DIN-2011.9.30-10Q
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, 2011
 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 o
 
Accelerated filer x
 
 
 
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 28, 2011
Common Stock, $.01 par value
 
18,039,682
 

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,
2011
 
December 31,
2010
 
 
(Unaudited)
 
 
Assets
 
 

 
 

Current assets:
 
 

 
 

Cash and cash equivalents
 
$
53,940

 
$
102,309

Restricted cash
 
3,221

 
854

Receivables, net
 
73,071

 
98,776

Inventories
 
10,695

 
10,757

Prepaid income taxes
 
13,763

 
34,094

Prepaid gift cards
 
25,048

 
27,465

Prepaid expenses
 
14,439

 
14,602

Deferred income taxes
 
31,367

 
24,301

Assets held for sale
 
39,972

 
37,944

Total current assets
 
265,516

 
351,102

Non-current restricted cash
 

 
778

Restricted assets related to captive insurance subsidiary
 
3,675

 
3,562

Long-term receivables
 
230,588

 
239,945

Property and equipment, net
 
524,947

 
612,175

Goodwill
 
697,470

 
697,470

Other intangible assets, net
 
825,046

 
835,879

Other assets, net
 
115,097

 
115,730

Total assets
 
$
2,662,339

 
$
2,856,641

Liabilities and Stockholders’ Equity
 
 

 
 

Current liabilities:
 
 

 
 

Current maturities of long-term debt
 
$
7,420

 
$
9,000

Accounts payable
 
29,410

 
32,724

Accrued employee compensation and benefits
 
23,748

 
32,846

Gift card liability
 
68,066

 
124,972

Accrued interest payable
 
31,763

 
17,482

Current maturities of capital lease and financing obligations
 
15,015

 
16,556

Facility closure liability
 
20,530

 

Other accrued expenses
 
23,359

 
31,502

Total current liabilities
 
219,311

 
265,082

Long-term debt, less current maturities
 
1,480,393

 
1,631,469

Financing obligations, less current maturities
 
203,091

 
237,826

Capital lease obligations, less current maturities
 
136,957

 
144,016

Deferred income taxes
 
384,629

 
375,697

Other liabilities
 
114,484

 
118,972

Total liabilities
 
2,538,865

 
2,773,062

Commitments and contingencies
 


 


Stockholders’ equity:
 
 

 
 

Convertible preferred stock, Series B, at accreted value, shares:10,000,000 authorized; 35,000 issued; September 30, 2011 - 34,900 outstanding; December 31, 2010 - 35,000 outstanding
 
43,850

 
42,055

Common stock, $.01 par value, shares: 40,000,000 authorized; September 30, 2011 - 24,669,129 issued, 18,034,083 outstanding; December 31, 2010 - 24,382,991 issued,18,183,083 outstanding
 
247

 
243

Additional paid-in-capital
 
203,971

 
192,214

Retained earnings
 
168,907

 
124,250

Accumulated other comprehensive loss
 
(312
)
 
(282
)
Treasury stock, at cost (shares:September 30, 2011 - 6,635,046; December 31, 2010 - 6,199,908)
 
(293,189
)
 
(274,901
)
Total stockholders’ equity
 
123,474

 
83,579

Total liabilities and stockholders’ equity
 
$
2,662,339

 
$
2,856,641

 See the accompanying Notes to Consolidated Financial Statements.

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Table of Contents

DINEEQUITY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
 
 
2011
 
2010
 
2011
 
2010
Segment Revenues:
 
 

 
 

 
 

 
 

Franchise revenues
 
$
97,679

 
$
92,157

 
$
300,782

 
$
280,851

Company restaurant sales
 
131,618

 
206,907

 
420,955

 
642,216

Rental revenues
 
31,163

 
32,210

 
95,003

 
98,329

Financing revenues
 
4,021

 
4,241

 
16,279

 
12,319

Total segment revenues
 
264,481

 
335,515

 
833,019

 
1,033,715

Segment Expenses:
 
 

 
 

 
 

 
 

Franchise expenses
 
25,006

 
25,298

 
78,656

 
76,163

Company restaurant expenses
 
113,976

 
177,253

 
363,021

 
551,874

Rental expenses
 
24,521

 
24,628

 
73,734

 
74,337

Financing expenses
 
425

 
763

 
6,001

 
1,234

Total segment expenses
 
163,928

 
227,942

 
521,412

 
703,608

Gross segment profit
 
100,553

 
107,573

 
311,607

 
330,107

General and administrative expenses
 
38,712

 
39,594

 
115,152

 
116,994

Interest expense
 
32,170

 
42,814

 
101,343

 
131,530

Impairment and closure charges
 
193

 
1,143

 
26,947

 
3,725

Debt modification costs
 

 

 
4,103

 

Amortization of intangible assets
 
3,075

 
3,077

 
9,225

 
9,230

Loss (gain) on extinguishment of debt
 

 

 
7,885

 
(4,640
)
Loss (gain) on disposition of assets
 
1,176

 
745

 
(21,287
)
 
923

Income before income taxes
 
25,227

 
20,200

 
68,239

 
72,345

Provision for income taxes
 
(8,702
)
 
(5,869
)
 
(21,667
)
 
(24,302
)
Net income
 
$
16,525

 
$
14,331

 
$
46,572

 
$
48,043

Net income available to common stockholders
 
 

 
 

 
 

 
 

Net income
 
$
16,525

 
$
14,331

 
$
46,572

 
$
48,043

Less: Series A preferred stock dividends
 

 
(5,640
)
 

 
(17,100
)
Less: Accretion of Series B preferred stock
 
(647
)
 
(612
)
 
(1,915
)
 
(1,810
)
Less: Net income allocated to unvested participating restricted stock
 
(359
)
 
(307
)
 
(1,212
)
 
(1,113
)
Net income available to common stockholders
 
$
15,519

 
$
7,772

 
$
43,445

 
$
28,020

Net income available to common stockholders per share
 
 

 
 

 
 

 
 

Basic
 
$
0.86

 
$
0.45

 
$
2.43

 
$
1.63

Diluted
 
$
0.85

 
$
0.44

 
$
2.38

 
$
1.60

Weighted average shares outstanding
 
 

 
 

 
 

 
 

Basic
 
17,968

 
17,227

 
17,912

 
17,168

Diluted
 
18,243

 
17,568

 
18,268

 
17,519

 
See the accompanying Notes to Consolidated Financial Statements.

