Condensed Consolidating Financial Statements (Tables)

12 Months Ended

Dec. 31, 2011

Condensed Consolidating Financial Statements

Condensed Consolidating Statement Of Income

Choice Hotels International, Inc.

Condensed Consolidating Statement of Income

For the Year Ended December 31, 2011

(In thousands)

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUES:
Royalty fees	$	219,699		$	104,898		$	34,491	$	(111,848	)	$	247,240
Initial franchise and relicensing fees	13,439			—			118		—			13,557
Procurement services	17,619			—			—		—			17,619
Marketing and reservation	298,797			329,831			18,555		(298,147		)	349,036
Other items, net	6,341			4,356			644		—			11,341
Total revenues	555,895			439,085			53,808		(409,995		)	638,793
OPERATING EXPENSES:
Selling, general and administrative	107,520			92,887			17,845		(111,848		)	106,404
Marketing and reservation	310,677			319,270			17,236		(298,147		)	349,036
Other items, net	2,824			7,782			884		—			11,490
Total operating expenses	421,021			419,939			35,965		(409,995		)	466,930
Operating income	134,874			19,146			17,843		—			171,863
OTHER INCOME AND EXPENSES, NET:
Interest expense	16,815			(3,886		)	10		—			12,939
Equity in earnings of consolidated subsidiaries	(30,595		)	—			—		30,595			0
Other items, net	(789		)	647			1,009		—			867
Total other income and expenses, net	(14,569		)	(3,239		)	1,019		30,595			13,806
Income before income taxes	149,443			22,385			16,824		(30,595		)	158,057
Income taxes	39,047			8,023			591		—			47,661
Net income	$	110,396		$	14,362		$	16,233	$	(30,595	)	$	110,396

Choice Hotels International, Inc.

Condensed Consolidating Statement of Income

For the Year Ended December 31, 2010

(In thousands)

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
REVENUES:
Royalty fees	$	205,668		$	94,649		$	30,035		$	(100,256	)	$	230,096
Initial franchise and relicensing fees	9,295			—			—			—			9,295
Procurement services	17,207			—			—			—			17,207
Marketing and reservation	283,769			312,882			16,349			(283,754		)	329,246
Other items, net	6,028			4,038			166			—			10,232
Total revenues	521,967			411,569			46,550			(384,010		)	596,076
OPERATING EXPENSES:
Selling, general and administrative	96,451			83,162			15,183			(100,256		)	94,540
Marketing and reservation	298,416			300,159			14,425			(283,754		)	329,246
Other items, net	3,578			7,138			812			—			11,528
Total operating expenses	398,445			390,459			30,420			(384,010		)	435,314
Operating income	123,522			21,110			16,130			—			160,762
OTHER INCOME AND EXPENSES, NET:
Interest expense	7,626			(952		)	6			—			6,680
Equity in earnings of consolidated subsidiaries	(37,079		)	—			—			37,079			0
Other items, net	(501		)	(2,110		)	(1,518		)	—			(4,129		)
Total other income and expenses, net	(29,954		)	(3,062		)	(1,512		)	37,079			2,551
Income before income taxes	153,476			24,172			17,642			(37,079		)	158,211
Income taxes	46,035			3,113			1,622			—			50,770
Net income	$	107,441		$	21,059		$	16,020		$	(37,079	)	$	107,441

Choice Hotels International, Inc.

Condensed Consolidating Statement of Income

For the Year Ended December 31, 2009

(In thousan

Condensed Consolidating Balance Sheet

Choice Hotels International, Inc.

Condensed Consolidating Balance Sheet

As of December 31, 2011

(In thousands)

	Parent			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Cash and cash equivalents	$	23,370		$	432	$	83,255	$	—		$	107,057
Receivables	44,620			2,407		5,985		—			53,012
Other current assets	12,190			25,997		5,226		(8,686		)	34,727
Total current assets	80,180			28,836		94,466		(8,686		)	194,796
Property and equipment, at cost, net	9,013			41,755		1,224		—			51,992
Goodwill	60,620			5,193		192		—			66,005
Franchise rights and other identifiable intangibles, net	11,061			3,334		2,860		—			17,255
Investments, employee benefit plans, at fair value	—			11,678		—		—			11,678
Investment in and advances to affiliates	285,996			235,571		8,323		(529,890		)	—
Receivable, marketing and reservation fees	54,014			—		—		—			54,014
Deferred income taxes	—			29,050		313		(6,698		)	22,665
Other assets	13,808			7,538		7,938		—			29,284
Total assets	$	514,692		$	362,955	$	115,316	$	(545,274	)	447,689
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Accounts payable	$	5,324		$	28,831	$	4,234	$	—		$	38,389
Accrued expenses	18,288			33,584		1,979		—			53,851
Deferred revenue	13,584			54,582		659		—			68,825
Current portion of long-term debt	—			654		19		—			673
Deferred compensation & retirement plan obligations	—			18,935		—		—			18,935
Other current liabilities	—			11,404		1,174		(8,686		)	3,892
Total current liabilities	37,196			147,990		8,065		(8,686		)	184,565
Long-term debt	249,443			2,519		70		—			252,032
Deferred compensation & retirement plan obligations	—			20,587		6		—			20,593
Advances from affiliates	239,903			468		9,853		(250,224		)	—
Other liabilities	13,711			9,027		20		(6,698		)	16,060
Total liabilities	540,253			180,591		18,014		(265,608		)	473,250
Total shareholders’ (deficit) equity	(25,561		)	182,364		97,302		(279,666		)	(25,561		)
Total liabilities and shareholders’ deficit	$	514,692		$	362,955	$	115,316	$	(545,274	)	$	447,689

