IHOP 2014 Annual Report Download

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2014 ANNUAL REPORT

Table of contents

  • Page 1
    2014 ANNUAL REPORT

  • Page 2
    ... set includes: Denny's, Waffle House, Cracker Barrel, Panera and Bob Evans. Year-to-date as of 1/2015. 5 Be The Change Revolutions: "Applebee's Social Media By the Numbers, 2014 Annual Report." 6 Be The Change Revolutions: "Applebee's Social Media By the Numbers, 2014 Annual Report." 7 Average...

  • Page 3
    ... As the only company in the restaurant industry with two #1 brands, we know how to turn brand equity into solid value. The equity and reputation of the Applebee's and IHOP brands attract new consumers and forge long-term bonds with loyal guests. Brand equity persuades operators who are already...

  • Page 4
    The value of reputat Every day, the Applebee's and IHOP brands generate a total return on brand equity that benefits our business and creates sustainable value. ® ® 2 DineEquity 2014 Annual Report

  • Page 5
    ... we can-and we do-attract the best and brightest based upon the appeal of the Applebee's and IHOP brands alone, we are also working to articulate the meaningful aspects of DineEquity's corporate brand to internal and external stakeholders. For fiscal 2014, "Free cash flow" for a given period was...

  • Page 6
    ... positive difference. No organization-wide culture initiative would be complete without contacting DineEquity's franchisees. For this reason we also periodically conduct surveys of our franchise partners to gauge their levels of 4 DineEquity 2014 Annual Report 11 Centralized Supply Chain Services...

  • Page 7
    ... franchisees, so that the Applebee's® and IHOP® brands can benefit from the experience and thought leadership of this distinguished group. I would like to express my sincere thanks to my executive team, our Board of Directors, team members, franchisees, the purchasing cooperative, vendor partners...

  • Page 8
    growth con We measure value in terms of

  • Page 9
    ... a consistent set of positive value drivers for guests, franchisees, shareholders, and the communities we serve. By maintaining our focus on these drivers and investing in building brand reputation for Applebee's and IHOP, we can expand value and capitalize on new opportunities for our business...

  • Page 10
    Inno 2014 Average Restaurant Volume was approximately $1.87 million for IHOP, and $2.46 million for Applebee's. 14 8 DineEquity 2014 Annual Report

  • Page 11
    ... test and refine new approaches, in order to evolve the roles that the Applebee's® and IHOP® brands play in consumers' lives. Our strategy includes finding ways to make investments that can yield big wins. We applied this approach to both brands in 2014. Winning hearts and minds at IHOP...

  • Page 12
    ... each of our core target segments. During the second half of 2014, DineEquity® and a large majority of its IHOP franchisees worked together to increase the total annual contribution percentage of restaurant gross sales to the IHOP National Advertising Fund. Collectively, we believe that additional...

  • Page 13
    nection Today, IHOP has 3.6 million fans across nine platforms: Facebook, Instagram, Pinterest, Vine, YouTube, Twitter, Snapchat, Foursquare and Tumblr. 18 11

  • Page 14
    Collab The IHOP Franchise Leadership Council (FLC) sub-committees are devoted to Menu Innovation, Operations, Development, Cost, Technology and Marketing. 12 DineEquity 2014 Annual Report

  • Page 15
    ...test processes for new menu items, marketing initiatives, or evaluations of cost or quality options for ingredients. In 2014, we teamed up with IHOP franchisees to create the Service Excellence Task Force, reinforcing the welcoming environment our restaurants provide guests. In 2015, we are building...

  • Page 16
    ... Day also marked the first time every IHOP restaurant in Mexico and Canada has participated in the pancake delight. Extending thanks on Veterans Day On our ninth annual Veterans Day celebration in 2014, close to one million free meals were served to veterans and active duty military at Applebee...

  • Page 17
    Applebee's has generated over 8.4 million meals and thanks since the Veterans Day/Thank You Movement program's inception. 15

  • Page 18
    Management Team (from left) Thomas W. Emrey Chief Financial Officer Steven R. Layt President, Applebee's Business Unit Daniel del Olmo President, International Bryan R. Adel Senior Vice President, Legal, General Counsel and Secretary John B. Jakubek Julia A. Stewart Chairman and Chief Executive ...

