Condensed Consolidating Financial Statements (Tables)

12 Months Ended

Dec. 31, 2014

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, 2014

(in thousands)

	Parent			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUES:
Royalty fees	$	262,540		$	121,295	$	44,357	$	(140,654	)	$	287,538
Initial franchise and relicensing fees	18,753			—		728		—			19,481
Procurement services	22,959			23		837		—			23,819
Marketing and reservation	367,726			369,359		18,783		(343,249		)	412,619
Other items, net	13,758			16		739		—			14,513
Total revenues	685,736			490,693		65,444		(483,903		)	757,970
OPERATING EXPENSES:
Selling, general and administrative	137,759			110,545		13,768		(140,654		)	121,418
Marketing and reservation	383,584			354,342		17,942		(343,249		)	412,619
Depreciation and amortization	3,038			5,679		648		—			9,365
Total operating expenses	524,381			470,566		32,358		(483,903		)	543,402
Operating income	161,355			20,127		33,086		—			214,568
OTHER INCOME AND EXPENSES, NET:
Interest expense	41,454			3		29		—			41,486
Equity in earnings of consolidated subsidiaries	(45,426		)	881		—		44,545			—
Other items, net	(1,465		)	567		222		—			(676		)
Other income and expenses, net	(5,437		)	1,451		251		44,545			40,810
Income from continuing operations before income taxes	166,792			18,676		32,835		(44,545		)	173,758
Income taxes	43,632			7,922		731		—			52,285
Income from from continuing operations, net of income taxes	123,160			10,754		32,104		(44,545		)	121,473
Income from discontinued operations, net of income taxes	—			1,687		—		—			1,687
Net income	$	123,160		$	12,441	$	32,104	$	(44,545	)	$	123,160

Choice Hotels International, Inc.

Condensed Consolidating Statement of Income

For the Year Ended December 31, 2013

(in thousands)

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
REVENUES:
Royalty fees	$	243,272		$	112,215		$	43,967		$	(131,642	)	$	267,812
Initial franchise and relicensing fees	17,432			—			1,254			—			18,686
Procurement services	19,864			—			804			—			20,668
Marketing and reservation	362,459			350,134			19,327			(324,287		)	407,633
Other items, net	8,834			—			1,017			—			9,851
Total revenues	651,861			462,349			66,369			(455,929		)	724,650
OPERATING EXPENSES:
Selling, general and administrative	128,966			100,900			13,489			(131,642		)	111,713
Marketing and reservation	377,884			336,498			17,538			(324,287		)	407,633
Depreciation and amortization	3,100			5,087			869			—			9,056
Total operating expenses	509,950			442,485			31,896			(455,929		)	528,402
Operating income	141,911			19,864			34,473			—			196,248
OTHER INCOME AND EXPENSES, NET:
Interest expense	42,418			113			6			—			42,537
Equity in earnings of consolidated subsidiaries	(47,362		)	—			—			47,362			—
Other items, net	(2,406		)	(1,532		)	(1,023		)	—			(4,961		)
Other income and expenses, net	(7,350		)	(1,419		)	(1,017		)	47,362			37,576
Income from continuing operations before income taxes	149,261			21,283			35,490			(47,362		)	158,672
Income taxes	35,552			8,897			873			—			45,322
Income from continuing operations, net of income taxes	113,709			12,386			34,617			(47,362		)	113,350
Income from discontinued operations, net of income taxes	—			359			—			—			359
Net income	$	113,709		$	12,745		$	34,617		$	(47,362	)	$	113,709

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	$	236,269		$	97,881		$	54,420		$	(126,890	)	$	261,680
Initial franchise and relicensing fees	13,727			—			476			—			14,203
Procurement services	17,152			—			810			—			17,962
Marketing and reservation	343,566			335,869			19,900			(309,657		)	389,678
Other items, net	8,363			—			842			—			9,205
Total revenues	619,077			433,750			76,448			(436,547		)	692,728
OPERATING EXPENSES:
Selling, general and administrative	130,709			89,122			8,938			(126,890		)	101,879
Marketing and reservation	350,573			326,865			18,036			(305,796		)	389,678
Depreciation and amortization	2,832			3,852			1,007			—			7,691
Total operating expenses	484,114			419,839			27,981			(432,686		)	499,248
Operating income	134,963			13,911			48,467			(3,861		)	193,480
OTHER INCOME AND EXPENSES, NET:
Interest expense	31,041			—			9			(3,861		)	27,189
Equity in earnings of consolidated subsidiaries	(56,246		)	—			—			56,246			—
Other items, net	(551		)	(1,995		)	(669		)	—			(3,215		)
Other income and expenses, net	(25,756		)	(1,995		)	(660		)	52,385			23,974
Income from continuing operations before income taxes	160,719			15,906			49,127			(56,246		)	169,506
Income taxes	39,106			6,769			2,353			—			48,228
Income from continuing operations, net of income taxes	121,613			9,137			46,774			(56,246		)	121,278
Income from discontinued operations, net of income taxes	—			335			—			—			335
Net income	$	121,613		$	9,472		$	46,774		$	(56,246	)	$	121,613

Condensed Consolidating Statement of Comprehensive Income

Choice Hotels International, Inc.