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Table of Contents

DINEEQUITY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
 
 
Nine Months Ended
 
 
September 30,
 
 
2011
 
2010
Cash flows from operating activities
 
 

 
 

Net income
 
$
46,572

 
$
48,043

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

 
 

Depreciation and amortization
 
38,599

 
47,594

Non-cash interest expense
 
4,582

 
31,203

Loss (gain) on extinguishment of debt
 
7,885

 
(4,640
)
Impairment and closure charges
 
26,729

 
3,085

Deferred income taxes
 
1,866

 
(10,976
)
Non-cash stock-based compensation expense
 
6,913

 
11,150

Tax benefit from stock-based compensation
 
6,085

 
1,407

Excess tax benefit from stock options exercised
 
(5,713
)
 
(2,211
)
(Gain) loss on disposition of assets
 
(21,287
)
 
923

Other
 
(217
)
 
(1,847
)
Changes in operating assets and liabilities
 
 

 
 

Receivables
 
25,360

 
30,930

Inventories
 
(1,202
)
 
226

Prepaid expenses
 
2,449

 
2,649

Current income tax receivables and payables
 
21,519

 
7,253

Accounts payable
 
(3,992
)
 
(4,699
)
Accrued employee compensation and benefits
 
(9,099
)
 
(3,460
)
Gift card liability
 
(56,906
)
 
(49,742
)
Other accrued expenses
 
4,928

 
(9,384
)
Cash flows provided by operating activities
 
95,071

 
97,504

Cash flows from investing activities
 
 

 
 

Additions to property and equipment
 
(20,829
)
 
(11,421
)
Proceeds from sale of property and equipment and assets held for sale
 
60,188

 
1,975

Principal receipts from notes, equipment contracts and other long-term receivables
 
9,922

 
14,939

Other
 
(558
)
 
1,842

Cash flows provided by investing activities
 
48,723

 
7,335

Cash flows from financing activities
 
 

 
 

Proceeds from issuance of long-term debt
 
25,000

 

Repayment of long-term debt
 
(178,437
)
 
(80,658
)
Principal payments on capital lease and financing obligations
 
(10,296
)
 
(12,191
)
Dividends paid
 

 
(17,100
)
Purchase of common stock
 
(21,170
)
 

Payment of debt modification and issuance costs
 
(12,307
)
 
(1,008
)
Repurchase of restricted stock
 
(4,802
)
 
(1,029
)
Proceeds from stock options exercised
 
6,326

 
2,487

Excess tax benefit from stock options exercised
 
5,713

 
2,211

Change in restricted cash
 
(1,590
)
 
25,377

Other
 
(600
)
 
(12
)
Cash flows used in financing activities
 
(192,163
)
 
(81,923
)
Net change in cash and cash equivalents
 
(48,369
)
 
22,916

Cash and cash equivalents at beginning of period
 
102,309

 
82,314

Cash and cash equivalents at end of period
 
$
53,940

 
$
105,230

Supplemental disclosures
 
 

 
 

Interest paid
 
$
95,867

 
$
113,755

Income taxes paid
 
$
15,685

 
$
29,350

 
See the accompanying Notes to Consolidated Financial Statements.

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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. Operating results for the three months and nine months ended September 30, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011.
 
The consolidated balance sheet at December 31, 2010 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, 2010.
 
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 are reported as ending on March 31, June 30, September 30 and December 31. The first three fiscal quarters of 2011 ended April 3, July 3, and October 2, 2011, respectively; the first three fiscal quarters of 2010 ended April 4, July 4, and October 3, 2010, 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 in consolidation.
 
The preparation of financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions 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.
 
Reclassifications
 
Certain reclassifications have been made to prior year information to conform to the current year presentation. These reclassifications had no effect on the net income or financial position previously reported. The following items previously reported as “other expense, net” for the three months and nine months ended September 30, 2010 have been reclassified as follows:
 
 
 
Three Months
Ended
 
Nine Months Ended
 
 
September 30, 2010
 
 
(In thousands)
Total other expense, as reported
 
$
838

 
$
2,783

Reclassified to:
 
 

 
 

Rental expenses
 
$
712

 
$
2,172

Impairment and closure charges
 
254

 
640

General and administrative expenses
 
229

 
463

Interest expense
 
(50
)
 
96

Franchise revenues
 
(74
)
 
(289
)
Franchise expenses
 
(215
)
 
(205
)
Other line items
 
(18
)
 
(94
)
Total reclassified
 
$
838

 
$
2,783


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Table of Contents


3. Accounting Policies
 
Newly Issued Accounting Standards
 
In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-04, Fair Value Measurement — Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). The amendments result in common fair value measurement and disclosure requirements in U.S. GAAP and international financial reporting standards (“IFRS”). To improve consistency in application across jurisdictions, some wording changes are necessary to ensure that U.S. GAAP and IFRS fair value measurement and disclosure requirements are described in the same way. ASU 2011-04 also provides for certain changes in current U.S. GAAP disclosure requirements. The amendments in ASU 2011-04 are to be applied prospectively, and will be effective for the Company’s fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of ASU 2011-04 is not expected to have a material impact on the Company’s consolidated balance sheets, statements of income or statements of cash flows.
 
