the applicable award agreement).~~companies. The awards are considered stock-based compensation and are classified as liabilities measured at fair value as of the respective period end. For the three months ended March 31, 2021 and 2020, ~~and 2019, $0.8~~an expense of $0.1 million and ~~$0.4~~$0.8 million, respectively, were included in total stock-based compensation expense related to LTIP awards. At March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, liabilities of ~~$2.1~~$0.8 million and ~~$2.9~~$2.1 million, respectively, related to LTIP awards were included as part of accrued employee compensation and benefits in the Consolidated Balance Sheets.

11. Segments

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

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

Table of Contents

Dine Brand Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

11. Segments (Continued)

As of March 31, ~~2020,~~2021, the franchise operations segment consisted of (i) ~~1,706~~1,636 restaurants operated by Applebee’s franchisees in the United States, 2 U.S. territories and 11 countries outside the United States and (ii) ~~1,840~~1,749 restaurants operated by IHOP franchisees and area licensees in the United States, 2 U.S. territories and 137 countries outside the United States. Franchise operations revenue consists primarily of franchise royalty revenues, franchise advertising revenue, sales of proprietary products to franchisees (primarily pancake and waffle dry mixes for the IHOP restaurants), and franchise fees. Franchise operations expenses include advertising expenses, the cost of IHOP proprietary products, bad debt expense, franchisor contributions to marketing funds, pre-opening training expenses and other franchise-related costs.

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

Rental operations revenue includes revenue from operating leases and interest income from direct financing leases. Rental operations expenses are costs of operating leases and interest expense from finance leases on which the Company is the lessee.

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

Information on segments is as follows:



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

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

Interest expense:

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

Depreciation and amortization:

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

Gross profit, by segment:

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

Table of Contents

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

Notes to Consolidated Financial Statements (Continued)

~~11. Segments (Continued)~~

~~Information on segments is as follows:~~

Three months ended March 31,
2020 2019
(In millions)
Revenues from external customers:
Franchise operations $ 145.1
$ 168.9
Rental operations 29.0
30.7
Company restaurants 31.3
35.8
Financing operations 1.5
1.8
Total $ 206.9
$ 237.2

Interest expense:
Rental operations $ 1.6
$ 2.5
Company restaurants 0.5
0.5
Corporate 15.2
15.4
Total $ 17.3
$ 18.4

Depreciation and amortization:
Franchise operations $ 2.6
$ 2.6
Rental operations 3.1
$ 3.5
Company restaurants 1.6
1.3
Corporate 3.3
2.8
Total $ 10.6
$ 10.2

Gross profit, by segment:
Franchise operations $ 75.6
$ 88.6
Rental operations 6.5
8.1
Company restaurants 1.0
4.2
Financing operations 1.3
1.7
Total gross profit 84.4
102.6
Corporate and unallocated expenses, net (55.3 ) (61.5 )
Income before income tax provision $ 29.1
$ 41.1

12. Net Income per Share

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



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

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

Three months ended March 31,
2020 2019
(In thousands, except per share data)
Numerator for basic and diluted income per common share:
Net income $ 22,328
$ 31,643
Less: Net income allocated to unvested participating restricted stock (748 ) (1,111 )
Net income available to common stockholders - basic 21,580
30,532
Effect of unvested participating restricted stock in two-class calculation 4
12
Net income available to common stockholders - diluted $ 21,584
$ 30,544
Denominator:
Weighted average outstanding shares of common stock - basic 16,263
17,343
Dilutive effect of stock options 207
347
Weighted average outstanding shares of common stock - diluted 16,470
17,690
Net income per common share:
Basic $ 1.33
$ 1.76
Diluted $ 1.31
$ 1.73

13. Closure and Impairment Charges

Closure and Long-lived Asset Impairment Charges

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


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

Closure Charges

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

Long-lived Tangible Asset Impairment

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

Table of Contents

Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

~~13.~~14. Fair Value Measurements

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

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

The fair values of the Company's 2019 Class A-2 Notes at March 31, ~~2020~~2021 and December 31, ~~2019~~2020 were as follows:

March 31, 2020 December 31, 2019
(In millions)
Face Value of Class A-2 Notes $ 1,300.0
$ 1,300.0

Fair Value of Class A-2 Notes $ 1,297.9
$ 1,326.3


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

The fair values were determined based on Level 2 inputs, including information gathered from brokers who trade in the Company’s 2019 Class A-2 Notes, as well as information on notes that are similar to those of the Company. Between March 17 and March 19, 2020, the Company borrowed a total of $220 million of the available amount under the Revolver. Given the short time between the dates of the borrowing and the Company's fiscal quarter end, the Company believes the face value of the Class A-1 Notes is a reasonable approximation of the fair value.

~~14.~~

15. Commitments and Contingencies

Litigation, Claims and Disputes

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

Lease Guarantees

In connection with the sale of Applebee’s restaurants to franchisees, the Company has, in certain cases, guaranteed or has potential continuing liability for lease payments totaling ~~$253.2~~$235.9 million as of March 31, ~~2020~~.2021. This amount represents the maximum potential liability for future payments under these leases. These leases have been assigned to the buyers and expire at the end of the respective lease terms, which range from ~~2020~~2021 through ~~2048~~.2048. Excluding unexercised option periods, the Company's potential liability for future payments under these leases is ~~$38.1~~$34.2 million. In the event of default, the indemnity and default clauses in the sale or assignment agreements govern the Company's ability to pursue and recover damages incurred.

~~15.~~16. Cash, Cash Equivalents and Restricted Cash

Cash and Cash Equivalents

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

Table of Contents

Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

16. Restricted Cash (Continued)

The components of cash and cash equivalents were as follows:


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

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

Current Restricted Cash

Current restricted cash ~~of $34.2 million at March 31, 2020~~ primarily consisted ~~of $31.6 million~~ of funds required to be held in trust in connection with the Company's securitized debt and ~~$2.5 million of~~ funds from Applebee's franchisees pursuant to franchise agreements, usage of which was restricted to advertising activities. ~~Current~~The components of current restricted cash of $40.7 million at December 31, 2019 primarily consisted of $38.4 million of funds required to be held in trust in connection with the Company's securitized debt and $2.3 million of funds from Applebee's franchisees pursuant to franchise agreements, usage of which was restricted to advertising activities.were as follows:



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

Non-current Restricted Cash

Non-current restricted cash ~~of $16.4~~was $32.8 million at both March 31, 2021 and December 31, 2020 and ~~$15.7 million at December 31, 2019~~ represents interest reserves required to be set aside for the duration of the Company's securitized debt. The required reserve is approximately one quarter's interest payment on the Company's securitized debt, currently approximately $16 million. The Company voluntarily increased the amount held in non-current cash to twice the required amount during the year ended December 31, 2020.

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

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

Overview

The following discussion and analysis provides information which we believe is relevant to an assessment and understanding of our consolidated results of operations and financial condition. The discussion should be read in conjunction with the consolidated financial statements and the notes thereto included in Item 1 of Part I of this Quarterly Report and the audited consolidated financial statements and notes thereto and the MD&A contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019.~~2020. Except where the context indicates otherwise, the words “we,” “us,” “our,” “Dine Brands Global” and the “Company” refer to Dine Brands Global, Inc., together with its subsidiaries that are consolidated in accordance with United States generally accepted accounting principles (“U.S. GAAP”). The financial tables appearing in MD&A present amounts in millions of dollars that are rounded from our consolidated financial statements presented in thousands of dollars. As a result, the tables may not foot or crossfoot due to rounding.

Through various subsidiaries, we own, franchise and operate the Applebee's Neighborhood Grill & Bar^® (“Applebee's”) concept in the bar and grill segment within the casual dining category of the restaurant industry and we own and franchise the International House of Pancakes^® (“IHOP”) concept in the family dining category of the restaurant industry. References herein to Applebee's^®and IHOP^® restaurants are to these two restaurant concepts, whether operated by franchisees, area licensees and their sub-licensees (collectively, “area licensees”) or by us. With ~~over 3,600~~3,458 restaurants combined, the substantial majority of which are franchised, we believe we are one of the largest full-service restaurant companies in the world. ~~The June 17, 2019 issue of~~ ~~Nation's Restaurant News~~ ~~reported IHOP was the largest family dining concept in terms of 2018 United States system-wide sales and Applebee's was the largest casual dining concept in terms of number of restaurants.~~

We identify our business segments based on the organizational units used by management to monitor performance and make operating decisions. We currently have five operating segments: Applebee's franchise operations, Applebee's company-operated restaurant operations, IHOP franchise operations, rental operations and financing operations. We have four reportable segments: franchise operations (an aggregation of Applebee's and IHOP franchise operations), company-operated restaurant operations, rental operations and financing operations. We consider these to be our reportable segments, regardless of whether any segment exceeds 10% of consolidated revenues, income before income tax provision or total assets.

~~Significant Recent Developments Regarding~~Ongoing Impact of COVID-19

Pandemic

~~During March 2020, a~~

The global pandemic ~~was~~ declared in March 2020 by the World Health Organization related to the ~~rapidly spreading~~ outbreak of a novel strain of coronavirus, designated “~~COVID-19.~~COVID-19,” ~~The pandemic has significantly impacted economic conditions in the United States, where the majority of our restaurants are located, as well as economic conditions globally. We first began~~continued to ~~experience impacts from COVID-19 around the middle of March 2020, as international, federal, state and local governments began to react to the public health crisis by encouraging or requiring~~ “~~social distancing,~~” instituting shelter-in-place orders, and requiring, in varying degrees, reduced operating hours, restaurant dine-in limitations, capacity limitations or other restrictions that largely limited restaurants to take-out and delivery sales. ~~The long-term~~have an adverse impact ~~of COVID-19 on world economies and~~ on our ~~business remains uncertain,~~operations during the ~~duration and scope of which cannot currently be predicted. Please refer to Part II, Item 1A., “Risk Factors,” of this Quarterly Report on Form 10-Q for further information.~~

~~The operating status of domestic IHOP and Applebee's restaurants at~~three months ended March 31, ~~2020 was as follows:~~

Applebee's IHOP
Restaurants operating without restriction 4
204
Restaurants with limited operations (primarily off-premise sales) 1,402
1,158
Restaurants temporarily closed 251
347
Total 1,657
1,709

~~As of March 31, 2020, 118 out of 249 international restaurants were open for business; the remaining 131 restaurants were temporarily closed.~~

Restaurants operating without restriction may only be offering a limited menu. While a few states or municipalities acted earlier, most of the dine-in restrictions were initiated during the week beginning March 16, 2020. Applebee's temporary closures reached 100 on March 22, reached 250 temporary closures during the week ended March 29 and have remained in that approximate range as of April 15, 2020. By March 22, 2020, there were fewer than 100 Applebee's restaurants operating without restriction and none as of April 3, 2020. IHOP temporary closures reached 100 on March 20, 2020 and increased steadily since that time. As of April 15, 2020, there were 375 temporary closures of IHOP restaurants. As of April 15, 2020, 101 out of 249 international units were open for business; the remaining 148 units were temporarily closed.

