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Leases

6 Months Ended

Jun. 30, 2023

The Company engages in leasing activity as both a lessee and a lessor. The Company currently leases from third parties the real property on which approximately 520 IHOP franchisee-operated restaurants and one Applebee's franchisee-operated restaurant are located; the Company (as lessor) subleases the property to the franchisees that operate those restaurants. The Company also leases property it owns to the franchisees that operate approximately 50 IHOP restaurants and one Applebee's restaurant. The Company leases from a third party the real property on which one Fuzzy's company-operated restaurant is located. The Company also leases office space for its principal corporate office in Pasadena, California and restaurant support centers in Leawood, Kansas, and Irving, Texas. The Company does not have a significant amount of non-real estate leases.

The Company's existing leases/subleases related to IHOP restaurants generally provide for an initial term of 20 to 25 years, with most having one or more five-year renewal options. Leases related to Applebee's restaurants generally have an initial term of 10 to 20 years, with renewal terms of five to 20 years. Option periods were not included in determining liabilities and right-of-use assets related to operating leases. Approximately 290 of the Company's leases met the sales levels that required variable rent payments to the Company (as lessor), based on a percentage of restaurant sales during the six months ended June 30, 2023. Approximately 40 of the leases met the sales levels that required variable rent payments by the Company (as lessee), based on a percentage of restaurant sales during the six months ended June 30, 2023.

The Company's lease (income) cost for the three and six months ended June 30, 2023 and 2022 was as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(In millions)
Finance lease cost:
Amortization of right-of-use assets	$	0.6	$	1.1	$	1.2	$	2.2
Interest on lease liabilities	0.7		1.2		1.4		2.5
Operating lease cost	18.9		21.2		38.1		42.3
Variable lease cost	2.2		1.9		4.1		3.6
Short-term lease cost	0.0		0.0		0.0		0.0
Sublease income	(27.0)		(26.6)		(56.5)		(53.1)
Lease income	$	(4.6)	$	(1.2)	$	(11.7)	$	(2.5)

Future minimum lease payments under noncancellable leases as lessee as of June 30, 2023 were as follows:


	Finance Leases		Operating Leases
	(In millions)
2023 (remaining six months)	$	3.8	$	31.6
2024	7.8		77.9
2025	6.4		67.4
2026	6.0		59.7
2027	4.9		41.4
Thereafter	20.3		126.5
Total minimum lease payments	49.2		404.5
Less: interest/imputed interest	(11.5)		(69.8)
Total obligations	37.7		334.7
Less: current portion	(5.9)		(58.7)
Long-term lease obligations	$	31.8	$	276.0

The weighted average remaining lease term as of June 30, 2023 was 6.1 years for finance leases and 6.1 years for operating leases. The weighted average discount rate as of June 30, 2023 was 9.3% for finance leases and 5.6% for operating leases.

During the three and six months ended June 30, 2023 and 2022, the Company made the following cash payments for leases:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(In millions)
Principal payments on finance lease obligations	$	1.7	$	2.4	$	3.6	$	4.7
Interest payments on finance lease obligations	0.7		1.2		1.4		2.5
Payments on operating leases	20.4		22.8		41.3		45.8
Variable lease payments	2.1		1.8		4.2		3.9

The Company's income from operating leases for the three and six months ended June 30, 2023 and 2022 was as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(In millions)
Minimum lease payments	$	24.4	$	24.0	$	51.7	$	47.8
Variable lease income	4.6		4.6		8.9		8.5
Total operating lease income	$	29.0	$	28.6	$	60.6	$	56.3

Minimum payments to be received as lessor under noncancellable operating leases as of June 30, 2023 were as follows:



	(In millions)
2023 (remaining six months)	$	52.5
2024	97.6
2025	85.1
2026	70.9
2027	53.2
Thereafter	141.3
Total minimum rents receivable	$	500.6

The Company's income from real estate leases for the three and six months ended June 30, 2023 and 2022 was as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(In millions)
Interest income	$	0.3	$	0.4	$	0.6	$	0.8
Variable lease income	0.1		0.2		0.2		0.4
Selling (loss) profit	—		(0.1)		—		0.4
Total real estate lease income	$	0.4	$	0.5	$	0.8	$	1.6

Minimum payments to be received as lessor under noncancellable real estate leases as of June 30, 2023 were as follows:



	(In millions)
2023 (remaining six months)	$	1.9
2024	2.6
2025	1.8
2026	1.8
2027	1.7
Thereafter	12.4
Total minimum rents receivable	22.2
Less: unearned income	(6.0)
Total net investment in real estate leases	16.2
Less: current portion	(2.5)
Long-term investment in real estate leases	$	13.7