In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income — Presentation of Comprehensive Income (“ASU 2011-05”). ASU 2011-05 will require the presentation of the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The amendments in this update do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income, nor does it affect how earnings per share is calculated or presented. Current U.S. GAAP allows reporting entities three alternatives for presenting other comprehensive income and its components in financial statements. One of those presentation options is to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity, which is the presentation format the Company currently uses. This update eliminates that option. The changes to the presentation format are required to be applied retrospectively, and will be effective for the Company’s fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of ASU 2011-05 is not expected to have a material impact on the Company’s consolidated balance sheets, statements of income or statements of cash flows.

In September 2011, the FASB issued ASU No. 2011-08, Intangibles-Goodwill and Other — Testing Goodwill for Impairment ("ASU 2011-08"). The amendments in ASU No. 2011-08 are intended to simplify goodwill impairment testing by adding a qualitative review step to assess whether the required quantitative impairment analysis that exists today is necessary. Under these amendments, an entity would not be required to calculate the fair value of a reporting unit unless the entity determines, based on the qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. ASU No. 2011-08 will be effective for the Company's fiscal years beginning after December 15, 2011; earlier adoption is permitted. As the amendments do not change the underlying principle that the carrying value of goodwill should not exceed its implied fair value, the adoption of ASU 2011-08 is not expected to have a material impact on the Company’s consolidated balance sheets, statements of income or statements of cash flows.
 
The Company reviewed all other significant newly issued accounting pronouncements and concluded that they either are not applicable to the Company’s operations or that no material effect is expected on the consolidated financial statements as a result of future adoption.
 
4. Assets Held for Sale
 
The Company classifies assets as held for sale and ceases the depreciation and amortization of the assets when there is a plan for disposal of the assets and those assets meet the held for sale criteria, as defined in applicable U.S. GAAP. The balance of assets held for sale at December 31, 2010 of $37.9 million was comprised of assets of 36 Applebee’s company-operated restaurants in the St. Louis market area, 30 Applebee’s company-operated restaurants in the Washington, D.C. market, three parcels of land on which Applebee’s franchised restaurants are situated, three parcels of land previously intended for future restaurant development and one IHOP restaurant held for refranchising.
 
During the nine months ended September 30, 2011, the Company entered into an agreement for the franchising and sale of related restaurant assets of 66 Applebee’s company-operated restaurants located in Massachusetts, New Hampshire, Maine, Rhode Island, Vermont and parts of New York. Additionally, the Company entered into a sale-leaseback agreement for a single Applebee's company-operated restaurant and took back one IHOP franchise restaurant to be refranchised. Accordingly, $38.6 million, representing the net book value of the assets related to these restaurants, was transferred to assets held for sale. During the nine months ended September 30, 2011, the Company sold 36 Applebee’s company-operated restaurants in the St. Louis market area, 30 Applebee’s company-operated restaurants in the Washington, D.C. market and two parcels of land on which Applebee’s franchised restaurants are situated. Additionally, the two IHOP restaurants held for sale were refranchised.

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The balance of assets held for sale at September 30, 2011 of $40.0 million was comprised of 66 Applebee’s company-operated restaurants located in Massachusetts, New Hampshire, Maine, Rhode Island, Vermont and parts of New York, one parcel of land on which an Applebee’s franchised restaurant is situated and three parcels of land previously acquired and held for future development. There were no IHOP restaurants held for refranchising in assets held for sale.
 
The following table summarizes the changes in the balance of assets held for sale during 2011:
 
 
(In millions)
Balance, December 31, 2010
$
37.9

Assets transferred to held for sale
38.6

Assets sold
(35.5
)
Refranchised
(0.7
)
Other
(0.3
)
Balance, September 30, 2011
$
40.0


5. Long-Term Debt
 
Long-term debt consists of the following components:
 
 
 
September 30, 2011
 
December 31, 2010
 
 
(In millions)
Senior Secured Credit Facility, due October 2017, at a variable interest rate of 4.25% and 6.0% as of September 30, 2011 and December 31, 2010, respectively
 
$
734.0

 
$
844.0

Senior Notes due October 2018, at a fixed rate of 9.5%
 
785.3

 
825.0

Discount
 
(31.5
)
 
(28.5
)
Total long-term debt
 
1,487.8

 
1,640.5

Less current maturities
 
(7.4
)
 
(9.0
)
Long-term debt, less current maturities
 
$
1,480.4

 
$
1,631.5

 
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, 2010.
 
Amendment of Credit Agreement
 
On February 25, 2011, the Company entered into Amendment No. 1 (the ‘‘Amendment’’) to the Credit Agreement dated as of October 8, 2010 (the “Credit Agreement”) under which a senior secured credit facility (“Credit Facility”) was established among the Company, lenders and the agents named therein. Pursuant to the Amendment, the interest rate margin applicable to LIBOR-based term loans made under the Credit Facility (“Term Loans”) was reduced from 4.50% to 3.00%, and the interest rate floors used to determine the LIBOR and Base Rate reference rates for Term Loans was reduced from 1.50% to 1.25% for LIBOR-based Term Loans and from 2.50% to 2.25% for Base Rate-denominated Term Loans. In addition, the Amendment increased the lender commitments under the Company’s revolving credit facility (the “Revolving Credit Facility”) available under the Credit Facility from $50 million to $75 million. The Amendment also modified certain restrictive covenants of the Credit Agreement, including those relating to repurchases of other debt securities, permitted acquisitions and payments on equity.
 
The Company paid $12.3 million in fees and costs related to the Amendment. $7.4 million in fees were paid to lenders and recorded as additional discount on debt and $0.8 million of costs related to the increase in the Revolving Credit Facility were recorded as deferred financing costs. Fees paid to third parties of $4.1 million were recorded as “Debt modification costs” in the Consolidated Statements of Income for the nine months ended September 30, 2011.
 
