DELAWARE | 52-1209792 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |
1 Choice Hotels Circle, Suite 400, Rockville, Maryland | 20850 | |
(Address of Principal Executive Offices) | (Zip Code) |
Title of Each Class | Ticker Symbol(s) | Name of Each Exchange on Which Registered | ||
Common Stock, Par Value $0.01 per share | CHH | New York Stock Exchange |
Large accelerated filer | x | Accelerated filer | o | |
Non-accelerated filer | o | Smaller reporting company | o | |
Emerging growth company | o | |||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o |
PAGE NO. | |
ITEM 1. | FINANCIAL STATEMENTS |
Three Months Ended | ||||||||
March 31, | ||||||||
2019 | 2018 | |||||||
REVENUES | ||||||||
Royalty fees | $ | 80,353 | $ | 76,698 | ||||
Initial franchise and relicensing fees | 6,807 | 6,214 | ||||||
Procurement services | 11,947 | 9,938 | ||||||
Marketing and reservation system | 110,064 | 107,001 | ||||||
Other | 9,149 | 9,543 | ||||||
Total revenues | 218,320 | 209,394 | ||||||
OPERATING EXPENSES | ||||||||
Selling, general and administrative | 39,514 | 40,864 | ||||||
Depreciation and amortization | 3,616 | 3,053 | ||||||
Marketing and reservation system | 119,839 | 119,228 | ||||||
Total operating expenses | 162,969 | 163,145 | ||||||
Impairment of goodwill | (3,097 | ) | — | |||||
Impairment of long-lived assets | (7,304 | ) | — | |||||
Gain on sale of assets, net | 100 | — | ||||||
Operating income | 45,050 | 46,249 | ||||||
OTHER INCOME AND EXPENSES, NET | ||||||||
Interest expense | 11,211 | 11,309 | ||||||
Interest income | (2,613 | ) | (1,609 | ) | ||||
Other (gain) loss | (2,198 | ) | 120 | |||||
Equity in net loss of affiliates | 2,171 | 5,968 | ||||||
Total other income and expenses, net | 8,571 | 15,788 | ||||||
Income before income taxes | 36,479 | 30,461 | ||||||
Income tax expense | 6,398 | 5,375 | ||||||
Net income | $ | 30,081 | $ | 25,086 | ||||
Basic earnings per share | $ | 0.54 | $ | 0.44 | ||||
Diluted earnings per share | $ | 0.54 | $ | 0.44 | ||||
Cash dividends declared per share | $ | 0.215 | $ | 0.215 |
Three Months Ended | ||||||||
March 31, | ||||||||
2019 | 2018 | |||||||
Net income | $ | 30,081 | $ | 25,086 | ||||
Other comprehensive income, net of tax: | ||||||||
Amortization of loss on cash flow hedge | 215 | 215 | ||||||
Foreign currency translation adjustment | (207 | ) | 855 | |||||
Other comprehensive income, net of tax | 8 | 1,070 | ||||||
Comprehensive income | $ | 30,089 | $ | 26,156 |
March 31, 2019 | December 31, 2018 | ||||||
ASSETS | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 31,810 | $ | 26,642 | |||
Receivables (net of allowance for doubtful accounts of $17,268 and $15,905, respectively) | 153,969 | 138,018 | |||||
Income taxes receivable | 2,541 | 10,122 | |||||
Notes receivable, net of allowances | 34,416 | 36,759 | |||||
Other current assets | 27,935 | 32,243 | |||||
Total current assets | 250,671 | 243,784 | |||||
Property and equipment, at cost, net | 134,861 | 127,535 | |||||
Operating lease right-of-use assets | 27,997 | — | |||||
Goodwill | 165,623 | 168,996 | |||||
Intangible assets, net | 264,690 | 271,188 | |||||
Notes receivable, net of allowances | 83,808 | 83,440 | |||||
Investments, employee benefit plans, at fair value | 21,970 | 19,398 | |||||
Investments in unconsolidated entities | 106,803 | 109,016 | |||||
Deferred income taxes | 32,850 | 30,613 | |||||
Other assets | 84,543 | 84,400 | |||||
Total assets | $ | 1,173,816 | $ | 1,138,370 | |||
LIABILITIES AND SHAREHOLDERS’ DEFICIT | |||||||
Current liabilities | |||||||
Accounts payable | $ | 72,086 | $ | 73,511 | |||
Accrued expenses and other current liabilities | 66,966 | 92,651 | |||||
Deferred revenue | 77,065 | 67,614 | |||||
Current portion of long-term debt | 1,088 | 1,097 | |||||
Liability for guest loyalty program | 86,666 | 83,566 | |||||
Total current liabilities | 303,871 | 318,439 | |||||
Long-term debt | 804,730 | 753,514 | |||||
Long-term deferred revenue | 111,113 | 110,278 | |||||
Deferred compensation and retirement plan obligations | 26,879 | 24,212 | |||||
Income taxes payable | 26,276 | 26,276 | |||||
Operating lease liabilities | 27,470 | — | |||||
Liability for guest loyalty program | 54,188 | 52,327 | |||||
Other liabilities | 4,766 | 37,096 | |||||
Total liabilities | 1,359,293 | 1,322,142 | |||||
Commitments and Contingencies | |||||||
Common stock, $0.01 par value; 160,000,000 shares authorized; 95,065,638 shares issued at March 31, 2019 and December 31, 2018; 55,673,675 and 55,679,207 shares outstanding at March 31, 2019 and December 31, 2018, respectively | 951 | 951 | |||||
Additional paid-in-capital | 216,384 | 213,170 | |||||
Accumulated other comprehensive loss | (5,438 | ) | (5,446 | ) | |||
Treasury stock, at cost; 39,391,963 and 39,386,431 shares at March 31, 2019 and December 31, 2018, respectively | (1,209,870 | ) | (1,187,625 | ) | |||
Retained earnings | 812,496 | 795,178 | |||||
Total shareholders’ deficit | (185,477 | ) | (183,772 | ) | |||
Total liabilities and shareholders’ deficit | $ | 1,173,816 | $ | 1,138,370 |
Three Months Ended | |||||||
March 31, | |||||||
2019 | 2018 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net income | $ | 30,081 | $ | 25,086 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 3,616 | 3,053 | |||||
Depreciation and amortization – marketing and reservation system | 4,521 | 5,071 | |||||
Franchise agreement acquisition cost amortization | 2,685 | 2,154 | |||||
Gain on disposal of assets | (2,120 | ) | — | ||||
Provision for bad debts, net | 2,983 | 3,389 | |||||
Impairment of long-lived assets | 7,304 | — | |||||
Impairment of goodwill | 3,097 | — | |||||
Non-cash stock compensation and other charges | 3,989 | 3,787 | |||||
Non-cash interest and other (income) loss | (2,495 | ) | 974 | ||||
Deferred income taxes | (2,257 | ) | 2,582 | ||||
Equity in net losses from unconsolidated joint ventures, less distributions received | 3,954 | 6,735 | |||||
Franchise agreement acquisition cost, net of reimbursements | (6,401 | ) | (11,925 | ) | |||
Change in working capital and other, net of acquisition | (31,014 | ) | (36,354 | ) | |||
Net cash provided by operating activities | 17,943 | 4,552 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Investment in property and equipment | (14,906 | ) | (4,996 | ) | |||
Investment in intangible assets | (760 | ) | (1,193 | ) | |||
Proceeds from sales of assets | 10,585 | — | |||||
Business acquisition, net of cash acquired | — | (231,317 | ) | ||||
Contributions to equity method investments | (8,495 | ) | (1,455 | ) | |||
Distributions from equity method investments | 5,724 | 766 | |||||
Purchases of investments, employee benefit plans | (1,603 | ) | (1,669 | ) | |||
Proceeds from sales of investments, employee benefit plans | 1,637 | 1,029 | |||||
Issuance of notes receivable | (1,755 | ) | (2,500 | ) | |||
Collections of notes receivable | 5,096 | 150 | |||||
Other items, net | 197 | — | |||||
Net cash used in investing activities | (4,280 | ) | (241,185 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Net borrowings pursuant to revolving credit facilities | 42,400 | 70,000 | |||||
Principal payments on long-term debt | (123 | ) | (111 | ) | |||
Purchase of treasury stock | (31,951 | ) | (41,869 | ) | |||
Dividends paid | (12,163 | ) | (12,265 | ) | |||
Debt issuance costs | — | (914 | ) | ||||
Proceeds from issuance of long term debt | 8,491 | 212 | |||||
Payments on transfer of interest in notes receivable | (24,409 | ) | — | ||||
Proceeds from exercise of stock options | 9,203 | 23,052 | |||||
Net cash (used in) provided by financing activities | (8,552 | ) | 38,105 | ||||
Net change in cash and cash equivalents | 5,111 | (198,528 | ) | ||||
Effect of foreign exchange rate changes on cash and cash equivalents | 57 | 26 | |||||
Cash and cash equivalents at beginning of period | 26,642 | 235,336 | |||||
Cash and cash equivalents at end of period | $ | 31,810 | $ | 36,834 | |||
Supplemental disclosure of cash flow information: | |||||||
Cash payments during the period for: | |||||||
Income taxes, net of refunds | $ | 807 | $ | 5,034 | |||
Interest, net of capitalized interest | $ | 19,885 | $ | 19,882 | |||
Non-cash investing and financing activities: | |||||||
Dividends declared but not paid | $ | 11,970 | $ | 12,117 | |||
Investment in property and equipment acquired in accounts payable | $ | 5,732 | $ | 374 |
Common Stock - Shares Outstanding | Common Stock - Par Value | Additional Paid-in- Capital | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | Retained Earnings | Total | ||||||||||||||||||||
Balance as of December 31, 2017 | 56,679,968 | $ | 951 | $ | 182,448 | $ | (4,699 | ) | $ | (1,064,573 | ) | $ | 627,272 | $ | (258,601 | ) | ||||||||||
Net income | — | — | — | — | — | 25,086 | 25,086 | |||||||||||||||||||
Other comprehensive income | — | — | — | 1,070 | — | — | 1,070 | |||||||||||||||||||
Share based payment activity | 498,510 | — | 13,203 | — | 13,376 | — | 26,579 | |||||||||||||||||||
Dividends declared ($0.215 per share) | — | — | — | — | — | (12,182 | ) | (12,182 | ) | |||||||||||||||||
Treasury purchases | (517,839 | ) | — | — | — | (41,869 | ) | — | (41,869 | ) | ||||||||||||||||
Balance as of March 31, 2018 | 56,660,639 | $ | 951 | $ | 195,651 | $ | (3,629 | ) | $ | (1,093,066 | ) | $ | 640,176 | $ | (259,917 | ) | ||||||||||
Common Stock - Shares Outstanding | Common Stock - Par Value | Additional Paid-in- Capital | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | Retained Earnings | Total | ||||||||||||||||||||
Balance as of December 31, 2018 | 55,679,207 | $ | 951 | $ | 213,170 | $ | (5,446 | ) | $ | (1,187,625 | ) | $ | 795,178 | $ | (183,772 | ) | ||||||||||
Net income | — | — | — | — | — | 30,081 | 30,081 | |||||||||||||||||||
Other comprehensive income | — | — | — | 8 | — | — | 8 | |||||||||||||||||||
Other (1) | — | — | — | — | — | (614 | ) | (614 | ) | |||||||||||||||||
Share based payment activity | 408,545 | — | 3,214 | — | 9,706 | — | 12,920 | |||||||||||||||||||
Dividends declared ($0.215 per share) | — | — | — | — | — | (12,149 | ) | (12,149 | ) | |||||||||||||||||
Treasury purchases | (414,077 | ) | — | — | — | (31,951 | ) | — | (31,951 | ) | ||||||||||||||||
Balance as of March 31, 2019 | 55,673,675 | $ | 951 | $ | 216,384 | $ | (5,438 | ) | $ | (1,209,870 | ) | $ | 812,496 | $ | (185,477 | ) |
1. | Basis of Presentation and Significant Accounting Policies |
2. | Revenue |
(in thousands) | |||
Balance as of December 31, 2018 | $ | 153,180 | |
Increases to the contract liability balance due to cash received | 19,949 | ||
Revenue recognized in the period | (15,282 | ) | |
Balance as of March 31, 2019 | $ | 157,847 |
Three Months Ended | Three Months Ended | ||||||||||||||||||||||
March 31, 2019 | March 31, 2018 | ||||||||||||||||||||||
Over time | Point in time | Total | Over time | Point in time | Total | ||||||||||||||||||
Revenues: | (in thousands) | (in thousands) | |||||||||||||||||||||
Royalty fees | $ | 80,353 | $ | — | $ | 80,353 | $ | 76,698 | $ | — | $ | 76,698 | |||||||||||
Initial franchise and relicensing fees | 6,807 | — | 6,807 | 6,214 | — | 6,214 | |||||||||||||||||
Procurement services | 11,487 | 460 | 11,947 | 9,565 | 373 | 9,938 | |||||||||||||||||
Marketing and reservation system | 104,078 | 5,986 | 110,064 | 101,128 | 5,873 | 107,001 | |||||||||||||||||
Other | 8,869 | — | 8,869 | 8,520 | 672 | 9,192 | |||||||||||||||||
Total Topic 606 revenues | $ | 211,594 | $ | 6,446 | 218,040 | $ | 202,125 | $ | 6,918 | 209,043 | |||||||||||||
Non-Topic 606 revenues | 280 | 351 | |||||||||||||||||||||
$ | 218,320 | $ | 209,394 |
3. | Other Current Assets |
March 31, 2019 | December 31, 2018 | ||||||
(in thousands) | |||||||
Prepaid expenses | $ | 22,259 | $ | 18,412 | |||
Other current assets | 5,676 | 6,831 | |||||
Land held for sale | — | 7,000 | |||||
Total | $ | 27,935 | $ | 32,243 |
4. | Notes Receivable and Allowance for Losses |
March 31, 2019 | December 31, 2018 | ||||||
Credit Quality Indicator | (in thousands) | ||||||
Senior | $ | 91,115 | $ | 94,349 | |||
Subordinated | 29,270 | 28,100 | |||||
Unsecured | 2,524 | 2,435 | |||||
Total notes receivable | 122,909 | 124,884 | |||||
Allowance for losses on receivables specifically evaluated for impairment | 4,426 | 4,426 | |||||
Allowance for losses on non-impaired loans | 259 | 259 | |||||
Total loan reserves | 4,685 | 4,685 | |||||
Net carrying value | $ | 118,224 | $ | 120,199 | |||
Current portion, net | $ | 34,416 | $ | 36,759 | |||
Long-term portion, net | 83,808 | 83,440 | |||||
Total | $ | 118,224 | $ | 120,199 |
30-89 days Past Due | > 90 days Past Due | Total Past Due | Current | Total Notes Receivable | |||||||||||||||
As of March 31, 2019 | (in thousands) | ||||||||||||||||||
Senior | $ | — | $ | — | $ | — | $ | 91,115 | $ | 91,115 | |||||||||
Subordinated | — | — | — | 29,270 | 29,270 | ||||||||||||||
