Condensed Consolidating Financial Statements (Tables)

9 Months Ended

Sep. 30, 2014

Condensed Consolidating Financial Statements [Abstract]

Condensed Consolidating Statement Of Income

Choice Hotels International, Inc.

Condensed Consolidating Statement of Income

For the Three Months Ended September 30, 2014

(Unaudited, in thousands)



	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
REVENUES:
Royalty fees	$	79,326		$	28,799		$	10,829		$	(32,863	)	$	86,091
Initial franchise and relicensing fees	4,125			—			174			—			4,299
Procurement services	5,215			—			280			—			5,495
Marketing and reservation	104,093			106,438			4,981			(99,859		)	115,653
Other	3,500			2			128			—			3,630
Total revenues	196,259			135,239			16,392			(132,722		)	215,168

OPERATING EXPENSES:
Selling, general and administrative	33,301			26,251			3,547			(32,863		)	30,236
Marketing and reservation	109,086			102,108			4,318			(99,859		)	115,653
Depreciation and amortization	765			1,383			145			—			2,293
Total operating expenses	143,152			129,742			8,010			(132,722		)	148,182

Operating income	53,107			5,497			8,382			—			66,986

OTHER INCOME AND EXPENSES, NET:
Interest expense	10,485			1			9			—			10,495
Equity in earnings of consolidated subsidiaries	(10,760		)	554			—			10,206			—
Other items, net	(263		)	410			386			—			533
Total other income and expenses, net	(538		)	965			395			10,206			11,028

Income from continuing operations before income taxes	53,645			4,532			7,987			(10,206		)	55,958
Income taxes	14,280			2,562			(300		)	—			16,542
Income from continuing operations, net of income taxes	39,365			1,970			8,287			(10,206		)	39,416
Net income (loss) from discontinued operations, net of income taxes	—			(51		)	—			—			(51		)
Net income	$	39,365		$	1,919		$	8,287		$	(10,206	)	$	39,365

Choice Hotels International, Inc.

Condensed Consolidating Statement of Income

For the Three Months Ended September 30, 2013

(Unaudited, in thousands)



	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
REVENUES:
Royalty fees	$	72,915		$	25,161		$	11,362		$	(29,978	)	$	79,460
Initial franchise and relicensing fees	4,419			—			231			—			4,650
Procurement services	4,375			—			333			—			4,708
Marketing and reservation	112,354			96,672			5,807			(90,024		)	124,809
Other	2,778			—			313			—			3,091
Total revenues	196,841			121,833			18,046			(120,002		)	216,718
OPERATING EXPENSES:
Selling, general and administrative	30,498			22,417			3,472			(29,978		)	26,409
Marketing and reservation	117,480			92,784			4,569			(90,024		)	124,809
Depreciation and amortization	828			1,222			222			—			2,272
Total operating expenses	148,806			116,423			8,263			(120,002		)	153,490
Operating income	48,035			5,410			9,783			—			63,228
OTHER INCOME AND EXPENSES, NET:
Interest expense	10,691			61			5			—			10,757
Equity in earnings of consolidated subsidiaries	(13,031		)	—			—			13,031			—
Other items, net	(577		)	(697		)	(526		)	—			(1,800		)
Total other income and expenses, net	(2,917		)	(636		)	(521		)	13,031			8,957
Income from continuing operations before income taxes	50,952			6,046			10,304			(13,031		)	54,271
Income taxes	12,236			3,017			445			—			15,698
Income from continuing operations, net of income taxes	38,716			3,029			9,859			(13,031		)	38,573
Income from discontinued operations, net of income taxes	—			143			—			—			143
Net income	$	38,716		$	3,172		$	9,859		$	(13,031	)	$	38,716

Choice Hotels International, Inc.

Condensed Consolidating Statement of Income

For the Nine Months Ended September 30, 2014

(Unaudited, in thousands)



	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Eliminations			Consolidated

REVENUES:
Royalty fees	$	203,411		$	89,773		$	33,711	$	(104,594	)	$	222,301
Initial franchise and relicensing fees	12,144			—			617		—			12,761
Procurement services	17,688			—			605		—			18,293
Marketing and reservation	275,203			274,638			14,150		(254,966		)	309,025
Other	9,798			3			387		—			10,188
Total revenues	518,244			364,414			49,470		(359,560		)	572,568
OPERATING EXPENSES:
Selling, general and administrative	101,012			81,845			10,066		(104,594		)	88,329
Marketing and reservation	286,903			263,710			13,378		(254,966		)	309,025
Depreciation and amortization	2,272			4,117			514		—			6,903
Total operating expenses	390,187			349,672			23,958		(359,560		)	404,257
Operating income	128,057			14,742			25,512		—			168,311
OTHER INCOME AND EXPENSES, NET:
Interest expense	31,356			3			17		—			31,376
Equity in earnings of consolidated subsidiaries	(34,874		)	604			—		34,270			—
Other items, net	(988		)	(107		)	310		—			(785		)
Total other income and expenses, net	(4,506		)	500			327		34,270			30,591
Income from continuing operations before income taxes	132,563			14,242			25,185		(34,270		)	137,720
Income taxes	34,688			6,746			122		—			41,556
Income from continuing operations, net of income taxes	97,875			7,496			25,063		(34,270		)	96,164
Income from discontinued operations, net of income taxes	—			1,711			—		—			1,711
Net income	$	97,875		$	9,207		$	25,063	$	(34,270	)	$	97,875