2021. The operating status of our restaurants iswas fluid throughout the first quarter of 2021 and subject to ~~change.~~change as governmental authorities increased or reduced restrictions on restaurant operations in response to changes in the number of COVID-19 infections and in the availability and acceptance of vaccines within their respective jurisdictions. While the significant majority of our restaurants were open for in-restaurant dining during the three months ended March 31, 2021, many federal, state, local and international governments maintained protocols that limited restaurant dine-in occupancy levels to less than 100% of capacity.As of March 31, 2021, the operating status of our restaurants was as follows:


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

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


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

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

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

Updates to normal operating reasons, such as scheduled or unscheduled maintenance. In March 2020, an IHOP franchisee that operated 49 locations indicated its intention to cease operations at certain of its locations. Subsequently, in April 2020, this franchisee initiated an assignment forseveral actions taken over the ~~benefit of creditors.~~

As a result of government restrictions on dine-in restaurants, we experienced a substantial decline in customer traffic at our restaurants which, in turn, had a significant unfavorable impact on the Key Financial Results presented below. The situation is rapidly changing and additional impacts on our business may arise that we are not aware of currently. We cannot predict whether, when or the manner in which the conditions surrounding the pandemic will change, including the timing of lifting any closure requirements or operating restrictions on restaurants, customer re-engagement with our brands and the short- and long-term impact on consumer discretionary spending and the United States economy in general. In light of these uncertainties, ~~we have withdrawn our 2020 financial performance guidance issued on February 24, 2020.~~

~~We have taken several actions~~past 12 months to mitigate the effects of the COVID-19 pandemic on the Company, its operations and its franchisees, asare discussed ~~below.~~below:

~~Between~~•In March ~~17 and March 19, 2020,~~2021, we ~~drew down a total of~~repaid $220 million ~~from~~of borrowings outstanding under our revolving credit ~~facility. Including approximately $3 million~~facility that initially had been drawn in ~~letters of credit, $223 million~~March 2020. At the time of the ~~total $225 million available under our revolving facility has been utilized. The Company has~~initial draw, we had no immediate need for additional liquidity, but in light of ~~current~~then-current market conditions and significant uncertainty related to the COVID-19 pandemic, we drew on the revolving facility to maximize our financial flexibility. As of March 31, 2021, our borrowing capacity under the credit facility was $221.7 million. See Liquidity and Capital Resources of the Company.

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

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

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

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

We have experienced a number of temporary and ~~normal restaurant operations resume.~~permanent closures of our restaurants during the COVID-19 pandemic. These closures occurred for a variety of reasons, and all closures were not necessarily related to the impact of the COVID-19 pandemic or related restrictions. We ~~intend to voluntarily increase~~cannot predict how long the ~~interest reserve required to set aside for our securitized debt, currently $16.4 million. Based~~COVID-19 pandemic and its impact on our ~~current projected operating cash flow needs, interest~~operations will last, whether or when recurrences of the virus and ~~debt repayments,~~variants of the virus may arise, the availability and ~~other expenditures, we believe we~~acceptance of vaccines, what restrictions on in-restaurant dining may be imposed or re-imposed, the timing and extent of customer re-engagement with our brands and, in general, what the short- and long-term impact on consumer discretionary spending the COVID-19 pandemic might have ~~adequate cash for at least the next twelve months to fund~~on our operations and ~~meet all~~the restaurant industry as a whole.

Table of ~~our financial commitments.~~Contents

To further maintain financial flexibility, we have reduced discretionary costs, frozen new hiring and suspended the use of independent contractors. In addition, we temporarily furloughed certain team members across various functional groups in our restaurant support centers and company-operated restaurants and also curtailed the hours of substantially all of the hourly restaurant associates at our company-operated restaurants. We will continue to provide medical, dental and vision benefits for furloughed team members, and we are temporarily waiving their obligations to pay a portion of the premiums for these benefits for up to 90 days.

As noted in the table above, a significant majority of our franchised restaurants remain open, primarily for take-out and delivery sales. We believe initiatives we began several years ago to reinvigorate Applebee's Carside-To-Go takeout platform, establish the IHOP 'N' Go takeout platform and enter into delivery agreements with leading national delivery service providers enabled our franchisees to transition more easily into an off-premise-only mode of operation than other restaurants that did not have off-premise capabilities currently in place

To assist franchisees impacted by COVID-19, we have offered financial support by deferring royalty, advertising and other fees, lease payments for up to two months on a case-by-case basis. We have deferred franchisee remodel and development obligations for up to 12 months. We have given our franchisees the flexibility to offer a limited menu and to modify their operating hours in the way they feel can optimize the functionality of their restaurants in light of COVID-19 limitations in place in their individual locations.

Additionally, we have engaged a national real estate firm to assist franchisees and ourselves with landlord discussions regarding rent abatements, deferrals and other modifications to lease agreements. We have withheld our payment of rents due in April on certain IHOP restaurant leases that are part of our rental operations, subject to the ongoing discussions with the respective landlords noted above.

Key Financial Results


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

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


Effective tax rate		(6.6)		%	23.2		%	29.8		%


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

The financial tables appearing in Management's Discussion and Analysis present amounts in millions of dollars that are rounded from our consolidated financial statements presented in thousands of dollars. As a result,tax benefit recognized for the ~~tables may not foot or crossfoot~~three months ended March 31, 2021 primarily was due to ~~rounding.~~the one-time recognition of excess tax benefits on stock-based compensation related to the departure of our previous chief executive officer.

Three months ended March 31, Favorable
(Unfavorable) Variance
2020 2019

(In millions, except per share data)
Income before income taxes $ 29.1
$ 41.1
$ (12.1 )
Income tax provision (6.7 ) (9.5 ) 2.8
Net income $ 22.3
$ 31.6
$ (9.3 )

Effective tax rate 23.2 % 23.1 % (0.1 )%

Net income per diluted share $ 1.31
$ 1.73
$ (0.42 )
% (decrease)
Weighted average diluted shares 16.5
17.7
(6.9 )%

The following table highlights the primary components of the ~~29.3%~~ decrease in our income before income taxes for the three months ended March 31, ~~2020~~2021, compared to our income before income taxes from the same period of ~~2019:~~2020:


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


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

Favorable
(Unfavorable) Variance
(In millions)
Decrease in gross profit:
Applebee's franchise operations $ (6.1 )
IHOP franchise operations (6.9 )
Company restaurant operations (3.2 )
Rental/financing operations (2.0 )
Total decrease in gross profit (18.2 )
Decrease in General and Administrative (“G&A”) expenses 5.2
Other income and expense items 0.9
Decrease in income before income taxes $ (12.1 )

~~Gross profit for~~We recognized closure and impairment charges of $2.0 million during the three months ended March 31, ~~2020 decreased compared~~2021, primarily $1.9 million related to establishment of or revision to closure reserves for approximately 35 IHOP properties, as well as a $0.1 million impairment to one IHOP property. There were no similar charges during the ~~same period of the prior year, primarily due to a significant decrease in customer traffic resulting from the measures undertaken to stem the spread of COVID-19 discussed above.~~three months ended March 31, 2020.

See “Consolidated Results of Operations - Comparison of the Three Months ended March 31, ~~2020~~2021 and ~~2019”~~March 31, 2020” for additional discussion of the changes ~~presented~~shown above.

Our net income per diluted share for three months ended March 31, 2020 decreased $0.40 per share. Our weighted shares outstanding decreased due to shares repurchased pursuant to stock repurchase programs. See ~~“Liquidity and Capital Resources - Stock Repurchases”~~ ~~for details on our stock repurchase programs.~~

Key Performance Indicators

In evaluating the performance of each restaurant concept, we consider the key performance indicators to be the system-wide sales percentage change, the percentage change in domestic system-wide same-restaurant sales (“domestic same-restaurant sales”), net franchise restaurant development and the change in effective restaurants. Changes in both domestic same-restaurant sales and in the number of Applebee's and IHOP 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.

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Our key performance indicators for the three months ended March 31, ~~2020~~2021 were as follows:

Three months ended March 31, 2020
Applebee's IHOP
Sales percentage decrease (12.1 )% (14.2 )%
% decrease in domestic system-wide same-restaurant sales (10.6 )% (14.7 )%
Net franchise restaurant reduction ⁽¹⁾
(12 ) (1 )
Net (decrease) increase in total effective restaurants ⁽²⁾
(65 ) 8


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

⁽¹⁾ Franchise and area license restaurant ~~openings,~~closings, net of ~~closings,~~openings, during the three months ended March 31, ~~2020.~~2021.

⁽²⁾ Change in the weighted average number of franchise, area license and company-operated restaurants open during the three months ended March 31, ~~2020,~~2021, compared to the weighted average number of those open during the same period of ~~2019.~~2020.

The ~~Applebee's~~changes in sales percentage and domestic same-restaurant sales of both brands were impacted by the varying degrees of restrictions on in-restaurant dining in effect during each period. Restrictions were first initiated in early March of 2020 by federal, state, local and international governments in response to the declaration of the COVID-19 pandemic. As a result, for the first 10 weeks of the 2020 first quarter, our restaurants operated without restriction, but during the last three weeks of that quarter, in-restaurant dining was essentially eliminated as most of our restaurants were either limited only to off-premise sales or were temporarily closed. For all 13 weeks of the 2021 first quarter, most of our restaurants were open for in-restaurant dining, however, the majority of restaurants that were open were operating with some degree of capacity limitation. Additionally, the calculation of the percentage change in domestic same-restaurant sales was also impacted by a shift in the weeks of comparison because of a 53rd week in fiscal 2020.

In light of the distortive effects of both the pandemic and a 53rd week in fiscal 2020 on the key performance indicators as noted above, we believe a comparison of average weekly unit sales, a function of reported retail sales and the number of effective restaurants, for the months of January, February and March of 2021 and 2020, provides additional insight into each brand's performance during the three months ended March 31, 2021 as compared to the same period of the prior year:


	Applebee's						IHOP
	2021		2020		Increase (decrease)		2021		2020		Increase (decrease)
	(in thousands)
January	$	39.5	$	49.8	$	(10.3)	$	24.8	$	36.1	$	(11.3)
February	$	43.5	$	49.7	$	(6.2)	$	27.4	$	35.0	$	(7.6)
March	$	54.3	$	35.1	$	19.2	$	35.1	$	25.4	$	9.7

The decrease in total effective restaurants for each brand reflects both permanent closures, net of openings, over the past 12 months as well as the weighted effect of restaurants temporarily closed during the three months ended March 31, 2021.

