Condensed Consolidating Financial Statements (Tables)

12 Months Ended

Dec. 31, 2012

Condensed Consolidating Financial Statements [Abstract]

Condensed Consolidating Statement Of Income

Choice Hotels International, Inc.

Condensed Consolidating Statement of Income

For the Year Ended December 31, 2012

(In thousands)

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
REVENUES:
Royalty fees	$	235,429		$	97,881		$	54,362		$	(126,890	)	$	260,782
Initial franchise and relicensing fees	13,727			—			476			—			14,203
Procurement services	17,152			—			810			—			17,962
Marketing and reservation	338,801			335,737			19,903			(309,657		)	384,784
Other items, net	8,363			4,573			842			—			13,778
Total revenues	613,472			438,191			76,393			(436,547		)	691,509
OPERATING EXPENSES:
Selling, general and administrative	130,682			89,122			8,938			(126,890		)	101,852
Marketing and reservation	345,809			326,735			18,036			(305,796		)	384,784
Other items, net	2,832			7,892			1,007			—			11,731
Total operating expenses	479,323			423,749			27,981			(432,686		)	498,367
Operating income	134,149			14,442			48,412			(3,861		)	193,142
OTHER INCOME AND EXPENSES, NET:
Interest expense	31,041			—			9			(3,861		)	27,189
Equity in earnings of consolidated subsidiaries	(55,834		)	—			—			55,834			—
Other items, net	(551		)	(1,995		)	(669		)	—			(3,215		)
Total other income and expenses, net	(25,344		)	(1,995		)	(660		)	51,973			23,974
Income before income taxes	159,493			16,437			49,072			(55,834		)	169,168
Income taxes	38,806			7,855			1,820			—			48,481
Net income	$	120,687		$	8,582		$	47,252		$	(55,834	)	$	120,687

Choice Hotels International, Inc.

Condensed Consolidating Statement of Income

For the Year Ended December 31, 2011

(In thousands)

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries (1)		Eliminations			Consolidated
REVENUES:
Royalty fees	$	219,699		$	104,898		$	32,677	$	(111,848	)	$	245,426
Initial franchise and relicensing fees	13,439			—			613		—			14,052
Procurement services	17,619			—			492		—			18,111
Marketing and reservation	298,797			329,831			18,555		(298,147		)	349,036
Other items, net	6,341			4,356			1,471		—			12,168
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			—
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

_______________

⁽¹⁾ Refer to Note 1 with regards to the reclassification of foreign revenue.

Choice Hotels International, Inc.

Condensed Consolidating Statement of Income

For the Year Ended December 31, 2010

(In thousands)

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries (1)			Eliminations			Consolidated
REVENUES:
Royalty fees	$	205,668		$	94,649		$	27,918		$	(100,256	)	$	227,979
Initial franchise and relicensing fees	9,295			—			738			—			10,033
Procurement services	17,207			—			534			—			17,741
Marketing and reservation	283,769			312,882			16,349			(283,754		)	329,246
Other items, net	6,028			4,038			1,011			—			11,077
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			—
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

Condensed Consolidating Statement of Comprehensive Income

Choice Hotels International, Inc.

Condensed Consolidating Statement of Comprehensive Income

For the Year Ended December 31, 2012

(In thousands)

	Parent		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Net income	$	120,687	$	8,582	$	47,252	$	(55,834	)	$	120,687
Other comprehensive income (loss), net of tax:
Amortization of loss on cash flow hedge	862		—		—		—			862
Foreign currency translation adjustment, net	237		5		224		(229		)	237
Amortization of pension related costs, net of tax:
Actuarial loss	80		80		—		(80		)	80
Settlement of pension plan	1,406		1,406		—		(1,406		)	1,406
Other comprehensive income (loss), net of tax	2,585		1,491		224		(1,715		)	2,585
Comprehensive income	$	123,272	$	10,073	$	47,476	$	(57,549	)	$	123,272

Choice Hotels International, Inc.

Condensed Consolidating Statement of Comprehensive Income

For the Year Ended December 31, 2011

(In thousands)

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net income	$	110,396		$	14,362		$	16,233		$	(30,595	)	$	110,396
Other comprehensive income (loss), net of tax:
Amortization of loss on cash flow hedge	862			—			—			—			862
Foreign currency translation adjustment, net	615			248			(1,604		)	1,356			615
Actuarial pension loss, net of tax	(1,086		)	(1,086		)	—			1,086			(1,086		)
Other comprehensive income (loss), net of tax	391			(838		)	(1,604		)	2,442			391
Comprehensive income	$	110,787		$	13,524		$	14,629		$	(28,153	)	$	110,787

Choice Hotels International, Inc.

