IHOP 2009 Annual Report Download - page 134

DineEquity, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
14. Consolidation of Variable Interest Entities (Continued)
The Co-op does not purchase items on behalf of member restaurants; rather, it facilitates
purchasing agreements and distribution arrangements between suppliers and member restaurants. Each
member restaurant is responsible for only 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. Further,
the Company bears no responsibility or risk of loss for goods and services purchased franchise
restaurants deemed de facto agents for purposes of determining the primary beneficiary of the VIE.
Based on these facts, the Company believes its maximum estimated loss related to its membership in
the Co-op is de minimis.
The Company does not anticipate that the adoption on January 1, 2010 of new U.S. GAAP
requirements with respect to VIEs will affect the determination of the primary beneficiary of the Co-op
(see Note 2, Basis of Presentation and Summary of Significant Accounting Policies).
15. Preferred Stock and Stockholders’ Equity
Preferred Stock
As part of the financing for the Applebee’s acquisition, on November 29, 2007, the Company
completed two separate private placements of preferred stock.
Series A Perpetual Preferred Stock
On November 29, 2007, the Company issued and sold 190,000 shares of Series A Perpetual
Preferred Stock (the ‘‘Series A Perpetual Preferred Stock’’) for an aggregate purchase price of
$190.0 million in cash. Total issuance costs were approximately $3.0 million. All of the shares were sold
to MSD SBI, L.P., an affiliate of MSD Capital, L.P., pursuant to a purchase agreement dated as of
July 15, 2007, as amended as of November 29, 2007. The shares of Series A Perpetual Preferred Stock
rank (i) senior to the common stock, and any series of preferred stock specifically designated as junior
to the Series A Perpetual Preferred Stock, with respect to the payment of dividends and distributions,
in a liquidation, dissolution or winding up, and upon any other distribution of the Company’s assets;
and (ii) on a parity with all other series of preferred stock, including the Series B Convertible Preferred
Stock, described below, with respect to the payment of dividends and distributions, in a liquidation,
dissolution or winding up, and upon any other distribution of the Company’s assets.
The holders of the Series A Perpetual Preferred Stock are entitled to receive dividends, at the
rates and on the dates set forth in the Certificate of Designations for the Series A Perpetual Preferred
Stock (the ‘‘Series A Certificate of Designations’’), if, as, and when such dividends are declared by the
Company’s Board of Directors, but out of funds legally available for the payment of dividends, which
dividends are payable in cash, subject to the Company’s right to elect to accumulate any dividends
payable after the first anniversary of the issue date. If, on any scheduled dividend payment date, the
holder of record of a share of Series A Perpetual Preferred Stock does not receive in cash the full
amount of any dividend required to be paid on such share on such date pursuant to the Series A
Certificate of Designations (such unpaid dividends that have accrued and were required to be paid, but
remain unpaid, on a scheduled dividend payment date, together with any accrued and unpaid
accumulated dividends, the ‘‘Passed Dividends’’), then such Passed Dividends accumulate on such
outstanding share of Series A Perpetual Preferred Stock, whether or not there are funds legally
available for the payment thereof or such Passed Dividends are declared by the Company’s Board of
Directors, and until such Passed Dividends have been paid, the applicable dividend rate under the
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