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Domestic Same-Restaurant Sales

Applebee’s system-wide domestic same-restaurant sales increased 11.9% for the three months ended March 31, ~~2020~~2021 compared to the same periods of 2019 was due to a decrease in domestic same-restaurant sales as a result of the effects of COVID-19 as well as a decrease in total effective restaurants caused by restaurant closures over the past 12 months, the majority of which took place in 2019. The IHOP sales percentage decrease for the three months ended March 31, ~~2020 was due to a decrease in domestic same-restaurant sales primarily as a result of the effects of COVID-19, partially offset by an~~2020. The increase ~~in total effective restaurants resulting from net restaurant development that took place in 2019.~~

~~Domestic Same-Restaurant Sales~~

~~Applebee’s system-wide domestic same-restaurant sales decreased 10.6% for the three months ended March 31, 2020 from the same period of the prior year. The decrease~~ primarily was due to a ~~significant~~substantial increase in average check partially offset by a decline in customer traffic as a result of the effects of COVID-19 that began to impact our restaurants around the middle of March 2020. Through the week ended March 8, 2020 (the first 10 weeks of our first fiscal quarter of 2020), Applebee's domestic same-restaurant sales increased 3.2%,traffic. The increase in average check was primarily due to ~~an increase~~favorable mix shifts related to a reduction in ~~customer traffic~~core menu items, successful promotional offerings and a larger number of items purchased with off-premise orders. We believe the distribution of the latest round of government stimulus checks that began in March 2021 favorably impacted consumer spending behavior as well as an increase in average customer check. During the weeks ended March 22 and March 29, 2020 (the last two weeks of our fiscal first quarter), by which time the COVID-19 limitations had impacted the majority of our restaurants, Applebee's system-wide domestic same-restaurant sales decreased an average of approximately 78%. As a result, Applebee's same-restaurant sales for the three months ended March 31, 2020 decreased 10.6%.well.

As of March 31, 2020, 1,406 of our 1,657 domestic franchise restaurants were open, virtually all of which were open only for off-premise sales (take-out and delivery). Off-premise sales comprised 16.3% of sales mix for the three months ended March 31, 2020, as compared to 13.0% of sales mix for the first quarter of 2019.

Based on data from Black Box Intelligence, a restaurant sales reporting firm (“Black Box”), Applebee's ~~decrease~~increase in same-restaurant sales ~~was smaller than that of~~for the three months ended March 31, 2021 outperformed the casual dining segment of the restaurant industry (excluding Applebee's) during that same period. During the three months ended March 31, 2021, the casual dining segment also experienced an increase in same-restaurant sales that was due to an increase in average check and an increase in customer traffic. Applebee's increase in average check for the three months ended March 31, 2021 was significantly larger than that of the casual dining segment.

Off-premise sales totaled approximately $344 million and comprised 36.7% of sales mix for the three months ended March 31, 2021, as compared to approximately $153 million of sales comprising 16.3% of sales mix for the three months ended March 31, 2020.

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IHOP's system-wide domestic same-restaurant sales decreased 0.9% for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. ~~During~~The decrease was due to a decline in customer traffic that ~~period,~~was nearly offset by an increase in average check. The increase in average check was primarily due to consumer spending generally as well as increases in both menu prices and delivery prices. We believe the ~~casual~~distribution of the latest round of government stimulus checks that began in March 2021 favorably impacted consumer spending behavior.

Based on data from Black Box, IHOP's decrease in same-restaurant sales for the three months ended March 31, 2021 outperformed the family dining segment ~~also~~of the restaurant industry (excluding IHOP) during that same period. During the three months ended March 31, 2021, the family dining segment experienced a decrease in same-restaurant sales that was

due to a ~~significant decline~~decrease in ~~customer~~ traffic that was partially offset by an increase in average ~~customer~~ check. ~~Applebee's~~IHOP's decrease in traffic for the three months ended March 31, ~~2020~~2021 was smaller than that of the ~~casual~~family dining segment.

* Same-restaurantOff-premise sales ~~data includes area license restaurants beginning in 2019~~

~~IHOP’s system-wide domestic same-restaurant~~totaled approximately $183 million and comprised 33.3% of sales ~~decreased 14.7% (including area license restaurants)~~mix for the three months ended March 31, ~~2020 from the same period in 2019. The decrease primarily was due~~2021, as compared to ~~a significant decline in customer traffic as a result~~approximately $80 million of the effects of COVID-19 that began to impact our restaurants around the middle of March 2020. Through the week ending March 8, 2020 (the first 10 weeks of our first fiscal quarter of 2020), IHOP's domestic same-restaurant sales decreased 0.6%, primarily due to a decrease in customer traffic that was partially offset by an increase in average customer check. During the weeks ended March 22 and March 29, 2020 (the last two weeks of our fiscal first quarter), by which time the COVID-19 limitations had impacted the majority of our restaurants, IHOP's system-wide domestic same-restaurant sales decreased an average of approximately 80%. As a result, IHOP's same-restaurant sales for the three months ended March 31, 2020 decreased 14.7%.

As of March 31, 2020, 1,362 of our 1,709 domestic franchise and area license restaurants remain open, of which 1,158 are open only for off-premise sales (take-out and delivery). Off-premise sales comprisedcomprising 12.8% of sales mix for the three months ended March 31, ~~2020, as compared to 9.5% of sales mix for the first quarter of 2019.~~2020.

Based on data from Black Box, the family dining segment of the restaurant industry also experienced a decrease in same-restaurant sales during the three months ended March 31, 2020, compared to the same period of the prior year, that was due to a significant decline in customer traffic, partially offset by an increase in average customer check. The IHOP decrease in same-restaurant sales during the three months ended March 31, 2020 was larger than that of that the family dining segment, as reported by Black Box, because IHOP experienced a larger decrease in customer traffic.

Restaurant Data

The following table sets forth the number of “Effective Restaurants” in the Applebee’s and IHOP systems and information regarding the percentage change in sales at those restaurants compared to the same ~~period~~periods 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.

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	Three months ended March 31,							Three months ended March 31,
	2020			2019					2021			2020
Applebee's Restaurant Data	(Unaudited)						Applebee's Restaurant Data		(Unaudited)
Effective Restaurants^(a)							Effective Restaurants(a)
Franchise	1,697			1,762			Franchise		1,628			1,697
Company	69			69			Company		69			69
Total	1,766			1,831			Total		1,697			1,766

System-wide^(b)							System-wide(b)
Domestic sales percentage change^(c)	(12.1		)%	(1.4		)%	Domestic sales percentage change(c)		1.2		%	(12.1)		%
Domestic same-restaurant sales percentage change^(d)	(10.6		)%	1.8		%	Domestic same-restaurant sales percentage change(d)		11.9		%	(10.6)		%
Franchise^(b)							Franchise(b)
Domestic sales percentage change^{(c) (e)}	(12.1		)%	(4.7		)%
Domestic sales percentage change(c)							Domestic sales percentage change(c)		0.7		%	(12.1)		%
Domestic same-restaurant sales percentage change^(d)	(10.6		)%	1.6		%	Domestic same-restaurant sales percentage change(d)		11.5		%	(10.6)		%
Average weekly domestic unit sales (in thousands)	$	44.6		$	49.6		Average weekly domestic unit sales (in thousands)		$	46.8		$	44.6

IHOP Restaurant Data							IHOP Restaurant Data

Effective Restaurants^(a)							Effective Restaurants(a)
Franchise	1,660			1,657			Franchise		1,563			1,660
Area license	161			156			Area license		157			161

Total	1,821			1,813			Total		1,720			1,821

System-wide^(b)							System-wide(b)
Sales percentage change^(c)	(14.2		)%	2.4		%	Sales percentage change(c)		(12.1)		%	(14.2)		%
Domestic same-restaurant sales percentage change, including area license restaurants^(d)	(14.7		)%	1.2		%	Domestic same-restaurant sales percentage change, including area license restaurants(d)		(0.9)		%	(14.7)		%

Franchise^(b)							Franchise(b)
Sales percentage change^(c)	(14.3		)%	2.3		%	Sales percentage change(c)		(12.9)		%	(14.3)		%
Domestic same-restaurant sales percentage change^(d)	(14.7		)%	1.1		%	Domestic same-restaurant sales percentage change(d)		(1.9)		%	(14.7)		%
Average weekly unit sales (in thousands)	$	31.7		$	37.1		Average weekly unit sales (in thousands)		$	29.4		$	31.7

Area License^(b)							Area License(b)
Sales percentage change^(c)	(13.8		)%	2.7		%	Sales percentage change(c)		(3.7)		%	(13.8)		%

(a) “Effective Restaurants” are the weighted average number of restaurants open in each fiscal period, adjusted to account for restaurants open for only a portion of the period. Information is presented for all Effective Restaurants in the Applebee’s and IHOP systems, which consist of restaurants owned by franchisees and area licensees as well as those owned by the Company. Effective Restaurants do not include units operated as ghost kitchens (small kitchens with no store-front presence, used to fill off-premise orders).

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


		Three months ended March 31,					Three months ended March 31,
		2020		2019					2021		2020
Reported sales (in millions)	(Unaudited)					Reported sales (in millions)		(Unaudited)

Applebee's domestic franchise restaurant sales		$	918.2	$	1,044.2	Applebee's domestic franchise restaurant sales			$	924.7	$	918.2
Applebee's company-operated restaurants		31.3		35.7		Applebee's company-operated restaurants			35.9		31.3
IHOP franchise restaurant sales		684.8		798.8		IHOP franchise restaurant sales			596.7		684.8
IHOP area license restaurant sales		64.0		74.3		IHOP area license restaurant sales			61.7		64.0
Total		$	1,698.3	$	1,953.0	Total			$	1,619.0	$	1,698.3

(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~~during 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.

