IHOP 2012 Annual Report Download - page 63

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Loss on Extinguishment of Debt
Instrument Retired/Repaid(1) Face Amount Retired/Repaid Cash Paid Loss(2)
(In millions)
Term Loans............................................. $ 210.5 $ 210.5 $ 4.9
Senior Notes............................................ 5.0 5.5 0.7
Loss on extinguishment of debt, 2012.... $ 215.5 $ 216.0 $ 5.6
Term Loans............................................. $ 161.5 $ 161.5 $ 3.2
Senior Notes............................................ 59.3 64.2 8.0
Loss on extinguishment of debt, 2011.... $ 220.8 $ 225.7 $ 11.2
(1) For a description of the respective instruments, refer to Note 8 of the Notes to Consolidated Financial Statements.
(2) Including write-off of the discount and deferred financing costs related to the debt retired.
During 2012 and 2011, our Senior Notes were selling at a premium to face value. For the years ended December 31, 2012
and 2011, we paid a total premium of $0.5 million and $4.9 million, respectively, to repurchase Senior Notes.
We may continue to dedicate a portion of excess cash flow towards opportunistic debt retirement.
Gain on Disposition of Assets
We recognized a gain on disposition of assets of $102.6 million in 2012, primarily related to the refranchising and sale of
related restaurant assets of 154 Applebee's company-operated restaurants, comprised as follows: 17 restaurants in a six-state market
area geographically centered around Memphis, Tennessee; 33 restaurants located primarily in Missouri and Indiana; 65 restaurants
located in Michigan and 39 restaurants located in Virginia.
In 2011, we recognized a gain on disposition of assets of $43.3 million, primarily related to the refranchising and sale of
related restaurant assets of 132 Applebee's company-operated restaurants, of which 66 were located in Massachusetts, New
Hampshire, Maine, Rhode Island, Vermont and parts of New York state (collectively, the New England market area), 36 were
located in the St. Louis market area and 30 were located in the Washington, D.C. market area.
Debt Modification Costs
In 2011, we incurred costs paid to third parties of $4.0 million in connection with an amendment to our Credit Agreement
that were expensed in accordance with U.S. GAAP guidance for debt modifications. There were no such costs in 2012.
Income Tax Provision
We recorded a tax provision of $67.2 million in 2012 as compared to a tax provision of $29.8 million in 2011. The change
was primarily due to the increase in our pretax book income. The 2012 effective tax rate of 34.5% applied to pretax book income
was lower than the statutory Federal tax rate of 35% primarily related to a reduction in state deferred taxes as a result of the
refranchising and sale of Applebee's company-operated restaurants and compensation-related tax credits.
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: