DIN-2013.9.30-10Q
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________________________ 
FORM 10-Q
 (Mark One)
x      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2013
 OR
o         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from                  to                
 
Commission File Number 001-15283
 ________________________________________________________________
DineEquity, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or
organization)
 
95-3038279
(I.R.S. Employer Identification No.)
 
 
 
450 North Brand Boulevard,
Glendale, California
 
91203-1903
(Address of principal executive offices)
 
(Zip Code)
 
(818) 240-6055
(Registrant’s telephone number, including area code)
 ______________________________________________________________
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x  No o
 Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  No o
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer x
 
Accelerated filer o
 
 
 
Non-accelerated filer o
 
Smaller reporting company o
(Do not check if a smaller reporting company)
 
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o  No x 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
 
Class
 
Outstanding as of October 25, 2013
Common Stock, $0.01 par value
 
19,026,864
 


Table of Contents

DineEquity, Inc. and Subsidiaries
Index
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

1

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements.
DineEquity, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share and per share amounts)
 
 
September 30,
2013
 
December 31, 2012
 
 
(Unaudited)
 
 
Assets
 
 

 
 

Current assets:
 
 

 
 

Cash and cash equivalents
 
$
95,535

 
$
64,537

Receivables, net
 
87,276

 
128,610

Prepaid income taxes
 
3,619

 
16,080

Prepaid gift cards
 
42,840

 
50,242

Deferred income taxes
 
24,811

 
21,772

Other current assets
 
7,683

 
13,214

Total current assets
 
261,764

 
294,455

Long-term receivables
 
201,080

 
212,269

Property and equipment, net
 
281,432

 
294,375

Goodwill
 
697,470

 
697,470

Other intangible assets, net
 
797,061

 
806,093

Other assets, net
 
108,909

 
110,738

Total assets
 
$
2,347,716

 
$
2,415,400

Liabilities and Stockholders’ Equity
 
 

 
 

Current liabilities:
 
 

 
 

Current maturities of long-term debt
 
$
4,720

 
$
7,420

Accounts payable
 
33,339

 
30,751

Gift card liability
 
93,198

 
161,689

Accrued employee compensation and benefits
 
18,063

 
22,435

Accrued interest payable
 
35,825

 
13,236

Current maturities of capital lease and financing obligations
 
11,974

 
10,878

Other accrued expenses
 
20,201

 
21,351

Total current liabilities
 
217,320

 
267,760

Long-term debt, less current maturities
 
1,204,998

 
1,202,063

Capital lease obligations, less current maturities
 
115,351

 
124,375

Financing obligations, less current maturities
 
51,930

 
52,049

Deferred income taxes
 
349,202

 
362,171

Other liabilities
 
98,919

 
98,177

Total liabilities
 
2,037,720

 
2,106,595

Commitments and contingencies
 


 


Stockholders’ equity:
 
 

 
 

Common stock, $0.01 par value, shares: 40,000,000 authorized; September 30, 2013 - 25,308,295 issued, 19,029,164 outstanding; December 31, 2012 - 25,362,946 issued, 19,197,899 outstanding
 
253

 
254

 Additional paid-in-capital
 
270,799

 
264,342

 Retained earnings
 
332,740

 
322,045

 Accumulated other comprehensive loss
 
(157
)
 
(152
)
Treasury stock, at cost; shares: September 30, 2013 - 6,279,131; December 31, 2012 - 6,165,047
 
(293,639
)
 
(277,684
)
Total stockholders’ equity
 
309,996

 
308,805

Total liabilities and stockholders’ equity
 
$
2,347,716

 
$
2,415,400


 See the accompanying Notes to Consolidated Financial Statements.

2

Table of Contents

DineEquity, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
(In thousands, except per share amounts)
(Unaudited)
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
 
 
2013
 
2012
 
2013
 
2012
Segment Revenues:
 
 

 
 

 
 
 
 
Franchise and restaurant revenues
 
$
127,137

 
$
182,246

 
$
379,619

 
$
587,801

Rental revenues
 
30,990

 
30,920

 
92,724

 
92,096

Financing revenues
 
3,156

 
3,152

 
10,223

 
11,394

Total segment revenues
 
161,283

 
216,318

 
482,566

 
691,291

Segment Expenses:
 
 

 
 

 
 
 
 
Franchise and restaurant expenses
 
44,091

 
95,689

 
130,875

 
313,424

Rental expenses
 
24,149

 
24,237

 
72,953

 
73,075

Financing expenses
 

 
15

 
245

 
1,586

Total segment expenses
 
68,240

 
119,941

 
204,073

 
388,085

Gross segment profit
 
93,043

 
96,377

 
278,493

 
303,206

General and administrative expenses
 
35,331

 
48,737

 
105,004

 
125,608

Interest expense
 
24,979

 
28,896

 
75,230

 
88,767

Amortization of intangible assets
 
3,072

 
3,072

 
9,212

 
9,222

Closure and impairment charges
 
(392
)
 
420

 
770

 
1,264

Loss on extinguishment of debt
 

 
2,306

 
36

 
4,917

Debt modification costs
 

 

 
1,296

 

Gain on disposition of assets
 
(72
)
 
(73,650
)
 
(326
)
 
(89,642
)
Income before income taxes
 
30,125

 
86,596

 
87,271

 
163,070

Income tax provision
 
(11,395
)
 
(26,023
)
 
(33,365
)
 
(54,215
)
Net income
 
18,730

 
60,573

 
53,906

 
108,855

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

 

 

 
140

Foreign currency translation adjustment
 
3

 
5

 
(5
)
 
4

Total comprehensive income
 
$
18,733

 
$
60,578

 
$
53,901

 
$
108,999

Net income available to common stockholders:
 
 
 
 

 
 
 
 
Net income
 
$
18,730

 
$
60,573

 
$
53,906

 
$
108,855

Less: Net income allocated to unvested participating restricted stock
 
(296
)
 
(1,187
)
 
(925
)
 
(2,477
)
Less: Accretion of Series B Convertible Preferred Stock
 

 
(688
)
 

 
(2,033
)
Net income available to common stockholders
 
$
18,434

 
$
58,698

 
$
52,981

 
$
104,345

Net income available to common stockholders per share:
 
 

 
 

 
 
 
 
Basic
 
$
0.98

 
$
3.26

 
$
2.80

 
$
5.84

Diluted
 
$
0.97

 
$
3.14

 
$
2.76

 
$
5.66

Weighted average shares outstanding:
 
 

 
 

 
 
 
 
Basic
 
18,831

 
18,006

 
18,898

 
17,859

Diluted
 
19,085

 
18,924

 
19,166

 
18,801

 
 
 
 
 
 
 
 
 
Dividends declared per common share
 
$
0.75

 
$

 
$
2.25

 
$

Dividends paid per common share
 
$
0.75

 
$

 
$
2.25

 
$

 
See the accompanying Notes to Consolidated Financial Statements.

3

Table of Contents

DineEquity, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
 
Nine Months Ended
 
 
September 30,
 
 
2013
 
2012
Cash flows from operating activities:
 
 

 
 

Net income
 
$
53,906

 
$
108,855

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

 
 

Depreciation and amortization
 
26,516

 
30,756

Non-cash interest expense
 
4,635

 
4,547

Loss on extinguishment of debt
 
36

 
4,917

Closure and impairment charges
 
1,166

 
991

Deferred income taxes
 
(16,007
)
 
(20,361
)
Non-cash stock-based compensation expense
 
7,081

 
8,799

Tax benefit from stock-based compensation
 
3,001

 
6,334

Excess tax benefit from share-based compensation
 
(1,985
)
 
(4,757
)
Gain on disposition of assets
 
(326
)
 
(89,642
)
Other
 
791

 
(1,768
)
Changes in operating assets and liabilities:
 
 

 
 

Receivables
 
41,698

 
41,422

Current income tax receivables and payables
 
7,232

 
12,512

Other current assets
 
16,054

 
7,414

Accounts payable
 
2,650

 
2,080

Accrued employee compensation and benefits
 
(4,372
)
 
(6,490
)
Gift card liability
 
(68,493
)
 
(62,841
)
Other accrued expenses
 
29,231

 
25,298

Cash flows provided by operating activities
 
102,814

 
68,066

Cash flows from investing activities:
 
 

 
 

Additions to property and equipment
 
(4,547
)
 
(13,477
)
Proceeds from sale of property and equipment and assets held for sale
 

 
137,449

Principal receipts from notes, equipment contracts and other long-term receivables
 
10,254

 
10,276

Other
 
282

 
964

Cash flows provided by investing activities
 
5,989

 
135,212

Cash flows from financing activities:
 
 
 
 

Borrowings under revolving credit facilities
 

 
50,000

Repayments under revolving credit facilities
 

 
(50,000
)
Repayment of long-term debt (including premiums)
 
(2,400
)
 
(184,237
)
Payment of debt modification costs
 
(1,296
)
 

Principal payments on capital lease and financing obligations
 
(7,515
)
 
(8,246
)
Repurchase of DineEquity common stock
 
(24,663
)
 

Dividends paid on common stock
 
(43,170
)
 

Repurchase of restricted stock
 
(3,209
)
 
(1,690
)
Proceeds from stock options exercised
 
5,585

 
5,443

Excess tax benefit from share-based compensation
 
1,985

 
4,757

Change in restricted cash
 
(3,122
)
 
(8,158
)
Cash flows used in financing activities
 
(77,805
)
 
(192,131
)
Net change in cash and cash equivalents
 
30,998

 
11,147

Cash and cash equivalents at beginning of period
 
64,537

 
60,691

Cash and cash equivalents at end of period
 
$
95,535

 
$
71,838

Supplemental disclosures:
 
 

 
 

Interest paid in cash
 
$
58,751

 
$
77,758

Income taxes paid in cash
 
$
39,084

 
$
58,339

 
See the accompanying Notes to Consolidated Financial Statements.

4

Table of Contents

DineEquity, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
 
1. General
 
The accompanying unaudited consolidated financial statements of DineEquity, Inc. (the “Company”) have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The operating results for the nine months ended September 30, 2013 are not necessarily indicative of the results that may be expected for the twelve months ending December 31, 2013.
 
The consolidated balance sheet at December 31, 2012 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.
 
These consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.
 
2. Basis of Presentation
 
The Company’s fiscal quarters end on the Sunday closest to the last day of each quarter. For convenience, the fiscal quarters of each year are reported as ending on March 31, June 30, September 30 and December 31. The first, second and third quarters of fiscal 2013 ended on March 31, 2013, June 30, 2013 and September 29, 2013, respectively; the first, second and third quarters of fiscal 2012 ended on April 1, 2012, July 1, 2012 and September 30, 2012, respectively.
 