~~(e)~~

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

Franchise restaurants opened:
Domestic			2	—

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



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




IHOP
Summary - beginning of period:
Franchise	1,611	1,680
Area license	158	161
Company	3	—
Total IHOP restaurants, beginning of period	1,772	1,841

Franchise/area license restaurants opened:
Domestic franchise	8	6
Domestic area license	—	1
International franchise	—	2

Total franchise/area license restaurants opened	8	9
Franchise/area license restaurants permanently closed:
Domestic franchise	(16)	(6)
Domestic area license	(2)	(2)
International franchise	(9)	(2)

Total franchise/area license restaurants permanently closed	(27)	(10)
Net franchise/area license restaurant closures	(19)	(1)

Franchise restaurants reacquired by the Company	(1)	—
Net reduction in franchise/area license restaurants	(20)	(1)

Summary - end of period:
Franchise	1,593	1,680
Area license	156	160
Company	4	—
Total IHOP restaurants, end of period	1,753	1,840
Domestic	1,660	1,709
International	93	131

The restaurant counts and activity presented above do not include three domestic Applebee's ghost kitchens (small kitchens with no store-front presence, used to fill off-premise orders) and two international IHOP ghost kitchens. The Applebee's franchise ~~sales percentage change for~~restaurant count at the ~~three months~~beginning of the period ended March 31, ~~2019~~2021 was ~~impacted~~adjusted downward by two restaurants, representing ghost kitchens that had been included in the ~~acquisition of 69 franchise restaurants in December 2019 that became~~total reported as ~~company-operated.~~of December 31, 2020.

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Restaurant Development Activity
Three months ended March 31,
2020 2019
Applebee's (Unaudited)
Summary - beginning of period:
Franchise 1,718
1,768
Company restaurants 69
69
Beginning of period 1,787
1,837

Total franchise restaurants opened —
—
Franchise restaurants permanently closed:
Domestic (8 ) (4 )
International (4 ) (3 )
Total franchise restaurants permanently closed (12 ) (7 )
Net franchise restaurant reduction (12 ) (7 )

Summary - end of period:
Franchise 1,706
1,761
Company restaurants 69
69
Total Applebee's restaurants, end of period 1,775
1,830
Domestic 1,657
1,689
International 118
141

IHOP
Summary - beginning of period:
Franchise 1,680
1,669
Area license 161
162
Total IHOP restaurants, beginning of period 1,841
1,831

Franchise/area license restaurants opened:
Domestic franchise 6
6
Domestic area license 1
—
International franchise 2
—
Total franchise/area license restaurants opened 9
6
Franchise/area license restaurants permanently closed:
Domestic franchise (6 ) (11 )
Domestic area license (2 ) (3 )
International franchise (2 ) (1 )
Total franchise/area license restaurants permanently closed (10 ) (15 )
Net franchise/area license restaurant reduction (1 ) (9 )

Summary - end of period:
Franchise 1,680
1,663
Area license 160
159
Total IHOP restaurants, end of period 1,840
1,822
Domestic 1,709
1,697
International 131
125

The closures presented in the ~~table~~tables above represent permanent closures of restaurants. Temporary closures, which can occur for a variety of reasons, are not reflected as ~~a reduction~~reductions in this table and temporarily closed restaurants are included in the summary counts at the beginning and end of each period shown. ~~None~~Temporary closures are reflected in the weighted calculation of Effective Restaurants presented in the preceding Restaurant Data table.

Closures of Applebee's and IHOP ~~permanent closures shown above were related~~restaurants adversely impact our system-wide retail sales that drive our franchise royalty revenues as well as, in the case of IHOP restaurants, sales of proprietary pancake and waffle dry mix. Further, with certain restaurants, we own or lease the underlying property and sublease it to ~~COVID-19 issues, but were related~~the applicable franchisee. Thus, our rental income also could be adversely affected due to ~~typical expirations of franchise agreements, lease terminations~~our obligation to make rental or other business considerations. Our franchisees are independent businesses and decisions to close restaurants can be impacted by numerous factors that are outside of our control, including but not limited to, franchisees' agreements with their landlords and lenders. In March 2020, an IHOP franchisee that operated 49 locations indicated its intention to cease operations at certain of its locations. Subsequently, in April 2020, this franchisee initiated an assignmentpayments for ~~the benefit of credito~~such properties.

rs.

For the full year of 2020, we believe our expectations regarding net restaurant development and closures by our Applebee’s franchisees and IHOP franchisees and area licensees could be materially impacted by the growing global impact of COVID-19 and our temporary suspension of franchisee development obligations in response thereto. Given the significant uncertainties related to
the COVID-19 pandemic, including the timing of lifting of dine-in operating restrictions on restaurants, customer re-engagement with our brands and the short- and long-term impact on consumer discretionary spending, ~~we have withdrawn our 2020 net restaurant development and closure guidance issued on February 24, 2020.~~

CONSOLIDATED RESULTS OF OPERATIONS

Comparison of the Three Months endedMarch 31, ~~2020~~2021 and ~~2019~~2020

Financial Results

Revenue Three months ended March 31, Favorable
(Unfavorable) Variance
2020 2019

(In millions)
Franchise operations $ 145.1
$ 168.9
$ (23.8 )
Rental operations 29.0
30.7
(1.7 )
Company restaurant operations 31.3
35.8
(4.5 )
Financing operations 1.5
1.8
(0.3 )
Total revenue $ 206.9
$ 237.2
$ (30.3 )
Change vs. prior period (12.8 )%


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

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

Gross Profit Three months ended March 31,
Favorable
(Unfavorable) Variance
2020 2019

(In millions)
Franchise operations $ 75.6
$ 88.6
$ (13.0 )
Rental operations 6.5
8.1
(1.6 )
Company restaurant operations 1.0
4.2
(3.2 )
Financing operations 1.3
1.7
(0.4 )
Total gross profit $ 84.4
$ 102.6
$ (18.2 )
Change vs. prior period (17.7 )%

Total revenue for franchise and ~~gross profit~~rental operations for the three months ended March 31, ~~2020~~2021 decreased compared with the same periods of the prior year, primarily due to ~~a significant~~restaurant closures and lease-buy-outs over the past 12 months, while financing revenues declined due to the progressive decline in ~~customer~~interest revenue as note balances are repaid. Rental operations revenue was also impacted a decline in rent paid based on a percentage of franchisees' retail sales. These declines were partially offset by an increase in revenue from Applebee's company-operated restaurants due to a higher average check and increased traffic ~~at our restaurants~~during the three months ended March 31, 2021 as ~~a result~~compared to the same period of the ~~effects of measures put in place by various levels of government to mitigate~~prior year.


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

			(In millions)
Franchise operations			$	76.0			$	75.6	$	0.4
Rental operations			5.2				6.5		(1.3)
Company restaurant operations			3.1				1.0		2.1
Financing operations			1.0				1.3		(0.3)
Total gross profit			$	85.3			$	84.4	$	0.9
Change vs. prior period			1.0		%

Total gross profit for the ~~spread~~three months ended March 31, 2021 increased compared with the same period of the ~~COVID-19 virus and related changes~~prior year, primarily due to the increased revenue from Applebee's company-operated restaurants, partially offset by a decline in ~~consumer behavior.~~

revenue from rental operations.

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	Three months ended March 31,						Favorable (Unfavorable) Variance				Three months ended March 31,						Favorable (Unfavorable) Variance
Franchise Operations	2020			2019						Franchise Operations		2021				2020
	(In millions, except number of restaurants)												(In millions, except number of restaurants)
Effective Franchise Restaurants:⁽¹⁾										Effective Franchise Restaurants:(1)
Applebee’s	1,697			1,762			(65		)	Applebee’s			1,628				1,697			(69)
IHOP	1,821			1,813			8			IHOP			1,720				1,821			(101)

Franchise Revenues:										Franchise Revenues:
Applebee’s franchise fees	$	37.8		$	43.3		$	(5.5	)	Applebee’s franchise fees			$	38.7			$	37.8		$	0.9
IHOP franchise fees	45.5			53.0			(7.5		)	IHOP franchise fees			41.4				45.5			(4.1)
Advertising fees	61.8			72.6			(10.8		)	Advertising fees			60.9				61.8			(0.9)
Total franchise revenues	145.1			168.9			(23.8		)	Total franchise revenues			141.0				145.1			(4.1)
Franchise Expenses:										Franchise Expenses:
Applebee’s	1.2			0.6			(0.6		)	Applebee’s			1.1				1.2			0.1
IHOP	6.5			7.1			0.6			IHOP			3.0				6.5			3.5
Advertising expenses	61.8			72.6			(10.8		)	Advertising expenses			60.9				61.8			0.9
Total franchise expenses	69.5			80.3			10.8			Total franchise expenses			65.0				69.5			4.5
Franchise Gross Profit:										Franchise Gross Profit:
Applebee’s	36.6			42.7			(6.1		)	Applebee’s			37.6				36.6			1.0
IHOP	39.0			45.9			(6.9		)	IHOP			38.4				39.0			(0.6)
Total franchise gross profit	$	75.6		$	88.6		$	(13.0	)	Total franchise gross profit			$	76.0			$	75.6		$	0.4
Gross profit as % of revenue ⁽²⁾	52.1		%	52.5		%				Gross profit as % of revenue (2)			53.9		%		52.1		%
Gross profit as % of franchise fees ^{(2) (3)}	90.7		%	92.0		%
Gross profit as % of franchise fees (2)(3)										Gross profit as % of franchise fees (2)(3)			94.9		%		90.7		%

_____________________________________________________

⁽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.

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

Applebee’s franchise fee revenue for the three months ended March 31, ~~2020 decreased 12.8%~~2021 increased 2.2% compared to the same period of the prior year. Approximately ~~$4.5~~$1.3 million of the ~~decrease~~increase was due to ~~a decrease of 10.6%~~the improvement in domestic franchise same-restaurant sales, ~~primarily caused~~approximately $1.0 million was due to improved collectibility and a slightly higher effective royalty rate, and $0.6 million was due to an increase in other franchise fees. These favorable items were partially offset by ~~the adverse impact on customer traffic of COVID-19-related mitigation measures and changes~~a $1.0 million decrease in ~~consumer behavior. Revenue decreased~~royalty revenue due to restaurant closures, a $0.5 million ~~due to fewer effective franchise restaurants~~increase in ~~operation during the three months ended March 31, 2020 because of restaurant closures by franchisees, the majority of which took place~~delivery credits that reduce royalty revenue and an $0.8 million decrease in ~~2019.~~international revenues.

The ~~increase~~decrease in Applebee's franchise expenses for the three months ended March 31, ~~2020~~2021 compared with the same period of the prior year primarily was due to ~~an increase~~a decrease in bad debt expense. Bad debt expense for the three months ended March 31, ~~2020~~2021 was ~~$0.3~~less than $0.1 million as compared to a bad debt ~~recovery credit~~expense of $0.3 million during the three months ended March 31, ~~2019.~~2020.