Choice Hotels International, Inc.

Condensed Consolidating Statement of Income

For the Nine Months Ended September 30, 2013

(Unaudited, in thousands)



	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated

REVENUES:
Royalty fees	$	189,559		$	84,477		$	31,940		$	(97,770	)	$	208,206
Initial franchise and relicensing fees	12,074			—			769			—			12,843
Procurement services	15,559			—			645			—			16,204
Marketing and reservation	275,780			267,404			15,391			(247,371		)	311,204
Other	6,581			—			781			—			7,362
Total revenues	499,553			351,881			49,526			(345,141		)	555,819
OPERATING EXPENSES:
Selling, general and administrative	94,903			75,799			9,876			(97,770		)	82,808
Marketing and reservation	287,436			257,197			13,942			(247,371		)	311,204
Depreciation and amortization	2,301			3,775			625			—			6,701
Total operating expenses	384,640			336,771			24,443			(345,141		)	400,713
Operating income	114,913			15,110			25,083			—			155,106
OTHER INCOME AND EXPENSES, NET:
Interest expense	32,210			111			13			—			32,334
Equity in earnings of consolidated subsidiaries	(34,691		)	—			—			34,691			—
Other items, net	(1,689		)	(1,261		)	(635		)	—			(3,585		)
Total other income and expenses, net	(4,170		)	(1,150		)	(622		)	34,691			28,749
Income from continuing operations before income taxes	119,083			16,260			25,705			(34,691		)	126,357
Income taxes	28,817			7,317			250			—			36,384
Income from continuing operations, net of income taxes	90,266			8,943			25,455			(34,691		)	89,973
Income from discontinued operations, net of income taxes	—			293			—			—			293
Net income	$	90,266		$	9,236		$	25,455		$	(34,691	)	$	90,266

Condensed Consolidating Statement of Comprehensive Income

Choice Hotels International, Inc.

Condensed Consolidating Statement of Comprehensive Income

For the Three Months Ended September 30, 2014

(Unaudited, in thousands)



	Parent			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated

Net income	$	39,365		$	1,919	$	8,287		$	(10,206	)	$	39,365
Other comprehensive income (loss), net of tax:
Amortization of loss on cash flow hedge	215			—		—			—			215
Foreign currency translation adjustment	(1,387		)	—		(1,387		)	1,387			(1,387		)
Other comprehensive income (loss), net of tax	(1,172		)	—		(1,387		)	1,387			(1,172		)
Comprehensive income	$	38,193		$	1,919	$	6,900		$	(8,819	)	$	38,193

Choice Hotels International, Inc.

Condensed Consolidating Statement of Comprehensive Income

For the Three Months Ended September 30, 2013

(Unaudited, in thousands)



	Parent		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated

Net income	$	38,716	$	3,172	$	9,859	$	(13,031	)	$	38,716
Other comprehensive income (loss), net of tax:
Amortization of loss on cash flow hedge	215		—		—		—			215
Foreign currency translation adjustment	524		—		524		(524		)	524
Other comprehensive income (loss), net of tax	739		—		524		(524		)	739
Comprehensive income	$	39,455	$	3,172	$	10,383	$	(13,555	)	$	39,455

Choice Hotels International, Inc.

Condensed Consolidating Statement of Comprehensive Income

For the Nine Months Ended September 30, 2014

(Unaudited, in thousands)



	Parent			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated

Net income	$	97,875		$	9,207	$	25,063		$	(34,270	)	$	97,875
Other comprehensive income (loss), net of tax:
Amortization of loss on cash flow hedge	646			—		—			—			646
Foreign currency translation adjustment	(357		)	—		(357		)	357			(357		)
Other comprehensive income (loss), net of tax	289			—		(357		)	357			289
Comprehensive income	$	98,164		$	9,207	$	24,706		$	(33,913	)	$	98,164

Choice Hotels International, Inc.

