IHOP 2012 Annual Report Download - page 68

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Interest Expense
The $38.8 million decrease in interest expense is primarily due to lower non-cash interest charges in 2011 compared to 2010 and
a reduction in long-term debt over the past twelve months, partially offset by an increase in overall weighted interest rates. Non-cash
interest charges declined to $6.2 million in 2011 from $34.4 million because deferred financing costs and discounts associated with
our debt instruments that were refinanced in October 2010 were written off at that time and the deferred financing costs and discounts
associated with new debt instruments are substantially less than those related to the refinanced debt. During 2011, we repaid $161.5
million of Term Loans and $59.3 million of Senior Notes.
Impairment and Closure Charges
Impairment and closure charges for the years ended December 31, 2011 and 2010 were as follows:
Year Ended
December 31,
2011 2010
(In millions)
Long-lived tangible asset impairment.................................................................................... $ 4.9 $ 1.5
Lenexa lease termination ....................................................................................................... 23.0 —
Closure charges...................................................................................................................... 2.0 2.8
Total impairment and closure charges................................................................................... $ 29.9 $ 4.3
On a quarterly basis, we assess whether events or changes in circumstances have occurred that potentially indicate the carrying
value of tangible long-lived assets, primarily assets related to company-operated restaurants, may not be recoverable. Recoverability
of a restaurant's assets is measured by comparing the assets' carrying value to the undiscounted future cash flows expected to be
generated over the assets' remaining useful lives or remaining lease terms, whichever is less. If the total expected undiscounted future
cash flows are less than the carrying amount of the assets, this may be an indicator of impairment. If it is decided that there has been
an impairment, the carrying amount of the asset is written down to the estimated fair value. The fair value is primarily determined by
discounting the future cash flows based on our cost of capital.
Impairment and closure charges for the year ended December 31, 2011 were primarily comprised of $23.0 million related to
termination of our sublease of the commercial space occupied by Applebee’s Restaurant Support Center in Lenexa, Kansas through
October 31, 2011 and a $4.5 million impairment charge related to the furniture, fixtures and leasehold improvements at that facility.
Other closure charges primarily related to adjustments to the reserve for previously closed surplus IHOP properties.
For the year ended December 31, 2010, we recognized impairment charges of $1.5 million and closure charges of $2.8 million.
The impairment charges primarily related to properties associated with Applebee's company-operated restaurants in the Minnesota
market expected to be sold and to a single Applebee's restaurant and the land on which it is situated. The closure charges related
primarily to two company-operated IHOP Cafe restaurants, a non-traditional restaurant test format that was evaluated but will no longer
be utilized, and to the closure of the only company-operated Applebee's restaurant in China.
Amortization of Intangible Assets
Amortization of intangible assets relates to intangible assets arising from the November 2007 acquisition of Applebee's,
primarily franchising rights. In the absence of future impairment charges, amortization charges should remain consistent from year
to year.