Condensed Consolidating Statement of Comprehensive Income

For the Year Ended December 31, 2014

(in thousands)

	Parent			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net income	$	123,160		$	12,441	$	32,104		$	(44,545	)	$	123,160
Other comprehensive income (loss), net of tax:
Amortization of loss on cash flow hedge	861			—		—			—			861
Foreign currency translation adjustment	(1,615		)	—		(1,615		)	1,615			(1,615		)
Other comprehensive income (loss), net of tax	(754		)	—		(1,615		)	1,615			(754		)
Comprehensive income	$	122,406		$	12,441	$	30,489		$	(42,930	)	$	122,406

Choice Hotels International, Inc.

Condensed Consolidating Statement of Comprehensive Income

For the Year Ended December 31, 2013

(in thousands)

	Parent			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net income	$	113,709		$	12,745	$	34,617		$	(47,362	)	$	113,709
Other comprehensive income (loss), net of tax:
Amortization of loss on cash flow hedge	862			—		—			—			862
Foreign currency translation adjustment	(2,863		)	—		(2,863		)	2,863			(2,863		)
Other comprehensive income (loss), net of tax	(2,001		)	—		(2,863		)	2,863			(2,001		)
Comprehensive income	$	111,708		$	12,745	$	31,754		$	(44,499	)	$	111,708

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	$	121,613	$	9,472	$	46,774	$	(56,246	)	$	121,613
Other comprehensive income (loss), net of tax:
Amortization of loss on cash flow hedge	862		—		—		—			862
Foreign currency translation adjustment	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	$	124,198	$	10,963	$	46,998	$	(57,961	)	$	124,198

Condensed Consolidating Balance Sheet

Choice Hotels International, Inc.

Condensed Consolidating Balance Sheet

As of December 31, 2014

(in thousands)

	Parent			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Cash and cash equivalents	$	25,290		$	25	$	189,564	$	—		$	214,879
Receivables, net	82,195			1,194		8,292		—			91,681
Other current assets	25,152			33,585		1,875		(15,758		)	44,854
Total current assets	132,637			34,804		199,731		(15,758		)	351,414
Property and equipment, at cost, net	25,300			37,675		14,334		—			77,309
Goodwill	60,620			5,193		—		—			65,813
Franchise rights and other identifiable intangibles, net	4,380			1,479		3,053		—			8,912
Notes receivable, net of allowances	11,847			27,895		699		—			40,441
Investments, employee benefit plans, at fair value	—			17,539		—		—			17,539
Investments in affiliates	424,600			31,139		—		(455,739		)	—
Advances to affiliates	15,670			222,500		7,793		(245,963		)	—
Deferred income taxes	9,418			10,429		699		—			20,546
Other assets	7,228			23,891		34,177		—			65,296
Total assets	$	691,700		$	412,544	$	260,486	$	(717,460	)	$	647,270
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Accounts payable	$	15,588		$	37,970	$	3,566	$	—		$	57,124
Accrued expenses	28,719			32,649		2,162		—			63,530
Deferred revenue	8,467			57,339		576		—			66,382
Current portion of long-term debt	11,250			718		381		—			12,349
Deferred compensation & retirement plan obligations	—			628		—		—			628
Other current liabilities	—			15,843		—		(15,758		)	85
Total current liabilities	64,024			145,147		6,685		(15,758		)	200,098
Long-term debt	767,760			3,966		10,356		—			782,082
Deferred compensation & retirement plan obligations	—			23,978		9		—			23,987
Advances from affiliates	237,973			341		7,649		(245,963		)	—
Other liabilities	50,744			16,116		3,044		—			69,904
Total liabilities	1,120,501			189,548		27,743		(261,721		)	1,076,071
Total shareholders’ (deficit) equity	(428,801		)	222,996		232,743		(455,739		)	(428,801		)
Total liabilities and shareholders’ deficit	$	691,700		$	412,544	$	260,486	$	(717,460	)	$	647,270