  • Page 19
    10-K Form

  • Page 20
    ... 90 days. Yes No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months...

  • Page 21
    ...SUBSIDIARIES Annual Report on Form 10-K For the Fiscal Year Ended December 31, 2014 Table of Contents Page PART I. Item 1-Business ...Item 1A-Risk Factors ...Item 1B-Unresolved Staff Comments ...Item 2-Properties ...Item 3-Legal Proceedings...Item 4-Mine Safety Disclosures ...PART II. Item 5-Market...

  • Page 22
    ... profit margins and reduces the volatility of free cash flow performance, as compared to owning a significant number of company-operated restaurants. We generate revenue from four reporting segments, comprised of Franchise operations - primarily royalties, fees and other income from 1,994 Applebee...

  • Page 23
    ...party financial sources arranged for by the franchise developer to purchase or lease a restaurant site, build and equip the business and fund its working capital needs. We refer to this method of operation as our "Current IHOP Business Model." The first restaurant in what became the Applebee's chain...

  • Page 24
    ...) 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-mixes; and (e) franchise advertising fees. The...

  • Page 25
    ... to specified Company policies and standards. Advertising Fees We currently require domestic franchisees of Applebee's restaurants to contribute 3.25% of their gross sales to a national advertising fund and to spend at least 0.5% of their gross sales on local marketing and promotional activities...

  • Page 26
    ...Applebee's development agreements in place call for the opening of a combined total of 102 domestic restaurants and 19 international restaurants in 2015 and 2016. As of December 31, 2014, we had signed commitments and options from IHOP franchisees to build 238 IHOP restaurants over the next 18 years...

  • Page 27
    ... one restaurant to 13 restaurants. Our five largest IHOP franchisees own 24% of the total 1,639 IHOP franchise restaurants. Company-Operated Restaurants As of December 31, 2014, we operated 23 Applebee's restaurants located in the Kansas City, Missouri market area and 10 IHOP restaurants located in...

  • Page 28
    ... house systems for accounting, labor and inventory management in our company restaurants. In addition, we are developing several consumer-facing technology initiatives focused on improving our customers' experience. Sales and product mix information is transmitted to our restaurant support centers...

  • Page 29
    ... requirements for restaurants, a number of other jurisdictions around the United States have adopted regulations requiring that chain restaurants include calorie information on their menus or make other nutritional information available. Initiatives in the area of nutrition disclosure or advertising...

  • Page 30
    ... such as lower residential real estate values, increased foreclosure rates, increased tax rates or other economic disruptions), our business could experience a decline in sales and/or customer traffic as potential customers choose lower-cost alternatives (such as quick-service restaurants) or choose...

  • Page 31
    ... 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 32
    ... We expect to continue to apply a business strategy that includes, among other things, (i) operation of a 99% franchised restaurant system; (ii) the maintenance of a purchasing cooperative that procures products and services for our Applebee's and IHOP restaurants; (iii) the possible introduction of...

  • Page 33
    ...iii) increases in other operating costs including advertising, utilities, leaserelated expenses and credit card processing fees; the highly competitive nature of the restaurant industry with respect to, among other things: (i) price, service, location, personnel and the type and quality of food; (ii...

  • Page 34
    ... customers) at a single Applebee's or IHOP location can have a substantial negative impact on the operations of all restaurants within the Applebee's or IHOP system. Multi-unit food service businesses such as ours can be materially and adversely affected by widespread negative publicity of any type...

  • Page 35
    ...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 36
    ...; the availability of suitable locations and terms for potential development sites, including lease or purchase terms for new locations; the ability of franchisees to fulfill their commitments to build new restaurants in the numbers and the time frames specified in their development agreements; 17

  • Page 37
    ... to receive less revenue from company restaurant sales and any increase in general and administrative expenses may have a greater proportional impact on our financial condition and business results. While our franchise agreements are designed to maintain brand consistency, the significant percentage...

