IHOP 2013 Annual Report Download

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We believe innov

Table of contents

  • Page 1
    We believe innov

  • Page 2
    vation in our restaurants in our culture in our business model in our culinary pipeline in our consumer-facing technology in our advertising in our social media in everything we do 2013 Annual Report

  • Page 3
    ... by year's end. From 2012 to 2013, direct @mentions to IHOP® (@IHOP) more than doubled-going from 47K to 141K, and tweets containing the word IHOP stayed consistent at 4 million. 252,054 3.7 million 64,010 Facebook Likes Twitter Followers Industry-leading marketing Applebee's Food Network...

  • Page 4
    with the same ingredients. 4 Record-setting stock performance DineEquity®'s stock reached an all-time intraday high of $85.74 on November 25, 2013. $85.74 per share ® Tech to table 100,000 tablets in 1,800 Applebee's In December 2013, Applebee's announced the rollout of 100,000 tabletop ...

  • Page 5
    ... sales performance, bolster our lead in the Family Dining category, and create a better guest experience. new menus in IHOP locations 1,500+ Even more international In 2013, IHOP restaurants opened for the first time in Saudi Arabia, Kuwait, and the Philippines. Additionally, Applebee's expanded...

  • Page 6
    ...'s Restaurant News, "Top 100," June 24, 2013 [Applebee's® rank based on U.S. system-wide sales in the "casual" dining category; IHOP® rank based on U.S. system-wide sales in the "family" dining category.] www.fastcompany.com/most-innovative-companies/2013/industry/food. 2 DineEquity 2013 Annual...

  • Page 7
    ... working to build even stronger relationships with our franchisees. Applebee's ranked #2 in Fast Company's "2013 Most Innovative Companies in Food." At the same time, we're strengthening our Applebee's® and IHOP® brands and improving operations. One of the core tenets of our growth plan involves...

  • Page 8
    ... and cost avoidances for Applebee's and IHOP of roughly $171 million. In late 2013, the first IHOP Express opened- at the busiest passenger airport in the world. supported by the addition of team members who bring international franchising experience to our organization. International development...

  • Page 9
    ... Applebee's® in 2007. Our free cash ï¬,ow generating business model enabled us to initiate a meaningful return of capital to shareholders in 2013. Additionally, since 2007, our prudent cost management has helped us to reduce G&A expenses by more than 25%. During this time, free cash ï¬,ow increased...

  • Page 10
    Together 6 DineEquity 2013 Annual Report

  • Page 11
    ... evolve our business and brands every day, in ways both large and small. Whether we're launching new strategies for advertising and marketing, designing new ways for consumers to access our brands, creating new culinary offerings, achieving new synergies, or expanding our international footprint, we...

  • Page 12
    ... are paying off in measurable ways. Over 122,000 guests have signed up for My IHOP; Pancake Revolution reached over 3 million members; and IHOP.com received over 10,800,000 visits by year-end 2013. ® At Applebee's® and IHOP,® we've significantly evolved our social media strategy in order...

  • Page 13
    ... the needs and desires of current and potential guests, and tailor online promotions accordingly. Are our strategies paying off? You bet. Applebee's is now consistently one of the top 10 brands in social media on a weekly basis. Also in 2013, Facebook Likes for Applebee's went from approximately...

  • Page 14
    ... with existing guests. At IHOP,® this means evolving our media strategy to maximize our impact in key decision-making time periods, diversifying how we reach new guests, and 8 Source: Nielson Source: Advertising benchmarking scores provided by Ace Metrix 10 DineEquity 2013 Annual Report 9

  • Page 15
    ...membership per restaurant surpassing our goals, and loyalty members spending more on average per check than non-members. IHOP visits have also increased among Rewards members. In July 2013, we introduced the Applebee's Perks pilot program in several locations around Kansas City. By year-end 2013, we...

  • Page 16
    ... guests with value, menu innovation, and unique, nutritious product offerings. Introducing guests to new favorites At Applebee's, national media promotion of the new "Lunch Combos" program helped highlight our focus on Applebee's new Kids' Menu features 10 new ''Kids LiveWell-Approved Meals''-more...

  • Page 17
    ... print three versions of the menu throughout the year, as we introduce new items and further refine our offerings. How's it working so far? After introducing the newly redesigned menu in June 2013, IHOP has outperformed the family dining segment in positive, comparable same-restaurant sales.10 13

  • Page 18
    ... part of our DNA. Every year, DineEquity team members and franchisees raise millions of dollars for worthy causes in the communities we serve. Six years ago, we began offering veterans and active duty military a free meal at Applebee's® on Veterans Day. Today, In 2013, we collectively raised over...