Condensed Consolidating Statement of Comprehensive Income

For the Nine Months Ended September 30, 2013

(Unaudited, in thousands)



	Parent			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated

Net income	$	90,266		$	9,236	$	25,455		$	(34,691	)	$	90,266
Other comprehensive income (loss), net of tax:
Amortization of loss on cash flow hedge	646			—		—			—			646
Foreign currency translation adjustment	(1,803		)	—		(1,803		)	1,803			(1,803		)
Other comprehensive income (loss), net of tax	(1,157		)	—		(1,803		)	1,803			(1,157		)
Comprehensive income	$	89,109		$	9,236	$	23,652		$	(32,888	)	$	89,109

Condensed Consolidating Balance Sheet

Choice Hotels International, Inc.

Condensed Consolidating Balance Sheet

As of September 30, 2014

(Unaudited, in thousands)



	Parent			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Cash and cash equivalents	$	63,757		$	63	$	180,572	$	—		$	244,392
Receivables, net	98,712			1,188		9,848		—			109,748
Other current assets	17,398			37,938		1,975		(6,025		)	51,286
Total current assets	179,867			39,189		192,395		(6,025		)	405,426
Property and equipment, at cost, net	20,377			37,122		882		—			58,381
Goodwill	60,620			5,193		—		—			65,813
Franchise rights and other identifiable intangibles, net	4,927			1,632		957		—			7,516
Notes receivable, net of allowances	11,948			21,649		1,448		—			35,045
Investments, employee benefit plans, at fair value	—			16,845		—		—			16,845
Investment in affiliates	413,865			30,579		—		(444,444		)	—
Advances to affiliates	12,284			231,454		10,382		(254,120		)	—
Deferred income taxes	2,569			11,006		923		—			14,498
Other assets	7,763			19,080		33,820		—			60,663
Total assets	$	714,220		$	413,749	$	240,807	$	(704,589	)	$	664,187
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Accounts payable	$	11,454		$	49,383	$	3,273	$	—		$	64,110
Accrued expenses	19,158			25,338		2,285		—			46,781
Deferred revenue	6,938			58,206		695		—			65,839
Current portion of long-term debt	11,250			713		4		—			11,967
Deferred compensation and retirement plan obligations	—			620		—		—			620
Other current liabilities	—			16,165		—		(6,025		)	10,140
Total current liabilities	48,800			150,425		6,257		(6,025		)	199,457
Long-term debt	770,556			4,149		51		—			774,756
Deferred compensation and retirement plan obligations	—			23,109		9		—			23,118
Advances from affiliates	246,193			371		7,556		(254,120		)	—
Other liabilities	45,686			17,364		821		—			63,871
Total liabilities	1,111,235			195,418		14,694		(260,145		)	1,061,202
Total shareholders’ (deficit) equity	(397,015		)	218,331		226,113		(444,444		)	(397,015		)
Total liabilities and shareholders’ deficit	$	714,220		$	413,749	$	240,807	$	(704,589	)	$	664,187

Choice Hotels International, Inc.

Condensed Consolidating Balance Sheet

As of December 31, 2013

(in thousands)



	Parent			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Cash and cash equivalents	$	9,785		$	569	$	157,441	$	—		$	167,795
Receivables, net	72,219			1,475		8,691		—			82,385
Other current assets	26,395			34,987		752		(5,340		)	56,794
Total current assets	108,399			37,031		166,884		(5,340		)	306,974
Property and equipment, at cost, net	11,087			55,963		802		—			67,852
Goodwill	60,620			5,193		—		—			65,813
Franchise rights and other identifiable intangibles, net	6,553			2,096		1,304		—			9,953
Advances, marketing and reservation activities	5,844			—		—		—			5,844
Notes receivable, net of allowances	13,257			17,158		1,457		—			31,872
Investments, employee benefit plans, at fair value	—			15,950		—		—			15,950
Investment in affiliates	376,712			28,312		—		(405,024		)	—
Advances to affiliates	14,198			189,833		10,896		(214,927		)	—
Deferred income taxes	—			10,710		871		(11,581		)	—
Other assets	8,955			13,184		30,025		—			52,164
Total assets	$	605,625		$	375,430	$	212,239	$	(636,872	)	$	556,422
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Accounts payable	$	6,276		$	30,778	$	4,609	$	—		$	41,663
Accrued expenses	28,215			26,503		1,907		—			56,625
Deferred revenue	7,065			53,414		709		—			61,188
Current portion of long-term debt	9,375			702		11		—			10,088
Deferred compensation and retirement plan obligations	—			2,492		—		—			2,492
Other current liabilities	—			7,401		221		(5,340		)	2,282
Total current liabilities	50,931			121,290		7,457		(5,340		)	174,338
Long-term debt	778,946			4,507		18		—			783,471
Deferred compensation and retirement plan obligations	—			22,520		7		—			22,527
Advances from affiliates	206,931			362		7,634		(214,927		)	—
Other liabilities	21,688			18,216		634		(11,581		)	28,957
Total liabilities	1,058,496			166,895		15,750		(231,848		)	1,009,293
Total shareholders’ (deficit) equity	(452,871		)	208,535		196,489		(405,024		)	(452,871		)
Total liabilities and shareholders' deficit	$	605,625		$	375,430	$	212,239	$	(636,872	)	$	556,422

Condensed Consolidating Statement Of Cash Flows

Choice Hotels International, Inc.