  • Page 38
    ... the franchisee over a 25-year period. Therefore, in addition to franchise fees and royalties, the revenues received from an IHOP franchisee operating under the Previous Business Model include, among other things, lease or sublease rents for the restaurant property building, rent under an equipment...

  • Page 39
    ...manipulation of sales reporting from our restaurants resulting in loss of sales and royalty payments, or a breach in security of these systems could be harmful and cause delays in customer service and reduce efficiency in our operations. Significant capital investments might be required to remediate...

  • Page 40
    ... syrups in retail outlets. If customers have negative perceptions or experiences with our retail products, our brand value could suffer which could have an adverse effect on our business. Failure of our internal controls over financial reporting and future changes in accounting standards may cause...

  • Page 41
    Item 2. Properties. The table below shows the location and ownership type of Applebee's and IHOP restaurants as of December 31, 2014: Franchise Applebee's Company Total Franchise IHOP Company Area License Total United States Alabama ...Alaska...Arizona...Arkansas...California ...Colorado......

  • Page 42
    ... defaults in the payment of rent 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...

  • Page 43
    ... Purchases of Equity Securities. Market Information Our common stock is traded on the NYSE under the symbol "DIN". The following table sets forth the high and low sales prices of our common stock on the NYSE for each fiscal quarter of 2014 and 2013. Fiscal Year 2014 Prices High Low Fiscal Year 2013...

  • Page 44
    ... 13, Stock-Based Incentive Plans, in the Notes to the Consolidated Financial Statements for a description of the Plan. Issuer Purchases of Equity Securities Purchases of Equity Securities by the Company Total number of shares purchased Average price paid per share Total number of shares purchased as...

  • Page 45
    ... on the Standard & Poor's 500 Composite Index and the Value-Line Restaurants Index ("Restaurant Index") over the five-year period ended December 31, 2014. The graph and table assume $100 invested at the close of trading on the last day of trading in 2009 in our common stock and in each of the market...

  • Page 46
    ...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, 2014, 2013, 2012, 2011 and 2010 are derived from our audited consolidated financial statements. Fiscal Year Ended December 31, 2014 2013...

  • Page 47
    ...and deliver maximum franchisee and stockholder value. Our Mission To unite great franchisees, iconic brands and team members to create the world's leading restaurant company - one guest at a time. To achieve this mission, our strategies are designed to ensure strong brands; drive profitable, organic...

  • Page 48
    ... Model we operated under prior to 2003. Growth in both the number of franchise restaurants and in sales at those restaurants will drive franchise revenues in the form of higher royalty revenues, additional franchise fees and, in the case of IHOP restaurants, sales of proprietary pancake and waffle...

  • Page 49
    ... restaurant development; Maintain strong financial discipline; and Drive stockholder value by generating strong free cash flow, the majority of which we intend to return to our stockholders. Our fundamental approach to brand building centers on a strategic combination of menu, media, remodel...

  • Page 50
    ... same-restaurant sales increased 2.8% for the three months ended December 31, 2014 from the same period in 2013. The increase for the fourth quarter was due to an increase in average customer check as well as a slight increase in customer traffic. For the full year ended December 31, 2014, Applebee...

  • Page 51
    ... to IHOP National Advertising Fund During 2014, the Company and franchisees whose restaurants contribute a large majority of total annual contributions to the IHOP National Advertising Fund (the "IHOP NAF") entered into an amendment to their franchise agreements that increased the advertising...

  • Page 52
    ...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 2014 Applebee's Restaurant Data Effective Restaurants:(a) Franchise...Company...Total...

  • Page 53
    ... 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, 2014, 2013 and 2012 were as follows: Year Ended December 31, Reported sales (unaudited) 2014 2013 (In millions...

  • Page 54
    ... IHOP restaurant development and franchising activity. 2014 Year Ended December 31, 2013 2012 Applebee's Restaurant Development Activity Summary - beginning of period: Franchise ...Company ...Total Applebee's restaurants, beginning of period...Franchise restaurants opened: Domestic ...International...