The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries that are consolidated in accordance with U.S. GAAP. All intercompany balances and transactions have been eliminated.
 
The preparation of financial statements in conformity with U.S. GAAP requires the Company’s management to make assumptions and estimates that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates, including those related to provisions for doubtful accounts, legal contingencies, income taxes, long-lived assets, goodwill and intangible assets. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates.
 
3. Accounting Policies
 
Accounting Standards Adopted in the Current Fiscal Year
 
In July 2012, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2012-02, Intangibles - Goodwill and Other: Testing Indefinite Lived Intangibles for Impairment (“ASU 2012-02”). ASU 2012-02 allows an entity the option to first assess qualitative factors in determining whether it is necessary to perform a quantitative impairment test on indefinite-lived intangibles. An entity electing to perform a qualitative assessment is no longer required to calculate the fair value of an indefinite-lived intangible asset unless the entity determines, based on the qualitative assessment, that it is more likely 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 2013-02”). The amendments in ASU 2013-02 do not change the current requirements for reporting net income or other comprehensive income. However, the amendments require disclosure of amounts reclassified out of accumulated other comprehensive income in their entirety, by component, on the face of the statement of operations or in the notes thereto. Amounts that are not required to be reclassified in their entirety to net income must be cross-referenced to other disclosures that provide additional detail. The adoption of ASU 2013-02 as of January 1, 2013 did not have any impact on the Company's consolidated financial statements or disclosures because the Company had no material amount of reclassifications.


5

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

Newly Issued Accounting Standards Not Yet Adopted

In February 2013, the FASB issued ASU No. 2013-04, Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date (“ASU 2013-04”). The amendments in ASU 2013-04 require an entity to measure obligations resulting from joint and several liability arrangements as the amount the entity agreed to pay on the basis of the arrangement among its co-obligors plus the amount an entity expects to pay on behalf of co-obligors. ASU 2013-04 also requires an entity to disclose the nature, amount and other information about each obligation or group of similar obligations. The Company will be required to adopt ASU 2013-04 effective January 1, 2014, and is currently evaluating the potential impact, if any, on its consolidated financial statements.

In July 2013, the FASB issued ASU No. 2013-11, Income Taxes - Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”). ASU 2013-11 provides guidance on the financial statement presentation of an unrecognized tax benefit, as either a reduction of a deferred tax asset or as a liability, when a net operating loss carryforward, similar tax loss, or a tax credit carryforward exists. ASU 2013-11 may be applied on a retrospective basis, and early adoption is permitted. The Company will be required to adopt ASU 2013-11 effective January 1, 2014, and is currently evaluating the potential impact, if any, on its consolidated financial statements.
 
The Company reviewed all other newly issued accounting pronouncements and concluded that they either are not applicable to the Company or are not expected to have a material effect on the Company's consolidated financial statements as a result of future adoption.
 
4. Long-Term Debt
 
Long-term debt consisted of the following components:
 
 
 
 
 
 
September 30, 2013
 
December 31, 2012
 
 
(In millions)
Senior Secured Credit Facility, due October 2017, at a variable interest rate of 3.75% as of September 30, 2013 and 4.25% as of December 31, 2012
 
$
469.6

 
$
472.0

Senior Notes due October 2018, at a fixed rate of 9.5%
 
760.8

 
760.8

Discount
 
(20.7
)
 
(23.3
)
Total long-term debt
 
1,209.7

 
1,209.5

Less current maturities
 
(4.7
)
 
(7.4
)
Long-term debt, less current maturities
 
$
1,205.0

 
$
1,202.1

 
For a description of the respective instruments, 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, 2012.

Debt Modification Costs
 
On February 4, 2013, the Company entered into Amendment No. 2 (“Amendment No. 2”) to the Credit Agreement dated October 8, 2010. For a description of Amendment No. 2, refer to Note 23 of the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012. 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 nine months ended September 30, 2013.


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

Loss on Extinguishment of Debt
 
During the nine months ended September 30, 2013 and 2012, the Company recognized a loss on extinguishment of debt as follows:
Quarter Ended
 
Instrument Repaid/Retired
 
Face Amount
Repaid/Retired
 
Cash Paid
 
Loss (1)
 
 
 
 
(In millions)
March 2013
 
Term Loans
 
$
1.2

 
$
1.2

 
$
0.0

June 2013
 
Term Loans
 
1.2

 
1.2

 
0.0

 
 
Total 2013
 
$
2.4

 
$
2.4

 
$
0.0

 
 
 
 
 
 
 
 
 
March 2012
 
Term Loans
 
$
70.5

 
$
70.5

 
$
1.9

March 2012
 
Senior Notes
 
5.0

 
5.5

 
0.7

September 2012
 
Term Loans
 
108.2

 
108.2

 
2.3

 
 
Total 2012
 
$
183.7

 
$
184.2

 
$
4.9

(1) Including write-off of the discount and deferred financing costs related to the debt retired.

Compliance with Covenants and Restrictions
 
The Company was in compliance with all the covenants and restrictions related to its Senior Secured Credit Facility and Senior Notes as of September 30, 2013.
 

5. Income Taxes
 
The effective tax rate was 38.2% for the nine months ended September 30, 2013 as compared to 33.2% for the nine months ended September 30, 2012. The effective tax rate in 2012 was lower primarily due to a discrete $6.3 million state benefit related to a reduction in state deferred taxes as a result of the refranchising of Applebee's company-operated restaurants and sale of related restaurant assets that was completed in 2012. Additionally, income tax credits, primarily FICA tip and other compensation-related tax credits, were higher in 2012 because Applebee’s had more company-operated restaurants during that year prior to completion of the refranchisings.
 