Loss (Gain) on Extinguishment of Debt
 
During the nine months ended September 30, 2011 and September 30, 2010, the Company recognized the following losses and gains on the extinguishment of debt:

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Table of Contents


 
Quarter
Ended
 
Instrument (1)
 
Face Amount
Retired/Repaid
 
Cash Paid
 
Loss (Gain)(2)
 
 
 
 
(In millions)
March 2011
 
Term Loans
 
$
110.0

 
$
110.0

 
$
2.7

March 2011
 
Senior Notes
 
32.3

 
35.3

 
4.2

June 2011
 
Senior Notes
 
7.5

 
8.2

 
1.0

Nine months ended September 30, 2011
 
 
 
$
149.8

 
$
153.5

 
$
7.9

 
 
 
 
 
 
 
 
 
March 2010
 
Class A-2-II-X Notes
 
$
48.7

 
$
43.8

 
$
(3.5
)
June 2010
 
Class A-2-II-X Notes
 
19.5

 
18.0

 
(1.1
)
Nine months ended September 30, 2010
 
 
 
$
68.2

 
$
61.8

 
$
(4.6
)

(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, 2010.
(2) 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 Credit Facility and Senior Notes as of September 30, 2011.
 
6. Financing Obligations
 
As of September 30, 2011, future minimum lease payments under financing obligations during the initial terms of the leases related to sale-leaseback transactions are as follows:
 
Fiscal Years
(In millions)
Remainder of 2011
$
5.6

2012(1)
20.7

2013
23.0

2014
23.2

2015
23.3

Thereafter
278.9

Total minimum lease payments
374.7

Less interest
(165.9
)
Total financing obligations
208.8

Less current portion(2)
(5.7
)
Long-term financing obligations
$
203.1

 
(1)     Due to the varying closing dates of the Company’s fiscal years, 11 monthly payments will be made in fiscal 2012.
(2)     Included in “current maturities of capital lease and financing obligations” on the consolidated balance sheet.
 
During the nine months ended September 30, 2011, the Company’s continuing involvement with 17 properties subject to financing obligations was ended by assignment of the lease obligations to a qualified franchisee. As a result, the Company’s financing obligations were reduced by $32.7 million.
 
7. Impairment and Closure Charges
 
The Company assesses tangible long-lived assets for impairment when events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. The following table summarizes the components of impairment and closure charges for the three months and nine months ended September 30, 2011 and 2010:
 

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Table of Contents

 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
 
 
2011
 
2010
 
2011
 
2010
 
 
(In millions)
Impairment and closure charges:
 
 

 
 

 
 

 
 

Impairment
 
$
0.1

 
$
1.3

 
$
4.9

 
$
1.6

Lenexa lease termination
 

 

 
21.2

 

Other closure charges
 
0.1

 
(0.2
)
 
0.8

 
2.1

Total impairment and closure charges
 
$
0.2

 
$
1.1

 
$
26.9

 
$
3.7

 
Impairment and closure charges for the nine months ended September 30, 2011 totaled $26.9 million and primarily related to termination of the Company’s sublease of the commercial space currently occupied by Applebee’s Restaurant Support Center in Lenexa, Kansas. The Company recognized a charge of $21.3 million for the termination fee and other closing costs and a $4.5 million impairment charge related to furniture, fixtures and leasehold improvements at the Restaurant Support Center, the book value of which was not realizable as the result of the termination of the sublease.
 
Impairment and closure charges for the nine months ended September 30, 2010 totaled $3.7 million. Impairment charges of $1.6 million primarily related to Applebee's company-operated restaurants reclassified as held for sale. Closure charges of $2.1 million related primarily to two company-operated IHOP Cafe restaurants, a non-traditional restaurant format development of which was ended after initial evaluation, and the closure of an Applebee's company-operated restaurant in China.

The following table summarizes changes in the closure liability for the Applebee’s Restaurant Support Center in Lenexa, Kansas:
 
 
(In thousands)
Balance, December 31, 2010
$

Closure cost accrual
21,160

Payments
(630
)
Balance, September 30, 2011
$
20,530

     
Substantially all of the closure liability is expected to be paid in the fourth quarter of 2011.

8. Income Taxes
 
The effective tax rate was 34.5% and 31.8% for the three months and nine months ended September 30, 2011, respectively. The effective tax rate of 31.8% is lower than the federal statutory rate of 35% for the nine months ended September 30, 2011 primarily due to tax credits and the release of liabilities for unrecognized tax benefits. The tax credits are primarily FICA tip and other compensation-related tax credits associated with Applebee's company-owned restaurant operations.
 
At September 30, 2011, the Company had a liability for unrecognized tax benefits, including potential interest and penalties net of related tax benefit, totaling $11.7 million, of which approximately $2.9 million is expected to be paid within one year. 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 settlements with taxing authorities will occur.

As of September 30, 2011, accrued interest and penalties were $5.0 million and $0.7 million, respectively, excluding any related income tax benefits. As of December 31, 2010, accrued interest and penalties were $8.9 million and $0.5 million, respectively, excluding any related income tax benefits. The decrease of $3.9 million of accrued interest is primarily related to the release of liabilities for unrecognized tax benefits surrounding gift card income deferral as a result of the issuance of new guidance by the U.S. Internal Revenue Service ("IRS"), partially offset by the accrual of interest on the remaining liability for unrecognized tax benefits during the nine months ended September 30, 2011. The Company recognizes interest accrued related to unrecognized tax benefits and penalties as a component of income tax expense which is recognized in the Consolidated Statements of Income.

The Company or one of its subsidiaries files federal income tax returns and income tax returns in various state and foreign jurisdictions. With few exceptions, the Company is no longer subject to federal, state or non-U.S. tax examinations by tax authorities for years before 2006 for federal returns and other jurisdictions. Applebee's is currently under audit by the IRS for the period ended November 29, 2007. The Company is currently under audit by the IRS for the period ended December 31, 2007.

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9. Stock-Based Compensation
 
From time to time, the Company has granted nonqualified stock options, restricted stock awards, 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 awards, 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 for incentive stock awards. The 2011 Plan will expire in May 2021.
 