  • Page 55
    ... number of IHOP restaurants due to new restaurant development by franchisees and a 1.1% increase in Applebee's domestic same-restaurant sales. These favorable variances were partially offset by a decrease in Applebee's franchise termination, transfer and extension fees. In 2014, we received a total...

  • Page 56
    ... fees. Franchise Operations Year ended December 31, Favorable (Unfavorable) Variance 2014 2013 %(2) $ (In millions, except percentages and number of restaurants) Effective Franchise Restaurants:(1) Applebee's...IHOP ...Franchise Revenues: Applebee's...$ IHOP...IHOP advertising...Total franchise...

  • Page 57
    ...Company Restaurant Operations Year ended December 31, Favorable (Unfavorable) Variance Effective Company Restaurants:(1) Applebee's...IHOP...Company restaurant sales ...$ Company restaurant expenses ...Company restaurant segment profit...$ Segment profit as % of revenue (2) _____ (1) (2) 2014 2013...

  • Page 58
    ... presented above Financing 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...

  • Page 59
    ... average rate of approximately 7.3% with $1.3 billion principal amount of new long-term debt bearing interest at a fixed rate of 4.277%. The new debt was issued September 30, 2014, on which date $464 million of the old long-term debt was repaid. On October 30, 2014, after a required 30-day notice...

  • Page 60
    ...the year ended December 31, 2014 related to two IHOP companyoperated restaurants in the Cincinnati, Ohio area. Long-lived tangible asset impairment charges for the year ended December 31, 2013 related to three Applebee's company-operated restaurants in the Kansas City, Missouri area. In each year we...

  • Page 61
    ... year. The most significant impact was the decline in revenues and segment profit from the Applebee's company-operated restaurants that were refranchised, partially offset by increased royalty revenues and franchise fees from the refranchised restaurants. While the total amount of segment profit...

  • Page 62
    ... of 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...

  • Page 63
    ... ...Franchise Expenses: Applebee's...IHOP...IHOP advertising...Total franchise expenses ...Franchise Segment Profit: Applebee's...IHOP...Total franchise segment profit ...$ Segment profit as % of revenue(2) ...(1) (2) 2013 2012 %(2) $ (In millions, except percentages and number of restaurants...

  • Page 64
    IHOP's total franchise expenses are substantially higher than Applebee's due to advertising expenses. Franchise fees designated for IHOP's national advertising fund and local marketing and advertising cooperatives are recognized as revenue and expense of franchise operations. However, due to our ...

  • Page 65
    ... 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 of equipment associated with IHOP...

  • Page 66
    ...related to adjustments to the estimated reserve for closed IHOP and Applebee's restaurants. Long-lived tangible asset impairment charges for the year ended December 31, 2013 related to three Applebee's company-operated restaurants in the Kansas City, Missouri area. We evaluated the causal factors of...

  • Page 67
    ...2013. During the year ended December 31, 2012, we completed the refranchising and sale of related restaurant assets of 154 Applebee's companyoperated restaurants, comprised as follows: 17 restaurants in a six-state market area geographically centered around Memphis, Tennessee; 33 restaurants located...

  • Page 68
    ...Term Debt Transaction Summary On September 30, 2014, Applebee's Funding LLC and IHOP Funding LLC (each a "Co-Issuer"), each a special purpose, wholly-owned indirect subsidiary of the Company, issued $1.3 billion of Series 2014-1 4.277% Fixed Rate Senior Notes, Class A-2 (the "Class A-2 Notes") in an...

  • Page 69
    ... assets of the Company and its subsidiaries, which principally consist of franchise agreements, area license agreements, development agreements, franchisee fee notes, equipment leases, agreements related to the production and sale of pancake and waffle dry-mixes, owned and leased real property and...

  • Page 70
    ... operations. Franchise revenues primarily consist of royalties and franchise fees from Applebee's and IHOP franchised restaurants, IHOP advertising fees and sales of proprietary products by IHOP, each of which fluctuates with increases or decreases in franchise retail sales. Franchise retail sales...

