IHOP 2011 Annual Report Download - page 62

Download and view the complete annual report

Please find page 62 of the 2011 IHOP annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 142

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142

44
Comparison of the fiscal years ended December 31, 2010 and 2009
Overview
As discussed in Note 2, Basis of Presentation and Summary of Significant Accounting Policies, under the subheading
"Reclassifications" in the Notes to the Consolidated Financial Statements, amounts previously reported and other income and
expense in the consolidated statements of operations were reclassified in 2011. The reclassifications had no impact on income
before income taxes, the income tax provision or benefit, and net income or loss for the years ended December 31, 2010 and 2009.
There was no significant impact on the comparison of segment profit between the two years as similar amounts were reclassified
in each year.
Our 2010 financial results compared to 2009 were significantly impacted by (i) 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 the October 2010 Refinancing; (ii) impairment charges in 2009 related to intangible and long-lived assets that did
not recur in 2010; (iii) lower interest expense due to the opportunistic early retirement of securitized debt with excess cash flow
prior to the October 2010 Refinancing; and (iv) a 53rd calendar week included in fiscal 2009. In comparing the Company's financial
results for 2010 to those of 2009, we note:
• Revenues decreased $80.9 million to $1.33 billion in 2010 from $1.41 billion in 2009. The decline was primarily due to
the net effect of refranchising 83 company-operated Applebee's restaurants in 2010 and seven in 2009, a 53rd calendar
week in fiscal 2009, a decline in same-restaurant sales of (1.3%) at Applebee's company-operated restaurants and the
closure of seven Applebee's restaurants in 2010, partially offset by an increase in IHOP and Applebee's effective franchise
units.
• Segment profit for 2010 decreased $15.7 million, comprised as follows:
Franchise operations
Company restaurant operations
Rental operations
Financing operations
Total segment profit
Reported 2010
change in
Segment
Profit
(in millions)
$ 3.0
(7.2)
(8.2)
(3.3)
$(15.7)
Less:
Impact of
53rd week in
2009
$ 5.9
4.6
2.4
0.3
$ 13.2
Adjusted
change in
2010
Segment
Profit
$ 8.9
(2.6)
(5.8)
(3.0)
$(2.5)
The decrease in segment profit was primarily due to the impact of a 53rd calendar week in 2009, as reflected in the table
above. Additionally, segment profit was reduced by a $7.7 million charge associated with an IHOP franchisee in default
and by the net effect of refranchising 90 company-operated Applebee's restaurants in 2010 and 2009, partially offset by
an increase in IHOP effective franchise units, margin improvements in Applebee's company-operated restaurants and an
increase in Applebee's same-restaurant sales.
• Impairment and closure charges were $101.6 million lower than in 2009 primarily because there was no impairment of
intangible assets in 2010.
• Loss on extinguishment of debt was $107.0 million in 2010, primarily related to the successful October 2010 Refinancing,
compared with gains on the extinguishment of debt of $45.7 million in 2009.
• Interest expense was $15.0 million lower in 2010 compared to 2009 due to the early retirement of fixed rate debt and
lower non-cash interest charges as the result of the October 2010 Refinancing.