  • Page 19
    ...in National Pancake Day. Every year on National Pancake Day, IHOP restaurants offer guests a free short stack of our famous buttermilk pancakes, and invite guests to make a voluntary donation to Children's Miracle Network Hospitals and other local charities. Guests can also purchase Miracle Balloons...

  • Page 20
    ... MSD Capital, L.P. Daniel J. Brestle Independent Consultant; Former Vice Chairman and President, Estee Lauder Companies Inc. North America Caroline W. Nahas Managing Director, Southern California, Korn/Ferry International 16 DineEquity 2013 Annual Report *Retiring from the Board of Directors at...

  • Page 21
    10-K form

  • Page 22
    ... by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes State the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2013: $1,126.8 million. Indicate the number of shares outstanding...

  • Page 23
    ... about Market Risk...Item 8-Financial Statements and Supplementary Data ...Item 9-Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...Item 9A-Controls and Procedures ...Item 9B-Other Information ...PART III. Item 10-Directors, Executive Officers and Corporate...

  • Page 24
    ...company-operated restaurants primarily to test new remodel programs, operating procedures, products, technology, cooking platforms and service models. We generate revenue from four reporting segments, comprised of Franchise operations - primarily royalties, fees and other income from 1,988 Applebee...

  • Page 25
    ... in terms of 2012 system-wide sales(1). IHOP We franchise, own and operate restaurants in the family dining category of the restaurant industry under the names IHOP and International House of Pancakes. IHOP restaurants feature full table service and high quality, moderately priced food and beverage...

  • Page 26
    ... the $20,000 development fee will be credited) for each restaurant developed under a multi-restaurant development agreement, in each case paid upon execution of the franchise agreement; (c) franchise royalties equal to 4.5% of weekly gross sales; (d) revenue from the sale of pancake and waffle dry...

  • Page 27
    .... Other Franchise-related Revenues and Fees Approximately 85% of franchise segment revenue for the year ended December 31, 2013 consisted of Applebee's and IHOP royalties and IHOP advertising revenue. Most of the remaining 15% consisted of sales of proprietary products (primarily IHOP pancake and...

  • Page 28
    ...two-year development commitments after the initial development period. The Applebee's development agreements in place call for the opening of a combined total of 105 domestic restaurants and 16 international restaurants in 2014 and 2015. As of December 31, 2013, we had signed commitments and options...

  • Page 29
    ... bases of competition in the industry are the type, quality and price of the food products served. Additionally, restaurant location, quality and speed of service, advertising, name identification and attractiveness of facilities are important. The market for high quality commercial real estate...

  • Page 30
    ... and operational risks that we must manage and may result in additional costs incurred. We accept credit cards, third party gift cards, and branded gift cards as payment in our restaurants. We submit our systems to regular audit and review, as required by Payment Card Industry Standards, including...

  • Page 31
    ..., we changed our name to DineEquity, Inc. Our principal executive offices are located at 450 North Brand Boulevard, Glendale, California 91203-2306 and our telephone number is (818) 240-6055. Our Internet address is www.dineequity.com. Our common stock is listed on the New York Stock Exchange ("NYSE...

  • Page 32
    ... profitability of franchise restaurants, potentially impacting the ability of franchisees to make royalty payments when they are due and to develop new restaurants as may be required in their respective development agreements, and negatively impact the financial performance of our company-operated...

  • Page 33
    ...restaurants. The restaurant industry is highly competitive with respect to price, service, location, personnel and the type and quality of food. Each Applebee's and IHOP restaurant competes directly and indirectly with a large number of national and regional restaurant chains, as well as independent...

  • Page 34
    ... assured. These factors could reduce the gross sales or profitability at Applebee's or IHOP restaurants, which would reduce the franchise payments received from our franchisees and the revenues generated by our company-owned restaurants. Our business strategy may not achieve anticipated results. We...

  • Page 35
    ... or IHOP restaurants. We may not be able to adequately adapt Applebee's or IHOP restaurants' menu offerings to keep pace with developments in consumer preferences, which may result in reductions to the franchise payments we receive from franchisees and the revenues generated by our company-operated...

  • Page 36
    ...of their franchise agreements, including underreporting of sales, failure to operate restaurants according to standard operating procedures and payment defaults. Such claims may reduce the ability of our franchisees to make payments to us and the profits generated by our company-operated restaurants...

