IHOP 2012 Annual Report Download - page 58

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40
Comparison of the fiscal years ended December 31, 2012 and 2011
Overview
Our 2012 financial results compared to 2011 were significantly impacted by (i) the successful refranchising of 154 Applebee's
company-operated restaurants during 2012 that resulted in increased gains on the disposition of the restaurants partially offset by
lower segment profit; (ii) lower impairment and closure charges due to non-recurring costs related to the 2011 termination of the
sublease of Applebee's Restaurant Support Center; and (iii) lower interest expense due to the ongoing early retirement of debt
with both proceeds from the asset dispositions and excess cash flow. Highlights of comparisons between the two periods included:
• Revenues decreased $225.3 million to $849.9 million in 2012 from $1.1 billion in 2011. The decline was primarily due
to the net effect of refranchising 286 company-operated Applebee's restaurants in 2012 and 2011, and a 1.6% decrease
in IHOP domestic system-wide same-restaurant sales, partially offset by a 2.7% increase in IHOP effective franchise
restaurants and a 1.2% increase in Applebee's domestic system-wide same-restaurant sales.
• Segment profit for 2012 decreased by $15.7 million, comprised as follows:
Year ended December 31, Favorable
(Unfavorable)
Variance
2012 2011
(In millions)
Franchise operations ....................................................................... $ 311.5 $ 293.5 $ 18.0
Company restaurant operations....................................................... 41.8 72.6 (30.8)
Rental operations............................................................................. 25.7 27.8 (2.1)
Financing operations....................................................................... 12.9 13.7 (0.8)
Total segment profit........................................................................ $ 391.9 $ 407.6 $ (15.7)
The decrease in segment profit was primarily due to the net effect of refranchising 286 Applebee's company-operated
restaurants in 2012 and 2011, the decrease in IHOP domestic system-wide same-restaurant sales and a write-off of deferred
lease rental income associated with franchised restaurants whose lease agreements were prematurely terminated. These
unfavorable factors were partially offset by the increase in IHOP effective franchise restaurants and the increase in
Applebee's same-restaurant sales.
• Impairment and closure charges were $25.7 million lower in 2012 primarily due to $27.5 million of charges related to
the 2011 termination of the sublease for Applebee's former Restaurant Support Center in Lenexa, Kansas that did not
recur.
• Interest expense decreased $18.4 million due to the ongoing early retirement of debt with both proceeds from the asset
dispositions and excess cash flow and the repricing of our bank debt in February 2011.
• General and administrative ("G&A") expenses increased $7.4 million, primarily due to a $9.1 million charge for settling
certain litigation that commenced prior to our 2007 acquisition of Applebee's.