DIN

Business Context and Reporting Period

This Form 10-K covers the fiscal year ended December 31, 2007, for IHOP Corp. (now Dine Brands Global, Inc.). The reporting period is defined by the November 29, 2007, acquisition of Applebee's International, Inc., which became a wholly-owned subsidiary. The Company operates two primary restaurant concepts: Applebee's Neighborhood Grill & Bar (casual dining) and International House of Pancakes (IHOP) (family dining). As of year-end, the combined system included over 3,300 restaurants. The Company is a large accelerated filer with common stock traded on the NYSE under the symbol "IHP."

Key Financial Metrics

Revenue Composition (2007): Franchise operations ($205.8M), Company restaurant sales ($125.9M), Rental income ($132.4M), and Financing revenues ($20.5M). The significant increase in Company restaurant sales and Franchise revenues is attributable to the inclusion of Applebee's operations for one month post-acquisition.

Material Changes Versus Prior Period

• Acquisition Impact: The acquisition of Applebee's drove a 38.6% increase in total revenues. However, the Company reported a net loss of $0.5 million in 2007 compared to net income of $44.6 million in 2006.
• Derivative Loss: A non-cash loss of $62.1 million was recorded on a derivative financial instrument (interest rate swap) settled in connection with the acquisition financing. This was the primary driver of the net loss.
• Debt Levels: Long-term debt increased from $94.5 million in 2006 to $2.26 billion in 2007, almost entirely to finance the Applebee's acquisition via securitization transactions and preferred stock issuance.
• Interest Expense: Interest expense rose to $28.7 million from $7.9 million, reflecting the new debt load and the amortization of the swap settlement.
• Segment Performance: IHOP franchise operations profit increased by 7.7% due to higher franchise retail sales. Applebee's contributed a net loss of $1.3 million for the one-month period included in the 2007 results.

Guidance, Outlook, and Risks

Strategic Outlook: Management plans to transition Applebee's to a heavily franchised model, targeting the sale of approximately 190 company-owned real estate parcels via sale-leaseback transactions and the refranchising of approximately 480 company-operated restaurants by 2010. Proceeds are intended to repay acquisition debt. The Company expects to open 50 to 65 new Applebee's restaurants and 65 to 70 new IHOP restaurants in 2008.

Key Risks and Contingencies:

• Debt Service: The Company incurred substantial indebtedness ($2.3 billion) to finance the acquisition. Failure to generate sufficient cash flow to meet debt service obligations could adversely affect financial condition.
• Integration Risks: There is no assurance that the integration of Applebee's will achieve anticipated cost savings or operational improvements.
• Legal Proceedings: The Company is defending a collective action lawsuit (Gerald Fast v. Applebee's) regarding minimum wage and tip credits for tipped workers. A nationwide class has been conditionally certified with over 5,500 opt-ins; the Company has not accrued a loss contingency as the outcome is uncertain.
• Intellectual Property: Technical issues were identified regarding IHOP trademark registrations filed prior to 1999. The Company believes these do not materially affect the business but has filed new applications.

Investor Verification Checklist

• Verify the status and potential liability of the Gerald Fast v. Applebee's wage and hour collective action lawsuit.
• Monitor the progress of the Applebee's refranchising and sale-leaseback initiatives, as these are critical to the debt reduction strategy.
• Review the amortization schedule of the $62.1 million derivative loss and its impact on future interest expense.
• Assess the Company's ability to meet debt covenants associated with the $2.3 billion in securitized debt.
• Confirm the resolution of the appraisal rights claims from Applebee's shareholders who rejected the $25.50 per share merger consideration.