IHOP 2015 Annual Report Download - page 91

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DineEquity, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
71
8. Financing Obligations
On May 19, 2008, the Company entered into a Purchase and Sale Agreement relating to the sale and leaseback of 181
parcels of real property (the “Sale-Leaseback Transaction”), each of which is improved with a restaurant operating as an
Applebee's Neighborhood Grill and Bar (the “Properties”). On June 13, 2008, the closing date of the Sale-Leaseback
Transaction, the Company entered into a Master Land and Building Lease (“Master Lease”) for the Properties. The proceeds
received from the transaction were $337.2 million. The Master Lease calls for an initial term of twenty years and four, five-year
options to extend the term.
The Company has an ongoing obligation related to the Properties until such time as the lease related to each of the
Properties is assigned to a qualified franchisee in a transaction meeting certain parameters set forth in the Master Lease. Due to
this continuing involvement, the Sale-Leaseback Transaction was recorded under the financing method in accordance with
U.S. GAAP. Accordingly, the value of the land and leasehold improvements will remain on the Company's books and the
leasehold improvements will continue to be depreciated over their remaining useful lives. The net proceeds received were
recorded as a financing obligation. A portion of the lease payments is recorded as a decrease to the financing obligation and a
portion is recognized as interest expense. In the event the lease obligation of any individual property or group of properties is
assumed by a qualified franchisee, the Company's continuing involvement will cease. At that time, that portion of the
transaction related to that property or group of properties is expected to be recorded as a sale in accordance with U.S. GAAP
and the net book value of those properties will be removed from the Company's books, along with a ratable portion of the
remaining financing obligation.
As of December 31, 2015, the Company's continuing involvement with 152 of the 181 Properties ended by assignment of
the lease obligation to a qualified franchisee or a release from the lessor. In accordance with the accounting described above,
the transactions related to these properties have been recorded as a sale with property and equipment and financing obligations
each cumulatively reduced by approximately $277.2 million.
As of December 31, 2015, future minimum lease payments under financing obligations during the initial terms of the leases
related to the sale-leaseback transactions are as follows:
Fiscal Years (In millions)
2016.................................................................................................................................................................. $ 5.0
2017(1) ................................................................................................................................................................................ 4.6
2018.................................................................................................................................................................. 5.2
2019.................................................................................................................................................................. 5.5
2020.................................................................................................................................................................. 5.9
Thereafter......................................................................................................................................................... 69.8
Total minimum lease payments ....................................................................................................................... 96.0
Less: interest .................................................................................................................................................... (53.5)
Total financing obligations .............................................................................................................................. 42.5
Less: current portion(2) .................................................................................................................................................... (0.1)
Long-term financing obligations...................................................................................................................... $ 42.4
____________________________________________________________________________________
(1) Due to the varying closing date of the Company's fiscal year, 11 monthly payments will be made in fiscal 2017.
(2) Included in current maturities of capital lease and financing obligations on the consolidated balance sheet.