  • Page 71
    ... and stock-based compensation) increased by $18.2 million compared to 2013. The primary reasons for the increase were a lower effective tax rate, an increase in segment profit and lower interest costs for the year ended December 31, 2014 compared to the same period of 2013. Net changes in working...

  • Page 72
    ...of cash held for gift card programs and advertising funds. Dividends During the fiscal years ended December 31, 2014 and 2013, we declared and paid dividends on our common stock as follows: Year ended December 31, 2014 Declaration date Payment date Dividend per share Total(1) First quarter...Second...

  • Page 73
    ... of restricted stock awards. Such shares are purchased at the closing price of our common stock on the vesting date. Off-Balance Sheet Arrangements As of December 31, 2014, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4) of SEC Regulation S-K. Contractual Obligations...

  • Page 74
    ...initial services required by the franchise agreement. Fees from development agreements are deferred and recorded into income as restaurants under the development agreement are opened. Sales by company-operated restaurants are recognized when food and beverage items are sold. Company restaurant sales...

  • Page 75
    ... based on historical experience, current payment patterns, future obligations and our assessment of the ability to pay outstanding balances. The primary indicator of credit quality is delinquency, which is considered to be a receivable balance greater than 90 days past due. We continually review...

  • Page 76
    ... the employee's requisite service period using the straight-line method. The fair 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...

  • Page 77
    ...its revenues, including franchise royalty revenues, sales of IHOP pancake and waffle dry mix and retail sales at company-operated restaurants will not be affected by ASU 2014-09. Additionally, lease rental revenues are not within the scope of ASU 2014-09 guidance. The Company is currently evaluating...

  • Page 78
    ...of IHOP franchise restaurants are members of CSCS. In some instances, IHOP and Applebee's may be required to guarantee their purchase of any remaining inventory of certain food and other items purchased by CSCS for the purpose of supplying limited time promotions on behalf of the Applebee's and IHOP...

  • Page 79
    ... Financial Statements Page Reference Report of Independent Registered Public Accounting Firm...Consolidated Balance Sheets as of December 31, 2014 and 2013 ...Consolidated Statements of Comprehensive Income for each of the three years in the period ended December 31, 2014 ...Consolidated Statements...

  • Page 80
    ... years in the period ended December 28, 2014. These financial statements are the responsibility 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...

  • Page 81
    ...Subsidiaries Consolidated Balance Sheets (In thousands, except share amounts) December 31, 2014 2013 Current assets: Cash and cash equivalents ...Receivables, net ...Restricted cash ...Prepaid gift cards ...Prepaid income taxes ...Deferred income taxes ...Other current assets...Total current assets...

  • Page 82
    ... Consolidated Statements of Comprehensive Income (In thousands, except per share amounts) Year Ended December 31, 2014 2013 2012 Segment Revenues: Franchise and restaurant revenues...$ Rental revenues ...Financing revenues...Total segment revenues...Segment Expenses: Franchise and restaurant...

  • Page 83
    ... 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 compensation...Dividends on common stock ...Balance at December 31, 2014 ...34...

  • Page 84
    ...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 equipment and assets...

  • Page 85
    ... States territories and eight countries outside of the United States. As of December 31, 2014, there were a total of 2,017 Applebee's restaurants, of which 1,994 were subject to franchise agreements and 23 were company-operated restaurants. These Applebee's restaurants were located in 49 states of...

  • Page 86
    ... 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 are...

  • Page 87
    ... 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...

  • Page 88
    ...initial services required by the franchise agreement. Fees from development agreements are deferred and recorded into income as restaurants under the development agreement are opened. Sales by company-operated restaurants are recognized when food and beverage items are sold. Company restaurant sales...

  • Page 89
    ...the national 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...

  • Page 90
    ... restricted stock units is determined based on the Company's stock price on the grant date. The Company estimates the grant date fair value of stock option awards using the Black-Scholes option pricing model, which considers, among other factors, a risk-free interest rate, the expected life of...

  • Page 91
    ...royalty revenues, sales of proprietary products (primarily IHOP pancake and waffle dry-mixes) and the portion of the franchise fees allocated to IHOP and Applebee's intellectual property. Additionally, franchise fees designated for IHOP's national advertising fund and local marketing and advertising...