Condensed Consolidating Statement of Cash Flows

For the Nine Months Ended September 30, 2014

(Unaudited, in thousands)



	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated

Net cash provided by operating activities	$	111,851		$	2,866		$	24,318		$	(657	)	$	138,378

CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in property and equipment	(5,138		)	(6,378		)	(370		)	—			(11,886		)
Proceeds from sales of assets	27			15,585			—			—			15,612
Equity method investments	—			(8,800		)	(5,562		)	—			(14,362		)
Purchases of investments, employee benefit plans	—			(1,520		)	—			—			(1,520		)
Proceeds from sales of investments, employee benefit plans	—			966			—			—			966
Issuance of mezzanine and other notes receivable	(3,340		)	—			—			—			(3,340		)
Collections of mezzanine and other notes receivable	9,832			—			—			—			9,832
Advances to and investments in affiliates	(1,000		)	(4,740		)	—			5,740			—
Other items, net	(446		)	(146		)	—			—			(592		)
Net cash provided (used) in investing activities	(65		)	(5,033		)	(5,932		)	5,740			(5,290		)

CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt	(6,563		)	(523		)	(24		)	—			(7,110		)
Proceeds from the issuance of long-term debt	—			176			50			—			226
Proceeds from contributions from affiliates	—			—			5,740			(5,740		)	—
Purchases of treasury stock	(23,757		)	—			—			—			(23,757		)
Dividends paid	(32,767		)	—			(657		)	657			(32,767		)
Excess tax benefits from stock-based compensation	289			2,008			—			—			2,297
Proceeds from exercise of stock options	4,984			—			—			—			4,984
Net cash provided (used) by financing activities	(57,814		)	1,661			5,109			(5,083		)	(56,127		)
Net change in cash and cash equivalents	53,972			(506		)	23,495			—			76,961
Effect of foreign exchange rate changes on cash and cash equivalents	—			—			(364		)	—			(364		)
Cash and cash equivalents at beginning of period	9,785			569			157,441			—			167,795
Cash and cash equivalents at end of period	$	63,757		$	63		$	180,572		$	—		$	244,392

Choice Hotels International, Inc.

Condensed Consolidating Statement of Cash Flows

For the Nine Months Ended September 30, 2013

(Unaudited, in thousands)



	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated

Net cash provided (used) by operating activities	$	60,070		$	20,198		$	26,221		$	—		$	106,489

CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in property and equipment	(4,083		)	(23,662		)	(177		)	—			(27,922		)
Equity method investments	—			(1,481		)	(2,280		)	—			(3,761		)
Purchases of investments, employee benefit plans	—			(1,845		)	—			—			(1,845		)
Proceeds from sales of investments, employee benefit plans	—			4,052			—			—			4,052
Collections of mezzanine and other notes receivable	224			—			—			—			224
Advances to and investments in affiliates	(1,000		)	(1,280		)	—			2,280			—
Other items, net	(578		)	—			—			—			(578		)
Net cash provided (used) in investing activities	(5,437		)	(24,216		)	(2,457		)	2,280			(29,830		)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments pursuant to revolving credit facility	(27,500		)	—			—			—			(27,500		)
Proceeds from issuance of long-term debt	—			3,360			—			—			3,360
Principal payments on long-term debt	(5,625		)	(502		)	(31		)	—			(6,158		)
Purchase of treasury stock	(3,684		)	—			—			—			(3,684		)
Dividends paid	(22,026		)	—			—			—			(22,026		)
Excess tax benefits from stock-based compensation	26			1,190			—			—			1,216
Proceeds from contributions from affiliates	—			—			2,280			(2,280		)	—
Proceeds from exercise of stock options	6,677			—			—			—			6,677
Net cash provided (used) by financing activities	(52,132		)	4,048			2,249			(2,280		)	(48,115		)
Net change in cash and cash equivalents	2,501			30			26,013			—			28,544
Effect of foreign exchange rate changes on cash and cash equivalents	—			—			(1,583		)	—			(1,583		)
Cash and cash equivalents at beginning of period	8,420			407			125,350			—			134,177
Cash and cash equivalents at end of period	$	10,921		$	437		$	149,780		$	—		$	161,138