IHOP franchise fee revenue for the three months ended March 31, ~~2020~~2021 decreased ~~14.1%~~8.9% compared to the same period of the prior year, primarily due to lower royalty and pancake and waffle dry mix revenues resulting from a decrease ~~of 14.7%~~ in domestic franchise same-restaurant sales, ~~primarily caused by the adverse impact on customer traffic~~a decline of ~~COVID-19-related mitigation measures~~$0.9 million in international revenues and ~~changes in consumer behavior, as well as~~ a decrease of ~~$0.5 million in franchise/transfer fees. Partially offsetting these unfavorable items was an increase in revenue of $0.5~~$0.6 million due to restaurant ~~development over the past 12 months.~~ closures. These unfavorable changes were partially offset by a $1.6 million increase in termination and other franchise fees.

IHOP franchise expenses for the three months ended March 31, ~~2020~~2021 declined from the same period of the prior year primarily due to a $2.3 million decrease in ~~purchase~~bad debt expense and a decline in purchases of pancake and waffle dry mix. IHOP reduced its allowance for bad ~~debt expense for~~debts by $2.1 million during the three months ended March 31, ~~2020 was $0.2 million.~~

~~Gross profit decreased for the three months ended March 31, 2020~~2021 compared to ~~the same period~~a bad debt expense of $0.2 million in the prior year ~~primarily due~~period. Favorable changes to ~~significant decreases~~the aging status of certain franchisee receivables resulted in ~~domestic franchise same-restaurant sales for both Applebee's and IHOP primarily resulting from the adverse impact on customer traffic~~a downward revision of ~~COVID-19-related mitigation measures and changes in consumer behavior.~~estimated reserve requirements.

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Advertising revenue and expense by brand for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 were as follows:


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

Three months ended March 31, Increase (decrease)
2020 2019
(in millions)
Advertising Revenues and Expenses:

Applebee’s $ 36.6
$ 43.0
$ (6.4 )
IHOP 25.2
29.6
(4.4 )
Total advertising revenues and expenses 61.8
72.6
(10.8 )

Applebee's advertising revenue and expense for the three months ended March 31, ~~2020~~2021 increased 5.7% compared to the same period of the prior year. Approximately $2.1 million of the increase was due to improved collectibilty from franchisees, and $1.4 million was due to the increase in domestic franchise same-restaurant sales. Partially offsetting the increases was a decrease of $1.1 million due to permanent domestic restaurant closures and a $0.5 million increase in delivery credits that reduce advertising revenue. IHOP's advertising revenue and expense for the three months ended March 31, 2021 decreased ~~15.1%~~11.6% compared to the same period of the prior year, primarily due to the decrease ~~of 10.6%~~ in domestic franchise same-restaurant sales, ~~and~~as well as a ~~$1.7~~$0.5 million increase in uncollected amounts from franchisees. IHOP's advertising revenue and expense for the three months ended March 31, 2020 decreased 15.0% compared to the same period of the prior year, primarilydecrease due to ~~the decrease of 14.7% in domestic franchise same-restaurant sales.~~ permanent restaurant closures.

It is our accounting policy to recognize any deficiency in advertising fee revenue compared to advertising expenditure or any recovery of a previously recognized deficiency in advertising fee revenue compared to advertising expenditure in the fourth quarter of our fiscal year.


Rental Operations	Three months ended March 31,						Favorable (Unfavorable) Variance			Rental Operations	Three months ended March 31,						Favorable (Unfavorable) Variance
	2020			2019								2021				2020
	(In millions)												(In millions)
Rental revenues	$	29.0		$	30.7		$	(1.7	)	Rental revenues			$	26.1			$	29.0		$	(2.9)
Total rental expenses	22.5			22.6			0.1

Rental expenses										Rental expenses			20.9				22.5			1.6
Rental operations gross profit	$	6.5		$	8.1		$	(1.6	)	Rental operations gross profit			$	5.2			$	6.5		$	(1.3)
Gross profit as % of revenue ⁽¹⁾	22.3		%	26.3		%				Gross profit as % of revenue (1)			19.8		%		22.3		%

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

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

Rental segment revenue for the three months ended March 31, ~~2020~~2021 decreased as compared to the same period of the prior year, primarily due to a ~~$1.0~~$0.9 million decrease in rental income based on a percentage of franchisees' retail sales, a $0.9 million decrease due to restaurant closures and lease buy-outs, a $0.7 million progressive decline in level rent adjustments and a progressive decline of $0.4 million in interest income as direct financing leases are repaid. Rental segment expenses for the three months ended March 31, ~~2020~~2021 decreased ~~slightly~~ compared to the same period of the prior year ~~as decreases~~due to an $0.8 million decrease in rental expenses, primarily due to restaurant closures and lease buy-outs, a $0.4 million decrease in depreciation expense, a $0.2 million decrease in rent paid based on a percentage of franchisees' retail sales and a $0.2 million decrease in interest expense as finance lease obligations are ~~repaid and a decrease in depreciation charges was essentially offset by lease renewals and extensions.~~repaid.

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Company Restaurant Operations Three months ended March 31, Favorable
(Unfavorable) Variance
2020 2019
(In millions)
Company restaurant sales $ 31.3
$ 35.8
$ (4.5 )
Company restaurant expenses 30.3
31.6
1.3
Company restaurant gross profit $ 1.0
$ 4.2
$ (3.2 )
Gross profit as % of revenue ⁽¹⁾
3.1 % 11.7 %
Company Restaurant Operations


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

Effective Restaurants			69				69			—
			(In millions)
Applebee's Company restaurant sales (1)			$	36.0			$	31.3		$	4.7
Applebee's Company restaurant expenses (1)			32.7				30.3			(2.4)
IHOP restaurant expenses (2)			0.2				—			(0.2)
Company restaurant gross profit			$	3.1			$	1.0		$	2.1
Average weekly sales (in thousands)			$	39.9			$	34.8
Gross profit as % of revenue (3)			9.0		%		3.1		%

(1)⁽¹⁾ Related to 69 Applebee's company-operated restaurants.

(2) Costs associated with IHOP restaurants in the process of being refranchised.

(3) Calculated for Applebee's company-operated restaurants only. Percentages calculated on actual amounts, not rounded amounts presented above.

At March 31, 2020, all 69 company-operated restaurants were open, but operations were limited to off-premise sales only. Through the week ending March 8, 2020 (the first 10 weeks of our first fiscal quarter of 2020), same-restaurant sales at our company-operated restaurants increased 0.3%, however, because of COVID-19-related mitigation measures and changes in consumer behavior during the last three weeks of the quarter, same-restaurantApplebee's company restaurant sales for the three months ended March 31, 2021 increased compared to the same period of 2020,

~~decreased 12.6%. Seven~~ due to an increase in average check as well as an increase in traffic. The increase in average check was due to favorable product mix and daypart shifts. We believe the distribution of the latest round of government stimulus checks in March 2021 favorably impacted both traffic and average check. All 69 of the Applebee's company-operated restaurants are located in South Carolina or North Carolina. Since the second week of January 2021, the 27 restaurants in South Carolina have operated without capacity limitations, while the 42 restaurants in North Carolina have operated at 50% capacity. In comparison, all 69 restaurants operated without restriction for the first 10 weeks of the 2020 first quarter but essentially were ~~temporarily closed after March 31,~~limited to off-premise sales for the last three weeks of the first quarter of 2020. ~~The comparison of~~

Gross profit and gross profit as a percentage of revenue ~~between~~for the three months ended March 31, 2021 improved compared to gross profit for the three months ended March 31, 2020, ~~and the same period of the prior year~~which was adversely impacted by the COVID-19-related operating constraints described above.

In addition, Company segment restaurant expenses for the three months ended March 31, 2021 include approximately $0.2 million of costs associated with reacquired IHOP restaurants in ~~place~~the process of being refranchised. None of the reacquired IHOP restaurants were operated during the ~~last~~ three ~~weeks of the quarter.~~months ended March 31, 2021.

Financing Operations

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

Financing revenue and gross profit for the three months ended March 31, ~~2020~~2021 declined primarily ~~due to decreases~~because of progressive decline in interest income as note balances are repaid.


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

G&A Expenses Three months ended March 31, Favorable
(Unfavorable) Variance
2020 2019
(In millions)
Total G&A expenses $ 37.6
$ 42.8
$ 5.2

G&A expenses for the three months ended March 31, ~~2020 decreased 12.2%~~2021 increased 6.1% compared to the same period of the prior year, primarily due to ~~a $5.6 million decrease~~an increase in personnel-related costs, partially offset by a decrease in travel costs. The increase in personnel-related costs primarily was due to higher costs of equity-based and other incentive ~~compensation, partially offset by increased depreciation on capitalized software projects.~~compensation. Included in total G&A expenses for the three months ended March 31, ~~2020~~2021 were ~~$1.6~~$1.2 million of expenses related to company-operated restaurants, an ~~increase of $0.3 million from the~~amount similar to same period of the prior year.

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Other Income and Expense Items

Three months ended March 31, Favorable
(Unfavorable) Variance
2020 2019
(In millions)
Interest expense, net $ 15.2
$ 15.4
$ 0.2
Amortization of intangible assets 2.8
2.9
0.1
Closure and impairment (0.0 ) 0.2
0.2
(Gain) loss on disposition of assets (0.2 ) 0.1
0.3
Total $ 17.7
$ 18.6
$ 0.9


Closure and Impairment Charges	Three months ended March 31,					Favorable (Unfavorable) Variance
		2021			2020
			(In millions)
Closure charges			$	1.9		$	(0.0)	$	(1.9)
Long-lived tangible asset impairment			0.1			—		$	(0.1)
Total closure and impairment charges			$	2.0		$	(0.0)	$	(2.0)

Closure charges for the three months ended March 31, 2021 related the establishment of or revision to closure reserves for approximately 35 IHOP restaurants. The $0.1 million of impairment related to the operating lease right-of-use asset of one IHOP restaurant.


Other Income and Expense Items	Three months ended March 31,					Favorable (Unfavorable) Variance
		2021			2020
			(In millions)
Interest expense, net			$	16.5		$	15.2	$	(1.3)

Amortization of intangible assets			2.7			2.8		0.1
Loss (gain) on disposition of assets			0.2			(0.2)		(0.4)
Total			$	19.4		$	17.8	$	(1.6)

Interest expense, net

Interest expense, net for the three months ended March 31, ~~2020~~2021 was ~~lower~~higher than the same ~~periods~~period of the prior year, primarily due to an increase in interest ~~income partially offset by an increase in interest~~ expense on ~~borrowings~~$220.0 million borrowed under our ~~revolving credit facility. Interest income~~Credit Facility in March 2020. The $220.0 million was outstanding for approximately nine weeks during the three months ended March 31, ~~2020 was $0.7 million as~~2021, compared to ~~$0.2~~$220.0 million outstanding for less than two weeks during the three months ended March 31, ~~2019.~~2020. See “Liquidity and Capital Resources” for additional discussion ofrelated to the ~~recent increase in borrowings under the revolving credit facility.~~borrowing.