  • Page 92
    ...its revenues, including franchise royalty revenues, sales of IHOP pancake and waffle dry mix and retail sales at company-operated restaurants will not be affected by ASU 2014-09. Additionally, lease rental revenues are not within the scope of ASU 2014-09 guidance. The Company is currently evaluating...

  • Page 93
    ...with the term of the corresponding restaurant building lease. The IHOP franchise fee notes have a term of five to eight years and are due in equal weekly installments, primarily bear interest averaging 6.4% and 6.6% per annum at December 31, 2014 and 2013, respectively, and are collateralized by the...

  • Page 94
    ...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 2014 and 2013, the Company made...

  • Page 95
    ...) Series 2014-1 Class A-2 4.227% Fixed Rate Senior Secured Notes...$ 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...

  • Page 96
    ...Note Purchase Agreement dated as of September 30, 2014 (the "Variable Funding Note Purchase Agreement"), among the Co-Issuers, the Guarantors , certain conduit investors, financial institutions and funding agents, and Cooperatieve Centrale Raiffeisen-Boerenleenbank, B.A. ("Rabobank Nederdland"), New...

  • Page 97
    ..., which principally consist of franchise agreements, area license agreements, development agreements, franchisee fee notes, equipment leases, agreements related to the production and sale of pancake and waffle dry-mixes, owned and leased real property and intellectual property. The Notes are...

  • Page 98
    ... as deferred financing costs. Fees paid to third parties of $4.0 million were charged against income. 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-based Term Loans...

  • Page 99
    ... and covenants under the Credit Agreement, remain unchanged. Fees of $1.3 million paid to third parties in connection with Amendment No. 2 were included as "Debt modification costs" in the Consolidated Statement of Comprehensive Income for the year ended December 31, 2013. Guarantees The loans made...

  • Page 100
    ... 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 debt, enter into certain...

  • Page 101
    ... in the Consolidated Statements of Comprehensive Income. As of December 31, 2013, $14.0 million of deferred financing costs associated with the Credit Agreement and the issuance of the Senior Notes was reported as other non-current assets, net in the Consolidated Balance Sheets. Discount on Debt The...

  • Page 102
    ... above and beyond base rent, for the years ended December 31, 2014, 2013 and 2012 was $14.1 million, $12.7 million and $12.5 million, respectively. The following is the Company's net investment in equipment leases receivable: December 31, (In millions) 2014 2013 Total minimum leases receivable...

  • Page 103
    ...fiscal year, 13 monthly payments will be made in fiscal 2015 and 11 monthly payments in fiscal 2017. 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 104
    ... B Convertible Preferred Stock for an aggregate purchase price of $35.0 million in 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...

  • Page 105
    ...the Company's Board of Directors approved increasing the share repurchase authorization back to the previous level of $100 million (the "2014 Authorization"). During the year ended December 31, 2014, the Company purchased 367,256 shares of our common stock under the 2013 authorization for a total of...

  • Page 106
    ... Financial Statements (Continued) 11. Stockholders' Equity (Continued) Dividends During the fiscal years ended December 31, 2014 and 2013, the Company declared and paid dividends on our common stock as follows: Year ended December 31, 2014 Declaration date Payment date Dividend per share Total...

  • Page 107
    ... to the Consolidated Financial Statements (Continued) 12. Closure and Impairment Charges (Continued) Long-lived tangible asset impairment charges for the year ended December 31, 2013 related to three Applebee's companyoperated restaurants in the Kansas City, Missouri area. The Company evaluated the...

  • Page 108
    ... the fair values generated by the model may not be indicative of the actual fair values of the Company's stock-based awards. The following table summarizes the assumptions used to value options granted in the respective periods: 2014 2013 2012 Risk free interest rate ...Weighted average historical...

  • Page 109
    ... classified awards of restricted stock and restricted stock units for the years ended December 31, 2014, 2013 and 2012 is as follows: Weighted Average Grant-Date Per Share Fair Value Weighted Average Grant-Date Per Share Fair Value Shares of Restricted Stock Restricted Stock Units Outstanding at...

