IHOP 2008 Annual Report Download - page 126
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DineEquity, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
12. Leases (Continued)
The minimum future lease payments shown above have not been reduced by the following future
minimum rents to be received on noncancelable subleases and leases of owned property at
December 31, 2008:
Direct
Financing Operating
Leases Leases
(In thousands)
2009 ......................................... $ 18,392 $ 94,232
2010 ......................................... 18,479 95,414
2011 ......................................... 18,539 95,738
2012 ......................................... 18,656 96,223
2013 ......................................... 18,815 97,041
Thereafter ..................................... 148,743 1,165,923
Total minimum rents receivable ...................... $241,624 $1,644,571
The Company has noncancelable leases, expiring at various dates through 2032, which require
payment of contingent rents based upon a percentage of sales of the related restaurant as well as
property taxes, insurance and other charges. Subleases to franchisees of properties under such leases
are generally for the full term of the lease obligation at rents that include the Company’s obligations
for property taxes, insurance, contingent rents and other charges. Generally, the noncancelable leases
include renewal options. Contingent rent expense for all noncancelable leases for the years ended
December 31, 2008, 2007 and 2006 was $4.5 million, $3.4 million and $3.3 million, respectively.
Minimum rent expense for all noncancelable operating leases for the years ended December 31, 2008,
2007 and 2006 was $91.2 million, $67.6 million and $63.8 million, respectively.
13. Fair Value Measurements
The Company adopted FAS No. 157 on January 1, 2008. FAS No. 157 defines fair value as the
price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date (an exit price). The Company has one financial
instrument we must measure under FAS No. 157, investments held by Applebee’s captive insurance
subsidiary. None of the current non-financial assets or non-financial liabilities must be measured at fair
value on a recurring basis. The fair value of the investments held by the captive insurance company at
December 31, 2008 was $5.6 million and was determined based on Level 3 inputs using a risk-adjusted
discounted cash flow model under the income approach.
14. Fair Value of Financial Instruments
We believe 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.
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