  • Page 37
    ... minimum wage standards or availability of labor, which may increase the price of goods and services they supply to us. We continue to review the Patient Protection and Affordable Care Act and regulations issued related thereto to evaluate the potential impact of this new law on our business, and to...

  • Page 38
    ... revenue from company restaurant sales and any increase in general and administrative expenses may have a greater impact on our financial condition and business results. While our franchise agreements are designed to maintain brand consistency, this increase in the franchised-operated restaurants...

  • Page 39
    ... of the related franchise agreements and development agreements. Any franchisee that is experiencing financial difficulties may also be unable to participate in implementing changes to our business strategy. Any franchisee that owns and operates a significant number of Applebee's restaurants and...

  • Page 40
    ... them subject to business, credit, financial and other risks which may be unrelated to the operations of Applebee's or IHOP restaurants. These unrelated risks could materially and adversely affect a franchisee and its ability to make its franchise payments in full or on a timely basis. Any such...

  • Page 41
    ... restaurant support centers. We have disaster recovery procedures and business continuity plans in place to address most events of a crisis nature, including earthquakes, tornadoes and other natural or man-made disasters, and back up and off-site locations for recovery of electronic and other forms...

  • Page 42
    ...in accounting standards may cause adverse unexpected operating results, affect our reported results of operations or otherwise harm our business and financial results. Our management is responsible for establishing and maintaining effective internal control over financial reporting. Internal control...

  • Page 43
    Item 2. Properties. The table below shows the location and ownership type of Applebee's and IHOP restaurants as of December 31, 2013: Franchise Applebee's Company Total Franchise IHOP Company Area License Total United States Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware...

  • Page 44
    ... or other terms of the sublease. We currently occupy our principal corporate offices and IHOP restaurant support center in Glendale, California, under a lease expiring in June 2020. The Applebee's restaurant support center is located in Kansas City, Missouri under a lease expiring in October 2021...

  • Page 45
    ..., our Board of Directors approved payment of a cash dividend of $0.75 per share of common stock, payable at the close of business on March 28, 2014 to the stockholders of record as of the close of business on March 14, 2014. Under our Credit Agreement and the Indenture under which our Senior Notes...

  • Page 46
    ...the Credit Agreement and approximately $112 million under the Indenture. Purchases of Equity Securities by the Company 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...

  • Page 47
    ... on the Standard & Poor's 500 Composite Index and the Value-Line Restaurants Index ("Restaurant Index") over the five-year period ended December 31, 2013. The graph and table assume $100 invested at the close of trading on the last day of trading in 2008 in our common stock and in each of the market...

  • Page 48
    ...and "Management's Discussion and Analysis of Financial Condition and Results of Operations" appearing elsewhere in this Annual Report on Form 10-K. The consolidated statement of operations information and the consolidated balance sheet data for the years ended and as of December 31, 2013, 2012, 2011...

  • Page 49
    ..., generates higher gross profit margins and reduces the volatility of free cash flow performance, as compared to a model based on owning a significant number of company-operated restaurants. On February 26, 2013, our Board of Directors approved a capital allocation strategy that contemplates the...

  • Page 50
    ... domestic system-wide same-restaurant sales. Since we are a 99% franchised company, expanding the number of franchise restaurants is an important driver of revenue growth. We currently do not plan to open any new Applebee's or IHOP company-operated restaurants. Revenue from our rental and financing...

  • Page 51
    ... tax payments, lower general and administrative expenses and lower interest costs for the year ended December 31, 2013 compared to the same period of 2012, partially offset by lower segment profit that resulted from the refranchising of Applebee's company-operated restaurants. Additional information...

  • Page 52
    ... and team members. The place aspect involves exterior and interior modifications to the restaurant to signal change. The promotional aspect involves a local public relations and marketing plan to re-connect with the neighborhood. Our franchisees have embraced this initiative and by year-end 2013...

  • Page 53
    ... franchise agreement in the event of noncompliance. To positively impact the costs of IHOP franchisees, management works closely with CSCS, an independent cooperative entity, formed by us and franchisees of Applebee's and IHOP domestic restaurants. We recognize the importance of managing the costs...

  • Page 54
    .... We believe the increase in average customer check was due in part to the new IHOP menu launched in June 2013 which influenced customers' purchasing patterns and resulted in a favorable shift in product mix. Additionally, we believe the average customer check declined in 2012 because of strong...

  • Page 55
    ... may experience financial difficulties, including bankruptcy, that may or may not relate to the financial performance of their franchised IHOP or Applebee's restaurants. In February 2013, an IHOP franchisee and its affiliated entities which owned and operated 19 restaurants located in the states of...