  • Page 110
    ... Consolidated Financial Statements (Continued) 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 111
    ... the second quarter of 2013, the Internal Revenue Service ("IRS") issued a Revenue Agent's Report ("RAR") related to its examination of the Company's U.S federal income tax return for the tax years 2008 to 2010. The Company disagrees with a portion of the proposed assessments and has contested them...

  • Page 112
    ... Statements of Comprehensive Income. The valuation allowance of $1.1 million as of both December 31, 2014 and 2013 related to the Massachusetts enacted legislation requiring unitary businesses to file combined reports. As of each reporting date, the Company's management considers new evidence...

  • Page 113
    ...) 17. Segment Reporting Information on segments and a reconciliation to income (loss) before income taxes are as follows: Year Ended December 31, 2013 (In millions) 2014 2012 Revenues Franchise operations ...Company restaurants...Rental operations...Financing operations ...Total...Income (loss...

  • Page 114
    ... 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 115
    ..."). Based on that evaluation, our management concluded that our internal control over financial reporting was effective as of December 28, 2014. The effectiveness of our internal control over financial reporting as of December 28, 2014 has been audited by Ernst & Young LLP, an independent registered...

  • Page 116
    ... respects, effective internal control over financial reporting as of December 28, 2014, 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...

  • Page 117
    ...officers is incorporated by reference to our Proxy Statement for the 2015 Annual Meeting of Shareholders ("2015 Proxy Statement") to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2014. Item 11. Executive Compensation. The information required by this Item...

  • Page 118
    ... 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, 2014 and 2013. Consolidated Statements...

  • Page 119
    ... and Guggenheim Securities, LLC (Exhibit 99.1 to Registrant's Form 8-K filed on August 14, 2014 is incorporated herein by reference). 10.30 Class A-1 Note Purchase Agreement, dated September 30, 2014, among Applebee's Funding LLC and IHOP Funding LLC, each as Co-Issuer, certain special-purpose...

  • Page 120
    10.32 Management Agreement, dated September 30, 2014, among Applebee's Funding LLC and IHOP Funding LLC, each as a Co-Issuer, other securitization entities party thereto from time to time, the Registrant, Applebee's Services, Inc. and International House of Pancakes, LLC, as sub-managers, and ...

  • Page 121
    ... 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 25th day of February 2015. Name Title /s/ JULIA A. STEWART...

  • Page 122
    ...987 56,727 4.9 Definitions of all components used in calculating the above ratios are found in the Base Indenture and the related Series 2014-1 Supplement to the Base Indenture, dated September 30, 2014, filed as Exhibits 4.1 and 4.2, respectively, to our Current Report on Form 8-K filed on October...

  • Page 123
    ... House of Pancakes, LLC...III Industries of Canada, LTD...IHOP of Canada ULC...IHOP TPGC, LLC ...IHOP SPV Guarantor, LLC...IHOP Funding, LLC...IHOP Restaurants, LLC...IHOP Franchisor, LLC ...IHOP Property, LLC...IHOP Leasing, LLC...ACM Cards, Inc...Anne Arundel Apple Holding Corporation...Applebee...

  • Page 124
    ...dated February 25, 2015, 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 28, 2014...

  • Page 125
    ... information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ JULIA A. STEWART Julia A. Stewart Chairman and Chief Executive Officer (b) Date: February 25, 2015

  • Page 126
    ...31.2 Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, As Amended I, Thomas W. Emrey, certify that: 1. 2. I have reviewed this Annual Report on Form 10-K of DineEquity, Inc.; Based on my knowledge, this report does not contain any untrue statement of a material fact or...

  • Page 127
    ...connection with the Annual Report on Form 10-K of DineEquity, Inc. (the "Company") for the year ended December 31, 2014, 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 128
    ...of 2002 In connection with the Annual Report on Form 10-K of DineEquity, Inc. (the "Company") for the year ended December 31, 2014, 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...

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  • Page 130
    .... 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 regarding...

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