Leases

The Company's lease (income) cost for the three and six months ended June 30, 2023 and 2022 was as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(In millions)
Finance lease cost:
Amortization of right-of-use assets	$	0.6	$	1.1	$	1.2	$	2.2
Interest on lease liabilities	0.7		1.2		1.4		2.5
Operating lease cost	18.9		21.2		38.1		42.3
Variable lease cost	2.2		1.9		4.1		3.6
Short-term lease cost	0.0		0.0		0.0		0.0
Sublease income	(27.0)		(26.6)		(56.5)		(53.1)
Lease income	$	(4.6)	$	(1.2)	$	(11.7)	$	(2.5)

Future minimum lease payments under noncancellable leases as lessee as of June 30, 2023 were as follows:


	Finance Leases		Operating Leases
	(In millions)
2023 (remaining six months)	$	3.8	$	31.6
2024	7.8		77.9
2025	6.4		67.4
2026	6.0		59.7
2027	4.9		41.4
Thereafter	20.3		126.5
Total minimum lease payments	49.2		404.5
Less: interest/imputed interest	(11.5)		(69.8)
Total obligations	37.7		334.7
Less: current portion	(5.9)		(58.7)
Long-term lease obligations	$	31.8	$	276.0

During the three and six months ended June 30, 2023 and 2022, the Company made the following cash payments for leases:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(In millions)
Principal payments on finance lease obligations	$	1.7	$	2.4	$	3.6	$	4.7
Interest payments on finance lease obligations	0.7		1.2		1.4		2.5
Payments on operating leases	20.4		22.8		41.3		45.8
Variable lease payments	2.1		1.8		4.2		3.9

The Company's income from operating leases for the three and six months ended June 30, 2023 and 2022 was as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(In millions)
Minimum lease payments	$	24.4	$	24.0	$	51.7	$	47.8
Variable lease income	4.6		4.6		8.9		8.5
Total operating lease income	$	29.0	$	28.6	$	60.6	$	56.3

Minimum payments to be received as lessor under noncancellable operating leases as of June 30, 2023 were as follows:



	(In millions)
2023 (remaining six months)	$	52.5
2024	97.6
2025	85.1
2026	70.9
2027	53.2
Thereafter	141.3
Total minimum rents receivable	$	500.6

The Company's income from real estate leases for the three and six months ended June 30, 2023 and 2022 was as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(In millions)
Interest income	$	0.3	$	0.4	$	0.6	$	0.8
Variable lease income	0.1		0.2		0.2		0.4
Selling (loss) profit	—		(0.1)		—		0.4
Total real estate lease income	$	0.4	$	0.5	$	0.8	$	1.6

Minimum payments to be received as lessor under noncancellable real estate leases as of June 30, 2023 were as follows:



	(In millions)
2023 (remaining six months)	$	1.9
2024	2.6
2025	1.8
2026	1.8
2027	1.7
Thereafter	12.4
Total minimum rents receivable	22.2
Less: unearned income	(6.0)
Total net investment in real estate leases	16.2
Less: current portion	(2.5)
Long-term investment in real estate leases	$	13.7

Leases

The Company's lease (income) cost for the three and six months ended June 30, 2023 and 2022 was as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(In millions)
Finance lease cost:
Amortization of right-of-use assets	$	0.6	$	1.1	$	1.2	$	2.2
Interest on lease liabilities	0.7		1.2		1.4		2.5
Operating lease cost	18.9		21.2		38.1		42.3
Variable lease cost	2.2		1.9		4.1		3.6
Short-term lease cost	0.0		0.0		0.0		0.0
Sublease income	(27.0)		(26.6)		(56.5)		(53.1)
Lease income	$	(4.6)	$	(1.2)	$	(11.7)	$	(2.5)

Future minimum lease payments under noncancellable leases as lessee as of June 30, 2023 were as follows:


	Finance Leases		Operating Leases
	(In millions)
2023 (remaining six months)	$	3.8	$	31.6
2024	7.8		77.9
2025	6.4		67.4
2026	6.0		59.7
2027	4.9		41.4
Thereafter	20.3		126.5
Total minimum lease payments	49.2		404.5
Less: interest/imputed interest	(11.5)		(69.8)
Total obligations	37.7		334.7
Less: current portion	(5.9)		(58.7)
Long-term lease obligations	$	31.8	$	276.0

During the three and six months ended June 30, 2023 and 2022, the Company made the following cash payments for leases:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(In millions)
Principal payments on finance lease obligations	$	1.7	$	2.4	$	3.6	$	4.7
Interest payments on finance lease obligations	0.7		1.2		1.4		2.5
Payments on operating leases	20.4		22.8		41.3		45.8
Variable lease payments	2.1		1.8		4.2		3.9