  • Page 56
    ... payments under leases that partially may be based on a percentage of their sales. Management also uses this information to make decisions about future plans for the development of additional restaurants as well as evaluation of current operations. Year Ended December 31, 2013 2012 2011 Applebee...

  • Page 57
    ...-operated restaurants. Sales at restaurants that are owned by franchisees and area licensees are not attributable to the Company. Unaudited reported sales for Applebee's domestic franchise restaurants, IHOP franchise restaurants and IHOP area license restaurants for the years ended December 31, 2013...

  • Page 58
    ... IHOP restaurant development and franchising activity. 2013 Year Ended December 31, 2012 2011 Applebee's Restaurant Development Activity Total restaurants, beginning of year...New franchise openings ...Franchise closures ...Total restaurants, end of year...Summary-end of year: Franchise...Company...

  • Page 59
    ...Applebee's company-operated restaurants in 2012, partially offset by higher franchise royalty revenues resulting from the increase in the number of Applebee's and IHOP franchise restaurants. Additionally, in 2013 we received a total of $7.8 million in termination, transfer and extension fees related...

  • Page 60
    ...extension fees related to Applebee's restaurants and a 2.4% increase in IHOP domestic same-restaurant sales. Nearly 90% of our segment profit now comes from our franchise operations. We operate our company restaurants primarily to test new remodel programs, operating procedures, products, technology...

  • Page 61
    ... (Unfavorable) Variance 2013 2012 %(2) $ (In millions, except percentages and number of restaurants) Effective Company Restaurants:(1) Applebee's...IHOP...Company restaurant sales ...$ Company restaurant expenses ...Company restaurant segment profit...$ Segment profit as % of revenue (2) _____...

  • Page 62
    ... operations relate primarily to IHOP franchise restaurants that were developed under the Previous IHOP Business Model described under Item 1. - Business. Financing operations revenue primarily consists of interest income from the financing of franchise fees and equipment leases, as well as sales...

  • Page 63
    ... Applebee's company-operated restaurants and from the full-year effect of restructuring initiatives announced in the third quarter of 2012; (ii) lower stock-based compensation costs and (iii) lower severance costs, partially offset by higher bonus expenses and higher expenses for outsourced services...

  • Page 64
    ...to the estimated fair value. The fair value is primarily determined by discounting the future cash flows based on our cost of capital. Closure charges for the year ended December 31, 2013 primarily related to adjustments to the estimated reserve for closed IHOP and Applebee's restaurants. Long-lived...

  • Page 65
    ... above Our 2012 financial results compared to 2011 were significantly impacted by: • The successful refranchising of 154 Applebee's company-operated restaurants during 2012 that resulted in increased gains on the disposition of the restaurants partially offset by lower segment profit; • Lower...

  • Page 66
    ... a 2.7% increase in IHOP effective franchise restaurants and a 1.2% increase in Applebee's domestic system-wide same-restaurant sales. SEGMENT PROFIT (LOSS) Favorable (Unfavorable) Variance %(1) Year ended December 31, 2012 2011 $ (In millions, except percentages) Franchise operations...$ Company...

  • Page 67
    ...during 2012 due to development. Applebee's franchise expenses increased primarily due to insurance costs associated with restaurants that were previously company-operated. Applebee's franchise expenses are relatively smaller than IHOP's due to advertising expenses. Franchise fees designated for IHOP...

  • Page 68
    ...) Components of Total Variance Total Current Variance Refranchised Restaurants Applebee's Company-Operated Expenses As Percentage of Restaurant Sales Year Ended December 31, 2012 2011 Revenue ...Food and beverage...Labor...Direct and occupancy ...Restaurant operating profit margin(1) ..._____...

  • Page 69
    ... operations relate primarily to IHOP franchise restaurants that were developed under the Previous Business Model described under "Item 1. - Business - Restaurant Concepts - IHOP - Franchising." Financing operations revenue primarily consists of interest income from the financing of franchise fees...

  • Page 70
    ... Applebee's. The settlement agreement was approved by the court November 1, 2012. Stock-based compensation expense increased $5.7 million primarily due to the impact of a higher stock price on both liability-based and equity-based stock awards to employees and non-employee directors. Severance costs...

  • Page 71
    ... state deferred taxes as a result of the refranchising and sale of Applebee's company-operated restaurants and compensation-related tax credits. Liquidity and Capital Resources of the Company Credit Facilities In October 2010, we entered into a credit agreement with a group of lenders and financial...

