IHOP 2013 Annual Report Download - page 64

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43
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.
Closure charges for the year ended December 31, 2013 primarily related to adjustments to the estimated reserve for closed
IHOP and Applebee's restaurants. Long-lived tangible asset impairment charges for the year ended December 31, 2013 related
to three Applebee's company-operated restaurants in the Kansas City, Missouri area. We evaluated the causal factors of all
impairments of long-lived assets as they were recorded during 2013 and concluded they were based on factors specific to each
asset and not potential indicators of an impairment of other long-lived assets.
Closure charges for the year ended December 31, 2012 primarily related to equipment at one franchise restaurant whose
lease agreement was prematurely terminated and the restaurant closed, as well as adjustments to the reserve for previously
closed surplus IHOP properties. Impairment charges for the year ended December 31, 2012 primarily related to equipment at
five IHOP franchise restaurants whose lease agreements were prematurely terminated and the restaurants subsequently
refranchised.
See “Critical Accounting Policies and Estimates - Goodwill and Intangibles” for a description of our policy with respect to
the review for impairments of goodwill and indefinite life intangible assets. In carrying out that policy, we noted no indicators
of impairment on an interim basis and no impairments as the result of performing our annual test for impairment during the
fiscal years ended 2013 and 2012.
Loss on Extinguishment of Debt
Instrument Retired/Repaid(1) Face Amount
Retired/Repaid Cash Paid
Loss(2)
(In millions)
Term Loans................................................................................................... $ 4.8 $ 4.8 $ 0.1
Loss on extinguishment of debt, 2013 ......................................................... $ 4.8 $ 4.8 $ 0.1
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
_____________________________________________________
(1) For a description of the respective instruments, refer to Note 7 of the Notes to Consolidated Financial Statements.
(2) Including proportional write-off of the discount and deferred financing costs related to the debt retired.
The loss on extinguishment of debt for the year ended December 31, 2013, decreased compared to the prior year because
of a decrease in the face amount of debt retired. There were no premiums paid to extinguish debt for the year ended December
31, 2013. We paid a total premium of $0.5 million to repurchase Senior Notes during the year ended December 31, 2012.
Debt Modification Costs
On February 4, 2013, we entered into Amendment No. 2 (“Amendment No. 2”) to the Credit Agreement dated October 8,
2010. The key provisions of Amendment No. 2 are discussed under “Liquidity and Capital Resources - February 2013
Amendment to Credit Agreement.” Fees paid to third parties of $1.3 million in connection with Amendment No. 2 were
included as “Debt modification costs” in the Consolidated Statement of Comprehensive Income for the year ended December
31, 2013.
Gain on Disposition of Assets
There were no individually significant dispositions of assets during the year ended December 31, 2013. During the year
ended December 31, 2012, we completed 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.