Condensed Consolidating Financial Statements (Tables)

3 Months Ended

Mar. 31, 2013

Condensed Consolidating Financial Statements [Abstract]

Condensed Consolidating Statement Of Income

Choice Hotels International, Inc.

Condensed Consolidating Statement of Income

For the Three Months Ended March 31, 2013

(Unaudited, in Thousands)

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUES:
Royalty fees	$	44,236		$	24,205		$	9,195	$	(27,900	)	$	49,736
Initial franchise and relicensing fees	3,568			—			209		—			3,777
Procurement services	3,800			—			150		—			3,950
Marketing and reservation	65,159			76,131			4,582		(69,432		)	76,440
Other items, net	1,788			956			225		—			2,969
Total revenues	118,551			101,292			14,361		(97,332		)	136,872
OPERATING EXPENSES:
Selling, general and administrative	29,082			22,438			3,296		(27,900		)	26,916
Marketing and reservation	67,698			73,136			5,038		(69,432		)	76,440
Other items, net	714			2,136			200		—			3,050
Total operating expenses	97,494			97,710			8,534		(97,332		)	106,406
Operating income (loss)	21,057			3,582			5,827		—			30,466
OTHER INCOME AND EXPENSES, NET:
Interest expense	10,736			33			1		—			10,770
Equity in earnings of consolidated subsidiaries	(7,967		)	—			—		7,967			—
Other items, net	(548		)	(711		)	46		—			(1,213		)
Total other income and expenses, net	2,221			(678		)	47		7,967			9,557
Income (loss) before income taxes	18,836			4,260			5,780		(7,967		)	20,909
Income taxes (benefit)	3,313			1,891			182		—			5,386
Net income (loss)	$	15,523		$	2,369		$	5,598	$	(7,967	)	$	15,523

Choice Hotels International, Inc.

Condensed Consolidating Statement of Income

For the Three Months Ended March 31, 2012

(Unaudited, in Thousands)

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
REVENUES:
Royalty fees	$	42,126		$	26,220		$	7,058		$	(27,551	)	$	47,853
Initial franchise and relicensing fees	2,433			—			95			—			2,528
Procurement services	3,148			—			167			—			3,315
Marketing and reservation	59,653			72,684			4,387			(65,795		)	70,929
Other items, net	3,441			978			125			—			4,544
Total revenues	110,801			99,882			11,832			(93,346		)	129,169
OPERATING EXPENSES:
Selling, general and administrative	24,487			22,828			4,585			(27,551		)	24,349
Marketing and reservation	61,554			69,797			4,270			(64,692		)	70,929
Other items, net	706			1,901			219			—			2,826
Total operating expenses	86,747			94,526			9,074			(92,243		)	98,104
Operating income	24,054			5,356			2,758			(1,103		)	31,065
OTHER INCOME AND EXPENSES, NET:
Interest expense	4,216			—			4			(1,103		)	3,117
Equity in earnings of consolidated subsidiaries	(6,881		)	—			—			6,881			—
Other items, net	(202		)	(2,003		)	(80		)	—			(2,285		)
Total other income and expenses, net	(2,867		)	(2,003		)	(76		)	5,778			832
Income before income taxes	26,921			7,359			2,834			(6,881		)	30,233
Income taxes	6,924			3,058			254			—			10,236
Net income	$	19,997		$	4,301		$	2,580		$	(6,881	)	$	19,997

Schedule of Condensed Consolidating Statement of Comprehensive Income

Choice Hotels International, Inc.

Condensed Consolidating Statement of Comprehensive Income

For the Three Months Ended March 31, 2013

(Unaudited, in Thousands)

	Parent			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net income	$	15,523		$	2,369	$	5,598		$	(7,967	)	$	15,523
Other comprehensive income (loss), net of tax:
Amortization of loss on cash flow hedge	215			—		—			—			215
Foreign currency translation adjustment, net	(232		)	—		(232		)	232			(232		)
Other comprehensive income (loss), net of tax	(17		)	—		(232		)	232			(17		)
Comprehensive income	$	15,506		$	2,369	$	5,366		$	(7,735	)	$	15,506

Choice Hotels International, Inc.

Condensed Consolidating Statement of Comprehensive Income

For the Three Months Ended March 31, 2012

(Unaudited, in Thousands)

	Parent		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Net income	$	19,997	$	4,301	$	2,580	$	(6,881	)	$	19,997
Other comprehensive income (loss), net of tax:
Amortization of loss on cash flow hedge	215		—		—		—			215
Foreign currency translation adjustment, net	412		6		391		(397		)	412
Amortization of pension related costs, net of tax:
Actuarial loss	20		20		—		(20		)	20
Other comprehensive income, net of tax	647		26		391		(417		)	647
Comprehensive income	$	20,644	$	4,327	$	2,971	$	(7,298	)	$	20,644

Condensed Consolidating Balance Sheet

Choice Hotels International, Inc.