 The total gross unrecognized tax benefit as of September 30, 2013 and December 31, 2012 was $2.0 million and $6.7 million, respectively, excluding interest, penalties and related tax benefits. The decrease of $4.7 million is primarily related to recent settlements with taxing authorities. The Company estimates the unrecognized tax benefits may decrease over the upcoming 12 months by an amount up to $0.7 million related to settlements with taxing authorities and the lapse of statutes of limitations. For the remaining liability, due to the uncertainties related to these tax matters, the Company is unable to make a reasonably reliable estimate when cash settlement with a taxing authority will occur.

As of September 30, 2013, the accrued interest and penalties were $2.6 million and $0.1 million, respectively, excluding any related income tax benefits. As of December 31, 2012, accrued interest and penalties were $1.4 million and $0.2 million, respectively, excluding any related income tax benefits. The increase of $1.2 million of accrued interest is primarily related to an increase in unrecognized tax benefits as a result of recent audits by taxing authorities. The Company recognizes interest accrued related to unrecognized tax benefits and penalties as a component of the income tax provision recognized in the 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 foreign jurisdictions. With few exceptions, the Company is no longer subject to federal, state or non-United States tax examinations by tax authorities for years before 2008. In 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 through the IRS administrative 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.


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

6. Stock-Based Compensation
 
From time to time, the Company has granted nonqualified stock options, restricted stock, cash-settled and stock-settled restricted stock units and performance units to officers, other employees and non-employee directors of the Company. Currently, the Company is authorized to grant nonqualified stock options, stock appreciation rights, restricted stock, cash-settled and stock-settled restricted stock units and performance units to officers, other employees and nonemployee directors under the DineEquity, Inc. 2011 Stock Incentive Plan (the “2011 Plan”). The 2011 Plan was approved by stockholders on May 17, 2011 and permits the issuance of up to 1,500,000 shares of the Company’s common stock. The 2011 Plan will expire in May 2021.
 
The nonqualified stock options generally vest ratably over a three-year period in one-third increments and have a term of ten years from the grant date. Option exercise prices equal the closing price of the Company’s common stock on the New York Stock Exchange 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 from the grant date.

The following table summarizes the components of the Company’s stock-based compensation expense included in general and administrative expenses in the consolidated financial statements:
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2013
 
2012
 
2013
 
2012
 
(In millions)
Total stock-based compensation:
 
 
 
 
 
 
 
Equity classified award expense
$
1.2

 
$
2.2

 
$
7.1

 
$
8.8

Liability classified award (credit) expense
(0.8
)
 
1.9

 
(0.9
)
 
2.4

Total pretax stock-based compensation expense
0.4

 
4.1

 
6.2

 
11.2

Tax benefit
(0.2
)
 
(1.6
)
 
(2.4
)
 
(4.3
)
Total stock-based compensation expense, net of tax
$
0.2

 
$
2.5

 
$
3.8

 
$
6.9

 


As of September 30, 2013, total unrecognized compensation cost of $9.1 million related to restricted stock and restricted stock units and $5.1 million related to stock options is expected to be recognized over a weighted average period of 1.8 years for restricted stock and restricted stock units and 1.7 years for stock options.
 
Equity Classified Awards - Stock Options

The estimated fair value of the stock options granted during the nine months ended September 30, 2013 was calculated using a Black-Scholes option pricing model. The following summarizes the assumptions used in the Black-Scholes model:
 
Risk-free interest rate
0.78
%
Weighted average historical volatility
83.4
%
Dividend yield
4.15
%
Expected years until exercise
4.6

Forfeitures
11.0
%
Weighted average fair value of options granted
$36.00
 

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


Option balances as of September 30, 2013 and activity related to stock options for the nine months ended September 30, 2013 were as follows:
 
 
Shares
 
Weighted
Average
Exercise
Price
 
Weighted Average
Remaining
Contractual Term
(in Years)
 
Aggregate
Intrinsic
Value
Outstanding at December 31, 2012
 
958,246

 
$39.67
 
 
 
 

Granted
 
81,328

 
$72.28
 
 
 
 

Exercised
 
(153,454
)
 
$36.40
 
 
 
 

Forfeited
 
(39,243
)
 
$55.78
 
 
 
 

Outstanding at September 30, 2013
 
846,877

 
$42.65
 
6.24
 
$
21,878,000

Vested at September 30, 2013 and Expected to Vest
 
824,671

 
$42.14
 
6.17
 
$
21,683,000

Exercisable at September 30, 2013
 
637,782

 
$37.31
 
5.49
 
$
19,650,000

 
The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the closing stock price of the Company’s common stock on the last trading day of the third quarter of 2013 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 September 30, 2013. 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 September 30, 2013 and activity related to restricted stock and restricted stock units for the nine months ended September 30, 2013 were as follows:
 
 
Restricted
Stock
 
Weighted
Average
Grant Date
Fair Value
 
Restricted
Stock Units
 
Weighted
Average
Grant Date
Fair Value
Outstanding at December 31, 2012
 
346,563

 
$44.74
 
33,242

 
$41.19
Granted
 
88,606

 
$72.16
 
15,387

 
$72.04
Conversion of cash-settled restricted stock units
 

 
 
37,184

 
$72.28
Released
 
(112,625
)
 