Condensed Consolidating Statement of Comprehensive Income

For the Year Ended December 31, 2010

(In thousands)

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Eliminations			Consolidated
Net income	$	107,441		$	21,059		$	16,020	$	(37,079	)	$	107,441
Other comprehensive income (loss), net of tax:
Settlement of forward starting interest rate swap agreement	(8,663		)	—			—		—			(8,663		)
Amortization of loss on cash flow hedge	332			—			—		—			332
Foreign currency translation adjustment, net	1,265			(289		)	11,435		(11,146		)	1,265
Actuarial pension loss, net of tax	(459		)	(459		)	—		459			(459		)
Other comprehensive income (loss), net of tax	(7,525		)	(748		)	11,435		(10,687		)	(7,525		)
Comprehensive income	$	99,916		$	20,311		$	27,455	$	(47,766	)	$	99,916

Condensed Consolidating Balance Sheet

Choice Hotels International, Inc.

Condensed Consolidating Balance Sheet

As of December 31, 2012

(In thousands)

	Parent			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Cash and cash equivalents	$	8,420		$	407	$	125,350	$	—		$	134,177
Receivables	44,344			1,797		6,129		—			52,270
Other current assets	41,897			20,110		3,528		(18,512		)	47,023
Total current assets	94,661			22,314		135,007		(18,512		)	233,470
Property and equipment, at cost, net	11,307			39,298		1,046		—			51,651
Goodwill	60,620			5,193		—		—			65,813
Franchise rights and other identifiable intangibles, net	8,669			2,715		2,089		—			13,473
Investments, employee benefit plans, at fair value	—			12,755		—		—			12,755
Investment in and advances to affiliates	343,290			232,964		13,479		(589,733		)	—
Receivable, marketing and reservation fees	42,179			—		—		—			42,179
Deferred income taxes	—			28,539		640		(13,761		)	15,418
Other assets	32,085			18,925		25,003		—			76,013
Total assets	$	592,811		$	362,703	$	177,264	$	(622,006	)	$	510,772
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Accounts payable	$	5,930		$	28,525	$	4,259	$	—		$	38,714
Accrued expenses	18,582			34,576		2,394		—			55,552
Deferred revenue	17,239			53,081		834		—			71,154
Current portion of long-term debt	7,500			675		20		—			8,195
Deferred compensation & retirement plan obligations	—			2,522		—		—			2,522
Other current liabilities	—			17,722		790		(18,512		)	—
Total current liabilities	49,251			137,101		8,297		(18,512		)	176,137
Long-term debt	845,257			1,845		48		—			847,150
Deferred compensation & retirement plan obligations	—			20,390		9		—			20,399
Advances from affiliates	226,917			189		7,395		(234,501		)	—
Other liabilities	20,290			9,216		245		(13,761		)	15,990
Total liabilities	1,141,715			168,741		15,994		(266,774		)	1,059,676
Total shareholders’ (deficit) equity	(548,904		)	193,962		161,270		(355,232		)	(548,904		)
Total liabilities and shareholders’ deficit	$	592,811		$	362,703	$	177,264	$	(622,006	)	$	510,772

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

Condensed Consolidating Statement Of Cash Flows

Choice Hotels International, Inc.

Condensed Consolidating Statement of Cash Flows

For the Year Ended December 31, 2012

(In thousands)

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by operating activities	$	90,690		$	29,087		$	41,243		$	—		$	161,020
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in property and equipment	(7,404		)	(7,800		)	(239		)	—			(15,443		)
Equity method investments	—			—			(20,285		)	—			(20,285		)
Issuance of notes receivable	(23,737		)	(11,188		)	—			—			(34,925		)
Collection of notes receivable	3,269			292			—			—			3,561
Purchases of investments, employee benefit plans	—			(1,697		)	—			—			(1,697		)
Proceeds from sales of investments, employee benefit plans	—			11,223			—			—			11,223
Advances to and investments in affiliates	—			(20,586		)	—			20,586			—
Other items, net	(433		)	—			—			—			(433		)
Net cash used in investing activities	(28,305		)	(29,756		)	(20,524		)	20,586			(57,999		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings pursuant to revolving credit facilities	57,000			—			—			—			57,000
Principal payments on long-term debt	(3,750		)	(653		)	(19		)	—			(4,422		)
Proceeds from the issuance of long-term debt	543,500			—			—			—			543,500
Purchase of treasury stock	(22,586		)	—			—			—			(22,586		)
Excess tax benefits from stock-based compensation	262			1,297			—			—			1,559
Debt issuance costs	(4,759		)	—			—			—			(4,759		)
Proceeds from exercise of stock options	7,090			—			—			—			7,090
Proceeds from contributions from affiliates	—			—			20,586			(20,586		)	—
Dividends paid	(654,092		)	—			—			—			(654,092		)
Net cash provided from (used in) financing activities	(77,335		)	644			20,567			(20,586		)	(76,710		)
Net change in cash and cash equivalents	(14,950		)	(25		)	41,286			—			26,311
Effect of foreign exchange rate changes on cash and cash equivalents	—			—			809			—			809
Cash and cash equivalents at beginning of period	23,370			432			83,255			—			107,057
Cash and cash equivalents at end of period	$	8,420		$	407		$	125,350		$	—		$	134,177

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 by (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		)
Collections 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	—			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 by 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	—			—			(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