Loss on disposition of assets

~~Closure and impairment~~

There were no individually significant ~~closure and impairment charges during the three months ended March 31, 2020 and 2019.~~

~~During the three months ended March 31, 2020, we performed assessments to determine whether events~~losses or changes in circumstances have occurred that could indicate a potential impairment to our goodwill and intangible assets (primarily related to our acquisition of Applebee's in 2007), as well as our tangible assets. We evaluated multiple scenarios modeling impacts of COVID-19 on our key performance indicators and our long-term view of future trends in sales, operating expenses, overhead expenses, depreciation, capital expenditures and changes in working capital. We also considered the continuing favorable benefits of the Tax Cuts and Jobs Act of 2017, the strong recovery of the Applebee's brand in 2018 and the Applebee's brand

performance during the first quarter of 2020 through the week ended March 8, 2020. We concluded it was not more likely than not that the carrying value of goodwill and intangible assets exceeded fair value as of March 31, 2020.

The COVID-19 outbreak has had a significant impact on the global economy, including but not limited to stock price volatility in general, the volatility of our stock price as well as the stock prices of our competitors, declining sales at our restaurants and the overall challenging environment for the restaurant industry. Given the high degree of uncertainty as to whether, when or the manner in which the conditions surrounding the pandemic will change, including the timing of any lifting of restrictions on restaurant operating hours, dine-in limitations or other restrictions that largely limited restaurants to take-out and delivery sales, customer engagement with our brands, the short- and long-term impact on consumer discretionary spending and overall global economic conditions, it is possible that non-cash impairments could be identified in our goodwill, intangible assets and tangible assets in the future. However, the likelihood or the amount of an impairment charge cannot be reasonably estimated at this time.

~~Gain/loss on disposition of assets~~

~~There were no individually significant~~ gains ~~or losses~~ on disposition of assets during the three months ended March 31, ~~2020~~2021 and ~~2019.~~2020.


Income Taxes	Three months ended March 31,						Favorable (Unfavorable) Variance			Income Taxes	Three months ended March 31,						Favorable (Unfavorable) Variance
	2020			2019								2021				2020
	(In millions)												(In millions)
Income tax provision	$	6.7		$	9.5		$	2.8
Income before income taxes										Income before income taxes			$	24.0			$	29.1		$	(5.1)
Income tax (benefit) provision										Income tax (benefit) provision			$	(1.6)			$	6.7		$	8.3
Effective tax rate	23.2		%	23.1		%	(0.1		)%	Effective tax rate			(6.6)		%		23.2		%	29.8		%

Our income tax provision or benefit will vary from period to period in our normal course of business 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 were addressed in the preceding sections of “Consolidated Results of Operations - Comparison of the Three Months Ended March 31, ~~2020~~2021 and ~~2019.~~2020.”

Our effective tax rate for the three months ended March 31, ~~2020~~2021 was ~~essentially the same as~~significantly different than the rate ~~for the three months ended March 31, 2019. As a result~~ of the ~~growing global impact from~~prior comparable period and the ~~COVID-19 pandemic, estimating a reliable annual effective~~statutory federal tax rate ~~for the year was not possible~~of 21%, primarily due to ~~changes in estimated forecast having a significant impact~~the one-time recognition of excess tax benefits on stock-based compensation related to the annual effective tax rate. Since forecasting an annual effective tax rate under these circumstances would not provide a meaningful estimate, the Company believes that the actual year-to-date effective tax rate is the best estimatedeparture of the annual tax rate in accordance with U.S. GAAP. The Company’s income tax provision has been calculated utilizing its actual effective tax rate based on the actual year-to-date results for the three-month period ended March 31, 2020.our previous chief executive officer.

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Liquidity and Capital Resources

On June 5, 2019, Applebee’s Funding LLC and IHOP Funding LLC (the “Co-Issuers”), each a special purpose, wholly-owned indirect subsidiary of the Company, issued two tranches of fixed rate senior secured notes, the Series 2019-1 4.194% Fixed Rate Senior Secured Notes, Class A-2-I (“Class A-2-I Notes”) in an initial aggregate principal amount of $700 million and the Series 2019-1 4.723% Fixed Rate Senior Secured Notes, Class A-2-II (“Class A-2-II Notes”) in an initial aggregate principal amount of $600 million (the “Class A-2-II Notes” and, together with the Class A-2-I Notes, the “2019 Class A-2 Notes”). The 2019 Class A-2 Notes were issued pursuant to an offering exempt from registration under the Securities Act of 1933, as amended.

The Co-Issuers also ~~replaced their existing revolving financing facility, the 2018-1 Variable Funding Senior Notes, Class A-1 (“2018-1 Class A-1 Notes”), with~~established a new revolving financing facility, the 2019-1 Variable Funding Senior Notes, Class A-1 (the ~~“Revolver”~~“Credit Facility”)~~, on substantially the same terms as the 2018-1 Class A-1 Notes in order to conform the term of the Revolver to the anticipated repayment dates for the 2019 Class A-2 Notes. The Revolver~~ that allows for drawings up to $225 million of variable funding notes and the issuance of letters of credit. The ~~Revolver and the~~ 2019 Class A-2 Notes and the Credit Facility are referred to collectively herein as the “New Notes.” The New Notes were issued in a securitization transaction pursuant to which substantially all the domestic revenue-generating assets and domestic intellectual property held by the Co-Issuers and certain other special-purpose, wholly-owned indirect subsidiaries of the Company (the “Guarantors”) were pledged as collateral to secure the New Notes.

While the 2019 Class A-2 Notes are outstanding, payment of principal and interest is required to be made on the 2019 Class A-2 Notes on a quarterly basis. The quarterly principal payment oftotaling $3.25 million on the 2019 Class A-2 Notes may be suspended when the leverage ratio for the Company and its subsidiaries is less than or equal to 5.25x. ~~In general, the leverage ratio is our indebtedness (as defined in the Indenture) divided by adjusted EBITDA (as defined in the Indenture) for the four preceding quarterly periods.~~ The complete definitions of all calculation elements of the leverage ratio are contained in the Base Indenture, dated as of September 30, 2014, amended and restated as of June 5, 2019 (the “Base Indenture”), as supplemented by the related Series 2019-1 Supplement to the Base Indenture, dated June 5, 2019 (the “Series 2019-1 Supplement”), among the Co-Issuers and Citibank, N.A., as the trustee (in such capacity, the “Trustee”) and securities intermediary (the Base Indenture and the Series 2019-1 Supplement, collectively, the “Indenture”). In general, the leverage ratio is our indebtedness (as defined in the Indenture) divided by adjusted EBITDA (as defined in the Indenture) for the four preceding quarterly periods.

As of March 31, ~~2020, the Company's~~2021, our leverage ratio was ~~4.79x; accordingly, no~~7.02x. As a result, quarterly principal ~~payment~~payments on the 2019 Class A-2 Notes ~~will~~of $3.25 million continue to be ~~required during the second quarter of 2020. Exceeding~~required. The leverage ratio is not a maintenance covenant and exceeding the leverage ratio of 5.25x does not violate any covenant related to the New Notes.

WeThe Company may voluntarily repay the ~~New~~2019 Class A-2 Notes at any time; however, if we repay the ~~New~~2019 Class A-2 Notes prior to certain dates we would be required to pay make-whole premiums. As of March 31, ~~2020,~~2021, the make-whole premium associated with voluntary prepayment of the Class A-2-I Notes was approximately ~~$51~~$29 million; this amount declines ~~progressively~~ each quarter to zero in June 2022. As of March 31, ~~2020,~~2021, the make-whole premium associated with voluntary prepayment of the Class A-2-II Notes was approximately ~~$88~~$59 million; this amount declines ~~progressively~~ each quarter to zero in June 2024. We would also be subject to a make-whole premium in the event of a mandatory prepayment required following a Rapid Amortization Event or certain asset dispositions. The mandatory make-whole premium requirements are considered derivatives embedded in the New Notes that must be bifurcated for separate valuation. We estimated the fair value of these derivatives to be immaterial as of March 31, ~~2020,~~2021, based on the probability-weighted discounted cash flows associated with either event.

Covenants and Restrictions

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

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•DSCR less than 1.75x - Cash Flow Sweeping Event

•DSCR less than 1.20x - Rapid Amortization Event

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

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

Our DSCR for the reporting period ended March 31, 2021 was approximately 3.45x.

During the second quarter of 2020, ~~was 3.93x.~~

~~We intend to~~we voluntarily ~~increase~~increased the interest reserve ~~required to~~ set aside for our securitized debt ~~currently~~from the required $16.4 ~~million.~~million to $32.8 million, which represented an estimated six months of interest and fees related to the 2019 Class A-2 Notes and the Credit Facility. In April 2021, we reduced the balance of the interest reserve to $16.4 million, the required three months of interest and fees related to the 2019 Class A-2 Notes and the Credit Facility. Also, during the second quarter of 2020, we voluntarily began accelerating the funding of interest on the 2019 Class A-2 Notes and the Credit Facility with the redirection of cash receipts within our securitization structure. As of April 27, 2021, the interest payments on the 2019 Class A-2 Notes and the Credit Facility that are due June 7, 2021 and September 7, 2021 have been fully funded within the securitization structure, in addition to the $16.4 million of interest reserve noted above.

Use of Credit Facilities

~~From~~In March ~~17 to March 19,~~ 2020, the Co-Issuers drew down a total of ~~$220~~$220.0 million offrom the ~~available amount under the Revolver.~~Credit Facility. The $220.0 million borrowing was repaid on March 5, 2021. The current interest rate for borrowings under the ~~Revolver~~Credit Facility is the three-month LIBOR rate plus 2.15% for 60% of the advances and the commercial paper funding rate of our conduit investor plus 2.15% for ~~the remaining portion~~40% of the advances. ~~During~~The weighted average interest rate on Credit Facility borrowings for the period outstanding during the three months ended March 31, ~~2020, the weighted average interest rate on Revolver borrowings for the period outstanding~~2021 was ~~3.39%~~2.4%.

It is anticipated that the principal and interest on the Revolver will be repaid in full on or prior to the quarterly payment date in June 2024, subject to two additional one-year extensions at the option of the Company upon the satisfaction of certain conditions. The proceeds of the drawdown will be available for general corporate purposes. Although the Company has no immediate need for additional liquidity, the Co-Issuers drew on the Revolver to increase the Company’s financial flexibility in light of current market conditions and uncertainty due to the COVID-19 outbreak.