$30.09
 
(39,000
)
 
$54.66
Forfeited
 
(53,551
)
 
$54.76
 

 
Outstanding at September 30, 2013
 
268,993

 
$57.84
 
46,813

 
$64.57



9

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


Liability Classified Awards - Restricted Stock Units
 
 
Restricted
Stock Units
 
Weighted
Average
Grant Date
Fair Value
Outstanding at December 31, 2012
 
37,184

 
$66.13
Conversion to stock-settled restricted stock units
 
(37,184
)
 
$72.28
Outstanding at September 30, 2013
 

 

The Company previously 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 determined that, pursuant to the terms of the Plan, these restricted stock units would be settled in shares of common stock and all outstanding restricted stock units were converted to equity classified awards. For the nine months ended September 30, 2013 and 2012, $0.3 million and $0.6 million, respectively, were included in pretax stock-based compensation expense for the cash-settled restricted stock units. At December 31, 2012, liabilities of $2.4 million were included as other accrued expenses in the consolidated balance sheet.

Liability Classified Awards - Long-Term Incentive Awards
The Company has granted cash long-term incentive awards (“LTIP awards”) to certain employees. Annual LTIP awards vest over a three-year period and are determined using a multiplier from 0% to 200% of the target award based on the total shareholder return of DineEquity, Inc. common stock compared to the total shareholder returns of a peer group of companies. Although LTIP awards are both denominated and paid only in cash, because the multiplier is based on the price of the Company's common stock, the awards are considered stock-based compensation in accordance with U.S. GAAP and are liability classified awards. For the nine months ended September 30, 2013 and 2012, a credit of $1.2 million and an expense of $1.8 million, respectively, were included in total stock-based compensation expense related to the LTIP awards. At September 30, 2013 and December 31, 2012, liabilities of $1.1 million and $4.5 million, respectively, related to LTIP awards were included as accrued employee compensation and benefits in the consolidated balance sheets.
 

7. Segments
 
The Company has four reporting segments: franchise operations, company restaurant operations, rental operations and financing operations.
 
As of September 30, 2013, the franchise operations segment consisted of (i) 1,987 restaurants operated by Applebee’s franchisees in the United States, one U.S. territory and 17 countries outside the United States; and (ii) 1,589 restaurants operated by IHOP franchisees and area licensees in the United States, two U.S. territories and seven countries outside the United States. Franchise operations revenue consists primarily of franchise royalty revenues, sales of proprietary products to franchisees (primarily pancake and waffle dry mixes for the IHOP restaurants), IHOP franchise advertising fees and the portion of the franchise fees allocated to IHOP and Applebee's intellectual property.  Franchise operations expenses include IHOP advertising expenses, the cost of IHOP proprietary products and IHOP and Applebee's pre-opening training expenses and other franchise-related costs.
 
At September 30, 2013, the company restaurant operations segment consisted of 23 Applebee’s company-operated restaurants, 10 IHOP company-operated restaurants and three IHOP restaurants reacquired from franchisees and operated by IHOP on a temporary basis until refranchised, all of which are located in the United States. Company restaurant sales are retail sales at company-operated restaurants. Company restaurant expenses are operating expenses at company-operated restaurants and include food, labor, utilities, rent and other restaurant operating costs.
 

10

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

Rental operations revenue includes revenue from operating leases and interest income from direct financing leases. Rental operations expenses are costs of operating leases and interest expense from capital leases on franchisee-operated restaurants. 
Financing operations revenue primarily consists of interest income from the financing of franchise fees and equipment leases and sales of equipment associated with refranchised IHOP restaurants. Financing expenses are primarily the cost of restaurant equipment associated with refranchised IHOP restaurants.
 

Information on segments for the three and nine months ended September 30, 2013 and 2012 was as follows:
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
 
 
2013
 
2012
 
2013
 
2012
 
 
(In millions)
Revenues from External Customers
 
 

 
 

 
 
 
 
Franchise operations
 
$
111.7

 
$
102.6

 
$
331.6

 
$
313.5

Company restaurants
 
15.4

 
79.6

 
48.1

 
274.3

Rental operations
 
31.0

 
30.9

 
92.7

 
92.1

Financing operations
 
3.2

 
3.2

 
10.2

 
11.4

Total
 
$
161.3

 
$
216.3

 
$
482.6

 
$
691.3

Interest Expense
 
 

 
 

 
 
 
 
Company restaurants
 
$
0.1

 
$
0.1

 
$
0.3

 
$
0.3

Rental operations
 
3.8

 
4.2

 
12.0

 
12.8

Corporate
 
25.0

 
28.9

 
75.2

 
88.8

Total
 
$
28.9

 
$
33.2

 
$
87.5

 
$
101.9

Depreciation and amortization
 
 

 
 

 
 
 
 
Franchise operations
 
$
2.7

 
$
2.5

 
$
8.1

 
$
7.4

Company restaurants
 
0.5

 
1.6

 
1.6

 
6.4

Rental operations
 
3.3

 
3.4

 
10.1

 
10.3

Corporate
 
2.4

 
2.3

 
6.7

 
6.7

Total
 
$
8.9

 
$
9.8

 
$
26.5

 
$
30.8

Income (loss) before income taxes
 
 

 
 

 
 
 
 
Franchise operations
 
$
83.3

 
$
75.5

 
$
248.8

 
$
232.4

Company restaurants
 
(0.3
)
 
11.0

 
(0.1
)
 