The Company's income from operating leases for the three and six months ended June 30, 2023 and 2022 was as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(In millions)
Minimum lease payments	$	24.4	$	24.0	$	51.7	$	47.8
Variable lease income	4.6		4.6		8.9		8.5
Total operating lease income	$	29.0	$	28.6	$	60.6	$	56.3

Minimum payments to be received as lessor under noncancellable operating leases as of June 30, 2023 were as follows:



	(In millions)
2023 (remaining six months)	$	52.5
2024	97.6
2025	85.1
2026	70.9
2027	53.2
Thereafter	141.3
Total minimum rents receivable	$	500.6

The Company's income from real estate leases for the three and six months ended June 30, 2023 and 2022 was as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(In millions)
Interest income	$	0.3	$	0.4	$	0.6	$	0.8
Variable lease income	0.1		0.2		0.2		0.4
Selling (loss) profit	—		(0.1)		—		0.4
Total real estate lease income	$	0.4	$	0.5	$	0.8	$	1.6

Minimum payments to be received as lessor under noncancellable real estate leases as of June 30, 2023 were as follows:



	(In millions)
2023 (remaining six months)	$	1.9
2024	2.6
2025	1.8
2026	1.8
2027	1.7
Thereafter	12.4
Total minimum rents receivable	22.2
Less: unearned income	(6.0)
Total net investment in real estate leases	16.2
Less: current portion	(2.5)
Long-term investment in real estate leases	$	13.7

Leases

The Company's lease (income) cost for the three and six months ended June 30, 2023 and 2022 was as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(In millions)
Finance lease cost:
Amortization of right-of-use assets	$	0.6	$	1.1	$	1.2	$	2.2
Interest on lease liabilities	0.7		1.2		1.4		2.5
Operating lease cost	18.9		21.2		38.1		42.3
Variable lease cost	2.2		1.9		4.1		3.6
Short-term lease cost	0.0		0.0		0.0		0.0
Sublease income	(27.0)		(26.6)		(56.5)		(53.1)
Lease income	$	(4.6)	$	(1.2)	$	(11.7)	$	(2.5)

Future minimum lease payments under noncancellable leases as lessee as of June 30, 2023 were as follows:


	Finance Leases		Operating Leases
	(In millions)
2023 (remaining six months)	$	3.8	$	31.6
2024	7.8		77.9
2025	6.4		67.4
2026	6.0		59.7
2027	4.9		41.4
Thereafter	20.3		126.5
Total minimum lease payments	49.2		404.5
Less: interest/imputed interest	(11.5)		(69.8)
Total obligations	37.7		334.7
Less: current portion	(5.9)		(58.7)
Long-term lease obligations	$	31.8	$	276.0

During the three and six months ended June 30, 2023 and 2022, the Company made the following cash payments for leases:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(In millions)
Principal payments on finance lease obligations	$	1.7	$	2.4	$	3.6	$	4.7
Interest payments on finance lease obligations	0.7		1.2		1.4		2.5
Payments on operating leases	20.4		22.8		41.3		45.8
Variable lease payments	2.1		1.8		4.2		3.9

The Company's income from operating leases for the three and six months ended June 30, 2023 and 2022 was as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(In millions)
Minimum lease payments	$	24.4	$	24.0	$	51.7	$	47.8
Variable lease income	4.6		4.6		8.9		8.5
Total operating lease income	$	29.0	$	28.6	$	60.6	$	56.3

Minimum payments to be received as lessor under noncancellable operating leases as of June 30, 2023 were as follows:



	(In millions)
2023 (remaining six months)	$	52.5
2024	97.6
2025	85.1
2026	70.9
2027	53.2
Thereafter	141.3
Total minimum rents receivable	$	500.6

The Company's income from real estate leases for the three and six months ended June 30, 2023 and 2022 was as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(In millions)
Interest income	$	0.3	$	0.4	$	0.6	$	0.8
Variable lease income	0.1		0.2		0.2		0.4
Selling (loss) profit	—		(0.1)		—		0.4
Total real estate lease income	$	0.4	$	0.5	$	0.8	$	1.6

Minimum payments to be received as lessor under noncancellable real estate leases as of June 30, 2023 were as follows:



	(In millions)
2023 (remaining six months)	$	1.9
2024	2.6
2025	1.8
2026	1.8
2027	1.7
Thereafter	12.4
Total minimum rents receivable	22.2
Less: unearned income	(6.0)
Total net investment in real estate leases	16.2
Less: current portion	(2.5)
Long-term investment in real estate leases	$	13.7