IHOP 2013 Annual Report Download - page 106

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DineEquity, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
9. Leases (Continued)
85
The minimum future lease payments shown above have not been reduced by the following future minimum rents to be
received on noncancelable subleases and leases of owned property at December 31, 2013:
Direct
Financing
Leases
Operating
Leases
(In millions)
2014 ............................................................................................................................................ $ 18.1 $ 98.9
2015 (1)............................................................................................................................................................................ 18.3 101.1
2016 ............................................................................................................................................ 17.8 99.0
2017 ............................................................................................................................................ 17.9 99.0
2018 ............................................................................................................................................ 17.5 98.3
Thereafter.................................................................................................................................... 55.2 652.2
Total minimum rents receivable ................................................................................................. $ 144.8 $ 1,148.5
________________________________________________________________________
(1) Due to the varying closing date of the Company's fiscal year, 13 monthly payments will be made in fiscal 2015
The Company has noncancelable leases, expiring at various dates through 2032, which require payment of contingent rents
based upon a percentage of sales of the related restaurant as well as property taxes, insurance and other charges. Subleases to
franchisees of properties under such leases are generally for the full term of the lease obligation at rents that include the
Company's obligations for property taxes, insurance, contingent rents and other charges. Generally, the noncancelable leases
include renewal options. Contingent rent expense for all noncancelable leases for the years ended December 31, 2013, 2012
and 2011 was $2.8 million, $2.7 million and $2.8 million, respectively. Minimum rent expense for all noncancelable operating
leases for the years ended December 31, 2013, 2012 and 2011 was $75.4 million, $78.0 million and $81.8 million, respectively.
10. Commitments and Contingencies
Purchase Commitments
In some instances, the Company enters into commitments to purchase advertising and other items. Most of these
agreements are fixed price purchase commitments. At December 31, 2013, the outstanding purchase commitments were $90.9
million, the majority of which related to advertising.
Lease Guarantees
In connection with the sale of Applebee's restaurants to franchisees and other parties, the Company has, in certain cases,
guaranteed or had potential continuing liability for lease payments. As of December 31, 2013 and 2012, the Company has
outstanding lease guarantees or is contingently liable for approximately $417.8 million and $448.5 million, respectively. This
amount represents the maximum potential liability of future payments under these leases. These leases have been assigned to
the buyers and expire at the end of the respective lease terms, which range from 2014 through 2048. In the event of default, the
indemnity and default clauses in our sale or assignment agreements govern our ability to pursue and recover damages incurred.
No material liabilities have been recorded as of December 31, 2013.
Contingencies
In February 2013, an IHOP franchisee and its affiliated entities which owned and operated 19 restaurants located in the
states of Illinois, Wisconsin and Missouri filed for bankruptcy protection. As a result of an order issued by the bankruptcy
court, two of the 19 restaurants were returned to the Company in the third quarter of 2013. A non-cash charge of $0.5 million
was recorded in the Consolidated Statement of Comprehensive Income against deferred rental revenue associated with the
leases for those two restaurants. During the third quarter of 2013, the Company received favorable rulings from the bankruptcy
court which, if upheld, would allow the transfer of the remaining 17 restaurants to another franchisee. These rulings have been
appealed by the current franchisee and are presently subject to a continued stay order, pursuant to which the current franchisee
is operating these restaurants only on a day-to-day basis and is continuing to make payments to the Company pursuant to the
terms of the original franchise agreements. Accordingly, the Company is unable to determine the ultimate outcome of the
bankruptcy proceedings at this time.