42.0

Rental operations
 
6.8

 
6.7

 
19.8

 
19.0

Financing operations
 
3.2

 
3.2

 
10.0

 
9.8

Corporate
 
(62.9
)
 
(9.8
)
 
(191.2
)
 
(140.1
)
Total
 
$
30.1

 
$
86.6

 
$
87.3

 
$
163.1



11

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


8. Net Income per Share

The computation of the Company's basic and diluted net income per share for the three and nine months ended September 30, 2013 and 2012 was as follows:
 
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2013
 
2012
 
2013
 
2012
 
(In thousands, except per share data)
Numerator for basic and dilutive income per common share:
 

 
 

 
 
 
 
Net income
$
18,730

 
$
60,573

 
$
53,906

 
$
108,855

Less: Net income allocated to unvested participating restricted stock
(296
)
 
(1,187
)
 
(925
)
 
(2,477
)
Less: Accretion of Series B Convertible Preferred Stock

 
(688
)
 

 
(2,033
)
Net income available to common stockholders - basic
18,434

 
58,698

 
52,981

 
104,345

Effect of unvested participating restricted stock in two-class calculation
1

 
57

 
3

 
121

Accretion of Series B Convertible Preferred Stock

 
688

 

 
2,033

Net income available to common stockholders - diluted
$
18,435

 
$
59,443

 
$
52,984

 
$
106,499

Denominator:
 

 
 

 
 
 
 
Weighted average outstanding shares of common stock - basic
18,831

 
18,006

 
18,898

 
17,859

Dilutive effect of:
 
 
 
 
 
 
 
Stock options
254

 
246

 
268

 
270

Series B Convertible Preferred Stock

 
672

 

 
672

Weighted average outstanding shares of common stock - diluted
19,085

 
18,924

 
19,166

 
18,801

Net income per common share:
 

 
 

 
 
 
 
Basic
$
0.98

 
$
3.26

 
$
2.80

 
$
5.84

Diluted
$
0.97

 
$
3.14

 
$
2.76

 
$
5.66


All Series B Convertible Preferred Stock was converted into DineEquity, Inc. common stock in November, 2012.


9. Fair Value Measurements
The Company does not have a material amount of financial instruments, non-financial assets or non-financial liabilities that are required under U.S. GAAP to be measured on a recurring basis at fair value. The Company has elected to not 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, accounts payable and the current portion of long-term debt approximate the carrying amounts due to their short duration.
 
The fair values of non-current financial liabilities at September 30, 2013 and December 31, 2012, determined based on Level 2 inputs, were as follows:
 
 
September 30, 2013
 
December 31, 2012
 
 
Carrying
Amount
 
Fair Value
 
Carrying
Amount
 
Fair Value
 
 
(In millions)
Long-term debt, less current maturities
 
$
1,205.0

 
$
1,311.6

 
$
1,202.1

 
$
1,334.2

 


12

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


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

Lease Guarantees
 
In connection with the sale of Applebee’s restaurants or previous brands to franchisees and other parties, the Company has, in certain cases, guaranteed or had potential continuing liability for lease payments totaling $431.9 million as of September 30, 2013. 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 2013 through 2048. In the event of default, the indemnity and default clauses in the sale or assignment agreements govern the Company's ability to pursue and recover damages incurred.  No material liabilities have been recorded as of September 30, 2013.

Contingencies

In February 2013, an IHOP franchisee and its affiliated entities which owned and operated 19 restaurants located in the states of Illinois, Wisconsin and Missouri filed for bankruptcy protection. As a result of an order issued by the bankruptcy court, two of the 19 restaurants were returned to the Company in the third quarter of 2013. A non-cash charge of $0.5 million was recorded in the Consolidated Statement of Comprehensive Income against deferred rental revenue associated with the leases for those two restaurants. During the third quarter of 2013, the Company received favorable rulings from the bankruptcy court which, if upheld, would allow the Company to transfer the remaining 17 restaurants to another franchisee. These rulings have been appealed by the current franchisee and are presently subject to a stay, pursuant to which the current franchisee is operating these restaurants only on a day-to-day basis and is continuing to make payments to the Company pursuant to the terms of the original franchise agreements. Accordingly, the Company is unable to determine the ultimate outcome of the bankruptcy proceedings at this time.
 
In an unrelated matter, in April 2013, an Applebee's franchisee which owned and operated 33 restaurants located in Illinois filed for bankruptcy protection. Pursuant to the bidding procedures approved by the bankruptcy court, 15 of the restaurants were sold in June 2013 to an affiliate of an existing franchisee and operated without interruption during the transition of ownership. The remaining 18 restaurants were closed in June 2013. We received approximately $3.8 million in termination payments and other fees in connection with the closure of these restaurants. We also have entered into a development agreement with the franchisee that acquired the 15 restaurants to open additional restaurants in Illinois in the future.


11.  Consolidating Financial Information
 
Certain of the Company's subsidiaries have guaranteed the Company's obligations under the Senior Secured Credit Facility. The following presents the condensed consolidating financial information separately for: (i) the parent Company, the issuer of the guaranteed obligations; (ii) the guarantor subsidiaries, on a combined basis, as specified in the Credit Agreement; (iii) the non-guarantor subsidiaries, on a combined basis; (iv) consolidating eliminations and reclassifications; and (v) DineEquity, Inc. and Subsidiaries on a consolidated basis.
 