  • Page 72
    ... that are amortized as additional non-cash interest expense over the seven-year life of the Credit Agreement, the weighted average effective interest rate for the Credit Facility as of December 31, 2013 was 5.0%. In addition, Amendment No. 2 established the following consolidated leverage ratio...

  • Page 73
    ... proceeds of assets sales or upon a change of control, as described in the Indenture under which the Senior Notes were issued. There were no such required repurchases during 2013. Restricted Payments The Credit Agreement contains covenants considered customary for similar types of facilities that...

  • Page 74
    ... and, in years prior to 2013, operating earnings from company-operated restaurants. Franchise revenues consist of royalties, IHOP advertising fees and sales of proprietary products for IHOP, each of which fluctuates with increases or decreases in franchise retail sales. Franchise retail sales are...

  • Page 75
    ...-related tax credits, that decreased due to the refranchising of Applebee's company-operated restaurants. Cash payments for interest decreased $17.1 million compared to 2012 primarily due to lower average debt balances during 2013 compared to 2012. There also was a favorable change in net working...

  • Page 76
    ... our Credit Agreement and Senior Notes. We evaluate dividend payments on 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, the...

  • Page 77
    ... both our Credit Agreement and Senior Notes. We evaluate 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, the...

  • Page 78
    ... franchise operations revenue consists primarily of royalty revenues, sales of proprietary IHOP products, IHOP advertising fees and the portion of the franchise fees allocated to our intellectual property. Company restaurant sales are retail sales at company-operated restaurants. Rental operations...

  • Page 79
    ... to determine fair value under the discounted cash flows model include future trends in sales, operating expenses, overhead expenses, depreciation, capital expenditures and changes in working capital, along with an appropriate discount rate based on our estimated cost of equity capital and after-tax...

  • Page 80
    ... value of each employee stock option and restricted stock award is estimated on the date of grant using an option pricing model that meets certain requirements. We currently use the Black-Scholes option pricing model to estimate the fair value of our share-based compensation. The Black-Scholes model...

  • Page 81
    ...rates. At December 31, 2013, we had $467.2 million of variable rate debt (the Term Loan under our Credit Agreement). If the interest rate on the Term Loan were to increase by 1% per annum, annual interest expense would increase by approximately $4.7 million based on the outstanding Term Loan balance...

  • Page 82
    ...in menu pricing or other strategies would not be material to our financial condition, results of operations or cash flows. The Company and owners of Applebee's and IHOP franchise restaurants are members of CSCS, a Co-op that manages procurement activities for the Applebee's and IHOP restaurants that...

  • Page 83
    Item 8. Financial Statements and Supplementary Data. Index to Consolidated Financial Statements Page Reference Report of Independent Registered Public Accounting Firm...Consolidated Balance Sheets as of December 31, 2013 and 2012 ...Consolidated Statements of Comprehensive Income for each of the ...

  • Page 84
    ... of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform...

  • Page 85
    ... Balance Sheets (In thousands, except share amounts) December 31, 2013 2012 Assets Current assets: Cash and cash equivalents ...Receivables, net ...Prepaid gift cards ...Prepaid income taxes ...Deferred income taxes ...Other current assets...Total current assets...Long-term receivables ...Property...

  • Page 86
    ... 31, 2013 2012 2011 Segment Revenues: Franchise and restaurant revenues...$ Rental revenues ...Financing revenues...Total segment revenues...Segment Expenses: Franchise and restaurant expenses ...Rental expenses ...Financing expenses ...Total segment expenses...Gross segment profit ...General...

  • Page 87
    ... stock ...Balance, December 31, 2012 ...Net income ...Other comprehensive loss ...Purchase of DineEquity common stock ...Reissuance of treasury stock ...Net issuance of shares pursuant to stock plans...Repurchase of restricted shares ...Stock-based compensation ...Tax benefit from stock-based...

  • Page 88
    ... ...Other current assets ...Accounts payable...Accrued employee compensation and benefits ...Gift card liability ...Other accrued expenses ...Cash flows provided by operating activities...Cash flows from investing activities Additions to property and equipment...Proceeds from sale of property and...

  • Page 89
    ... to the Consolidated Financial Statements 1. The Company The first International House of Pancakes® ("IHOP®") restaurant opened in 1958 in Toluca Lake, California. Shortly thereafter, the Company's predecessor began developing and franchising additional restaurants. The Company was incorporated as...