The nonqualified stock options generally vest over a three-year period and have a term of ten years from the effective issuance 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 awards 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.

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,
 
 
2011
 
2010
 
2011
 
2010
 
 
(In millions)
Pre-tax compensation expense
 
$
1.6

 
$
4.7

 
$
8.0

 
$
12.9

Tax provision
 
(0.6
)
 
(1.9
)
 
(3.2
)
 
(5.1
)
Total stock-based compensation expense, net of tax
 
$
1.0

 
$
2.8

 
$
4.8

 
$
7.8

 
As of September 30, 2011, $7.8 million and $8.9 million (including estimated forfeitures) of total unrecognized compensation cost related to restricted stock and stock options, respectively, is expected to be recognized over a weighted average period of 1.55 years for restricted stock and 1.46 years for stock options.
 
The estimated fair values of the options granted during 2011 were calculated using a Black-Scholes option pricing model. The following summarizes the assumptions used in the Black-Scholes model:
 
Risk-free interest rate
1.77
%
Weighted average historical volatility
82.7
%
Dividend yield

Expected years until exercise
4.84

Forfeitures
11.0
%
Weighted average fair value of options granted
$
34.72

 
Option balances as of September 30, 2011 and activity related to the Company’s stock options during the nine months then ended were as follows:
 
 
 
Shares
 
Weighted
Average
Exercise
Price
 
Weighted Average
Remaining
Contractual Term
(in Years)
 
Aggregate
Intrinsic
Value
Outstanding at December 31, 2010
 
1,523,710

 
$
24.90

 
 

 
 

Granted
 
229,449

 
$
53.21

 
 

 
 

Exercised
 
(378,866
)
 
$
16.70

 
 

 
 

Forfeited
 
(43,444
)
 
$
28.22

 
 

 
 

Outstanding at September 30, 2011
 
1,330,849

 
$
32.01

 
6.85

 
$
13,961,000

Vested at September 30, 2011 and Expected to Vest
 
1,152,655

 
$
32.70

 
6.62

 
$
11,257,000

Exercisable at September 30, 2011
 
614,321

 
$
33.98

 
4.97

 
$
4,435,000


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Table of Contents

 
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the closing stock price of the Company’s common stock on the last trading day of the third quarter of 2011 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, 2011. The amount of 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.
 
A summary of restricted stock activity for the nine months ended September 30, 2011 is presented below:
 
 
 
Restricted
Stock
 
Weighted
Average
Grant Date
Fair Value
 
Restricted
Stock Units
 
Weighted
Average
Grant Date
Fair Value
Outstanding at December 31, 2010
 
666,244

 
$
28.62

 
18,000

 
$
29.32

Granted
 
142,574

 
$
54.10

 

 

Released
 
(267,565
)
 
$
39.76

 

 

Forfeited
 
(52,810
)
 
$
29.96

 

 

Outstanding at September 30, 2011
 
488,443

 
$
29.80

 
18,000

 
$
29.32


The Company has issued 44,957 shares of cash-settled restricted stock units to members of the Board of Directors, of which 41,957 are outstanding at September 30, 2011. As these instruments only can be settled in cash, they are recorded as liabilities based on the closing price of the Company’s common stock as of September 30, 2011. For the nine months ended September 30, 2011 and 2010, $0.3 million and $1.1 million, respectively, were included as pre-tax stock-based compensation expense for the cash-settled restricted stock units.
 
10. Segments
 
The Company’s revenues and expenses are recorded in four segments: franchise operations, company restaurant operations, rental operations and financing operations.
 
As of September 30, 2011, the franchise operations segment consisted of (i) 1,767 restaurants operated by Applebee’s franchisees in the United States, one U.S. territory and 14 countries outside the United States; and (ii) 1,519 restaurants operated by IHOP franchisees and area licensees in the United States, two U.S. territories and three countries outside the United States. Franchise operations revenue consists primarily of franchise royalty revenues, sales of proprietary products, certain franchise advertising fees and the portion of the franchise fees allocated to intellectual property.  Franchise operations expenses include advertising expense, the cost of proprietary products, pre-opening training expenses and costs related to intellectual property provided to certain franchisees.
 
As of September 30, 2011, the company restaurant operations segment consisted of 243 Applebee’s company-operated restaurants and 13 IHOP company-operated restaurants, all 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, benefits, utilities, rent and other restaurant operating costs.
 
Rental operations revenue includes revenue from operating leases and interest income from direct financing leases. Rental operations expenses are costs of operating leases and interest expense on capital leases on franchisee-operated restaurants.
 
Financing operations revenue consists of interest income from the financing of franchise fees and equipment leases, as well as sales of equipment and the portion of franchise fees not allocated to intellectual property. Financing expenses are primarily the costs of restaurant equipment.
 
Information on segments is as follows:
 

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Table of Contents

 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
 
 
2011
 
2010
 
2011
 
2010
 
 
(In millions)
Revenues from External Customers
 
 

 
 

 
 

 
 

Franchise operations
 
$
97.7

 
$
92.2

 
$
300.8

 
$
280.9

Company restaurants
 
131.6

 
206.9

 
420.9

 
642.2

Rental operations
 
31.2

 
32.2

 
95.0

 
98.3

Financing operations
 
4.0

 
4.2

 
16.3

 
12.3

Total
 
$
264.5

 
$
335.5

 
$
833.0

 
$
1,033.7

Interest Expense
 
 

 
 

 
 

 
 

Company restaurants
 
$
0.1

 
$
0.2

 
$
0.4

 
$
0.6

Rental operations
 
4.4

 
4.6

 
13.6

 
14.3

Corporate
 
32.2

 
42.8

 
101.3

 
131.5

Total
 
$
36.7

 
$
47.6

 
$
115.3

 
$
146.4

Depreciation and amortization
 
 

 
 

 
 

 
 