Each guarantor subsidiary is 100% owned by the Company at the date of each balance sheet presented. The notes are fully and unconditionally guaranteed on a joint and several basis by each guarantor subsidiary. Each entity in the consolidating financial information follows the same accounting policies as described in the consolidated financial statements.
 

13

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

Supplemental Condensed Consolidating Balance Sheet
September 30, 2013
(In millions(1))
 
 
 
Parent
 
Combined
Guarantor
Subsidiaries
 
Combined
Non-guarantor
Subsidiaries
 
Eliminations and
Reclassification
 
Consolidated
Assets
 
 

 
 

 
 

 
 

 
 

Current Assets
 
 

 
 

 
 

 
 

 
 

Cash and cash equivalents
 
$
52.2

 
$
42.5

 
$
0.8

 
$

 
$
95.5

Receivables, net
 
3.9

 
91.2

 
0.2

 
(8.0
)
 
87.3

Prepaid expenses and other current assets
 
192.2

 
50.6

 

 
(188.6
)
 
54.1

Deferred income taxes
 
(0.1
)
 
23.6

 
1.4

 

 
24.8

Intercompany
 
(436.8
)
 
432.3

 
4.4

 

 

Total current assets
 
(188.6
)
 
640.2

 
6.8

 
(196.6
)
 
261.8

Long-term receivables
 

 
201.1

 

 

 
201.1

Property and equipment, net
 
23.2

 
257.2

 
1.0

 

 
281.4

Goodwill
 

 
697.5

 

 

 
697.5

Other intangible assets, net
 

 
797.0

 

 

 
797.1

Other assets, net
 
16.7

 
92.2

 

 

 
108.9

Investment in subsidiaries
 
1,697.6

 

 

 
(1,697.6
)
 

Total assets
 
$
1,548.9

 
$
2,685.2

 
$
7.8

 
$
(1,894.2
)
 
$
2,347.7

Liabilities and Stockholders’ Equity
 
 
 
 
 
 
 
 
 
 
Current Liabilities
 
 
 
 
 
 
 
 
 
 
Current maturities of long-term debt
 
$
12.7

 
$

 
$

 
$
(8.0
)
 
$
4.7

Accounts payable
 
1.8

 
31.5

 

 


 
33.3

Accrued employee compensation and benefits
 
9.8

 
8.2

 

 


 
18.1

Gift card liability
 

 
93.2

 

 


 
93.2

Other accrued expenses
 
1.3

 
255.6

 
(0.2
)
 
(188.6
)
 
68.0

Total current liabilities
 
25.7

 
388.5

 
(0.2
)
 
(196.6
)
 
217.3

Long-term debt
 
1,205.0

 

 

 


 
1,205.0

Financing obligations
 

 
51.9

 

 


 
51.9

Capital lease obligations
 

 
115.4

 

 

 
115.4

Deferred income taxes
 
2.2

 
347.2

 
(0.3
)
 


 
349.2

Other liabilities
 
5.8

 
92.2

 
0.9

 


 
98.9

Total liabilities
 
1,238.7

 
995.2

 
0.4

 
(196.6
)
 
2,037.7

Total stockholders’ equity
 
310.1

 
1,690.0

 
7.4

 
(1,697.6
)
 
310.0

Total liabilities and stockholders’ equity
 
$
1,548.9

 
$
2,685.2

 
$
7.8

 
$
(1,894.2
)
 
$
2,347.7

(1) Supplemental condensed statements presented in millions may not foot/crossfoot due to rounding from Consolidated Statements presented in thousands.



14

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

Supplemental Condensed Consolidating Balance Sheet
December 31, 2012
(In millions(1))
 
 
Parent
 
Combined
Guarantor
Subsidiaries
 
Combined
Non-guarantor
Subsidiaries
 
Eliminations  and
Reclassification
 
Consolidated
Assets
 
 

 
 

 
 

 
 

 
 

Current Assets
 
 

 
 

 
 

 
 

 
 

Cash and cash equivalents
 
$
9.9

 
$
54.0

 
$
0.6

 
$

 
$
64.5

Receivables, net
 
2.8

 
133.7

 
0.1

 
(8.0
)
 
128.6

Prepaid expenses and other current assets
 
151.3

 
64.6

 

 
(136.3
)
 
79.5

Deferred income taxes
 
(3.2
)
 
24.1

 
0.8

 

 
21.8

Intercompany
 
(394.9
)
 
389.0

 
6.0

 

 

Total current assets
 
(234.1
)
 
665.4

 
7.5

 
(144.3
)
 
294.5

Long-term receivables
 

 
212.3

 

 

 
212.3

Property and equipment, net
 
23.2

 
270.2

 
0.9

 

 
294.4

Goodwill
 

 
697.5

 

 

 
697.5

Other intangible assets, net
 

 
806.1

 

 

 
806.1

Other assets, net
 
18.4

 
92.3

 

 

 
110.7

Investment in subsidiaries
 
1,697.6

 

 

 
(1,697.6
)
 

Total assets
 
$
1,505.1

 
$
2,743.8

 
$
8.5

 
$
(1,841.9
)
 
$
2,415.4

Liabilities and Stockholders’ Equity
 
 

 
 

 
 

 
 

 
 

Current Liabilities
 
 

 
 

 
 

 
 

 
 

Current maturities of long-term debt
 
$
15.4

 
$

 
$

 
$
(8.0
)
 
$
7.4

Accounts payable
 
1.4

 
29.3

 
0.1

 

 
30.8

Accrued employee compensation and benefits
 
9.4

 
13.0

 

