Condensed Consolidating Financial Statements (Tables)

3 Months Ended

Mar. 31, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Condensed Consolidating Statement Of Income

Choice Hotels International, Inc. and Subsidiaries

Condensed Consolidating Statement of Income

For theThree Months Ended March 31, 2018

(Unaudited, in thousands)

	Parent			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
REVENUES
Royalty fees	$	71,615		$	36,209	$	8,470		$	(39,596	)	$	76,698
Initial franchise and relicensing fees	6,052			—		162			—			6,214
Procurement services	9,679			124		278			(143		)	9,938
Marketing and reservation system	88,395			106,426		3,746			(91,566		)	107,001
Other	6,002			—		3,633			(92		)	9,543
Total revenues	181,743			142,759		16,289			(131,397		)	209,394
OPERATING EXPENSES
Selling, general and administrative	41,357			32,614		6,790			(39,897		)	40,864
Marketing and reservation system	109,247			95,855		5,626			(91,500		)	119,228
Depreciation and amortization	1,649			549		855			—			3,053
Total operating expenses	152,253			129,018		13,271			(131,397		)	163,145
Operating income	29,490			13,741		3,018			—			46,249
OTHER INCOME AND EXPENSES, NET
Interest expense	10,991			—		318			—			11,309
Equity in earnings of consolidated subsidiaries	(10,766		)	1,071		—			9,695			—
Other items, net	(497		)	5,616		(640		)	—			4,479
Total other income and expenses, net	(272		)	6,687		(322		)	9,695			15,788
Income before income taxes	29,762			7,054		3,340			(9,695		)	30,461
Income taxes	4,676			727		(28		)	—			5,375
Net income	$	25,086		$	6,327	$	3,368		$	(9,695	)	$	25,086

Choice Hotels International, Inc. and Subsidiaries

Condensed Consolidating Statement of Income

For the Three Months Ended March 31, 2017

(Unaudited, in thousands)

	Parent			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
REVENUES
Royalty fees	$	63,596		$	30,735	$	10,514		$	(36,551	)	$	68,294
Initial franchise and relicensing fees	5,611			—		195			—			5,806
Procurement services	7,301			—		62			—			7,363
Marketing and reservation system	87,700			93,724		3,473			(86,044		)	98,853
Other	6,287			40		2,412			(187		)	8,552
Total revenues	170,495			124,499		16,656			(122,782		)	188,868
OPERATING EXPENSES
Selling, general and administrative	37,448			27,271		5,787			(36,761		)	33,745
Marketing and reservation system	102,681			87,642		3,692			(86,021		)	107,994
Depreciation and amortization	384			511		831			—			1,726
Total operating expenses	140,513			115,424		10,310			(122,782		)	143,465
Operating income	29,982			9,075		6,346			—			45,403
OTHER INCOME AND EXPENSES, NET
Interest expense	11,063			—		142			—			11,205
Equity in earnings of consolidated subsidiaries	(13,192		)	455		—			12,737			—
Other items, net	(364		)	928		(645		)	—			(81		)
Total other income and expenses, net	(2,493		)	1,383		(503		)	12,737			11,124
Income before income taxes	32,475			7,692		6,849			(12,737		)	34,279
Income taxes	8,206			2,026		(222		)	—			10,010
Net income	$	24,269		$	5,666	$	7,071		$	(12,737	)	$	24,269

Condensed Consolidating Statement of Comprehensive Income

Choice Hotels International, Inc. and Subsidiaries

Condensed Consolidating Statement of Comprehensive Income

For the Three Months EndedMarch 31, 2018

(Unaudited, in thousands)

	Parent		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Net income	$	25,086	$	6,327	$	3,368	$	(9,695	)	$	25,086
Other comprehensive income, net of tax:
Amortization of loss on cash flow hedge	215		—		—		—			215
Foreign currency translation adjustment	855		—		855		(855		)	855
Other comprehensive income, net of tax	1,070		—		855		(855		)	1,070
Comprehensive income	$	26,156	$	6,327	$	4,223	$	(10,550	)	$	26,156

Choice Hotels International, Inc. and Subsidiaries

Condensed Consolidating Statement of Comprehensive Income

For the Three Months EndedMarch 31, 2017

(Unaudited, in thousands)

	Parent		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Net income	$	24,269	$	5,666	$	7,071	$	(12,737	)	$	24,269
Other comprehensive income, net of tax:
Amortization of loss on cash flow hedge	215		—		—		—			215
Foreign currency translation adjustment	568		—		568		(568		)	568
Other comprehensive income, net of tax	783		—		568		(568		)	783
Comprehensive income	$	25,052	$	5,666	$	7,639	$	(13,305	)	$	25,052