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 reservations 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
Investments 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 & 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 & 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 Year Ended December 31, 2014

(in thousands)

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by operating activities	$	140,738		$	9,106		$	34,704		$	(657	)	$	183,891
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in property and equipment	(11,234		)	(9,188		)	(524		)	—			(20,946		)
Proceeds from sale of assets	27			15,585			—			—			15,612
Equity method investments	—			(11,390		)	(6,399		)	—			(17,789		)
Issuance of mezzanine and other notes receivable	(3,340		)	—			—			—			(3,340		)
Collections of mezzanine and other notes receivable	11,289			—			—			—			11,289
Purchases of investments, employee benefit plans	—			(2,794		)	—			—			(2,794		)
Proceeds from sales of investments, employee benefit plans	—			964			—			—			964
Advances to and investments in affiliates	(1,000		)	(5,578		)	—			6,578			—
Other items, net	(496		)	(146		)	—			—			(642		)
Net cash used in investing activities	(4,754		)	(12,547		)	(6,923		)	6,578			(17,646		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt	(9,375		)	(701		)	(32		)	—			(10,108		)
Proceeds from the issuance of long-term debt	—			176			74			—			250
Purchase of treasury stock	(77,972		)	—			—			—			(77,972		)
Excess tax benefits from stock-based compensation	299			3,422			—			—			3,721
Proceeds from exercise of stock options	10,098			—			—			—			10,098
Proceeds from contributions from affiliates	—			—			6,578			(6,578		)	—
Dividends paid	(43,529		)	—			(657		)	657			(43,529		)
Net cash provided from (used in) financing activities	(120,479		)	2,897			5,963			(5,921		)	(117,540		)
Net change in cash and cash equivalents	15,505			(544		)	33,744			—			48,705
Effect of foreign exchange rate changes on cash and cash equivalents	—			—			(1,621		)	—			(1,621		)
Cash and cash equivalents at beginning of period	9,785			569			157,441			—			167,795
Cash and cash equivalents at end of period	$	25,290		$	25		$	189,564		$	—		$	214,879

Choice Hotels International, Inc.

Condensed Consolidating Statement of Cash Flows

For the Year Ended December 31, 2013

(in thousands)

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by operating activities	$	91,745		$	27,209		$	36,529		$	(1,570	)	$	153,913
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in property and equipment	(5,167		)	(27,984		)	(246		)	—			(33,397		)
Equity method investments	—			(2,401		)	(3,284		)	—			(5,685		)
Issuance of mezzanine and other notes receivable	(1,095		)	—			—			—			(1,095		)
Collections of mezzanine and other notes receivable	9,748			—			—			—			9,748
Purchases of investments, employee benefit plans	—			(2,676		)	—			—			(2,676		)
Proceeds from sales of investments, employee benefit plans	—			4,168			—			—			4,168
Advances to and investments in affiliates	(1,000		)	(2,284		)	—			3,284			—
Other items, net	(485		)	—			—			—			(485		)
Net cash used in investing activities	2,001			(31,177		)	(3,530		)	3,284			(29,422		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments pursuant to revolving credit facilities	(57,000		)	—			—			—			(57,000		)
Principal payments on long-term debt	(7,500		)	(671		)	(33		)	—			(8,204		)
Proceeds from the issuance of long-term debt	—			3,360			—			—			3,360
Purchase of treasury stock	(3,965		)	—			—			—			(3,965		)
Excess tax benefits from stock-based compensation	19			1,441			—			—			1,460
Proceeds from exercise of stock options	8,864			—			—			—			8,864
Proceeds from contributions from affiliates	—			—			3,284			(3,284		)	—
Dividends paid	(32,799		)	—			(1,570		)	1,570			(32,799		)
Net cash provided from (used in) financing activities	(92,381		)	4,130			1,681			(1,714		)	(88,284		)
Net change in cash and cash equivalents	1,365			162			34,680			—			36,207
Effect of foreign exchange rate changes on cash and cash equivalents	—			—			(2,589		)	—			(2,589		)
Cash and cash equivalents at beginning of period	8,420			407			125,350			—			134,177
Cash and cash equivalents at end of period	$	9,785		$	569		$	157,441		$	—		167,795

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	$	90,688		$	18,191		$	41,243		$	—		$	150,122
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 mezzanine and other notes receivable	(23,736		)	—			—			—			(23,736		)
Collections of mezzanine and other notes receivable	3,270			—			—			—			3,270
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	(28,303		)	(18,860		)	(20,524		)	20,586			(47,101		)
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