IHOP 2011 Annual Report Download - page 56

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38
Comparison of the fiscal years ended December 31, 2011 and 2010
Overview
Our 2011 financial results compared to 2010 were significantly impacted by (i) the successful refranchising of 215 Applebee's
company-operated restaurants since October 2010; (ii) a loss on extinguishment of debt and temporary equity of $107.0 million
primarily related to the write off of deferred financing costs, prepayment penalties and tender premiums associated with our 2010
debt refinancing that did not recur; (iii) lower interest expense due to our refinancing of long-term debt in October 2010, the
ongoing early retirement of debt with excess cash flow and the repricing of our bank debt in February 2011; and (iv) impairment
and closure charges related to termination of the sublease of Applebee's Restaurant Support Center in Lenexa, Kansas. Highlights
of comparison between the two periods included:
• Revenues decreased $258.4 million to $1.1 billion in 2011 from $1.3 billion in 2010. The decline was primarily due to
the net effect of refranchising 132 company-operated Applebee's restaurants in 2011 and 83 in the fourth quarter of 2010,
and a decrease in IHOP domestic system-wide same-restaurant sales of (2.0)% , partially offset by a 3.6% increase in
IHOP effective franchise units and a 2.0% increase in Applebee's domestic system-wide same-restaurant sales.
• Segment profit for 2011 decreased by $22.2 million, comprised as follows:
Franchise operations
Company restaurant operations
Rental operations
Financing operations
Total segment profit
Year ended December 31
2011
(in millions)
$ 293.5
72.6
27.8
13.7
$ 407.6
2010
$ 273.6
116.3
25.5
14.4
$ 429.8
Favorable
(Unfavorable)
Variance
$ 19.9
(43.7)
2.3
(0.7)
$(22.2)
The decrease in segment profit was primarily due to the net effect of refranchising 215 Applebee's company-operated
restaurants since October 2010, a decline in margins at Applebee's company-operated restaurants and a (2.0)% decrease
in IHOP domestic system-wide same-restaurant sales. These unfavorable factors were partially offset by $7.7 million of
charges associated with an IHOP franchisee that defaulted in 2010, the increase in IHOP effective franchise units and the
increase in Applebee's same-restaurant sales.
• Loss on extinguishment of debt was $11.2 million in 2011, compared with a loss on the extinguishment of debt of $107.0
million in 2010. The significant loss in 2010 included charges of $110.2 million related to our debt refinancing in October
2010 and the redemption of Series A Preferred Stock.
• Interest expense decreased $38.8 million due to lower non-cash interest charges as the result of the October 2010
refinancing, the ongoing early retirement of debt with excess cash flow and the repricing of our bank debt in February
2011.
• Impairment and closure charges were $25.6 million higher in 2011 primarily due to $27.5 million of charges related to
termination of the sublease for Applebee's former Restaurant Support Center in Lenexa, Kansas.