 

 
22.4

Gift card liability
 

 
161.7

 

 

 
161.7

Other accrued expenses
 
(42.5
)
 
223.8

 
0.5

 
(136.3
)
 
45.5

Total current liabilities
 
(16.3
)
 
427.8

 
0.6

 
(144.3
)
 
267.8

Long-term debt
 
1,202.1

 

 

 

 
1,202.1

Financing obligations
 

 
52.0

 

 

 
52.0

Capital lease obligations
 

 
124.4

 

 

 
124.4

Deferred income taxes
 
4.7

 
357.6

 
(0.2
)
 

 
362.2

Other liabilities
 
5.6

 
91.9

 
0.7

 

 
98.2

Total liabilities
 
1,196.1

 
1,053.8

 
1.1

 
(144.3
)
 
2,106.6

Total stockholders’ equity
 
309.0

 
1,690.0

 
7.4

 
(1,697.6
)
 
308.8

Total liabilities and stockholders’ equity
 
$
1,505.1

 
$
2,743.8

 
$
8.5

 
$
(1,841.9
)
 
$
2,415.4

(1) Supplemental condensed statements presented in millions may not foot/crossfoot due to rounding from Consolidated Statements presented in thousands.









15

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

Supplemental Condensed Consolidating Statement of Comprehensive Income
For the Three Months Ended September 30, 2013
(In millions(1))
 
 
Parent
 
Combined
Guarantor
Subsidiaries
 
Combined
Non-guarantor
Subsidiaries
 
Eliminations  and
Reclassification
 
Consolidated
Revenues
 
 

 
 

 
 

 
 

 
 

Franchise and restaurant revenues
 
$
0.7

 
$
126.1

 
$
0.4

 
$

 
$
127.1

Rental revenues
 

 
31.0

 

 

 
31.0

Financing revenues
 

 
3.2

 

 

 
3.2

Total revenue
 
0.7

 
160.3

 
0.4

 

 
161.3

Franchise and restaurant expenses
 
0.6

 
43.5

 

 

 
44.1

Rental expenses
 

 
24.1

 

 

 
24.2

Financing expenses
 

 

 

 

 

General and administrative expenses
 
9.0

 
26.0

 
0.3

 

 
35.3

Interest expense
 
24.6

 
0.3

 

 

 
25.0

Amortization of intangible assets
 

 
3.1

 

 

 
3.1

Closure and impairment charges
 

 
(0.5
)
 
0.1

 

 
(0.4
)
Loss (gain) on disposition of assets
 

 
0.1

 
(0.2
)
 

 
(0.1
)
Intercompany dividend
 
(39.2
)
 

 

 
39.2

 

Income before income taxes
 
5.6

 
63.5

 
0.2

 
(39.2
)
 
30.1

Benefit (provision) for income taxes
 
13.1

 
(24.5
)
 

 

 
(11.4
)
Net income
 
$
18.7

 
$
39.0

 
$
0.2

 
$
(39.2
)
 
$
18.7

Total comprehensive income
 
$
18.7

 
$
39.0

 
$
0.2

 
$
(39.2
)
 
$
18.7

(1) Supplemental condensed statements presented in millions may not foot/crossfoot due to rounding from Consolidated Statements presented in thousands.

Supplemental Condensed Consolidating Statement of Comprehensive Income
For the Three Months Ended September 30, 2012
(In millions(1))
 
 
Parent
 
Combined
Guarantor
Subsidiaries
 
Combined
Non-guarantor
Subsidiaries
 
Eliminations  and
Reclassification
 
Consolidated
Revenues
 
 

 
 

 
 

 
 

 
 

Franchise and restaurant revenues
 
$
0.7

 
$
181.3

 
$
0.3

 
$

 
$
182.2

Rental revenues
 

 
30.9

 

 

 
30.9

Financing revenues
 

 
3.2

 

 

 
3.2

Total revenue
 
0.7

 
215.4

 
0.3

 

 
216.3

Franchise and restaurant expenses
 
0.6

 
95.2

 

 

 
95.7

Rental expenses
 

 
24.2

 

 

 
24.2

Financing expenses
 

 

 

 

 

General and administrative expenses
 
15.8

 
32.5

 
0.4

 

 
48.7

Interest expense
 
26.5

 
2.4

 

 

 
28.9

Amortization of intangible assets
 

 
3.1

 

 

 
3.1

Closure and impairment charges
 

 
0.2

 
0.2

 

 
0.4

Gain on disposition of assets
 

 
(73.3
)
 
(0.4
)
 

 
(73.7
)
Loss on extinguishment of debt
 
2.3

 

 

 

 
2.3

Intercompany dividend
 
(88.7
)
 

 

 
88.7

 

Income before income taxes
 
44.2

 
131.1

 
0.1

 
(88.7
)
 
86.6

Benefit (provision) for income taxes
 
16.5

 
(42.5
)
 

 

 
(26.0
)
Net income
 
$
60.6

 
$
88.6

 
$
0.1

 
$
(88.7
)
 
$
60.6

Total comprehensive income
 
$
60.6

 
$
88.6

 
$
0.1

 
$
(88.7
)
 
$
60.6

(1) Supplemental condensed statements presented in millions may not foot/crossfoot due to rounding from Consolidated Statements presented in thousands.

16

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

Supplemental Condensed Consolidating Statement of Comprehensive Income
For the Nine Months Ended September 30, 2013
(In millions(1))