Unsecured | — | — | — | 2,524 | 2,524 | ||||||||||||||
$ | — | $ | — | $ | — | $ | 122,909 | $ | 122,909 | ||||||||||
As of December 31, 2018 | |||||||||||||||||||
Senior | $ | — | $ | — | $ | — | $ | 94,349 | $ | 94,349 | |||||||||
Subordinated | — | — | — | 28,100 | 28,100 | ||||||||||||||
Unsecured | — | — | — | 2,435 | 2,435 | ||||||||||||||
$ | — | $ | — | $ | — | $ | 124,884 | $ | 124,884 |
5. | Long-lived Assets and Goodwill |
March 31, 2019 | December 31, 2018 | ||||||
(in thousands) | |||||||
Goodwill | $ | 173,201 | $ | 173,477 | |||
Accumulated impairment losses | (7,578 | ) | (4,481 | ) | |||
Net carrying amount | $ | 165,623 | $ | 168,996 |
December 31, 2018 | Acquisitions | Foreign Exchange | Impairment | March 31, 2019 | |||||||||||||||
Hotel Franchising | $ | 159,197 | $ | — | $ | — | $ | — | $ | 159,197 | |||||||||
Other | 9,799 | — | (276 | ) | (3,097 | ) | 6,426 | ||||||||||||
Total | $ | 168,996 | $ | — | $ | (276 | ) | $ | (3,097 | ) | $ | 165,623 |
6. | Investments in Unconsolidated Entities |
7. | Leases |
Three Months Ended March 31, 2019 | |||
(in thousands) | |||
Operating lease cost | $ | 2,570 | |
Sublease income | (72 | ) | |
Total lease cost | $ | 2,498 |
March 31, 2019 | |||
(in thousands) | |||
Assets: | |||
Operating lease right-of-use assets | $ | 27,997 | |
Liabilities: | |||
Current operating lease liabilities | 10,980 | ||
Long-term operating lease liabilities | 27,470 | ||
Total lease liabilities | $ | 38,450 |
Three Months Ended March 31, 2019 | |||
(in thousands) | |||
Cash paid for amounts included in the measurement of lease liabilities: | |||
Operating cash flows from operating leases | $ | 3,302 | |
ROU assets obtained in exchange for lease liabilities in non-cash transactions: | |||
Operating lease assets obtained in exchange for operating lease liabilities | $ | 1,160 | |
Weighted-average remaining lease term | 3.74 years | ||
Weighted-average discount rate(1) | 3.74 | % |
As of March 31, 2019 | |||
(in thousands) | |||
2019 (remaining 9 months) | $ | 9,344 | |
2020 | 10,671 | ||
2021 | 9,070 | ||
2022 | 8,818 | ||
2023 | 3,316 | ||
Thereafter | 2 | ||
Total minimum lease payments | $ | 41,221 | |
Less imputed interest | 2,771 | ||
Present value of minimum lease payments | $ | 38,450 |
As of December 31, 2018 | |||
(in thousands) | |||
2019 (net of minimum sublease rentals of $124) | $ | 12,509 | |
2020 | 10,638 | ||
2021 | 9,258 | ||
2022 | 8,866 | ||
2023 | 3,514 | ||
Thereafter | — | ||
Total | $ | 44,785 |
8. | Debt |
March 31, 2019 | December 31, 2018 | ||||||
(in thousands) | |||||||
$400 million senior unsecured notes with an effective interest rate of 6.0% less deferred issuance costs of $3.0 million and $3.2 million at March 31, 2019 and December 31, 2018, respectively | $ | 397,048 | $ | 396,844 | |||
$250 million senior unsecured notes with an effective interest rate of 6.19% less a discount and deferred issuance costs of $0.4 million and $0.5 million at March 31, 2019 and December 31, 2018, respectively | 249,565 | 249,489 | |||||
$600 million senior unsecured credit facility with an effective interest rate of 3.47%, less deferred issuance costs of $2.9 million and $3.0 million at March 31, 2019 and December 31, 2018, respectively | 130,146 | 87,582 | |||||
Construction loan with an effective interest rate of 6.8%, less deferred issuance costs of $0.8 million and $0.9 million at March 31, 2019 and December 31, 2018, respectively | 16,201 | 7,652 | |||||
Fixed rate collateralized mortgage with an effective interest rate of 4.57%, plus a fair value adjustment of $0.3 million and $0.4 million at March 31, 2019 and December 31, 2018, respectively | 8,029 | 8,197 | |||||
Economic development loans with an effective interest rate of 3.0% at March 31, 2019 and December 31, 2018, respectively | 4,240 | 4,240 | |||||
Other notes payable | 589 | 607 | |||||
Total debt | $ | 805,818 | $ | 754,611 | |||
Less current portion | 1,088 | 1,097 | |||||
Total long-term debt | $ | 804,730 | $ | 753,514 |
Loss on Cash Flow Hedge | Foreign Currency Items | Total | |||||||||
(in thousands) | |||||||||||
Beginning balance, December 31, 2018 | $ | (1,436 | ) | $ | (4,010 | ) | $ | (5,446 | ) | ||
Other comprehensive income (loss) before reclassification | — | (207 | ) | (207 | ) | ||||||
Amounts reclassified from accumulated other comprehensive loss | 215 | — | 215 | ||||||||
Net current period other comprehensive income (loss) | 215 | (207 | ) | 8 | |||||||
Ending balance, March 31, 2019 | $ | (1,221 | ) | $ | (4,217 | ) | $ | (5,438 | ) |
Component | Amount Reclassified from Accumulated Other Comprehensive Loss | Affected Line Item in the Consolidated Statements of Income | ||||
Three Months Ended March 31, 2019 | ||||||
Loss on cash flow hedge: | ||||||
Interest rate contract | $ | 215 | Interest expense |
10. | Fair Value Measurements |
Fair Value Measurements at Reporting Date Using | |||||||||||||||
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets | (in thousands) | ||||||||||||||
As of March 31, 2019 | |||||||||||||||
Mutual funds(1) | $ | 21,654 | $ | 21,654 | $ | — | $ | — | |||||||
Money market funds(1) | 1,944 | — | 1,944 | — | |||||||||||
$ | 23,598 | $ | 21,654 | $ | 1,944 | $ | — | ||||||||
As of December 31, 2018 | |||||||||||||||
Mutual funds(1) | $ | 19,378 | $ | 19,378 | $ | — | $ | — | |||||||
Money market funds(1) | 1,923 | — | 1,923 | — | |||||||||||
$ | 21,301 | $ | 19,378 | $ | 1,923 | $ | — |
11. | Income Taxes |
12. | Share-Based Compensation and Capital Stock |
Three Months Ended March 31, | ||||||||
(In millions) | 2019 | 2018 | ||||||
Stock options | $ | 0.6 | $ | 0.7 | ||||
Restricted stock | 2.0 | 1.7 | ||||||
Performance vested restricted stock units | 1.1 | 1.1 | ||||||
Total | $ | 3.7 | $ | 3.5 | ||||
Income tax benefits | $ | 0.9 | $ | 0.8 |
Stock Options | Restricted Stock | Performance Vested Restricted Stock Units | ||||||||||||||||||||
Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | Shares | Weighted Average Grant Date Fair Value | Shares | Weighted Average Grant Date Fair Value | ||||||||||||||||
Outstanding at January 1, 2019 | 1,186,180 | $ | 54.13 | 303,765 | $ | 65.06 | 336,820 | $ | 63.28 | |||||||||||||
Granted | 141,827 | 81.15 | 136,350 | 81.04 | 83,934 | 81.15 | ||||||||||||||||
Performance-Based Leveraging(1) | — | — | — | — | 1,583 | 51.49 | ||||||||||||||||
Exercised/Vested | (205,030 | ) | 44.89 | (65,538 | ) | 62.67 | (73,199 | ) | 50.67 | |||||||||||||
Expired | — | — | — | — | — | — | ||||||||||||||||
Forfeited | — | — | (6,034 | ) | 65.77 | (2,736 | ) | 70.18 | ||||||||||||||
Outstanding at March 31, 2019 | 1,122,977 | $ | 59.23 | 3.9 years | 368,543 | $ | 71.38 | 346,402 | $ | 70.16 | ||||||||||||
Options exercisable at March 31, 2019 | 752,844 | $ | 53.62 | 3.1 years |
2019 Grants | |||
Risk-free interest rate | 2.46 | % | |
Expected volatility | 21.49 | % | |
Expected life of stock option | 4.4 years | ||
Dividend yield | 1.06 | % | |
Requisite service period | 4 years | ||
Contractual life | 7 years | ||
Weighted average fair value of options granted (per option) | $ | 15.84 |
13. | Earnings Per Share |
Three Months Ended | ||||||||
March 31, | ||||||||
(In thousands, except per share amounts) | 2019 | 2018 | ||||||
Computation of Basic Earnings Per Share: | ||||||||
Numerator: | ||||||||
Net income | $ | 30,081 | $ | 25,086 | ||||
Income allocated to participating securities | (179 | ) | (155 | ) | ||||
Net income available to common shareholders | $ | 29,902 | $ | 24,931 | ||||
Denominator: | ||||||||
Weighted average common shares outstanding – basic | 55,347 | 56,464 | ||||||
Basic earnings per share | $ | 0.54 | $ | 0.44 | ||||
Computation of Diluted Earnings Per Share: | ||||||||
Numerator: | ||||||||
Net income | $ | 30,081 | $ | 25,086 | ||||
Income allocated to participating securities | (179 | ) | (154 | ) | ||||
Net income available to common shareholders | $ | 29,902 | $ | 24,932 | ||||
Denominator: | ||||||||
Weighted average common shares outstanding – basic | 55,347 | 56,464 | ||||||
Diluted effect of stock options and PVRSUs | 310 | 647 | ||||||
Weighted average common shares outstanding – diluted | 55,657 | 57,111 | ||||||
Diluted earnings per share | $ | 0.54 | $ | 0.44 |
14. | Reportable Segment Information |
Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | ||||||||||||||||||||||
(In thousands) | Hotel Franchising | Corporate & Other | Consolidated | Hotel Franchising | Corporate & Other | Consolidated | |||||||||||||||||
Revenues | $ | 214,992 | $ | 3,328 | $ | 218,320 | $ | 205,622 | $ | 3,772 | $ | 209,394 | |||||||||||
Operating income (loss) | $ | 70,457 | $ | (25,407 | ) | $ | 45,050 | $ | 59,358 | $ | (13,109 | ) | $ | 46,249 | |||||||||
Income (loss) before income taxes | $ | 68,287 | $ | (31,808 | ) | $ | 36,479 | $ | 53,389 | $ | (22,928 | ) | $ | 30,461 |
15. | Commitments and Contingencies |
• | The Company provides financing in the form of franchise agreement acquisition payments to franchisees for property improvements, hotel development efforts and other purposes. At March 31, 2019, the Company had commitments to extend an additional $252.7 million for these purposes provided certain conditions are met by its franchisees. |
• | The Company committed to make additional capital contributions totaling $11.0 million to existing unconsolidated and consolidated joint ventures related to the construction of various hotels to be operated under the Company's Cambria Hotels brand. |
• | The Company committed to provide financing in the form of mezzanine loans or credit facilities to franchisees for Choice brand development efforts. The Company has committed to provide an aggregate of approximately $40.0 million, upon certain conditions being met. As of March 31, 2019, $6.3 million have been disbursed. |
• | In March 2018, the Company entered into a construction loan agreement for the rehabilitation and development of a former office building into a hotel through a consolidated joint venture with a commercial lender, which is secured by the building. The construction loan can be drawn up to $34.9 million. The Company has a carve-out guaranty and the unaffiliated joint venture partner has a completion guaranty in relation to the loan, in which both parties are required to meet certain financial covenants relating to liquidity and net worth. The rehabilitation of the building is considered a qualified asset in which requires a significant amount of time to prepare for its intended use. Therefore, any interest costs incurred during the development period of the building is considered an element of the historical cost of the qualifying asset. At March 31, 2019, the Company has borrowed $17.0 million of the construction loan and recorded $0.3 million of capitalized interest costs. |
• | The Company’s franchise agreements require the payment of franchise fees, which include marketing and reservation system fees. These fees are described in Note 2. In accordance with terms of our franchise agreements, the Company is obligated to use the marketing and reservation system revenues it collects from the current franchisees comprising its various hotel brands to provide marketing and reservation services appropriate to support the operation of the overall system. To the extent revenues collected exceed expenditures incurred, the Company has a commitment to the franchisee system to make expenditures in future years. Conversely, to the extent expenditures incurred exceed revenues collected, the Company has the contractual enforceable right to assess and collect such amounts. |
16. | Transactions with Unconsolidated Joint Ventures |
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
(in thousands) | |||||||
Total Revenues | $ | 218,320 | $ | 209,394 | |||
Adjustments: | |||||||
Marketing and reservation system revenues | (110,064 | ) | (107,001 | ) | |||
Revenues, excluding marketing and reservation system activities | $ | 108,256 | $ | 102,393 |
(In thousands) | 2019 | 2018 | |||||
REVENUES | |||||||
Royalty fees | $ | 80,353 | $ | 76,698 | |||
Initial franchise and relicensing fees | 6,807 | 6,214 | |||||
Procurement services | 11,947 | 9,938 | |||||
Marketing and reservation system | 110,064 | 107,001 | |||||
Other | 9,149 | 9,543 | |||||
Total revenues | 218,320 | 209,394 | |||||
OPERATING EXPENSES | |||||||
Selling, general and administrative | 39,514 | 40,864 | |||||
Depreciation and amortization | 3,616 | 3,053 | |||||
Marketing and reservation system | 119,839 | 119,228 | |||||
Total operating expenses | 162,969 | 163,145 | |||||
Impairment of goodwill | (3,097 | ) | — | ||||
Impairment of long-lived assets | (7,304 | ) | — | ||||
Gain on sale of assets, net | 100 | — | |||||
Operating income | 45,050 | 46,249 | |||||
OTHER INCOME AND EXPENSES, NET | |||||||
Interest expense | 11,211 | 11,309 | |||||
Interest income | (2,613 | ) | (1,609 | ) | |||
Other (gain) loss | (2,198 | ) | 120 | ||||