Franchise operations
 
$
2.3

 
$
2.5

 
$
7.4

 
$
7.5

Company restaurants
 
4.0

 
7.2

 
13.5

 
22.1

Rental operations
 
3.5

 
3.5

 
10.5

 
10.4

Corporate
 
2.5

 
3.0

 
7.2

 
7.6

Total
 
$
12.3

 
$
16.2

 
$
38.6

 
$
47.6

Income (loss) before income taxes
 
 

 
 

 
 

 
 

Franchise operations
 
$
72.7

 
$
66.9

 
$
222.1

 
$
204.7

Company restaurants
 
17.7

 
29.7

 
57.9

 
90.3

Rental operations
 
6.6

 
7.5

 
21.3

 
24.0

Financing operations
 
3.6

 
3.5

 
10.3

 
11.1

Corporate
 
(75.4
)
 
(87.4
)
 
(243.4
)
 
(257.8
)
Total
 
$
25.2

 
$
20.2

 
$
68.2

 
$
72.3


11. Other Comprehensive Income
 
The components of comprehensive income, net of taxes, are as follows:
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
 
 
2011
 
2010
 
2011
 
2010
 
 
(In millions)
Net income
 
$
16.5

 
$
14.3

 
$
46.6

 
$
48.0

Other comprehensive income, net of tax:
 
 

 
 

 
 

 
 

Interest rate swap
 

 
2.4

 

 
6.9

Total comprehensive income
 
$
16.5

 
$
16.7

 
$
46.6

 
$
54.9

 
The amount of income tax benefit allocated to the interest rate swap was $1.5 million and $4.5 million for the three months and nine months ended September 30, 2010, respectively. The loss related to an interest rate swap designated as a cash flow hedge that was being reclassified into earnings as interest expense over the expected life of the related debt, which was estimated to be approximately five years. The entire amount of loss remaining at the time of retirement of the related designated debt was reclassified into earnings in October 2010.
 
The accumulated comprehensive loss of $0.3 million (net of tax) reflected in the Consolidated Balance Sheet as of September 30, 2011 and December 31, 2010 is primarily comprised of a temporary decline in available-for-sale securities.
 

12. Net Income per Share
 
The computation of the Company’s basic and diluted net income per share is as follows:
 

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Table of Contents

 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
 
 
2011
 
2010
 
2011
 
2010
 
 
(In thousands, except per share data)
Numerator for basic and dilutive income - per common share:
 
 

 
 

 
 

 
 

Net income
 
$
16,525

 
$
14,331

 
$
46,572

 
$
48,043

Less: Series A Preferred Stock dividends
 

 
(5,640
)
 

 
(17,100
)
Less: Accretion of Series B Preferred Stock
 
(647
)
 
(612
)
 
(1,915
)
 
(1,810
)
Less: Net income allocated to unvested participating restricted stock
 
(359
)
 
(307
)
 
(1,212
)
 
(1,113
)
Net income available to common stockholders - basic
 
15,519

 
7,772

 
43,445

 
28,020

Effect of unvested participating restricted stock in two-class calculation
 
5

 
6

 
22

 
21

Net income available to common stockholders - diluted
 
$
15,524

 
$
7,778

 
$
43,467

 
$
28,041

Denominator:
 
 

 
 

 
 

 
 

Weighted average outstanding shares of common stock - basic
 
17,968

 
17,227

 
17,912

 
17,168

Dilutive effect of:
 
 

 
 

 
 

 
 

Stock options
 
275

 
341

 
356

 
351

Weighted average outstanding shares of common stock - diluted
 
18,243

 
17,568

 
18,268

 
17,519

Net income per common share:
 
 

 
 

 
 

 
 

Basic
 
$
0.86

 
$
0.45

 
$
2.43

 
$
1.63

Diluted
 
$
0.85

 
$
0.44

 
$
2.38

 
$
1.60

 
The effect of adding shares from the assumed conversion of Series B Convertible Preferred stock to the denominator and the related add-back of the dividends on Series B Convertible Preferred stock to the numerator is anti-dilutive for the three months and nine months ended September 30, 2011 and 2010, respectively.

13. Fair Value Measurements
 
The Company has two types of financial instruments which are required under U.S. GAAP to be measured on a recurring basis at fair value—restricted assets related to Applebee’s captive insurance subsidiary and certain loan guarantees. None of the Company’s non-financial assets or non-financial liabilities is required to be measured at fair value on a recurring basis. The Company has not elected to use fair value measurement, as provided under U.S. GAAP, for any assets or liabilities for which fair value measurement is not presently required.
 
Financial instruments measured at fair value on a recurring basis at September 30, 2011 and December 31, 2010 are as follows:
 
 
 
 
 
Fair Value Measured Using
 
 
Fair Value
 
Level 1
 
Level 2
 
Level 3
 
 
(In millions)
At September 30, 2011:
 
 

 
 

 
 

 
 

Restricted assets of captive insurance company
 
$
3.7

 
$
1.1

 
$

 
$
2.6

Loan guarantees
 
$
0.2

 
$

 
$

 
$
0.2

At December 31, 2010:
 
 

 
 

 
 

 
 

Restricted assets of captive insurance company
 
$
3.6

 
$
1.0

 
$

 
$
2.6

Loan guarantees
 
$
0.2

 
$

 
$

 
$
0.2

 
The level 3 inputs used for the restricted assets consist of a discounted cash flow under the income approach using primarily assumptions as to future interest payments and a discount rate. The fair value of the guarantees was determined by assessing the financial health of each of the four franchisees that have open notes and assessing the likelihood of default. There was no change in the valuation methodologies between the periods presented.
 

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Table of Contents

The Company believes the fair values of cash equivalents, accounts receivable, accounts payable and the current portion of long-term debt approximate their carrying amounts due to their short duration.
 