  • Page 90
    ... the total Applebee's and IHOP franchise and area license restaurants in the United States. Receivables from these franchisees totaled $59.9 million at December 31, 2013. The Company maintains an allowance for credit losses based upon historical experience while taking into account current economic...

  • Page 91
    ... used to determine fair value under the discounted cash flow model include future trends in sales, operating expenses, overhead expenses, capital expenditures and changes in working capital, along with an appropriate discount rate based on the Company's estimated cost of equity capital and after-tax...

  • Page 92
    ...operations. Franchise operations revenue consists primarily of royalty revenues, sales of proprietary IHOP products, IHOP advertising fees and the portion of the franchise fees allocated to the Company's intellectual property. Company restaurant sales are retail sales at company-operated restaurants...

  • Page 93
    ... advertising fund made by Applebee's and IHOP company-operated restaurants and certain advertising costs incurred by the Company to benefit future franchise operations. Costs of advertising are expensed either as incurred or the first time the advertising takes place. Advertising expense included in...

  • Page 94
    ... Stock Incentive Plan. The Company accounts for all stock-based payments to employees and non-employee directors, including grants of stock options, restricted stock and restricted stock units to be recognized in the financial statements, based on their respective grant date fair values. The value...

  • Page 95
    ... revenue and expense. Franchise operations expenses include IHOP advertising expense, the cost of proprietary products, pre-opening training expenses and other franchise-related costs. Company Segment As of December 31, 2013, the company restaurant operations segment consisted of 23 Applebee...

  • Page 96
    ... than not that the asset is impaired. The adoption of ASU 2012-02 as of January 1, 2013 did not have any impact on the Company's consolidated financial statements. In February 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income ("ASU...

  • Page 97
    ...not charged on gift card receivables. Financing receivables primarily 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...

  • Page 98
    ...determine fair value under the discounted cash flows model include future trends in sales, operating expenses, overhead expenses, depreciation, capital expenditures, and changes in working capital, along with an appropriate discount rate. During the fiscal years ended 2013 and 2012, the Company made...

  • Page 99
    ... components: 2013 (In millions) 2012 Senior Secured Credit Facility, due October 2017, at a variable interest rate of 3.75% and 4.25% as of December 31, 2013 and 2012, respectively...$ Senior Notes due October 2018, at a fixed rate of 9.5% ...Discount...Total debt ...Less: current maturities...Long...

  • Page 100
    ... "Debt modification costs" in the Consolidated Statement of Comprehensive Income for the year ended December 31, 2011. On February 4, 2013, the Company entered into Amendment No. 2 ("Amendment No. 2") to the Credit Agreement. Pursuant to Amendment No. 2, the interest rate margin applicable to LIBOR...

  • Page 101
    ..., change the Company's fiscal year, make capital expenditures and prepay certain indebtedness, subject to certain customary exceptions, including carve-outs and baskets. The Company was in compliance with all financial covenants at December 31, 2013. The Credit Agreement contains certain customary...

  • Page 102
    ... to incur additional indebtedness (excluding certain indebtedness under the Credit Facility), issue certain preferred shares, pay dividends and make other equity distributions, purchase or redeem capital stock, make certain investments, create certain liens on its assets to secure certain...

  • Page 103
    ... a Purchase and Sale Agreement relating to the sale and leaseback of 181 parcels of real property (the "Sale-Leaseback Transaction"), each of which is improved with a restaurant operating as an Applebee's Neighborhood Grill and Bar (the "Properties"). On June 13, 2008, the closing date of the Sale...

  • Page 104
    ... date of the Company's fiscal year, 13 monthly payments will be made in fiscal 2015. Included in current maturities of capital lease and financing obligations on the consolidated balance sheet. 9. Leases The Company is the lessor or sub-lessor of approximately half of all IHOP franchise restaurants...

  • Page 105
    ... varying closing date of the Company's fiscal year, 13 monthly payments will be made in fiscal 2015 Included in current maturities of capital lease and financing obligations on the consolidated balance sheet. The asset cost and carrying amount on company-owned property leased at December 31, 2013...

  • Page 106
    ... varying closing date of the Company's fiscal year, 13 monthly payments will be made in fiscal 2015 The Company has noncancelable leases, expiring at various dates through 2032, which require payment of contingent rents based upon a percentage of sales of the related restaurant as well as property...

  • Page 107
    ... cash. Total issuance costs were approximately $0.8 million. All of the shares were sold to affiliates of Chilton Investment Company, LLC (collectively, "Chilton") pursuant to a purchase agreement dated as of July 15, 2007. The shares of Series B Convertible Preferred Stock ranked (i) senior to the...