Equity in net loss of affiliates | 2,171 | 5,968 | |||||
Total other income and expenses, net | 8,571 | 15,788 | |||||
Income before income taxes | 36,479 | 30,461 | |||||
Income tax expense | 6,398 | 5,375 | |||||
Net income | $ | 30,081 | $ | 25,086 |
Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | Change | |||||||||||||||||||||||||||
Average Daily Rate | Occupancy | RevPAR | Average Daily Rate | Occupancy | RevPAR | Average Daily Rate | Occupancy | RevPAR | |||||||||||||||||||||
Comfort Inn | $ | 87.96 | 57.7 | % | $ | 50.77 | $ | 88.73 | 58.2 | % | $ | 51.59 | (0.9)% | (50 | ) | bps | (1.6)% | ||||||||||||
Comfort Suites | 95.15 | 65.7 | % | 62.54 | 95.13 | 65.7 | % | 62.46 | —% | — | bps | 0.1% | |||||||||||||||||
Sleep | 81.48 | 59.7 | % | 48.64 | 81.40 | 59.9 | % | 48.76 | 0.1% | (20 | ) | bps | (0.2)% | ||||||||||||||||
Quality | 75.19 | 54.0 | % | 40.59 | 75.83 | 54.2 | % | 41.07 | (0.8)% | (20 | ) | bps | (1.2)% | ||||||||||||||||
Clarion | 77.93 | 51.3 | % | 39.99 | 79.62 | 51.9 | % | 41.34 | (2.1)% | (60 | ) | bps | (3.3)% | ||||||||||||||||
Econo Lodge | 58.86 | 49.2 | % | 28.98 | 58.74 | 49.4 | % | 29.02 | 0.2% | (20 | ) | bps | (0.1)% | ||||||||||||||||
Rodeway | 59.19 | 50.7 | % | 30.02 | 60.06 | 51.9 | % | 31.19 | (1.4)% | (120 | ) | bps | (3.8)% | ||||||||||||||||
WoodSpring Suites* | 45.35 | 78.5 | % | 35.62 | 44.97 | 78.5 | % | 35.29 | 0.8% | — | bps | 0.9% | |||||||||||||||||
MainStay | 81.56 | 64.7 | % | 52.78 | 77.38 | 63.6 | % | 49.24 | 5.4% | 110 | bps | 7.2% | |||||||||||||||||
Suburban | 57.73 | 73.5 | % | 42.44 | 53.50 | 73.7 | % | 39.43 | 7.9% | (20 | ) | bps | 7.6% | ||||||||||||||||
Cambria Hotels | 132.64 | 66.9 | % | 88.73 | 129.05 | 66.4 | % | 85.68 | 2.8% | 50 | bps | 3.6% | |||||||||||||||||
Ascend Hotel Collection | 117.81 | 52.1 | % | 61.37 | 115.98 | 53.1 | % | 61.55 | 1.6% | (100 | ) | bps | (0.3)% | ||||||||||||||||
Total* | $ | 76.75 | 57.7 | % | $ | 44.29 | $ | 76.86 | 58.0 | % | $ | 44.61 | (0.1)% | (30) | bps | (0.7)% |
March 31, 2019 | March 31, 2018 | Variance | |||||||||||||||||||||
Hotels | Rooms | Hotels | Rooms | Hotels | Rooms | % | % | ||||||||||||||||
Comfort Inn | 1,048 | 82,478 | 1,072 | 83,958 | (24 | ) | (1,480 | ) | (2.2 | )% | (1.8 | )% | |||||||||||
Comfort Suites | 566 | 43,918 | 565 | 43,875 | 1 | 43 | 0.2 | % | 0.1 | % | |||||||||||||
Sleep | 396 | 28,111 | 385 | 27,443 | 11 | 668 | 2.9 | % | 2.4 | % | |||||||||||||
Quality | 1,642 | 126,735 | 1,562 | 121,665 | 80 | 5,070 | 5.1 | % | 4.2 | % | |||||||||||||
Clarion | 173 | 21,908 | 162 | 21,547 | 11 | 361 | 6.8 | % | 1.7 | % | |||||||||||||
Econo Lodge | 837 | 50,539 | 833 | 50,808 | 4 | (269 | ) | 0.5 | % | (0.5 | )% | ||||||||||||
Rodeway | 602 | 34,523 | 603 | 34,538 | (1 | ) | (15 | ) | (0.2 | )% | — | % | |||||||||||
WoodSpring Suites | 256 | 30,766 | 241 | 28,909 | 15 | 1,857 | 6.2 | % | 6.4 | % | |||||||||||||
MainStay | 64 | 4,281 | 58 | 4,111 | 6 | 170 | 10.3 | % | 4.1 | % | |||||||||||||
Suburban | 54 | 5,700 | 58 | 6,349 | (4 | ) | (649 | ) | (6.9 | )% | (10.2 | )% | |||||||||||
Cambria Hotels | 41 | 5,797 | 37 | 5,301 | 4 | 496 | 10.8 | % | 9.4 | % | |||||||||||||
Ascend Hotel Collection | 179 | 14,956 | 163 | 13,239 | 16 | 1,717 | 9.8 | % | 13.0 | % | |||||||||||||
Total Domestic Franchises | 5,858 | 449,712 | 5,739 | 441,743 | 119 | 7,969 | 2.1 | % | 1.8 | % |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 4. | CONTROLS AND PROCEDURES |
ITEM 1. | LEGAL PROCEEDINGS |
ITEM 1A. | RISK FACTORS |
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Month Ending | Total Number of Shares Purchased or Redeemed | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1), (2) | Maximum Number of Shares that may yet be Purchased Under the Plans or Programs, End of Period | |||||||||
January 31, 2019 | 18,695 | $ | 76.62 | — | 2,190,003 | ||||||||
February 28, 2019 | 35,050 | 79.60 | — | 2,190,003 | |||||||||
March 31, 2019 | 360,332 | 76.95 | 354,646 | 1,835,357 | |||||||||
Total | 414,077 | $ | 77.16 | 354,646 | 1,835,357 |
ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
ITEM 4. | MINE SAFETY DISCLOSURES |
ITEM 5. | OTHER INFORMATION |
ITEM 6. | EXHIBITS |
Exhibit Number | Description | |
3.01(a) | ||
3.02(b) | ||
3.03(c) | ||
3.04(d) | ||
3.05(e) | ||
31.1* | ||
31.2* | ||
32* | ||
101.INS* | XBRL Instance Document | |
101.SCH* | XBRL Taxonomy Extension Schema Document | |
101.CAL* | XBRL Taxonomy Calculation Linkbase Document | |
101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB* | XBRL Taxonomy Label Linkbase Document | |
101.PRE* | XBRL Taxonomy Presentation Linkbase Document | |
* | Filed herewith |
(a) | Incorporated by reference to the identical document filed as an exhibit to Choice Hotels International, Inc.'s Registration Statement on Form S-4, filed August 31, 1998 (Reg. No. 333-62543). |
(b) | Incorporated by reference to the identical document filed as an exhibit to Choice Hotels International, Inc.'s Current Report on Form 8-K filed May 1, 2013. |
(c) | Incorporated by reference to the identical document filed as an exhibit to Choice Hotels International, Inc.'s Current Report on Form 8-K filed February 16, 2010. |
(d) | Incorporated by reference to the identical document filed as an exhibit to Choice Hotels International, Inc.'s Current Report on Form 8-K filed April 29, 2015. |
(e) | Incorporated by reference to the identical document filed as an exhibit to Choice Hotels International, Inc.'s Current Report on Form 8-K filed on January 13, 2016. |
CHOICE HOTELS INTERNATIONAL, INC. | ||
May 9, 2019 | By: | /s/ PATRICK S. PACIOUS |
Patrick S. Pacious | ||
President & Chief Executive Officer | ||
CHOICE HOTELS INTERNATIONAL, INC. | ||
May 9, 2019 | By: | /s/ DOMINIC E. DRAGISICH |
Dominic E. Dragisich | ||
Chief Financial Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Choice Hotels International, Inc.; |
2. | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and |
(d) | Disclosed in this quarterly report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
May 9, 2019 | /s/ PATRICK S. PACIOUS |
Patrick S. Pacious | |
President & Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Choice Hotels International, Inc.; |
2. | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and |
(d) | Disclosed in this quarterly report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
May 9, 2019 | /s/ DOMINIC E. DRAGISICH |
Dominic E. Dragisich | |
Chief Financial Officer |
May 9, 2019 | /s/ PATRICK S. PACIOUS |
Patrick S. Pacious | |
President & Chief Executive Officer | |
May 9, 2019 | /s/ DOMINIC E. DRAGISICH |
Dominic E. Dragisich | |
Chief Financial Officer |
Document And Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Apr. 30, 2019 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | CHOICE HOTELS INTERNATIONAL INC /DE | |
Trading Symbol | chh | |
Entity Central Index Key | 0001046311 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Emerging Growth Company | false | |
Entity Small Business | false | |
Entity Common Stock, Shares Outstanding | 55,640,668 |
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Statement of Comprehensive Income [Abstract] | ||
Net income | $ 30,081 | $ 25,086 |
Other comprehensive income, net of tax: | ||
Amortization of loss on cash flow hedge | 215 | 215 |
Foreign currency translation adjustment | (207) | 855 |
Other comprehensive income, net of tax | 8 | 1,070 |
Comprehensive income | $ 30,089 | $ 26,156 |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Receivables, allowance for doubtful accounts | $ 17,268 | $ 15,905 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 160,000,000 | 160,000,000 |
Common stock, shares issued (in shares) | 95,065,638 | 95,065,638 |
Common stock, shares outstanding (in shares) | 55,673,675 | 55,679,207 |
Treasury stock, shares (in shares) | 39,391,963 | 39,386,431 |
Consolidated Statements of Shareholders' Deficit Statement - USD ($) $ in Thousands |
Total |
Common Stock |
Additional Paid-in- Capital |
Accumulated Other Comprehensive Income (Loss) |
Treasury Stock |
Retained Earnings |
||
---|---|---|---|---|---|---|---|---|
Beginning balance (in shares) at Dec. 31, 2017 | 56,679,968 | |||||||
Beginning balance at Dec. 31, 2017 | $ (258,601) | $ 951 | $ 182,448 | $ (4,699) | $ (1,064,573) | $ 627,272 | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Net income | 25,086 | 25,086 | ||||||
Other comprehensive income | 1,070 | 1,070 | ||||||
Share based payment activity (in shares) | 498,510 | |||||||
Share based payment activity | 26,579 | 13,203 | 13,376 | |||||
Dividends declared ($0.215 per share) | (12,182) | (12,182) | ||||||
Treasury purchases (in shares) | (517,839) | |||||||
Treasury purchases | (41,869) | (41,869) | ||||||
Ending balance at Mar. 31, 2018 | $ (259,917) | $ 951 | 195,651 | (3,629) | (1,093,066) | 640,176 | ||
Ending balance (in shares) at Mar. 31, 2018 | 56,660,639 | |||||||
Beginning balance (in shares) at Dec. 31, 2018 | 55,679,207 | 55,679,207 | ||||||
Beginning balance at Dec. 31, 2018 | $ (183,772) | $ 951 | 213,170 | (5,446) | (1,187,625) | 795,178 | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Net income | 30,081 | 30,081 | ||||||
Other comprehensive income | 8 | 8 | ||||||
Other | [1] | (614) | (614) | |||||
Share based payment activity (in shares) | 408,545 | |||||||
Share based payment activity | 12,920 | 3,214 | 9,706 | |||||
Dividends declared ($0.215 per share) | $ (12,149) | (12,149) | ||||||
Treasury purchases (in shares) | (354,646) | (414,077) | ||||||
Treasury purchases | $ (31,951) | (31,951) | ||||||
Ending balance at Mar. 31, 2019 | $ (185,477) | $ 951 | $ 216,384 | $ (5,438) | $ (1,209,870) | $ 812,496 | ||
Ending balance (in shares) at Mar. 31, 2019 | 55,673,675 | 55,673,675 | ||||||
|
Consolidated Statements of Shareholders' Deficit (Parenthetical) - $ / shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Statement of Stockholders' Equity [Abstract] | ||
Cash dividends declared per share (in dollars per share) | $ 0.215 | $ 0.215 |
Basis of Presentation and Significant Accounting Policies |
3 Months Ended |
---|---|
Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Significant Accounting Policies | Basis of Presentation The accompanying unaudited consolidated financial statements of Choice Hotels International, Inc. and its subsidiaries (together the "Company") have been prepared by the Company in accordance with United States of America generally accepted accounting principles ("GAAP") pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). These unaudited consolidated financial statements include all adjustments that are necessary, in the opinion of management, to fairly present the Company's financial position and results of operations. Except as otherwise disclosed, all adjustments are of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP have been omitted. The Company believes the disclosures made are adequate to make the information presented not misleading. The consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2018 and notes thereto included in the Company’s Annual Report on Form 10-K, filed with the SEC on February 26, 2019. Interim results are not necessarily indicative of the entire year results. All inter-company transactions and balances between Choice Hotels International, Inc. and its subsidiaries have been eliminated in consolidation. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Summary of Significant Accounting Policies The Company’s significant accounting policies are detailed in Note 1 “Summary of Significant Accounting Policies” in the Annual Report on Form 10-K for the year ended December 31, 2018. The significant accounting policies that changed in 2019 are set forth below. Recently Adopted Accounting Standards In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) and issued subsequent amendments to the initial guidance at various points thereafter (collectively referred to as "Topic 842"). Topic 842 requires a lessee to recognize operating leases on its balance sheet by recording liabilities for its lease obligations and assets for its right-of-use ("ROU") of the underlying assets as of the lease commencement dates. This differs from prior treatment of operating leases in accordance with ASC 840, Leases (Topic 840) ("Topic 840"), as operating leases were not captured on a lessee's consolidated balance sheet. Topic 842 prescribes that entities should recognize expenses on their consolidated statements of income in a manner similar to Topic 840 whereby minimum lease payments are recognized on a straight-line basis over a lease term. The Company elected to apply the package of practical expedients that allows entities to forego reassessing at the transition date: (1) whether expired or existing contracts are or contain leases; (2) lease classification for any expired or existing leases; and (3) whether initial direct costs for existing leases qualify for capitalization. Topic 842 allows entities an optional transitional method to apply the transition requirements at the effective date, rather than at the beginning of the earliest comparative period. An entity’s reporting for the comparative periods presented in the year of adoption continues to be in accordance with Topic 840, including the disclosure requirements of Topic 840. The Company adopted Topic 842 on January 1, 2019 using this optional transition method and therefore, the financial results reported in periods prior to January 1, 2019 are unchanged. Adoption of the standard resulted in the recording of operating lease ROU assets of $28.0 million and operating lease liabilities of $38.5 million as of March 31, 2019. Topic 842 did not have an impact on our consolidated statements of income. Refer to Note 7. Recently Issued Accounting Standards In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) ("ASU 2016-13"), which will require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. ASU 2016-13 requires enhanced disclosures, including qualitative and quantitative requirements, to provide insight to significant estimates and judgments used in estimating credit losses and the amounts recorded in the financial statements. The guidance is effective for annual reporting periods beginning after December 15, 2019 and interim periods within those fiscal years. ASU 2016-13 requires the use of the modified retrospective approach for adoption. The Company is currently assessing the potential impact that ASU 2016-13 will have on its consolidated financial position, results of operations, and disclosures, including the processes to evaluate allowances for trade and notes receivables. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement ("ASU 2018-13"). ASU 2018-13 modifies disclosure requirements on fair value measurements. The guidance is effective for annual reporting periods beginning after December 15, 2019 and interim periods within those fiscal years. Early adoption is permitted. The Company is currently assessing the potential impact that ASU 2018-13 will have on the financial statement disclosures. In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract ("ASU 2018-15"). ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The guidance is effective for annual reporting periods beginning after December 15, 2019 and interim periods within those fiscal years. Early adoption is permitted. The Company is currently assessing the timing of adoption and the potential impact that ASU 2018-15 will have on the financial statements and disclosures. |
Revenue |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | Revenue Contract Liabilities Contract liabilities relate to (i) advance consideration received, such as initial franchise and relicensing fees paid when a franchise agreement is awarded and system implementation fees paid at time of installation, for services considered to be part of the brand intellectual property performance obligation and (ii) amounts received when Choice Privileges points are issued but for which revenue is not yet recognized since the related points have not been redeemed. Initial and relicensing fees are charged when (i) new hotels enter the franchise system; (ii) there is a change of ownership; or (iii) existing franchise agreements are extended. These revenues are recognized as revenue ratably as services are provided over the enforceable period of the franchise agreement. System implementation fees charged to franchisees are also deferred and recognized as revenue over the enforceable period of the franchise agreement. The enforceable period is the period from hotel opening to the first point the franchisee or the Company can terminate the franchise agreement without incurring a significant penalty. Deferred revenues from initial and relicensing fees and system implementation fees will typically be recognized over a five- to ten-year period, unless the franchise agreement is terminated and the hotel exits the franchise system whereby remaining deferred amounts will be recognized to revenue in the period of termination. Loyalty points represent a performance obligation attributable to usage of the points, and thus revenues are recognized at the point in time when the loyalty points are redeemed by members for benefits. The estimated fair value of future redemptions is reflected in current and non-current Liability for guest loyalty program in our consolidated balance sheets. The amount of the loyalty program fees in excess of the point liability represents current and non-current Deferred revenue, which is recognized to revenue as points are redeemed including an estimate of future forfeitures. The anticipated redemption pattern of the points is the basis for current and non-current designation of each liability. Loyalty points are typically redeemed within three years of issuance. Significant changes in the contract liabilities balances during the period December 31, 2018 to March 31, 2019 are as follows:
Remaining Performance Obligations The aggregate amount of transaction price allocated to unsatisfied or partially unsatisfied performance obligations is $157.8 million as of March 31, 2019. This amount represents fixed transaction price that will be recognized as revenue in future periods, which is primarily captured in the balance sheet as current and non-current deferred revenue. Based on practical expedient elections permitted by Topic 606, the Company does not disclose the value of unsatisfied performance obligations for (i) variable consideration subject to the sales or usage-based royalty constraint or comprising a component of a series (including franchise, partnership, qualified vendor, and software as a service ("SaaS") agreements), (ii) variable consideration for which we recognize revenue at the amount to which we have the right to invoice for services performed, or (iii) contracts with an expected original duration of one year or less. Disaggregation of Revenue
Non-Topic 606 revenues primarily represent revenue from leasing an office building (refer to Note 7) and are presented in Other revenues in the consolidated statements of income. As presented in Note 14, the Corporate & Other segment amounts represent $3.3 million and $3.8 million for the three months ended March 31, 2019 and 2018, respectively, and are included in the Over time column of Other revenues and Non-Topic 606 revenues row. The remaining revenues relate to the Hotel Franchising segment. |
Other Current Assets |
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Assets, Current [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Current Assets | Other Current Assets Other current assets consist of the following:
Land held for sale represents certain parcels of land previously acquired by the Company as part of its program to incent franchise development in strategic markets for the Company's Cambria Hotels brand. During the three months ended March 31, 2019, the Company sold one parcel of land with a total book value of $7.0 million recognizing a gain on sale of $0.1 million. |
Notes Receivable and Allowance for Losses |
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Accounts and Notes Receivable, Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes Receivable and Allowance for Losses | Notes Receivable and Allowance for Losses The following table shows the composition of the Company's notes receivable balances:
The Company utilizes the level of security it has in the notes receivable as its primary credit quality indicator (i.e., senior, subordinated or unsecured) when determining the appropriate allowances for uncollectible loans. The Company considers loans to be past due and in default when payments are not made when due. Although the Company considers loans to be in default if payments are not received on the due date, the Company does not suspend the accrual of interest until those payments are more than 30 days past due. The Company applies payments received for loans on non-accrual status first to interest and then principal. The Company does not resume interest accrual until all delinquent payments are received. For impaired loans, the Company recognizes interest income on a cash basis. The Company determined that approximately $52.4 million and $52.1 million of its notes receivable were impaired at March 31, 2019 and December 31, 2018, respectively. The total unpaid principal balances of these impaired notes are $51.8 million, which are current based on their restructured loan maturity terms, as of both March 31, 2019 and December 31, 2018. The Company recorded allowances for credit losses on these impaired loans totaling $4.4 million at both March 31, 2019 and December 31, 2018. The average notes receivable on non-accrual status was approximately $27.1 million and $1.8 million for the three months ended March 31, 2019 and 2018, respectively. No interest income on impaired loans was recognized on a cash basis during the three months ended March 31, 2019 and 2018. The Company provided loan reserves on non-impaired loans totaling $0.3 million at both March 31, 2019 and December 31, 2018. There were no changes in total loan reserves between December 31, 2018 and March 31, 2019. The Company has identified loans totaling approximately $13.8 million and $12.9 million, respectively, with stated interest rates that are less than market rate, representing a total discount of $1.4 million and $1.5 million as of March 31, 2019 and December 31, 2018, respectively. These discounts are reflected as a reduction of the outstanding loan amounts and are amortized over the life of the related loan. Past due balances of notes receivable by credit quality indicators are as follows:
Variable Interest through Notes Issued The Company has issued notes receivables to certain entities that have created variable interests in these borrowers totaling $111.9 million and $114.3 million as of March 31, 2019 and December 31, 2018, respectively. The Company has determined that it is not the primary beneficiary of these variable interest entities ("VIEs"). These loans have stated fixed and/ or variable interest amounts. |
Long-lived Assets and Goodwill |
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Long-lived Assets and Goodwill | Long-lived Assets and Goodwill On January 29, 2019, the Company became aware that a key customer of the SaaS for vacation rentals reporting unit provided the unit’s management team with a letter purporting to terminate the customer’s contract. The unit’s management team asserts, and the Company currently believes, that the purported termination notice is not valid. The unit’s management team is in active discussions with the customer regarding potential resolutions of the disputed contract termination, and is exploring its contractual and other legal rights, remedies and options related to the customer’s purported termination of the contract. The customer is contemplated in the SaaS for vacation rentals reporting unit's projected revenues, and the Company has determined that the unit’s receipt of the purported termination notice, even though the validity of the notice is being actively contested by the unit, represents a triggering event which required an interim reevaluation of the reporting unit's long-lived assets group and goodwill in the first quarter of 2019. Long-lived asset impairment analysis The long-lived assets of the SaaS for vacation rentals reporting unit are comprised of $4.3 million of intangible assets, $1.7 million of operating lease right-of-use assets, and $1.3 million of property and equipment. The long-lived asset group is determined to be at the SaaS for vacation rentals reporting unit level. Recoverability of the long-lived asset group was assessed based on net, undiscounted expected cash flows of the asset group, which were less than the carrying amount of the asset group. An impairment charge was recorded for the excess of the carrying value over the fair value of the asset group. To estimate the fair value of the long-lived asset group, the Company utilized a combination of income and market approach valuation methods via performance of a discounted cash flow analysis and quoted market prices. The Company recognized a non-cash pre-tax long-lived asset group impairment charge for the full amount of SaaS for vacation rentals long-lived assets of $7.3 million. Goodwill impairment analysis The carrying value of the SaaS for vacation rentals reporting unit was adjusted after the $7.3 million long-lived asset impairment. The adjusted carrying value exceeded the fair value of the reporting unit by $3.1 million, resulting in an additional non-cash pre-tax impairment charge on the SaaS for vacation rentals reporting unit's goodwill in this amount. The following table details the carrying amount of our goodwill:
The following is a summary of changes in the carrying amount of goodwill:
As of March 31, 2019, the $6.4 million of carrying value remaining in Other goodwill is fully attributable to the SaaS for vacation rentals reporting unit. The results of the SaaS for vacation rentals reporting unit are included in Corporate & Other in Note 14. The long-lived assets and goodwill impairment charges do not have an impact on the Company's liquidity or calculation of financial covenants under existing debt arrangements. There can be no assurance there will not be further impairments or charges incurred against the assets of the SaaS for vacation rentals reporting unit in future periods. |
Investments in Unconsolidated Entities |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Investments in Unconsolidated Entities | Investments in Unconsolidated Entities The Company maintains a portfolio of investments owned through noncontrolling interests in equity method investments with one or more partners. The Company has equity method investments in joint ventures that represent VIEs totaling $101.9 million and $103.0 million on the consolidated balance sheets at March 31, 2019 and December 31, 2018, respectively. These investments relate to the Company's program to offer equity support to qualified franchisees to develop and operate Cambria Hotels in strategic markets. Based on an analysis of who has the power to direct the activities that most significantly impact these entities performance and who has an obligation to absorb losses of these entities or a right to receive benefits from these entities that could potentially be significant to the entity, the Company determined that it is not the primary beneficiary of any of these VIEs. The Company based its qualitative analysis on its review of the design of the entity, its organizational structure including decision-making ability and the relevant development, operating management and financial agreements. Although the Company is not the primary beneficiary of these VIEs, it does exercise significant influence through its equity ownership and as a result the Company's investment in these entities is accounted for under the equity method. For the three months ended March 31, 2019 and 2018, the Company recognized losses totaling $2.4 million and $6.4 million, respectively, from these investments. The Company's maximum exposure to losses related to its investments in VIEs is limited to its equity investments as well as certain limited payment guaranties described in Note 15 of these financial statements. |
Leases |
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Leases | Leases Lessee The Company determines if an arrangement is a lease and classification as operating or financing at lease inception. Operating leases are included in operating lease ROU assets, accrued expenses and other current liabilities, and operating lease liabilities on our consolidated balance sheets. The Company does not have any leases classified as financing. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. Operating lease ROU assets are further offset by any prepaid rent, lease incentives and initial direct costs incurred. When a lease agreement does not provide an implicit rate, the Company utilizes its incremental borrowing rate based on the information available at commencement date in determining the present value of future minimum lease payments. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Variable lease payments include certain index-based changes in rent, certain nonlease components (such as maintenance and other services provided by the lessor), and other charges included in the lease. Variable lease payments are excluded from future minimum lease payments and expensed as incurred. The Company elected the practical expedient to not separate lease and non-lease components for all classes of underlying assets in which it is the lessee and made a policy election to not account for leases with an initial term of 12 months or less on the balance sheet. These short-term leases are expensed on a straight-line basis over the lease term. The Company has operating leases primarily for office space, buildings, and equipment. Our leases have remaining lease terms of one month to five years, some of which may include options to extend leases for up to fifteen years and some which may include options to terminate the leases within one year. The Company's lease costs were as follows:
Leases recorded on the consolidated balance sheet consist of the following:
Other information related to the Company's lease arrangements is as follows:
(1) Discount rates used for existing operating leases upon adoption of Topic 842 were established based on remaining lease term as of January 1, 2019. Maturities of lease liabilities are as follows:
During the three months ended March 31, 2019, the Company entered into a sale and leaseback transaction in which we sold an office building for a gain of $2.0 million within the Marketing and reservation system line item on the consolidated statements of income and entered into a lease with the option to terminate after 2019. This lease is included in the tables above. The Company adopted Topic 842 on January 1, 2019 using the optional transition method to present comparative periods prior to adoption date in accordance with Topic 840, including disclosure. The following table discloses future minimum lease payments in accordance with Topic 840:
Lessor The Company leases an office building to a third-party tenant. This lease has a remaining lease term of less than two years. Lease income comprises fixed lease payments of $0.3 million for the three months ended March 31, 2019. The lease does not contain an option to purchase the underlying asset. The Company elected to not separate lease and nonlease components. Related Party The Company and family members of the Company's largest shareholder entered into an agreement that allows those family members to lease the Company aircraft from time to time for their personal use. The agreements provide for lease payments that contribute towards the fixed costs associated with the aircraft as well as reimbursement of the Company’s variable costs associated with operation of the aircraft, in compliance with, and to the extent authorized by, applicable regulatory requirements. The terms of the lease agreements are consistent with the terms of lease agreements that the Company has entered into with unrelated third parties for use of the aircraft. During the three months ended March 31, 2019, the Company received $12 thousand pursuant to this arrangement. In December 2013, the Company's board of directors approved an arrangement with an entity controlled by the family members of the Company's largest shareholder to sublease approximately 2,200 square feet of office space located in Chevy Chase, Maryland. The lease has a month to month term, with a 90 day notice period, and annual lease payments totaling approximately $90 thousand. In May 2016, the sublease was amended for the expansion of the office space, with annual lease payments totaling approximately $146 thousand. During the three months ended March 31, 2019, the Company received approximately $36 thousand in rent payments associated with this lease. |
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Leases | Leases Lessee The Company determines if an arrangement is a lease and classification as operating or financing at lease inception. Operating leases are included in operating lease ROU assets, accrued expenses and other current liabilities, and operating lease liabilities on our consolidated balance sheets. The Company does not have any leases classified as financing. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. Operating lease ROU assets are further offset by any prepaid rent, lease incentives and initial direct costs incurred. When a lease agreement does not provide an implicit rate, the Company utilizes its incremental borrowing rate based on the information available at commencement date in determining the present value of future minimum lease payments. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Variable lease payments include certain index-based changes in rent, certain nonlease components (such as maintenance and other services provided by the lessor), and other charges included in the lease. Variable lease payments are excluded from future minimum lease payments and expensed as incurred. The Company elected the practical expedient to not separate lease and non-lease components for all classes of underlying assets in which it is the lessee and made a policy election to not account for leases with an initial term of 12 months or less on the balance sheet. These short-term leases are expensed on a straight-line basis over the lease term. The Company has operating leases primarily for office space, buildings, and equipment. Our leases have remaining lease terms of one month to five years, some of which may include options to extend leases for up to fifteen years and some which may include options to terminate the leases within one year. The Company's lease costs were as follows:
Leases recorded on the consolidated balance sheet consist of the following:
Other information related to the Company's lease arrangements is as follows:
(1) Discount rates used for existing operating leases upon adoption of Topic 842 were established based on remaining lease term as of January 1, 2019. Maturities of lease liabilities are as follows:
During the three months ended March 31, 2019, the Company entered into a sale and leaseback transaction in which we sold an office building for a gain of $2.0 million within the Marketing and reservation system line item on the consolidated statements of income and entered into a lease with the option to terminate after 2019. This lease is included in the tables above. The Company adopted Topic 842 on January 1, 2019 using the optional transition method to present comparative periods prior to adoption date in accordance with Topic 840, including disclosure. The following table discloses future minimum lease payments in accordance with Topic 840:
Lessor The Company leases an office building to a third-party tenant. This lease has a remaining lease term of less than two years. Lease income comprises fixed lease payments of $0.3 million for the three months ended March 31, 2019. The lease does not contain an option to purchase the underlying asset. The Company elected to not separate lease and nonlease components. Related Party The Company and family members of the Company's largest shareholder entered into an agreement that allows those family members to lease the Company aircraft from time to time for their personal use. The agreements provide for lease payments that contribute towards the fixed costs associated with the aircraft as well as reimbursement of the Company’s variable costs associated with operation of the aircraft, in compliance with, and to the extent authorized by, applicable regulatory requirements. The terms of the lease agreements are consistent with the terms of lease agreements that the Company has entered into with unrelated third parties for use of the aircraft. During the three months ended March 31, 2019, the Company received $12 thousand pursuant to this arrangement. In December 2013, the Company's board of directors approved an arrangement with an entity controlled by the family members of the Company's largest shareholder to sublease approximately 2,200 square feet of office space located in Chevy Chase, Maryland. The lease has a month to month term, with a 90 day notice period, and annual lease payments totaling approximately $90 thousand. In May 2016, the sublease was amended for the expansion of the office space, with annual lease payments totaling approximately $146 thousand. During the three months ended March 31, 2019, the Company received approximately $36 thousand in rent payments associated with this lease. |
Debt |
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Debt | Debt Debt consists of the following:
For additional information regarding the senior unsecured credit facility and other debt, see the "Debt" caption under the "Liquidity and Capital Resources" section in Management's Discussion and Analysis of Financial Condition and Results of Operations. |
Accumulated Other Comprehensive Loss |
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Accumulated Other Comprehensive Loss | Accumulated Other Comprehensive Loss The following represents the changes in accumulated other comprehensive loss, net of tax, by component for the three months ended March 31, 2019:
The amounts below were reclassified from accumulated other comprehensive loss to the following line items in the Company's Consolidated Statements of Income during the three months ended March 31, 2019. There is no income tax expense or benefit attributable to the components below.
