IHOP 2010 Annual Report Download - page 114

DineEquity, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
6. Goodwill (Continued)
month after the acquisition. The fair value of the franchise unit was determined using a discounted
cash flow based on forecast royalty revenues from the franchise operations. These fair values, which
reconciled to the overall purchase price paid to acquire Applebee’s, were then used to assign goodwill
between the reporting units as the excess of the estimated fair value of over the carrying value (as of
November 29, 2007) of each reporting unit. The goodwill resulting from this acquisition is not expected
to be deductible for tax purposes.
During 2008 the Company completed several refranchising transactions involving components of
the Company unit (see Note 4, Assets Held For Sale). The goodwill of the Company unit was reduced
by $11.3 million for the goodwill allocated to these restaurants.
In performing the 2008 annual impairment test of goodwill, the Company concluded the goodwill
allocated to the Company unit was fully impaired and an impairment charge of $113.5 million was
recorded (see Note 17, Impairment and Closure Charges).
7. Other Intangible Assets
As of December 31, 2010 and 2009, intangible assets are as follows:
Not Subject to Amortization Subject to Amortization
Liquor Franchising Recipes and
Tradename Licenses Other Rights Menus Leaseholds Total
(In millions)
Balance, December 31, 2007 ....... $790.0 $ 6.4 $ — $199.5 $15.6 $ — $1,011.5
Additions ..................... — — — — — 7.3 7.3
Purchase price adjustments ........ — (1.7) — — — 0.4 (1.3)
Amortization expense ............ — — — (10.0) (2.1) (1.7) (13.8)
Impairment ................... (44.1) — — — — — (44.1)
Refranchising .................. — (1.8) — — — (1.8) (3.6)
Balance, December 31, 2008 ....... 745.9 2.9 — 189.5 13.5 4.2 956.0
Amortization expense ............ — — — (10.0) (2.3) (1.1) (13.4)
Impairment ................... (93.5) — — — — — (93.5)
Other ........................ — — 0.2 — — 0.3 0.5
Balance, December 31, 2009 ....... 652.4 2.9 0.2 179.5 11.2 3.4 849.6
Amortization expense ............ — — — (10.0) (2.3) (1.0) (13.3)
Impairment ................... — (0.3) — — — — (0.3)
Refranchising .................. — — — (0.2) — (1.2) (1.4)
Other ........................ — — 0.1 — — 1.2 1.3
Balance, December 31, 2010 ....... $652.4 $ 2.6 $0.3 $169.3 $ 8.9 $ 2.4 $ 835.9
See Note 17, Impairment and Closure Charges, regarding the impairments of the tradename
recognized in 2009 and 2008.
Annual amortization expense for next five fiscal years is estimated to be approximately
$12.2 million annually. The weighted average life of the intangible assets subject to amortization is 18.7
and 18.6 years at December 31, 2010 and 2009, respectively.
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