At March 31, ~~2020, $2.8~~2021, there were no outstanding borrowings under the Credit Facility. At March 31, 2021, $3.3 million was pledged against the ~~Revolver~~Credit Facility for outstanding letters of credit, leaving ~~$2.2~~$221.7 million ~~of the Revolver~~ available for borrowing. The letters of credit are used primarily to satisfy insurance-related collateral requirements.

Capital Allocation

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. To maintain financial flexibility in light of the COVID-19 pandemic, we have not declared any dividends after the first quarter of 2020 and have suspended repurchasing our common stock. We will continue to evaluate our capital allocation strategy as industry conditions evolve and normal restaurant operations resume.

Dividends

~~During~~We did not declare or pay dividends during the three months ended March 31, 2020, we paid dividends on common stock of $11.5 million, representing a cash dividend of $0.69 per share declared in the fourth quarter of 2019, paid in January 2020. On February 22, 2020, our Board of Directors approved payment of a cash dividend of $0.76 per share of common stock. This dividend was paid on April 3, 2020 to stockholders of record at the close of business on March 20, 2020. We reported dividends payable of $12.7 million at March 31, 2020.2021.

Stock Repurchases

~~A summary~~

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We did not repurchase any shares ~~repurchased~~ under the 2019 Repurchase Program during the three months ended March 31, ~~2020 and cumulatively, is as follows:~~

Shares Cost of shares
(In millions)
2019 Repurchase Program:
Repurchased during the three months ended March 31, 2020 459,899
$ 26.5
Cumulative (life-of-program) repurchases 1,697,597
$ 129.8
Remaining dollar value of shares that may be repurchased n/a $ 70.2

~~We evaluate dividend payments on common stock and~~2021. As of March 31, 2021, cumulative repurchases of ~~common~~ stock ~~within~~total 1,697,597 shares at a cost of $129.8 million, with a dollar value of $70.2 million remaining for repurchase under the context of our overall capital allocation strategy with our Board of Directors on an ongoing basis, giving consideration to our current and forecast earnings, financial condition, cash requirements and other factors. We have stopped repurchasing our common stock for the foreseeable future and our Board of Directors has decided not to declare a dividend for the second quarter of 2020. We will reevaluate our capital allocation strategy as industry conditions improve and normal restaurant operations resume.2019 Repurchase Program.

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~~this stock repurchase activity during the first quarter of ~~2020.~~2021.

Cash Flows

In summary, our cash flows for the three months ended March 31, ~~2020~~2021 and ~~2019~~March 31, 2020 were as follows:

Three months ended March 31,
2020 2019 Variance
(In millions)
Net cash provided by operating activities $ 29.6
$ 28.9
$ 0.7
Net cash (used in) provided by investing activities (1.2 ) 0.4
(1.6 )
Net cash provided by (used in) financing activities 194.2
(45.5 ) 239.7
Net decrease in cash, cash equivalents and restricted cash $ 222.6
$ (16.1 ) $ 238.7


	Three months ended March 31,
	2021		2020		Variance
	(In millions)
Net cash provided by operating activities	$	30.6	$	29.6	$	1.0
Net cash provided by (used in) investing activities	3.1		(1.2)		4.3
Net cash (used in) provided by financing activities	(217.3)		194.2		(411.5)
Net (decrease) increase in cash, cash equivalents and restricted cash	$	(183.6)	$	222.6	$	(406.2)

Operating Activities

Cash provided by operating activities increased ~~$0.7~~$1.0 million during the three months ended March 31, ~~2020~~2021 compared to the same period of the prior year. Our net income plus the non-cash reconciling items shown in our statements of cash flows (primarily closure and impairment charges, depreciation, deferred taxes and stock-based ~~compensation and loss on extinguishment of debt) decreased $18.0~~compensation) increased $5.9 million from ~~2019.~~2020. This ~~change~~ was primarily due to ~~a decrease~~the recognition of excess tax benefits on stock-based compensation and an increase in gross profit, ~~primarily due to a significant decline~~partially offset by an increase in ~~customer traffic at our restaurants as a result~~G&A expenses, each of ~~the effects of measures put in place by various levels of government to mitigate the spread of the COVID-19 virus and related changes in consumer behavior, as~~which was discussed in preceding sections of the MD&A. ~~Additionally, net~~Net changes in working capital provided cash of ~~$5.4~~$0.4 million during the three months ended March 31, ~~2020~~2021 compared to ~~using~~providing cash of ~~$13.3~~$5.4 million during the same period of the prior ~~year. This favorable~~year, an unfavorable change of ~~$18.7 million between years,~~$5.0 million. The unfavorable change in working capital was primarily ~~$12.6 million~~ due to a decrease in cash from trade and gift card receivables. Typically we see an increase in cash collections in the first fiscal quarter of the year due to gift card sales during the preceding holiday season. Due to the pandemic, gift card sales in the fourth quarter of 2020 were lower than the fourth quarter of 2019, resulting in lower cash collections in the first quarter of 2021 compared to the first quarter of 2020. This was partially offset by the timing of ~~settlement~~marketing disbursements.

Investing Activities

Investing activities provided net cash of ~~gift card receivables and payables, a $3.8~~$3.1 million ~~decrease in incentive compensation payments and a $1.2 million decrease in income taxes paid. The increase of $0.7 million in cash provided by operating activities~~ for the three months ended March 31, ~~2020 was due to the decrease~~2021. Principal receipts from notes, equipment contracts and other long-term receivables of ~~$18.0~~$4.7 million ~~in net income plus non-cash reconciling items~~ and ~~the favorable change~~proceeds from asset sales of ~~$18.7~~$1.0 million ~~in cash used~~were partially offset by ~~working~~ capital ~~changes.~~

~~Investing Activities~~

expenditures of $2.4 million. Investing activities used net cash of $1.2 million for the three months ended March 31, 2020. ~~Capital~~The variance between the two periods primarily was due to a decrease in capital expenditures during the three months ended March 31, 2021 compared to the same period of ~~$5.1 million and loans to franchisees of $1.5 million were partially offset by principal receipts from notes, equipment contracts and other long-term receivables of $5.5 million. Investing~~the prior year.

Financing Activities

Financing activities ~~provided~~used net cash of ~~$0.4~~$217.3 million for the three months ended March 31, ~~2019. The variance between the two periods was not significant.~~

~~Financing Activities~~

2021. As discussed above under Use of Credit Facilities, we repaid $220.0 million borrowed from our Credit Facility. We also paid $9.7 million for taxes withheld for vesting of restricted stock units and made payments totaling $5.9 million on long-term debt and capital lease obligations. We had a net cash inflow of approximately $18.3 million related to equity compensation awards.

Financing activities provided net cash of $194.2 million for the three months ended March 31, ~~2020. As discussed above under Use of Credit Facilities, we drew down $220.0~~2020, primarily due to a $220 million drawdown from our ~~revolving credit facility to increase our financial flexibility~~Credit Facility and $20.5 million in ~~light~~proceeds from stock option exercises, offset by stock repurchases and dividend payments totaling $41.3 million. The variance of ~~current market conditions and uncertainty~~$411.5 million between periods primarily was due to the ~~COVID-19 outbreak. We also had a net cash inflow~~$440 million swing in use of ~~approximately $18.5 million related to equity compensation awards~~. ~~These financing inflows were~~the Credit Facility, partially offset by ~~cash~~our not having repurchased stock or paid dividends ~~paid on our common stock totaling $11.5 million, repurchases of our common stock totaling $29.9 million and repayments of finance lease obligations of $3.0 million.~~

~~Financing activities used net cash of $45.5 million for~~during the three months ended March 31, ~~2019. The increase~~2021.

Table of ~~$239.7 million in the net cash outflow for financing activities was primarily due to the drawdown from our revolving credit facility and an increase in proceeds from the exercise of stock options.~~Contents

Cash and Cash Equivalents

At Our total cash balances as of March 31, 2021 and December 31, 2020 were are follows:


	March 31, 2021		December 31, 2020
	(In millions)
Cash and cash equivalents	$	179.6	$	383.4
Restricted cash, current	60.1		39.9
Restricted cash, non-current	32.8		32.8
Total	$	272.5	$	456.1

~~, our cash~~

Cash and cash equivalents ~~totaled $344.6~~include $72.0 million ~~including $64.2~~and $71.6 million of cash held for gift card programs and advertising ~~funds.~~funds as of March 31, 2021 and December 31, 2020, respectively. The decrease in cash and cash equivalents between December 31, 2020 and March 31, 2021 was due to the repayment of $220.0 million discussed above under Use of Credit Facilities.

We believe that our unrestricted cash on hand, cash flow from operations, and the ~~actions taken to mitigate the effects~~$221.7 million of ~~the COVID-19 pandemic discussed above~~borrowing capacity available under ~~Significant Recent Developments~~our Credit Facility will provide us with adequate liquidity for the next twelve months.

Adjusted Free Cash Flow

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

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


	Three months ended March 31,										Three months ended March 31,
	2020			2019			Variance				2021		2020		Variance
	(In millions)										(In millions)
Cash flows provided by operating activities	$	29.6		$	28.9		$	0.7		Cash flows provided by operating activities	$	30.6	$	29.6	$	1.0
Receipts from notes and equipment contracts receivable	3.0			3.5			(0.5		)	Receipts from notes and equipment contracts receivable	2.5		3.0		(0.5)
Additions to property and equipment	(5.1		)	(4.7		)	(0.4		)	Additions to property and equipment	(2.4)		(5.1)		2.7
Adjusted free cash flow	$	27.5		$	27.7		$	(0.2	)	Adjusted free cash flow	$	30.7	$	27.5	$	3.2

~~Statement of Financial Position~~

Our total assets and total liabilities and stockholders' deficit at March 31, 2020 increased $136 million compared to the balances at December 31, 2019. The increase was primarily due to increases in cash balances and long-term debt related to the drawdown of $220 million from the Revolver partially offset by seasonal decreases in gift card-related receivables and payables.

Off-Balance Sheet Arrangements

We have obligations for guarantees on certain franchisee lease agreements, as disclosed in Note 1415 - 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 March 31, ~~2020.~~2021.

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Contractual Obligations and Commitments

As discussed above, ~~from~~in March ~~17 to March 19, 2020,~~2021, we ~~drew down a total of~~repaid $220 million ~~from the Revolver.~~of borrowings outstanding under our Credit Facility. Other than this ~~borrowing,~~repayment, 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, ~~2019.~~2020.