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Fair Value Measurements |
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Fair Value Measurements | Fair Value Measurements The Company estimates the fair value of its financial instruments utilizing a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The following summarizes the three levels of inputs, as well as the assets that the Company values using those levels of inputs. Level 1: Quoted prices in active markets for identical assets and liabilities. The Company’s Level 1 assets consist of marketable securities (primarily mutual funds) held in the Company's Deferred Compensation Plan. Level 2: Observable inputs, other than quoted prices in active markets for identical assets and liabilities, such as quoted prices for similar assets and liabilities; quoted prices in markets that are not active; or other inputs that are observable. The Company’s Level 2 assets consist of money market funds held in the Company's Deferred Compensation Plan and those recorded in cash and cash equivalents. Level 3: Unobservable inputs, supported by little or no market data available, where the reporting entity is required to develop its own assumptions to determine the fair value of the instrument. The Company does not currently have any assets whose fair value was determined using Level 3 inputs. The Company's policy is to recognize transfers in and transfers out of the three levels of the fair value hierarchy as of the end of each quarterly reporting period. There were no transfers between Level 1, 2 and 3 assets during the three months ended March 31, 2019. As of March 31, 2019 and December 31, 2018, the Company had the following assets measured at fair value on a recurring basis:
(1) Included in Investments, employee benefit plans at fair value and Other current assets on the consolidated balance sheets. Other Financial Instruments The Company believes that the fair value of its current assets and current liabilities approximate their reported carrying amounts due to the short-term nature of these items. In addition, the interest rates of the Company's senior unsecured credit facility adjust frequently based on current market rates; accordingly its carrying amount approximates fair value. The Company estimates the fair value of notes receivable, which approximate their carrying value, utilizing an analysis of future cash flows and credit worthiness for similar types of arrangements. Based upon the availability of market data, the notes receivable have been classified as Level 3 inputs. The primary sensitivity in these calculations is based on the selection of appropriate interest and discount rates. For further information on the notes receivables, refer to Note 4. The fair values of the Company's $250 million and $400 million Senior Notes are classified as Level 2 as the significant inputs are observable in an active market. At March 31, 2019 and December 31, 2018, the $250 million Senior Notes had an approximate fair value of $258.2 million and $257.0 million, respectively. At March 31, 2019 and December 31, 2018, the $400 million Senior Notes had an approximate fair value of $426.9 million and $415.7 million, respectively. Fair value estimates are made at a specific point in time, are subjective in nature and involve uncertainties and matters of significant judgment. Settlement of such fair value amounts may not be possible and may not be a prudent management decision. |
Income Taxes |
3 Months Ended |
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Mar. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The effective income tax rates were 17.5% and 17.6% for the three months ended March 31, 2019 and 2018, respectively. The effective income tax rate for the three months ended March 31, 2019 was lower than the U.S. federal income tax rate of 21% primarily due to $2.0 million of excess tax benefits from share-based compensation and the impact of foreign operations, partially offset by state income taxes. The effective income tax rate for the three months ended March 31, 2018 was lower than the U.S. federal income tax rate of 21% primarily due to $1.6 million of excess tax benefits from share-based compensation and the impact of foreign operations, partially offset by state income taxes. |
Share-Based Compensation and Capital Stock |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Compensation and Capital Stock | Share-Based Compensation and Capital Stock The components of the Company’s pretax share-based compensation expense and associated income tax benefits are as follows for the three months ended March 31, 2019 and 2018:
A summary of stock-based award activity as of March 31, 2019 and changes during the three months ended are presented below:
The stock options granted by the Company had an exercise price equal to the market price of the Company's common stock on the date of grant. The fair value of the options granted was estimated on the grant date using the Black-Scholes option-pricing model with the following weighted average assumptions:
Restricted stock awards generally vest ratably over the service period beginning with the first anniversary of the grant date. Vesting service period of shares granted during the three months ended March 31, 2019 range from 36 - 48 months. The Company has granted PVRSUs to certain employees. The vesting of these stock awards is contingent upon the Company achieving performance targets over a 36 - 48 months requisite service period and the employees' continued employment. The performance conditions affect the number of shares that will ultimately vest and can range between 0% and 200% of the shares granted. Share Repurchases and Redemptions The Company purchased 354,646 shares of common stock under the share repurchase program at a total cost of $27.3 million during the three months ended March 31, 2019, respectively. During the three months ended March 31, 2019, the Company redeemed 59,431 shares of common stock at a total cost of approximately $4.7 million from employees to satisfy the option exercise price and statutory minimum tax-withholding requirements related to the exercising of stock options and vesting of performance vested restricted stock units and restricted stock grants. These redemptions were outside the share repurchase program. |
Earnings Per Share |
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Earnings Per Share | Earnings Per Share The computation of basic and diluted earnings per common share is as follows:
The Company's unvested restricted shares contain rights to receive nonforfeitable dividends, and thus are participating securities requiring the two-class method of computing earnings per share ("EPS"). The calculation of EPS for common stock shown above excludes the income attributable to the unvested restricted share awards from the numerator and excludes the dilutive impact of those awards from the denominator. At March 31, 2019 and 2018, the Company had 1.1 million and 1.7 million outstanding stock options, respectively. Stock options are included in the diluted EPS calculation using the treasury stock method and average market prices during the period, unless the stock options would be anti-dilutive. For the three months ended March 31, 2019, 0.2 million anti-dilutive stock options were excluded from the diluted EPS calculation. For the three months ended March 31, 2018, the Company excluded 0.1 million of anti-dilutive stock options from the diluted EPS calculation. PVRSUs are also included in the diluted EPS calculation when the performance conditions have been met at the reporting date. However, at March 31, 2019 and 2018, PVRSUs totaling 324,140 and 338,204, respectively, were excluded from the computation since the performance conditions had not been met. |
Reportable Segment Information |
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Reportable Segment Information | Reportable Segment Information Hotel Franchising: Hotel Franchising includes the Company's hotel franchising operations consisting of its thirteen brands. The thirteen brands are aggregated within this segment considering their similar economic characteristics, types of customers, distribution channels and regulatory business environments. Revenues from the hotel franchising business include royalty fees, initial franchise and relicensing fees, marketing and reservation system fees, procurement services revenue and other hotel franchising related revenue. The Company is obligated under its hotel franchise agreements to provide marketing and reservation services appropriate for the operation of its systems. These services do not represent separate reportable segments as their operations are directly related to the Company's hotel franchising business. The revenues received from franchisees that are used to pay for part of the Company's ongoing operations are included in hotel franchising revenues and are offset by the related expenses paid for marketing and reservation activities to calculate hotel franchising operating income. The Company evaluates its hotel franchising segment based primarily on the results of the segment without allocating corporate expenses, income taxes or indirect general and administrative expenses, which are included in the Corporate & Other column. Corporate & Other revenues include rental income related to an office building owned by the Company, as well as revenues related to the Company's vacation rental activities and its SaaS technology solutions divisions which provide cloud-based property management software to non-franchised hoteliers and vacation rental management companies. Equity in earnings or losses from hotel franchising related joint ventures is allocated to the Company's hotel franchising segment. The Company does not allocate interest expense, interest income, other gains and losses or income taxes to its segments. The following table presents the financial information for the Company's segments:
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Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||
Commitments and Contingencies | Commitments and Contingencies The Company is not a party to any litigation other than litigation in the ordinary course of business. The Company's management and legal counsel do not expect that the ultimate outcome of any of its currently ongoing legal proceedings, individually or collectively, will have a material adverse effect on the Company's financial position, results of operations or cash flows. Contingencies The Company entered into various limited payment guaranties with regards to the Company’s VIEs supporting the VIE’s efforts to develop and own hotels franchised under the Company’s brands. Under these limited payment guaranties, the Company has agreed to guarantee a portion of the outstanding debt until certain conditions are met such as (a) the loan matures, (b) certain debt covenants are achieved, (c) the maximum amount guaranteed by the Company is paid in full or (d) the Company, through its affiliates, ceases to be a member of the VIE. The maximum exposure of principal incidental to these limited payment guaranties is $10.7 million, plus unpaid expenses and accrued unpaid interest. The Company believes the likelihood of having to perform under the aforementioned limited payment guaranties was remote as of March 31, 2019 and December 31, 2018. In the event of performance, the Company has recourse for two of the transactions in the form of a membership interest pledge as collateral for the guaranty. The Company transferred $24.4 million of a $50.1 million outstanding note receivable with a maturity date of November 30, 2019 to a third party. Under the agreement, the counter party had the right to require the Company to purchase the outstanding interest in the note in certain circumstances, including if the Company declares a default against the borrower and enters into foreclosure proceedings. In February 2019, in connection with the Company's restructuring negotiations with the borrower, the Company mutually agreed with the counter party to repurchase the $24.4 million previously transferred prior to the maturity date. The Company retains the full loan balance as recorded in Notes receivable, net of allowances as of March 31, 2019. Commitments The Company has the following commitments outstanding at March 31, 2019:
In the ordinary course of business, the Company enters into numerous agreements that contain standard indemnities whereby the Company indemnifies another party for breaches of representations and warranties. Such indemnifications are granted under various agreements, including those governing (i) purchases or sales of assets or businesses, (ii) leases of real estate, (iii) licensing of trademarks, (iv) access to credit facilities, (v) issuances of debt or equity securities, and (vi) certain operating agreements. The indemnifications issued are for the benefit of the (i) buyers in sale agreements and sellers in purchase agreements, (ii) landlords in lease contracts, (iii) franchisees in licensing agreements, (iv) financial institutions in credit facility arrangements, (v) underwriters in debt or equity security issuances and (vi) parties under certain operating agreements. In addition, these parties are also generally indemnified against any third party claim resulting from the transaction that is contemplated in the underlying agreement. While some of these indemnities extend only for the duration of the underlying agreement, many survive the expiration of the term of the agreement or extend into perpetuity (unless subject to a legal statute of limitations). There are no specific limitations on the maximum potential amount of future payments that the Company could be required to make under these indemnities, nor is the Company able to develop an estimate of the maximum potential amount of future payments to be made under these indemnifications as the triggering events are not subject to predictability. With respect to certain of the aforementioned indemnities, such as indemnifications of landlords against third party claims for the use of real estate property leased by the Company, the Company maintains insurance coverage that mitigates potential liability. |