Choice Hotels International, Inc.

Condensed Consolidating Balance Sheet

As of December 31, 2010

(In thousan

Condensed Consolidating Statement Of Cash Flows

Choice Hotels International, Inc.

Condensed Consolidating Statement of Cash Flows

For the Year Ended December 31, 2011

(In thousands)

	Parent				Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Consolidated
Net cash provided from (used in) operating activities	$	120,964			$	(7,122	)	$	21,002		$	—	$	134,844
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in property and equipment	(2,839		)		(7,690		)	(395		)	—		(10,924		)
Equity method investments	—				—			(5,000		)	—		(5,000		)
Issuance of notes receivable	(9,341		)		(3,425		)	—			—		(12,766		)
Collection of notes receivable	4,690				64			—			—		4,754
Proceeds from sale of assets	1,654				—			—			—		1,654
Purchases of investments, employee benefit plans	—				(1,602		)	—			—		(1,602		)
Proceeds from sales of investments, employee benefit plans	—			0	644			—			—		644
Other items, net	(570		)		(10		)	16			—		(564		)
Net cash used in investing activities	(6,406		)		(12,019		)	(5,379		)	—		(23,804		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) pursuant to revolving credit facility	(200		)		—			—			—		(200		)
Principal payments on long-term debt	—				(275		)	(22		)	—		(297		)
Proceeds from the issuance of long-term debt	—				—			75			—		75
Purchase of treasury stock	(53,617		)		—			—			—		(53,617		)
Excess tax benefits from stock-based compensation	38				1,189			—			—		1,227
Debt issuance costs	(2,356		)		—			—			—		(2,356		)
Proceeds from exercise of stock options	3,845				—			—			—		3,845
Dividends paid	(43,747		)		—			—			—		(43,747		)
Net cash provided from (used in) financing activities	(96,037		)		914			53			—		(95,070		)
Net change in cash and cash equivalents	18,521				(18,227		)	15,676			—		15,970
Effect of foreign exchange rate changes on cash and cash equivalents	—				—			(172		)	—		(172		)
Cash and cash equivalents at beginning of period	4,849				18,659			67,751			—		91,259
Cash and cash equivalents at end of period	$	23,370			$	432		$	83,255		$	—	$	107,057

Choice Hotels International, Inc.

Condensed Consolidating Statement of Cash Flows

For the Year Ended December 31, 2010

(In thousands)

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Consolidated
Net cash provided from operating activities	$	99,871		$	41,607		$	3,457		$	—	$	144,935
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in property and equipment	(1,448		)	(22,606		)	(314		)	—		(24,368		)
Acquisitions, net of cash acquired	0			0			(466		)	—		(466		)
Issuance of notes receivable	(10,583		)	(1,203		)	—			—		(11,786		)
Collections of notes receivable	5,000			83			—			—		5,083
Purchases of investments, employee benefit plans	—			(1,948		)	—			—		(1,948		)
Proceeds from sales of investments, employee benefit plans	—			1,649			—			—		1,649
Other items, net	(474		)	144			11			—		(319		)
Net cash used in investing activities	(7,505		)	(23,881		)	(769		)	—		(32,155		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of long-term debt	247,733			—			—			—		247,733
Net repayments pursuant to revolving credit facility	(277,500		)	—			—			—		(277,500		)
Principal payments on long-term debt	—			—			(25		)	—		(25		)
Settlement of forward starting interest rate swap agreement	(8,663		)	—			—			—		(8,663		)
Purchase of treasury stock	(11,212		)	—			—			—		(11,212		)
Dividends paid	(43,808		)	—			—			—		(43,808		)
Other items, net	1,652			630			—			—		2,282
Net cash provided from (used in) in financing activities	(91,798		)	630			(25		)	—		(91,193		)
Net change in cash and cash equivalents	568			18,356			2,663			—		21,587
Effect of foreign exchange rate changes on cash and cash equivalents	—			—			1,802			—		1,802
Cash and cash equivalents at beginning of period	4,281			303			63,286			—		67,870
Cash and cash equivalents at end of period	$	4,849		$	18,659		$	67,751		$	—	$	91,259

Choice Hotels International, Inc.

Condensed Consolidating Statement of Cash Flows

For the Year Ended December 31, 2009

(In thousan