At September 30, 2011 and December 31, 2010, the cost and market value of our financial instruments measured at fair value (restricted assets related to Applebee’s captive insurance subsidiary) are as follows:
 
September 30, 2011
 
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
 
 
(in millions)
Cash equivalents and money market funds
 
$
1.1

 
$

 
$

 
$
1.1

Auction-rate securities
 
$
2.9

 
$

 
$
(0.3
)
 
$
2.6

 
December 31, 2010
 
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
 
 
(in millions)
Cash equivalents and money market funds
 
$
1.0

 
$

 
$

 
$
1.0

Auction-rate securities
 
$
2.9

 
$

 
$
(0.3
)
 
$
2.6

 
The scheduled maturity of one auction-rate security valued at $0.6 million is December 2030. The remaining balance of auction-rate securities is in mutual funds invested in auction rate securities with no scheduled maturity for the funds.

The fair values of non-current financial liabilities at September 30, 2011 and December 31, 2010 were as follows:
 
 
 
September 30, 2011
 
December 31, 2010
 
 
Carrying
Amount
 
Fair Value
 
Carrying
Amount
 
Fair Value
 
 
(in millions)
Long-term debt, less current maturities
 
$
1,480.4

 
$
1,484.3

 
$
1,631.5

 
$
1,721.0

 
At September 30, 2011 and December 31, 2010, the fair value of the non-current financial liabilities was determined based on Level 2 inputs.
 
14. Commitments and Contingencies
 
Litigation, Claims and Disputes
 
The Company is subject to various lawsuits, claims and governmental inspections or audits arising in the ordinary course of business. Some of these lawsuits purport to be class actions and/or seek substantial damages. In the opinion of management, these matters are adequately covered by insurance or, if not so covered, are without merit or are of such a nature or involve amounts that would not have a material adverse impact on the Company’s business or consolidated financial statements.
 
Gerald Fast v. Applebee’s
 
The Company is currently defending a collective action in United States District Court for the Western District of Missouri, Central Division filed on July 14, 2006 under the Fair Labor Standards Act styled Gerald Fast v. Applebee’s International, Inc., in which named plaintiffs claim that tipped workers in company restaurants perform excessive amounts of non-tipped work for which they should be compensated at the minimum wage. The court has conditionally certified a nationwide class of servers and bartenders who have worked in company-operated Applebee’s restaurants since June 19, 2004. Unlike a class action, a collective action requires potential class members to “opt in” rather than “opt out.” On February 12, 2008, 5,540 opt-in forms were filed with the court.
 
In cases of this type, conditional certification of the plaintiff class is granted under a lenient standard. On January 15, 2009, we filed a motion seeking to have the class de-certified and the plaintiffs filed a motion for summary judgment, both of which were denied by the court.
 
The parties stipulated to a bench trial which was set to begin on September 8, 2009 in Jefferson City, Missouri. Just prior

14

Table of Contents

to trial, however, the court vacated the trial setting in order to submit key legal issues to the Eighth Circuit Court of Appeals for review on interlocutory appeal.  On April 21, 2011, the Eighth Circuit Court of Appeals issued its decision on the interlocutory appeal, affirming the trial court’s ruling that the tip credit is subject to a 20% limit on “related duties in a tipped occupation that are not themselves tip producing” based on guidance in the Department of Labor’s Field Operations Handbook. On May 5, 2011, the Company filed a petition for rehearing en banc with the Eighth Circuit Court of Appeals, which was denied on July 6, 2011 with four judges dissenting. On October 4, 2011, the Company filed a petition for certiorari asking the United States Supreme Court to review the decision of the Eighth Circuit Court of Appeals.
 
The Company believes it has meritorious defenses and intends to vigorously defend this case. An estimate of the possible loss, if any, or the range of the loss cannot be made and, therefore, the Company has not accrued a loss contingency related to this matter.
 
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 $214.5 million as of September 30, 2011. This amount represents the maximum potential liability of 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 2011 through 2048. In the event of default, the indemnity and default clauses in our sale or assignment agreements govern our ability to pursue and recover damages incurred.  No material liabilities have been recorded as of September 30, 2011.

15. Involvement with Variable Interest Entities
 
In February 2009, the Company and owners of Applebee’s and IHOP franchise restaurants formed Centralized Supply Chain Services, LLC (“CSCS”), a purchasing co-operative, to manage procurement activities for the Applebee’s and IHOP restaurants choosing to join CSCS. CSCS is a variable interest entity (“VIE”) as defined under U.S. GAAP. Under the terms of the membership agreements, each member restaurant belonging to CSCS has equal and identical voting rights, ownership rights and obligations. The Company does not have voting control of CSCS. Accordingly, the Company is not considered to be the primary beneficiary of the VIE and therefore does not consolidate the results of CSCS. The Company reaffirmed this assessment as of September 30, 2011 as there have been no changes in the significant facts and circumstances related to the Company’s involvement with CSCS.
 
Each member restaurant is responsible only for the goods and services it chooses to purchase and bears no responsibility or risk of loss for goods and services purchased by other member restaurants. Based on these facts, the Company believes its maximum estimated loss related to its membership in the CSCS is insignificant.

16.  Consolidating Financial Information
 
Certain of our subsidiaries have guaranteed our obligations under the 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.
 