Transactions with Unconsolidated Joint Ventures |
3 Months Ended |
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Mar. 31, 2019 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Transactions with Unconsolidated Joint Ventures | Transactions with Unconsolidated Joint Ventures The Company has a management fee arrangement for marketing services with a joint venture partner. For the three months ended March 31, 2019 and 2018, fees earned and payroll costs reimbursed under this arrangement totaled $0.3 million for both periods. The Company has entered into franchise agreements with certain of the unconsolidated joint ventures discussed in Note 6. Pursuant to these franchise agreements, for the three months ended March 31, 2019 and 2018, the Company has recorded royalty and marketing reservation system fees of approximately $4.6 million. The Company recorded $1.0 million and $1.1 million as a receivable due from these joint ventures as of March 31, 2019 and December 31, 2018, respectively. In addition, the Company paid commissions of $50 thousand and $44 thousand for the three months ended March 31, 2019 and 2018, respectively, to an on-line travel agent for which the Company is a joint venture member. |
Subsequent Events |
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Mar. 31, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events On April 19, 2019, the Company's board of directors declared a quarterly cash dividend of $0.215 per share of common stock. The dividend is payable on July 17, 2019 to shareholders of record on July 2, 2019. |
Basis of Presentation and Significant Accounting Policies (Policy) |
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Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
Basis of Accounting | Basis of Presentation The accompanying unaudited consolidated financial statements of Choice Hotels International, Inc. and its subsidiaries (together the "Company") have been prepared by the Company in accordance with United States of America generally accepted accounting principles ("GAAP") pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). These unaudited consolidated financial statements include all adjustments that are necessary, in the opinion of management, to fairly present the Company's financial position and results of operations. Except as otherwise disclosed, all adjustments are of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP have been omitted. The Company believes the disclosures made are adequate to make the information presented not misleading. The consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2018 and notes thereto included in the Company’s Annual Report on Form 10-K, filed with the SEC on February 26, 2019. Interim results are not necessarily indicative of the entire year results. All inter-company transactions and balances between Choice Hotels International, Inc. and its subsidiaries have been eliminated in consolidation. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Recently Adopted Accounting Standards and Recently Issued Accounting Standards | Recently Adopted Accounting Standards In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) and issued subsequent amendments to the initial guidance at various points thereafter (collectively referred to as "Topic 842"). Topic 842 requires a lessee to recognize operating leases on its balance sheet by recording liabilities for its lease obligations and assets for its right-of-use ("ROU") of the underlying assets as of the lease commencement dates. This differs from prior treatment of operating leases in accordance with ASC 840, Leases (Topic 840) ("Topic 840"), as operating leases were not captured on a lessee's consolidated balance sheet. Topic 842 prescribes that entities should recognize expenses on their consolidated statements of income in a manner similar to Topic 840 whereby minimum lease payments are recognized on a straight-line basis over a lease term. The Company elected to apply the package of practical expedients that allows entities to forego reassessing at the transition date: (1) whether expired or existing contracts are or contain leases; (2) lease classification for any expired or existing leases; and (3) whether initial direct costs for existing leases qualify for capitalization. Topic 842 allows entities an optional transitional method to apply the transition requirements at the effective date, rather than at the beginning of the earliest comparative period. An entity’s reporting for the comparative periods presented in the year of adoption continues to be in accordance with Topic 840, including the disclosure requirements of Topic 840. The Company adopted Topic 842 on January 1, 2019 using this optional transition method and therefore, the financial results reported in periods prior to January 1, 2019 are unchanged. Adoption of the standard resulted in the recording of operating lease ROU assets of $28.0 million and operating lease liabilities of $38.5 million as of March 31, 2019. Topic 842 did not have an impact on our consolidated statements of income. Refer to Note 7. Recently Issued Accounting Standards In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) ("ASU 2016-13"), which will require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. ASU 2016-13 requires enhanced disclosures, including qualitative and quantitative requirements, to provide insight to significant estimates and judgments used in estimating credit losses and the amounts recorded in the financial statements. The guidance is effective for annual reporting periods beginning after December 15, 2019 and interim periods within those fiscal years. ASU 2016-13 requires the use of the modified retrospective approach for adoption. The Company is currently assessing the potential impact that ASU 2016-13 will have on its consolidated financial position, results of operations, and disclosures, including the processes to evaluate allowances for trade and notes receivables. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement ("ASU 2018-13"). ASU 2018-13 modifies disclosure requirements on fair value measurements. The guidance is effective for annual reporting periods beginning after December 15, 2019 and interim periods within those fiscal years. Early adoption is permitted. The Company is currently assessing the potential impact that ASU 2018-13 will have on the financial statement disclosures. In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract ("ASU 2018-15"). ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The guidance is effective for annual reporting periods beginning after December 15, 2019 and interim periods within those fiscal years. Early adoption is permitted. The Company is currently assessing the timing of adoption and the potential impact that ASU 2018-15 will have on the financial statements and disclosures. |
Revenue (Tables) |
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contract with Customer, Liability | Significant changes in the contract liabilities balances during the period December 31, 2018 to March 31, 2019 are as follows:
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Disaggregation of Revenue |
|
Other Current Assets (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets, Current [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Other Current Assets | Other current assets consist of the following:
|
Notes Receivable and Allowance for Losses (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes Receivable and Allowance for Losses [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Notes Receivable | The following table shows the composition of the Company's notes receivable balances:
|
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Mezzanine & Other Notes Receivable | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes Receivable and Allowance for Losses [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Past Due Balances Of Notes Receivable | Past due balances of notes receivable by credit quality indicators are as follows:
|
Long-lived Assets and Goodwill (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Goodwill | The following table details the carrying amount of our goodwill:
The following is a summary of changes in the carrying amount of goodwill:
|
Leases (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lease, Cost | Other information related to the Company's lease arrangements is as follows:
(1) Discount rates used for existing operating leases upon adoption of Topic 842 were established based on remaining lease term as of January 1, 2019. The Company's lease costs were as follows:
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Lessee, Operating Leases, Balance Sheet | Leases recorded on the consolidated balance sheet consist of the following:
|
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Lessee, Operating Lease, Liability, Maturity | Maturities of lease liabilities are as follows:
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Schedule of Future Minimum Rental Payments for Operating Leases | The following table discloses future minimum lease payments in accordance with Topic 840:
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Debt (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Components Of Debt | Debt consists of the following:
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Accumulated Other Comprehensive Loss (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Changes in Accumulated Other Comprehensive Loss | The following represents the changes in accumulated other comprehensive loss, net of tax, by component for the three months ended March 31, 2019:
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Reclassifications From Accumulated Other Comprehensive Income (Loss) | The amounts below were reclassified from accumulated other comprehensive loss to the following line items in the Company's Consolidated Statements of Income during the three months ended March 31, 2019. There is no income tax expense or benefit attributable to the components below.
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Fair Value Measurements (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Fair Value Of Assets | As of March 31, 2019 and December 31, 2018, the Company had the following assets measured at fair value on a recurring basis:
(1) Included in Investments, employee benefit plans at fair value and Other current assets on the consolidated balance sheets. |
Share-Based Compensation and Capital Stock (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pre-Tax Stock-Based Compensation Expenses And Associated Income Tax Benefits | The components of the Company’s pretax share-based compensation expense and associated income tax benefits are as follows for the three months ended March 31, 2019 and 2018:
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Summary Of Change In Stock-Based Award Activity | A summary of stock-based award activity as of March 31, 2019 and changes during the three months ended are presented below:
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Weighted Average Assumptions Of Black-Scholes Option-Pricing Model | The fair value of the options granted was estimated on the grant date using the Black-Scholes option-pricing model with the following weighted average assumptions:
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Earnings Per Share (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Computation Of Basic And Diluted Earnings Per Common Share | The computation of basic and diluted earnings per common share is as follows:
|
Reportable Segment Information (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Financial Information For Company's Franchising Segment | The following table presents the financial information for the Company's segments:
|
Basis of Presentation and Significant Accounting Policies (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Operating lease right-of-use assets | $ 27,997 | $ 0 |
Operating lease liabilities | 38,450 | |
Accounting Standards Update 2016-02 | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Operating lease right-of-use assets | 28,000 | |
Operating lease liabilities | $ 38,500 |
Revenue - Textual (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Disaggregation of Revenue [Line Items] | ||
Redemption of loyalty points period | 36 months | |
Revenue, remaining performance obligation | $ 157,800 | |
Revenues | 218,040 | $ 209,043 |
Corporate & Other | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | $ 3,300 | $ 3,800 |
