IHOP 2015 Annual Report Download - page 93

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DineEquity, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
9. Leases (Continued)
73
Direct
Financing
Leases Operating
Leases
(In millions)
2016 ............................................................................................................................................ $ 17.6 $ 100.7
2017 ............................................................................................................................................ 17.7 100.7
2018 ............................................................................................................................................ 17.4 100.2
2019 ............................................................................................................................................ 16.3 98.4
2020 ............................................................................................................................................ 14.9 98.6
Thereafter.................................................................................................................................... 25.0 496.6
Total minimum rents receivable................................................................................................. $ 108.9 $ 995.2
The Company has noncancelable leases, expiring at various dates through 2036, 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, 2015, 2014
and 2013 was $3.3 million, $2.8 million and $2.8 million, respectively. Minimum rent expense for all noncancelable operating
leases for the years ended December 31, 2015, 2014 and 2013 was $80.9 million, $75.9 million and $75.4 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, 2015, the outstanding purchase commitments were $130.1
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, 2015 and 2014, the Company has
outstanding lease guarantees or is contingently liable for approximately $398.0 million and $378.1 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 2016 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, 2015.
Litigation, Claims and Disputes
The Company is subject to various lawsuits, governmental inspections, administrative proceedings, audits, and claims
arising in the ordinary course of business. Some of these lawsuits purport to be class actions and/or seek substantial damages.
The Company is required to record an accrual for litigation loss contingencies that are both probable and reasonably estimable.
Legal fees and expenses associated with the defense of all of the Company's litigation are expensed as such fees and expenses
are incurred. In the opinion of management, these matters are adequately covered by insurance or, if not so covered, are without
merit or are of such a nature or involve amounts that would not have a material adverse impact on the Company's business or
consolidated financial statements. Management regularly assesses the Company's insurance deductibles, analyzes litigation
information with the Company's attorneys and evaluates its loss experience in connection with pending legal proceedings.
While the Company does not presently believe that any of the legal proceedings to which the Company is currently a party will
ultimately have a material adverse impact on the Company, there can be no assurance that the Company will prevail in all the
proceedings the Company is party to, or that the Company will not incur material losses from them.
Letters of Credit
The Company provides letters of credit, primarily to various insurance carriers to collateralize obligations for outstanding
claims. As of December 31, 2015, the Company had approximately $6.3 million of unused letters of credit outstanding, of
which $5.9 million reduce the Company's available borrowing under its Variable Funding Notes. These letters expire on various
dates in 2016 and are automatically renewed for an additional year if no cancellation notice is submitted.