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Table of Contents

Supplemental Condensed Consolidating Balance Sheet
September 30, 2011
(In millions)
 
 
 
Parent
 
Combined
Guarantor
Subsidiaries
 
Combined
Non-guarantor
Subsidiaries
 
Eliminations and
Reclassification
 
Consolidated
Assets
 
 

 
 

 
 

 
 

 
 

Current Assets
 
 

 
 

 
 

 
 

 
 

Cash and cash equivalents
 
$
34.7

 
$
18.8

 
$
0.5

 
$

 
$
54.0

Restricted cash
 

 
3.2

 

 

 
3.2

Receivables, net
 
0.1

 
72.8

 
0.1

 

 
73.0

Inventories
 

 
10.7

 

 

 
10.7

Prepaid expenses
 
64.3

 
38.3

 
0.2

 
(49.5
)
 
53.3

Deferred income taxes
 
3.3

 
23.1

 
5.0

 

 
31.4

Assets held for sale
 

 
37.7

 
2.2

 

 
39.9

Intercompany
 
(300.2
)
 
299.4

 
0.8

 

 

Total current assets
 
(197.8
)
 
504.0

 
8.8

 
(49.5
)
 
265.5

Non-current restricted cash
 

 

 

 

 

Long-term receivables
 

 
230.6

 

 

 
230.6

Property and equipment, net
 
19.3

 
505.7

 

 

 
525.0

Goodwill
 

 
697.5

 

 

 
697.5

Other intangible assets, net
 

 
825.0

 

 

 
825.0

Other assets, net
 
24.7

 
93.9

 
0.1

 

 
118.7

Investment in subsidiaries
 
1,758.3

 

 

 
(1,758.3
)
 

Total assets
 
$
1,604.5

 
$
2,856.7

 
$
8.9

 
$
(1,807.8
)
 
$
2,662.3

Liabilities and Stockholders’ Equity
 
 
 
 
 
 
 
 
 
 
Current Liabilities
 
 
 
 
 
 
 
 
 
 
Current maturities of long-term debt
 
$
7.4

 
$

 
$

 
$

 
$
7.4

Accounts payable
 
1.6

 
27.8

 

 

 
29.4

Accrued employee compensation and benefits
 
4.6

 
19.0

 
0.1

 

 
23.7

Gift card liability
 

 
68.1

 

 

 
68.1

Other accrued expenses
 
(22.4
)
 
161.5

 
1.1

 
(49.5
)
 
90.7

Total current liabilities
 
(8.8
)
 
276.4

 
1.2

 
(49.5
)
 
219.3

Long-term debt
 
1,480.4

 

 

 

 
1,480.4

Financing obligations
 

 
203.1

 

 

 
203.1

Capital lease obligations
 

 
137.0

 

 

 
137.0

Deferred income taxes
 
5.7

 
378.8

 

 

 
384.5

Other liabilities
 
3.7

 
109.6

 
1.2

 

 
114.5

Total liabilities
 
1,481.0

 
1,104.9

 
2.4

 
(49.5
)
 
2,538.8

Total stockholders’ equity
 
123.5

 
1,751.8

 
6.5

 
(1,758.3
)
 
123.5

Total liabilities and stockholders’ equity
 
$
1,604.5

 
$
2,856.7

 
$
8.9

 
$
(1,807.8
)
 
$
2,662.3





16

Table of Contents

Supplemental Condensed Consolidating Balance Sheet
December 31, 2010
(In millions)
 
 
 
Parent
 
Combined
Guarantor
Subsidiaries
 
Combined
Non-guarantor
Subsidiaries
 
Eliminations and
Reclassification
 
Consolidated
Assets
 
 

 
 

 
 

 
 

 
 

Current Assets
 
 

 
 

 
 

 
 

 
 

Cash and cash equivalents
 
$
23.4

 
$
77.3

 
$
1.6

 
$

 
$
102.3

Restricted cash
 

 
0.9

 

 

 
0.9

Receivables, net
 

 
98.7

 

 

 
98.7

Inventories
 

 
10.7

 

 

 
10.7

Prepaid expenses
 
2.7

 
73.8

 

 
(0.3
)
 
76.2

Deferred income taxes
 
1.1

 
17.9

 
5.3

 

 
24.3

Assets held for sale
 

 
35.7

 
2.3

 

 
38.0

Intercompany
 
(46.0
)
 
46.0

 

 

 

Total current assets
 
(18.8
)
 
361.0

 
9.2

 
(0.3
)
 
351.1

Non-current restricted cash
 

 
0.8

 

 

 
0.8

Long-term receivables
 

 
240.0

 

 

 
240.0

Property and equipment, net
 
16.5

 
595.7

 

 

 
612.2

Goodwill
 

 
697.5

 

 

 
697.5

Other intangible assets, net
 

 
835.8

 
0.1

 

 
835.9

Other assets, net
 
28.3

 
89.3

 
0.2

 
1.3

 
119.1

Investment in subsidiaries
 
1,683.3

 

 

 
(1,683.3
)
 

Total assets
 
$
1,709.3

 
$
2,820.1

 
$
9.5

 
$
(1,682.3
)
 
$
2,856.6

Liabilities and Stockholders’ Equity
 
 

 
 

 
 

 
 

 
 

Current Liabilities
 
 

 
 

 
 

 
 

 
 

Current maturities of long-term debt
 
$
9.0

 
$

 
$

 
$

 
$
9.0

Accounts payable
 
3.7

 
29.1

 

 

 
32.8

Accrued employee compensation and benefits
 
9.3

 
23.4

 
0.1

 

 
32.8

Gift card liability
 

 
125.0

 

 

 
125.0

Other accrued expenses
 
(26.0
)
 
90.8

 
1.0

 
(0.3
)
 
65.5

Total current liabilities
 
(4.0
)
 
268.3

 
1.1

 
(0.3
)
 
265.1

Long-term debt
 
1,631.5

 

 

 

 
1,631.5

Financing obligations
 

 
237.8

 

 

 
237.8

Capital lease obligations
 

 
144.0

 

 

 
144.0

Deferred income taxes
 
(5.6
)
 
380.0

 

 
1.3

 
375.7

Other liabilities
 
3.5

 
114.4

 
1.0

 

 
118.9

Total liabilities
 
1,625.4

 
1,144.5

 
2.1

 
1.0

 
2,773.0

Total stockholders’ equity
 
83.9

 
1,675.6

 
7.4

 
(1,683.3
)
 
83.6

Total liabilities and stockholders’ equity
 
$
1,709.3

 
$
2,820.1

 
$
9.5

 
$
(1,682.3
)