Condensed Consolidating Balance Sheet

As of March 31, 2013

(Unaudited, in thousands)

	Parent			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Cash and cash equivalents	$	5,185		$	328	$	134,712	$	—		$	140,225
Receivables, net	47,025			1,244		5,933		—			54,202
Other current assets	39,257			20,628		3,609		(18,148		)	45,346
Total current assets	91,467			22,200		144,254		(18,148		)	239,773
Property and equipment, at cost, net	13,445			56,844		1,000		—			71,289
Goodwill	60,620			5,193		—		—			65,813
Franchise rights and other identifiable intangibles, net	8,064			2,561		1,925		—			12,550
Receivable – marketing and reservation fees	51,297			—		—		—			51,297
Investments, employee benefit plans, at fair value	—			13,933		—		—			13,933
Investment in affiliates	338,267			26,027		—		(364,294		)	—
Advances to affiliates	13,840			193,247		9,649		(216,736		)	—
Deferred income taxes	—			28,538		637		(14,206		)	14,969
Other assets	31,349			19,034		25,966		—			76,349
Total assets	$	608,349		$	367,577	$	183,431	$	(613,384	)	$	545,973
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Accounts payable	$	11,351		$	43,176	$	4,902	$	—		$	59,429
Accrued expenses	19,116			14,255		1,763		—			35,134
Deferred revenue	19,536			55,912		868		—			76,316
Current portion of long-term debt	7,500			680		21		—			8,201
Deferred compensation & retirement plan obligations	—			2,361		—		—			2,361
Other current liabilities	—			19,097		601		(18,148		)	1,550
Total current liabilities	57,503			135,481		8,155		(18,148		)	182,991
Long-term debt	861,398			1,674		42		—			863,114
Deferred compensation & retirement plan obligations	—			19,933		7		—			19,940
Advances from affiliates	208,942			249		7,545		(216,736		)	—
Other liabilities	19,835			13,418		210		(14,206		)	19,257
Total liabilities	1,147,678			170,755		15,959		(249,090		)	1,085,302
Total shareholders’ (deficit) equity	(539,329		)	196,822		167,472		(364,294		)	(539,329		)
Total liabilities and shareholders’ deficit	$	608,349		$	367,577	$	183,431	$	(613,384	)	$	545,973

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,net	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
Receivable - marketing and reservation fees	42,179			—		—		—			42,179
Investments, employee benefit plans, at fair value	—			12,755		—		—			12,755
Investment in affiliates	329,038			26,194		—		(355,232		)	—
Advances to affiliates	14,252			206,770		13,479		(234,501		)	—
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 and 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

Condensed Consolidating Statement Of Cash Flows

Choice Hotels International, Inc.

Condensed Consolidating Statement of Cash Flows

For the Three Months Ended March 31, 2013

(Unaudited, in thousands)

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided (used) by operating activities	$	(17,180	)	$	9,216		$	9,838		$	—		$	1,874
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in property and equipment	(2,328		)	(11,237		)	(80		)	—			(13,645		)
Equity method investments	—			—			(1,000		)	—			(1,000		)
Issuance of notes receivable	—			(1,484		)	(245		)	—			(1,729		)
Collections of notes receivable	19			—			—			—			19
Purchases of investments, employee benefit plans	—			(1,242		)	—			—			(1,242		)
Proceeds from sales of investments, employee benefit plans	—			3,882			—			—			3,882
Advances to and investments in affiliates	(1,000		)	—			—			1,000			—
Other items, net	(101		)	—			—			—			(101		)
Net cash provided (used) by investing activities	(3,410		)	(10,081		)	(1,325		)	1,000			(13,816		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings pursuant to revolving credit facilities	18,000			—			—			—			18,000
Repayments of long-term debt	(1,875		)	(166		)	(5		)	—			(2,046		)
Purchase of treasury stock	(3,634		)	—			—			—			(3,634		)
Dividends paid	(503		)	—			—			—			(503		)
Excess tax benefits from stock-based compensation	—			952			—			—			952
Proceeds from contributions from affiliates	—			—			1,000			(1,000		)	—
Proceeds from exercise of stock options	5,367			—			—			—			5,367
Net cash provided (used) by financing activities	17,355			786			995			(1,000		)	18,136
Net change in cash and cash equivalents	(3,235		)	(79		)	9,508			—			6,194
Effect of foreign exchange rate changes on cash and cash equivalents	—			—			(146		)	—			(146		)
Cash and cash equivalents at beginning of period	8,420			407			125,350			—			134,177
Cash and cash equivalents at end of period	$	5,185		$	328		$	134,712		$	—		$	140,225

Choice Hotels International, Inc.

Condensed Consolidating Statement of Cash Flows

For the Three Months Ended March 31, 2012

(Unaudited, in Thousands)

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided (used) by operating activities	$	5,388		$	(3,265	)	$	2,289		$	—		$	4,412
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in property and equipment	(1,354		)	(1,688		)	(87		)	—			(3,129		)
Equity method investments	—			—			(2,600		)	—			(2,600		)
Issuance of notes receivable	(3,136		)	(583		)	—			—			(3,719		)
Collections of notes receivable	44			107			—			—			151
Purchases of investments, employee benefit plans	—			(743		)	—			—			(743		)
Proceeds from sales of investments, employee benefit plans	—			8,652			—			—			8,652
Advances to and investments in affiliates	—			(2,623		)	—			2,623			—
Other items, net	(108		)	—			—			—			(108		)
Net cash provided (used) in investing activities	(4,554		)	3,122			(2,687		)	2,623			(1,496		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings pursuant to revolving credit facility	5,900			—			—			—			5,900
Repayments of long-term debt	—			(161		)	(5		)	—			(166		)
Purchase of treasury stock	(14,854		)	—			—			—			(14,854		)
Dividends paid	(10,713		)	—			—			—			(10,713		)
Excess tax benefits from stock-based compensation	—			422			—			—			422
Proceeds from contributions from affiliates	—			—			2,623			(2,623		)	—
Proceeds from exercise of stock options	389			—			—			—			389
Net cash provided (used) by financing activities	(19,278		)	261			2,618			(2,623		)	(19,022		)
Net change in cash and cash equivalents	(18,444		)	118			2,220			—			(16,106		)
Effect of foreign exchange rate changes on cash and cash equivalents	—			—			361			—			361
Cash and cash equivalents at beginning of period	23,370			432			83,255			—			107,057
Cash and cash equivalents at end of period	$	4,926		$	550		$	85,836		$	—		$	91,312