Minimum | ||
Disaggregation of Revenue [Line Items] | ||
Deferred revenue, recognition period | 5 years | |
Maximum | ||
Disaggregation of Revenue [Line Items] | ||
Deferred revenue, recognition period | 10 years |
Revenue - Contract Liability (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Changes in Contract Liability [Roll Forward] | |
Contract with customer, liability, beginning | $ 153,180 |
Increases to the contract liability balance due to cash received | 19,949 |
Revenue recognized in the period | (15,282) |
Contract with customer, liability, ending | $ 157,847 |
Other Current Assets - Schedule of Other Current Assets (Details) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019
USD ($)
parcelofland
|
Mar. 31, 2018
USD ($)
|
Dec. 31, 2018
USD ($)
|
|
Property, Plant and Equipment [Line Items] | |||
Prepaid expenses | $ 22,259 | $ 18,412 | |
Other current assets | 5,676 | 6,831 | |
Land held for sale | 0 | 7,000 | |
Total | $ 27,935 | 32,243 | |
Parcels of land, sold | parcelofland | 1 | ||
Property, plant and equipment, book value | $ 134,861 | $ 127,535 | |
Gain on sale of assets, net | 100 | $ 0 | |
Land | |||
Property, Plant and Equipment [Line Items] | |||
Property, plant and equipment, book value | 7,000 | ||
Gain on sale of assets, net | $ 100 |
Notes Receivable and Allowance for Losses - Schedule Of Notes Receivable (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Notes Receivable and Allowance for Losses [Line Items] | ||
Notes receivable | $ 122,909 | $ 124,884 |
Allowance for losses on receivables specifically evaluated for impairment | 4,426 | 4,426 |
Allowance for losses on non-impaired loans | 259 | 259 |
Total loan reserves | 4,685 | 4,685 |
Net carrying value | 118,224 | 120,199 |
Current portion, net | 34,416 | 36,759 |
Long-term portion, net | 83,808 | 83,440 |
Senior | ||
Notes Receivable and Allowance for Losses [Line Items] | ||
Notes receivable | 91,115 | 94,349 |
Subordinated | ||
Notes Receivable and Allowance for Losses [Line Items] | ||
Notes receivable | 29,270 | 28,100 |
Unsecured | ||
Notes Receivable and Allowance for Losses [Line Items] | ||
Notes receivable | $ 2,524 | $ 2,435 |
Long-lived Assets and Goodwill (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
Goodwill [Line Items] | |||
Long-lived asset | $ 1,173,816 | $ 1,138,370 | |
Impairment of long-lived assets | 7,304 | $ 0 | |
Impairment of goodwill | 3,097 | $ 0 | |
Goodwill | 165,623 | 168,996 | |
Other Segments | |||
Goodwill [Line Items] | |||
Impairment of goodwill | 3,097 | ||
Goodwill | 6,426 | $ 9,799 | |
Other Segments | SaaS for Vacation Rentals | |||
Goodwill [Line Items] | |||
Impairment of long-lived assets | 7,300 | ||
Impairment of goodwill | 3,100 | ||
Goodwill | 6,400 | ||
Intangible Assets | Other Segments | SaaS for Vacation Rentals | |||
Goodwill [Line Items] | |||
Long-lived asset | 4,300 | ||
Operating Lease Right-of-use Asset | Other Segments | SaaS for Vacation Rentals | |||
Goodwill [Line Items] | |||
Long-lived asset | 1,700 | ||
Property, Plant and Equipment | Other Segments | SaaS for Vacation Rentals | |||
Goodwill [Line Items] | |||
Long-lived asset | $ 1,300 |
Long-lived Assets and Goodwill - Goodwill (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Goodwill | $ 173,201 | $ 173,477 |
Accumulated impairment losses | (7,578) | (4,481) |
Net carrying amount | $ 165,623 | $ 168,996 |
Long-lived Assets and Goodwill - Changes in Goodwill (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Goodwill [Roll Forward] | ||
Goodwill. Beginning Balance | $ 168,996 | |
Acquisitions | 0 | |
Foreign Exchange | (276) | |
Impairment | (3,097) | $ 0 |
Goodwill, Ending Balance | 165,623 | |
Hotel Franchising | ||
Goodwill [Roll Forward] | ||
Goodwill. Beginning Balance | 159,197 | |
Acquisitions | 0 | |
Foreign Exchange | 0 | |
Impairment | 0 | |
Goodwill, Ending Balance | 159,197 | |
Other Segments | ||
Goodwill [Roll Forward] | ||
Goodwill. Beginning Balance | 9,799 | |
Acquisitions | 0 | |
Foreign Exchange | (276) | |
Impairment | (3,097) | |
Goodwill, Ending Balance | $ 6,426 |
Investments in Unconsolidated Entities (Details) - USD ($) $ in Millions |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
Investments in joint ventures included in unconsolidated entities | $ 101.9 | $ 103.0 | |
Net (income) loss attributable to variable interest entities | $ 2.4 | $ 6.4 |
Leases (Details) $ in Thousands |
1 Months Ended | 3 Months Ended | |
---|---|---|---|
May 31, 2016
USD ($)
|
Dec. 31, 2013
USD ($)
ft²
|
Mar. 31, 2019
USD ($)
|
|
Lessee, Lease, Description [Line Items] | |||
Lessee, operating lease, renewal term | 15 years | ||
Lessee, operating lease, termination period | 1 year | ||
Sale and leaseback transaction, gain, net | $ (2,000) | ||
Lessor, operating lease, remaining lease term | 2 years | ||
Lease income comprised of fixed lease payments | $ 300 | ||
Minimum | |||
Lessee, Lease, Description [Line Items] | |||
Lessee, operating lease, remaining lease term | 1 month | ||
Maximum | |||
Lessee, Lease, Description [Line Items] | |||
Lessee, operating lease, remaining lease term | 5 years | ||
Leased Office Space | Lease Agreements | Family Member(s) of Largest Shareholder | |||
Lessee, Lease, Description [Line Items] | |||
Payments received from related party | $ 12 | ||
Leased square footage | ft² | 2,200 | ||
Sublease notice period | 90 days | ||
Annual lease payments, related party | $ 146 | $ 90 | $ 36 |
Leases - Lease Cost (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2019 |
Dec. 31, 2018 |
|
Leases [Abstract] | ||
Operating lease cost | $ 2,570 | |
Sublease income | (72) | $ (124) |
Total lease cost | $ 2,498 |
Leases - Balance Sheet (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Leases [Abstract] | ||
Operating lease right-of-use assets | $ 27,997 | $ 0 |
Current operating lease liabilities | 10,980 | |
Long-term operating lease liabilities | 27,470 | $ 0 |
Total lease liabilities | $ 38,450 |
Leases - Other Information (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Leases [Abstract] | |
Operating cash flows from operating leases | $ 3,302 |
Operating lease assets obtained in exchange for operating lease liabilities | $ 1,160 |
Weighted-average remaining lease term | 3 years 8 months 26 days |
Weighted-average discount rate - operating leases | 3.74% |
Leases - Lessee Topic 842 Maturity (Details) $ in Thousands |
Mar. 31, 2019
USD ($)
|
---|---|
Leases [Abstract] | |
2019 (remaining 9 months) | $ 9,344 |
2020 | 10,671 |
2021 | 9,070 |
2022 | 8,818 |
2023 | 3,316 |
Thereafter | 2 |
Total minimum lease payments | 41,221 |
Less imputed interest | 2,771 |
Present value of minimum lease payments | $ 38,450 |
Leases - Lessee Topic 840 Maturity (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2019 |
Dec. 31, 2018 |
|
Leases [Abstract] | ||
2019 | $ 12,509 | |
2020 | 10,638 | |
2021 | 9,258 | |
2022 | 8,866 | |
2023 | 3,514 | |
Thereafter | 0 | |
Total | 44,785 | |
Sublease Income | $ 72 | $ 124 |
Accumulated Other Comprehensive Loss - Amounts Reclassified from Accumulated Other Comprehensive Loss (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Interest rate contract | Loss on Cash Flow Hedge | Reclassification out of Accumulated Other Comprehensive Income | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | |
Interest expense | $ 215 |
Fair Value Measurements - Narrative (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Dec. 31, 2018 |
|
Level 1 | ||
Fair Value Measurements [Line Items] | ||
Defined benefit plan, transfers between measurement levels | $ 0 | |
Level 2 | ||
Fair Value Measurements [Line Items] | ||
Defined benefit plan, transfers between measurement levels | 0 | |
Level 3 | ||
Fair Value Measurements [Line Items] | ||
Defined benefit plan, transfers between measurement levels | 0 | |
Senior | $250 Million Senior Notes | ||
Fair Value Measurements [Line Items] | ||
Debt instrument face amount | 250,000,000 | $ 250,000,000 |
Senior | $250 Million Senior Notes | Level 2 | ||
Fair Value Measurements [Line Items] | ||
Debt instrument fair value | 258,200,000 | 257,000,000 |
Senior | $400 Million Senior Notes | ||
Fair Value Measurements [Line Items] | ||
Debt instrument face amount | 400,000,000 | 400,000,000 |
Senior | $400 Million Senior Notes | Level 2 | ||
Fair Value Measurements [Line Items] | ||
Debt instrument fair value | $ 426,900,000 | $ 415,700,000 |
Income Taxes - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Income Tax Disclosure [Abstract] | ||
Effective income tax rate (percent) | 17.50% | 17.60% |
Share-based compensation, excess tax benefit, amount | $ 2.0 | $ 1.6 |
Share-Based Compensation and Capital Stock - Pre-Tax Stock-Based Compensation Expenses And Associated Income Tax Benefits (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Share-Based Compensation and Capital Stock [Line Items] | ||
Share-based compensation expense | $ 3.7 | $ 3.5 |
Income tax benefits | 0.9 | 0.8 |
Stock options | ||
Share-Based Compensation and Capital Stock [Line Items] | ||
Share-based compensation expense | 0.6 | 0.7 |
Restricted stock | ||
Share-Based Compensation and Capital Stock [Line Items] | ||
Share-based compensation expense | 2.0 | 1.7 |
Performance Vested Restricted Stock Units | ||
Share-Based Compensation and Capital Stock [Line Items] | ||
Share-based compensation expense | $ 1.1 | $ 1.1 |
Share-Based Compensation and Capital Stock - Weighted Average Assumptions Of Black-Scholes Option-Pricing Model (Details) - Stock options |
3 Months Ended |
---|---|
Mar. 31, 2019
$ / shares
| |
Share-Based Compensation and Capital Stock [Line Items] | |
Risk-free interest rate (percent) | 2.46% |
Expected volatility (percent) | 21.49% |
Expected life of stock option | 4 years 5 months |
Dividend yield (percent) | 1.06% |
Requisite service period | 4 years |
Contractual life | 7 years |
Weighted average fair value of options granted (in dollars per share) | $ 15.84 |
Earnings Per Share - Computation Of Basic And Diluted Earnings Per Common Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Numerator: | ||
Net income | $ 30,081 | $ 25,086 |
Income allocated to participating securities | (179) | (155) |
Net income available to common shareholders | $ 29,902 | $ 24,931 |
Denominator: | ||
Weighted average common shares outstanding – basic (in shares) | 55,347 | 56,464 |
Basic earnings per share (in dollars per share) | $ 0.54 | $ 0.44 |
Numerator: | ||
Income allocated to participating securities | $ (179) | $ (154) |
Net income available to common shareholders | $ 29,902 | $ 24,932 |
Denominator: | ||
Weighted average common shares outstanding – basic (in shares) | 55,347 | 56,464 |
Diluted effect of stock options and PVRSUs (in shares) | 310 | 647 |
Weighted average common shares outstanding – diluted (in shares) | 55,657 | 57,111 |
Diluted earnings per share (in dollars per share) | $ 0.54 | $ 0.44 |
Earnings Per Share - Narrative (Details) - shares |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||
Outstanding stock options (in shares) | 1,122,977 | 1,700,000 | 1,186,180 |
Stock options | |||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||
Antidilutive securities excluded from EPS computation (in shares) | 200,000 | 100,000 | |
Performance Vested Restricted Stock Units | |||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||
PVRSUs excluded from EPS calculation due to performance conditions not met (in shares) | 324,140 | 338,204 |
Reportable Segment Information - Narrative (Details) |
Mar. 31, 2019
brand
|
---|---|
Segment Reporting [Abstract] | |
Number of brands | 13 |
Reportable Segment Information - Schedule Of Financial Information For Company's Franchising Segment (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Reportable Segment Information [Line Items] | ||
Revenues | $ 218,320 | $ 209,394 |
Operating income (loss) | 45,050 | 46,249 |
Income (loss) before income taxes | 36,479 | 30,461 |
Corporate & Other | ||
Reportable Segment Information [Line Items] | ||
Revenues | 3,328 | 3,772 |
Operating income (loss) | (25,407) | (13,109) |
Income (loss) before income taxes | (31,808) | (22,928) |
Hotel Franchising | Operating Segments | ||
Reportable Segment Information [Line Items] | ||
Revenues | 214,992 | 205,622 |
Operating income (loss) | 70,457 | 59,358 |
Income (loss) before income taxes | $ 68,287 | $ 53,389 |
Transactions with Unconsolidated Joint Ventures (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
Related Party Transaction [Line Items] | |||
Receivables | $ 153,969 | $ 138,018 | |
Joint Venture Partner | |||
Related Party Transaction [Line Items] | |||
Fees earned and payroll costs reimbursed from marketing services arrangement | 300 | $ 300 | |
Member of Unconsolidated Joint Venture | |||
Related Party Transaction [Line Items] | |||
Royalty and marketing and reservation system fees | 4,600 | 4,600 | |
Receivables | 1,000 | $ 1,100 | |
Commissions paid to travel agent | $ 50 | $ 44 |
Subsequent Events (Details) - $ / shares |
3 Months Ended | ||
---|---|---|---|
Apr. 19, 2019 |
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Subsequent Event [Line Items] | |||
Cash dividends declared per share (in dollars per share) | $ 0.215 | $ 0.215 | |
Subsequent Event | |||
Subsequent Event [Line Items] | |||
Cash dividends declared per share (in dollars per share) | $ 0.215 |
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