IHOP 2009 Annual Report Download - page 127

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DineEquity, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
9. Financing Obligations (Continued)
recorded under the financing method in accordance with U.S. GAAP governing sale-leaseback
transactions involving real estate. Accordingly, the value of the land, buildings and improvements will
remain on the Company’s books and the buildings and improvements will continue to be depreciated
over their remaining useful lives. The net proceeds received have been recorded as a financing
obligation. A portion of the lease payments is recorded as a decrease to the financing obligation and a
portion is recognized as interest expense. In the event the lease obligation of any individual property or
group of properties is assumed by a qualified franchisee the Company’s continuing involvement will
cease. At that time, that portion of the transaction related to that property or group of properties is
expected to be recorded as a sale in accordance with U.S. GAAP and the net book value of those
properties will be removed from the Company’s books, along with a ratable portion of the remaining
financing obligation.
As of December 31, 2009, the Company’s continuing involvement with 23 of the 181 Properties
was ended by assignment of the lease obligation to a qualified franchisee or a release from the lessor.
In accordance with the accounting described above, the transactions related to these properties have
been recorded as a sale with property and equipment and financing obligations each reduced by
$45.2 million.
In July 2008, the Company entered into a sale-leaseback transaction with respect to its support
center in Lenexa, Kansas. In connection with this transaction, the Company received approximately
$39 million in proceeds. The initial term of the leaseback agreement is 15 years. As the Company
expects to have continuing involvement in the form of future subleasing of a substantial portion of the
support center, the transaction will be recorded under the financing method as described above.
As of December 31, 2009, future minimum lease payments under financing obligations during the
initial terms of the leases related to the sale-leaseback transactions are as follows:
Fiscal Years (In millions)
2010 .................................................. $ 31.6
2011 .................................................. 31.9
2012(1) ................................................ 29.3
2013 .................................................. 32.0
2014 .................................................. 32.1
Thereafter ............................................. 415.0
Total minimum lease payments ............................... 571.9
Less interest ............................................ (253.4)
Total financing obligations .................................. 318.5
Less current portion(2) .................................... (9.1)
Long-term financing obligations .............................. $309.4
(1) Due to the varying closing date of the Company’s fiscal year, 11 monthly payments will be
made in fiscal 2012.
(2) Included in other accrued expenses on the consolidated balance sheet.
108