IHOP 2014 Annual Report Download - page 94

DineEquity, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
75
4. Property and Equipment
Property and equipment by category is as follows:
2014 2013
(In millions)
Land ............................................................................................................................................ $ 59.2 $ 63.8
Buildings and improvements ...................................................................................................... 58.7 60.1
Leaseholds and improvements.................................................................................................... 258.3 274.9
Equipment and fixtures............................................................................................................... 78.4 81.8
Construction in progress ............................................................................................................. 5.1 3.6
Properties under capital lease ..................................................................................................... 59.2 60.0
Property and equipment, gross ................................................................................................... 518.9 544.3
Less: accumulated depreciation and amortization...................................................................... (277.7) (270.0)
Property and equipment, net ....................................................................................................... $ 241.2 $ 274.3
The Company recorded depreciation expense on property and equipment of $22.7 million, $23.1 million and $27.9 million
for the years ended December 31, 2014, 2013 and 2012, respectively.
Accumulated depreciation and amortization includes accumulated amortization for properties under capital lease in the
amount of $36.8 million and $34.7 million at December 31, 2014 and 2013, respectively.
5. Goodwill
The significant majority of the Company's goodwill and other intangible assets arose from the November 29, 2007
acquisition of Applebee's. As of December 31, 2014 and 2013, the balance of goodwill was $697.5 million, of which $686.7
million has been allocated to the Applebee's franchise reporting unit and $10.8 million to the IHOP franchise reporting unit.
In accordance with U.S. GAAP, goodwill must be evaluated for impairment, at a minimum, on an annual basis, and more
frequently if the Company believes indicators of impairment exist. Such indicators include, but are not limited to, events or
circumstances such as a significant adverse change in the business climate, unanticipated competition, a loss of key personnel,
adverse legal or regulatory developments, or a significant decline in the market price of the Company's common stock. In the
process of the Company's annual impairment review, the Company primarily uses the income approach method of valuation
that utilizes a discounted cash flow model to estimate the fair value of its reporting units. Significant assumptions used to
determine fair value under the discounted cash flows model include future trends in sales, operating expenses, overhead
expenses, depreciation, capital expenditures, and changes in working capital, along with an appropriate discount rate.
During the fiscal years ended 2014 and 2013, the Company made periodic assessments as to whether there were indicators
of impairment, particularly with respect to the significant assumptions underlying the discounted cash flow model, and
determined an interim test of goodwill was not warranted. Accordingly, the Company performed a quantitative test for
impairment of goodwill of the Applebee's franchise reporting unit in the fourth quarter of 2014 and 2013. In the first step of
each year's impairment test, the estimated fair value of the Applebee's franchising unit exceeded the carrying values and the
Company concluded there was no impairment of goodwill. The Company performed a qualitative assessment of the goodwill of
the IHOP franchise reporting unit and concluded there was no impairment of goodwill.