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, ~~2019.~~2020. During the three months ended March 31, ~~2020~~,2021, there were no significant changes in our ~~estimates and~~ critical accounting policies ~~other than~~or in our critical accounting policy for current expected credit losses, which changed because of the adoption of the accounting guidance discussed in Note 3 - Accounting Standards Adopted and Newly Issued Accounting Standards Not Yet Adopted, in the Notes to Consolidated Financial Statements.estimates.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

The following change from the information contained in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 took place during the three months ended March 31, ~~2020:~~2021:

Interest Rate Risk

We are only exposed to interest rate risk on borrowings we make under our ~~2019 Class A-1 Notes, a revolving credit facility (the “Revolver”),~~Credit Facility, borrowings from which are subject to variable interest rates. InAs of March ~~2020,~~2021, we ~~drew down $220.0 million from~~have no borrowings outstanding under the ~~Revolver, all of which was outstanding at March 31, 2020. A 1% increase or decrease in~~Credit Facility and currently are not exposed to interest ~~rates would increase or decrease our annual interest expense by $2.2 million.~~rate risk.

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.

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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.

The novel coronavirus (COVID-19) pandemic has disrupted and may further disrupt our business, which could further materially affect our operations, and business and financial results. In addition, any other epidemic, disease outbreak or public health emergency may result in similar adverse effects.

The COVID-19 pandemic has impacted and may continue to impact sales and traffic at our and our franchisees’ restaurants, may make it more difficult to staff restaurants and, in more severe cases, may damage our reputation, cause an inability to obtain supplies, increase commodity costs or cause partial or total closuresThere are no material changes from the risk factors set forth under Item 1A of impacted restaurants. The extent to which the COVID-19 pandemic and other epidemics, disease outbreaks or public health emergencies will impact our business, liquidity, financial condition, and results of operations, will depend on numerous evolving factors that we may not be able to accurately predict or assess, including the duration and scopePart I of the ~~pandemic, epidemic, disease outbreak, or public health emergency;~~Company’s Annual Report on

Form 10-K for the negative impact on the economy; the short and longer-term impacts on the demand for restaurant services and levels of consumer confidence; the ability of us and our franchisees to successfully navigate the impacts; government action,fiscal year ended December 31, 2020.

including restrictions on restaurant operations; increased unemployment; and reductions in consumer discretionary spending. Even if a virus or other disease does not spread significantly, the perceived risk of infection or health risk may damage our reputation and adversely affect our business, liquidity, financial condition and results of operations.

We and our franchisees have been and could further be adversely affected by government restrictions on public gatherings; shelter-in-place orders; and limitations on operations of restaurants, including dine-in restrictions, mandatory or voluntary closures or restrictions on hours of operations. Restaurants in the U.S. and abroad are currently under government mandates or guidelines to temporarily suspend operation of restaurants or limit restaurant dine-in business in light of COVID-19. We are unable to predict when these measures may be scaled back, or how quickly our operations will return to previous levels after the measures are scaled back. Many of our and our franchisees’ restaurants have shifted to a take-out and delivery-only operating model, suspending sit-down dining. We and our franchisees have also implemented closures, modified hours, reduced staff, and furloughed employees. To assist franchisees impacted by COVID-19, we have offered deferral of royalty, advertising, and other fees, including, in some cases, lease payments. We have temporarily suspended franchisee development obligations. These changes and any additional changes may materially adversely affect our business, liquidity, financial condition, and results of operations, particularly if these changes are in place for a prolonged amount of time. The COVID-19 pandemic as well as other epidemics, disease outbreaks or public health emergencies may also materially adversely affect our ability to implement our growth plans, including delays in development of new locations or adversely impact our overall ability to successfully execute our plans to enter into new markets.

As we previously announced, we drew down a significant majority of the amount available under our revolving facility. The increase in our level of debt may adversely affect our financial and operating activities or ability to incur additional debt. Furthermore, the impacts of COVID-19 could cause us to fail to meet certain financial performance measures, including debt service coverage ratios and minimum domestic franchise system sales amounts, that must be met to avoid a possible rapid amortization event or event of default under the terms of our existing debt arrangements. In addition, as a result of the risks described above, we may be required to raise additional capital, and there is no guarantee that debt and/or equity financings will be available in the future to fund our obligations, or will be available on terms consistent with our expectations.

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)
December 30, 2019 - January 26, 2020^(a)

160,076
$ 84.94
157,527
$ 83,300,000
January 27, 2020 - February 23, 2020^(a)
141
92.05
—
$ 83,000,000
February 24, 2019 - March 29, 2020^(a)
325,624
45.81
302,372
$ 70,200,000
485,841
$ 58.72
459,899
$ 70,200,000


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

^(a)These amounts ~~include 2,549~~represent shares owned and tendered by employees at an average price of $87.12 per share during the fiscal month ended January 26, 2020, 141 shares owned and tendered by employees at an average price of $92.05 per share during the fiscal month ended February 23, 2020 and 23,252 shares owned and tendered by employees at an average price of $75.90 per share during the fiscal month ended March 29, 2020, to satisfy tax withholding obligations arising upon vesting of restricted stock awards. Shares so surrendered by the participants are repurchased by us pursuant to the terms of the plan and the applicable individual award agreements under which the shares were issued ~~and the applicable individual award agreements~~ and not pursuant to publicly announced repurchase authorizations.

^(b) In February 2019, the Company’s Board of Directors approved the 2019 Repurchase Program authorizing the Company to repurchase up to $200 million of the Company's common stock. The 2019 Repurchase Program, as approved by the Board of Directors, does not require the repurchase of a specific number of shares and can be terminated at any time.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not Applicable.

Item 5. Other Information.

None.

Table of Contents

Item 6. Exhibits.



*~~31.1~~†10.1		Nonqualified Stock Option Agreement, dated January 4, 2021, by and between the Registrant and John W. Peyton.
*†10.2	Restricted Stock Unit Agreement, dated January 4, 2021, by and between the Registrant and John W. Peyton.
*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 - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH			Inline XBRL Schema Document.***
101.CAL			Inline XBRL Calculation Linkbase Document.***
101.DEF			Inline XBRL Definition Linkbase Document.***
101.LAB			Inline XBRL Label Linkbase Document.***
101.PRE			Inline XBRL Presentation Linkbase Document.***
104	Cover page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* 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.

** 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 and 104 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.

Table of Contents

Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 and 104 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.

SIGNATURES

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



		Dine Brands Global, Inc. (Registrant)


Dated:	~~29th~~5th day of ~~April, 2020~~May, 2021	By:	/s/ ~~Stephen P. Joyce~~John W. Peyton
			~~Stephen P. Joyce~~John W. Peyton Chief Executive Officer (Principal Executive Officer)


Dated:	~~29th~~5th day of ~~April, 2020~~May, 2021	By:	/s/ ~~Thomas H. Song~~Allison Hall
			~~Thomas H. Song~~Allison Hall Interim Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)



Assets	March 31, 2020			December 31, 2019
	(Unaudited)
Current assets:
Cash and cash equivalents	$	344,560		$	116,043
Receivables, gross	85,321			140,007
Less: allowance for credit losses	(4,906		)	(3,138		)
Receivables, net	80,415			136,869
Restricted cash	34,159			40,732
Prepaid gift card costs	27,563			36,077
Prepaid income taxes	7,039			13,290
Other current assets	6,254			3,906
Total current assets	499,990			346,917
Other intangible assets, net	572,449			575,103
Operating lease right-of-use assets	364,875			366,931
Goodwill	343,862			343,862
Property and equipment, net	211,835			216,420
Long-term receivables, gross	90,123			94,154
Less: allowance for credit losses	(8,375		)	(8,155		)
Long-term receivables, net	81,748			85,999
Deferred rent receivable	68,759			70,308
Non-current restricted cash	16,400			15,700
Other non-current assets, net	25,552			28,271
Total assets	$	2,185,470		$	2,049,511
Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable	25,389			40,925
Gift card liability	120,187			159,019
Current maturities of operating lease obligations	72,508			72,815
Current maturities of finance lease and financing obligations	13,502			13,669
Accrued employee compensation and benefits	11,714			23,904
Dividends payable	12,739			11,702
Deferred franchise revenue, short-term	9,567			10,086
Other accrued expenses	24,972			25,792
Total current liabilities	290,578			357,912
Long-term debt	1,506,203			1,288,248
Operating lease obligations, less current maturities	355,160			359,025
Finance lease obligations, less current maturities	74,498			77,393
Financing obligations, less current maturities	35,944			37,682
Deferred income taxes, net	87,851			98,499
Deferred franchise revenue, long-term	56,046			56,944
Other non-current liabilities	15,567			15,582
Total liabilities	2,421,847			2,291,285
Commitments and contingencies
Stockholders’ deficit:
Preferred stock, $1 par value, 10,000,000 shares authorized; no shares issued or outstanding	—			—
Common stock, $0.01 par value; shares: 40,000,000 authorized; March 31, 2020 - 24,917,498 issued, 16,421,273 outstanding; December 31, 2019 - 24,925,447 issued, 16,521,921 outstanding	249			249
Additional paid-in-capital	252,443			246,192
Retained earnings	70,769			61,653
Accumulated other comprehensive loss	(58		)	(58		)
Treasury stock, at cost; shares: March 31, 2020 - 8,496,225; December 31, 2019 - 8,403,526	(559,780		)	(549,810		)
Total stockholders’ deficit	(236,377		)	(241,774		)
Total liabilities and stockholders’ deficit	$	2,185,470		$	2,049,511



	(In thousands)
Remainder of 2020	$	6,453
2021	9,113
2022	7,480
2023	6,887
2024	6,189
Thereafter	29,491
Total	$	65,613



	(In millions)
2020 (remaining nine months)	$	81.9
2021	103.1
2022	100.2
2023	95.9
2024	87.0
Thereafter	216.8
Total minimum rents receivable	$	684.7



	Shares	Cost of shares
		(In millions)
Repurchased during the three months ended March 31, 2020	459,899	$	26.5
Cumulative (life-of-program) repurchases	1,697,597	$	129.8
Remaining dollar value of shares that may be repurchased	n/a	$	70.2



	Cash-Settled Restricted Stock Units		Weighted Average Fair Value
Outstanding at December 31, 2019	63,852		$	85.63
Granted	517		85.41
Forfeited	(7,597	)	86.53
Outstanding at March 31, 2020	56,772		$	34.51



		Favorable (Unfavorable) Variance
	(In millions)
Decrease in gross profit:
Applebee's franchise operations		$	(6.1	)
IHOP franchise operations		(6.9		)
Company restaurant operations		(3.2		)
Rental/financing operations		(2.0		)
Total decrease in gross profit		(18.2		)
Decrease in General and Administrative (“G&A”) expenses		5.2
Other income and expense items		0.9
Decrease in income before income taxes		$	(12.1	)