  • Page 108
    ... based on business, market, applicable legal requirements, and other considerations. The repurchase program does not require the repurchase of a specific number of shares and may be terminated at any time. During the year ended December 31, 2013, the Company repurchased 412,022 shares of stock...

  • Page 109
    ...by the Applebee's Restaurant Support Center in Lenexa, Kansas. The Company recognized a charge of $23.0 million for the termination fee and other closing costs. 13. Stock-Based Incentive Plans General Description From time to time, the Company has granted nonqualified stock options, restricted stock...

  • Page 110
    ...the closing price on the New York Stock Exchange of the Company's common stock on the date of grant. Restricted stock and restricted stock units are issued at no cost to the holder and vest over terms determined by the Compensation Committee of the Company's Board of Directors, generally three years...

  • Page 111
    ... Consolidated Financial Statements (Continued) 13. Stock-Based Incentive Plans (Continued) 2013 2012 2011 Risk free interest rate ...Weighted average historical volatility...Dividend yield...Expected years until exercise ...Forfeitures ...Weighted average fair value of options granted...$ 0.8% 83...

  • Page 112
    ... had issued shares of cash-settled restricted stock units to members of the Board of Directors. Originally these instruments were expected to be settled in cash and were recorded as liabilities based on the closing price of the Company's common stock as of each period end. In February 2013, it was...

  • Page 113
    ... and benefits in the consolidated balance sheet. 14. Employee Benefit Plans 401(k) Savings and Investment Plan Effective January 1, 2013, the Company amended the DineEquity, Inc. 401(k) Plan to (i) modify the Company matching formula and (ii) eliminate the one year completed service requirement that...

  • Page 114
    ... appeals procedures. We anticipate the appeals process to continue into 2014. The Company continues to believe that adequate reserves have been provided relating to all matters contained in the tax periods open to examination. The total gross unrecognized tax benefit as of December 31, 2013 and 2012...

  • Page 115
    ... Inc. and International House of Pancakes, LLC and Subsidiaries. The Company implemented a tax planning strategy that enables the Company to utilize the state net operating loss carryovers from prior years before they expire. As of each reporting date, the Company's management considers new evidence...

  • Page 116
    .... and Subsidiaries Notes to the Consolidated Financial Statements (Continued) 16. Net Income Per Share The computation of the Company's basic and diluted net income (loss) per share is as follows: Year Ended December 31, 2013 2012 2011 (In thousands, except per share data) Numerator for basic and...

  • Page 117
    ... Financial Statements (Continued) 17. Segment Reporting Information on segments and a reconciliation to income (loss) before income taxes are as follows: Year Ended December 31, 2012 (In millions) 2013 2011 Revenues Franchise operations ...Company restaurants...Rental operations...Financing...

  • Page 118
    ... assets, net ...Investment in subsidiaries...Total assets...Liabilities and Stockholders' Equity Current Liabilities Current maturities of long-term debt ...Accounts payable ...Accrued employee compensation and benefits Gift card liability...Other accrued expenses...Total current liabilities...Long...

  • Page 119
    ... assets, net ...Investment in subsidiaries...Total assets...Liabilities and Stockholders' Equity Current Liabilities Current maturities of long-term debt ...Accounts payable ...Accrued employee compensation and benefits Gift card liability...Other accrued expenses...Total current liabilities...Long...

  • Page 120
    ... Information (Continued) Supplemental Condensed Consolidating Statement of Operations For the Year Ended December 31, 2013 (In millions(1)) Combined Guarantor Subsidiaries Combined Non-guarantor Subsidiaries Parent Eliminations and Reclassification Consolidated Franchise and restaurant revenues...

  • Page 121
    ... Information (Continued) Supplemental Condensed Consolidating Statement of Operations For the Year Ended December 31, 2012 (In millions(1)) Combined Guarantor Subsidiaries Combined Non-guarantor Subsidiaries Parent Eliminations and Reclassification Consolidated Franchise and restaurant revenues...

  • Page 122
    ... Information (Continued) Supplemental Condensed Consolidating Statement of Operations For the Year Ended December 31, 2011 (In millions(1)) Combined Guarantor Subsidiaries Combined Non-guarantor Subsidiaries Parent Eliminations and Reclassification Consolidated Franchise and restaurant revenues...

  • Page 123
    ... to property and equipment ...Principal receipts from long-term receivables . Proceeds from sale of assets ...Other ...Cash flows provided by (used in) investing activities ...Financing cash flows Payment of debt ...Payment of debt issuance costs...Purchase of DineEquity common stock...Dividends...

  • Page 124
    ... . Proceeds from sale of assets ...Other ...Cash flows provided by (used in) investing activities ...Financing cash flows Revolving credit borrowings...Revolving credit repayments ...Payment of debt ...Payment of debt issuance costs...Purchase of DineEquity common stock...Restricted cash ...Other...

  • Page 125
    ... . Proceeds from sale of assets ...Other ...Cash flows provided by (used in) investing activities Financing cash flows Revolving credit borrowings...Revolving credit repayments ...Payment of debt ...Payment of debt issuance costs...Purchase of DineEquity common stock...Restricted cash ...Other...

  • Page 126
    ... and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. In designing...

  • Page 127
    ...management concluded that our internal control over financial reporting was effective as of December 31, 2013. The effectiveness of our internal control over financial reporting as of December 31, 2013 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated...

  • Page 128
    ... reporting as of December 31, 2013, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the accompanying consolidated balance sheets of DineEquity, Inc. and Subsidiaries as of December 31, 2013 and 2012...

  • Page 129
    ..., our internal control over financial reporting. Item 9B. None. PART III Item 10. Directors, Executive Officers and Corporate Governance. Other Information. The information required by this Item regarding our directors and executive officers is incorporated by reference to our Proxy Statement for...

  • Page 130
    ... Statement Schedules. (a)(1) Consolidated Financial Statements The following documents are contained in Part II, Item 8 of this Annual Report on Form 10-K: Reports of Independent Registered Public Accounting Firm. Consolidated Balance Sheets as of December 31, 2013 and 2012. Consolidated Statements...

  • Page 131
    ... the other agents named therein (Exhibit 10.1 to Registrant's Form 8-K, filed on February 5, 2013 is incorporated herein by reference). 10.31 Asset Purchase Agreement, Applebee's Neighborhood Grill & Bar Restaurants located in the Western Michigan and Detroit Markets, dated July 20, 2012, including...

  • Page 132
    ...Independent Registered Public Accounting Firm. *31.1 Certification of CEO pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended. *31.2 Certification of CFO pursuant to Rule... plan or arrangement in which directors or executive officers are eligible to participate. 111

  • Page 133
    ... Chairman and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant, and in the capacities indicated, on this 26th day of February 2014. Name Title /s/ JULIA A. STEWART...

  • Page 134
    ...Twelve Months Ended December 31, 2013 Consolidated Leverage Ratio Calculation: Financial Covenant Debt(1) ...$ Consolidated EBITDA... calculating the above ratios are found in the Credit Agreement, dated October 8, 2010, filed as Exhibit 10.2 to our Current Report on Form 8-K filed on October 21, 2010.

  • Page 135
    .... International House of Pancakes, LLC III Industries of Canada, LTD. IHOP of Canada ULC IHOP Holdings, LLC IHOP Franchising, LLC IHOP Property Leasing, LLC IHOP Properties, LLC IHOP Real Estate, LLC IHOP IP, LLC IHOP Franchise Company, LLC IHOP TPGC, LLC ACM Cards, Inc. Anne Arundel Apple Holding...

  • Page 136
    ...dated February 26, 2014, with respect to the consolidated financial statements of DineEquity, Inc. and Subsidiaries and the effectiveness of internal control over financial reporting of DineEquity, Inc. and Subsidiaries, included in this Annual Report (Form 10-K) for the year ended December 31, 2013...

  • Page 137
    ... in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and Any fraud, whether or not material, that involves management or other employees who...

  • Page 138
    ... in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and Any fraud, whether or not material, that involves management or other employees who...

  • Page 139
    ...connection with the Annual Report on Form 10-K of DineEquity, Inc. (the "Company") for the year ended December 31, 2013, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Julia A. Stewart, Chairman and Chief Executive Officer of the Company, do hereby certify...

  • Page 140
    ...of 2002 In connection with the Annual Report on Form 10-K of DineEquity, Inc. (the "Company") for the year ended December 31, 2013, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Thomas W. Emrey, as Chief Financial Officer of the Company, do hereby certify...

  • Page 141
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  • Page 142
    ...-995-DINE. Pursuant to Rule 303A.12 of the New York Stock Exchange Listed Companies Manual, each listed company CEO must certify to the NYSE each year that he or she is not aware of any violation by the company of NYSE corporate governance listing standards. Julia Stewart's annual CEO certification...

  • Page 143
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