Condensed Consolidating Balance Sheet

Choice Hotels International, Inc. and Subsidiaries

Condensed Consolidating Balance Sheet

As of March 31, 2018

(Unaudited, in thousands)

	Parent			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Cash and cash equivalents	$	11,415		$	52	$	25,367	$	—		$	36,834
Receivables	126,154			5,555		11,725		(406		)	143,028
Other current assets	16,611			64,530		13,231		(42,389		)	51,983
Total current assets	154,180			70,137		50,323		(42,795		)	231,845
Property and equipment, at cost, net	46,996			16,888		34,519		—			98,403
Goodwill	159,196			—		15,342		—			174,538
Intangible assets, net	141,483			93,646		11,796		—			246,925
Notes receivable, net of allowances	20,346			—		57,940		—			78,286
Investments, employee benefit plans, at fair value	—			20,142		—		—			20,142
Investments in affiliates	283,439			47,882		—		(331,321		)	—
Advances to affiliates	10,704			109,042		11		(119,757		)	—
Deferred income taxes	16,982			10,050		170		(2,601		)	24,601
Other assets	417			154,978		21,882		—			177,277
Total assets	$	833,743		$	522,765	$	191,983	$	(496,474	)	$	1,052,017
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Accounts payable	$	16,489		$	42,869	$	3,778	$	(406	)	$	62,730
Accrued expenses and other current liabilities	60,724			27,752		12,866		(42,389		)	58,953
Deferred revenue	31,101			28,515		2,631		—			62,247
Current portion of long-term debt	—			—		1,265		—			1,265
Liability for guest loyalty program	—			83,843		232		—			84,075
Total current liabilities	108,314			182,979		20,772		(42,795		)	269,270
Long-term debt	783,588			3,712		8,445		—			795,745
Long-term deferred revenue	72,259			22,436		1,656		—			96,351
Deferred compensation & retirement plan obligations	—			24,499		14		—			24,513
Advances from affiliates	115,267			1,371		3,119		(119,757		)	—
Income tax payable	—			—		29,041		—			29,041
Other liabilities	14,232			64,859		20,524		(2,601		)	97,014
Total liabilities	1,093,660			299,856		83,571		(165,153		)	1,311,934
Total shareholders’ (deficit) equity	(259,917		)	222,909		108,412		(331,321		)	(259,917		)
Total liabilities and shareholders’ deficit	$	833,743		$	522,765	$	191,983	$	(496,474	)	$	1,052,017

Choice Hotels International, Inc. and Subsidiaries

Condensed Consolidating Balance Sheet

As of December 31, 2017

(in thousands)

	Parent			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Cash and cash equivalents	$	12,671		$	38	$	222,627	$	—		$	235,336
Receivables	107,470			6,120		12,480		(200		)	125,870
Other current assets	12,507			60,569		9,930		(43,783		)	39,223
Total current assets	132,648			66,727		245,037		(43,983		)	400,429
Property and equipment, at cost, net	47,736			18,114		17,524		—			83,374
Goodwill	65,813			—		14,944		—			80,757
Intangible assets, net	5,122			83,441		11,929		—			100,492
Notes receivable, net of allowances	22,193			—		57,943		—			80,136
Investments, employee benefit plans, at fair value	—			20,838		—		—			20,838
Investments in affiliates	475,434			47,172		—		(522,606		)	—
Advances to affiliates	10,517			120,466		—		(130,983		)	—
Deferred income taxes	20,548			9,335		169		(2,828		)	27,224
Other assets	189			160,045		41,707		—			201,941
Total assets	$	780,200		$	526,138	$	389,253	$	(700,400	)	$	995,191
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Accounts payable	$	15,326		$	48,213	$	4,500	$	(200	)	$	67,839
Accrued expenses and other current liabilities	73,225			41,814		13,059		(43,783		)	84,315
Deferred revenue	24,984			25,301		1,857		—			52,142
Current portion of long-term debt	—			—		1,232		—			1,232
Liability for guest loyalty program	—			78,899		224		—			79,123
Total current liabilities	113,535			194,227		20,872		(43,983		)	284,651
Long-term debt	713,175			3,712		8,405		—			725,292
Long-term deferred revenue	71,100			20,513		2,540		—			94,153
Deferred compensation & retirement plan obligations	—			25,552		14		—			25,566
Advances from affiliates	126,691			1,294		2,998		(130,983		)	—
Income taxes payable	—			—		29,041		—			29,041
Other liabilities	14,300			62,845		20,772		(2,828		)	95,089
Total liabilities	1,038,801			308,143		84,642		(177,794		)	1,253,792
Total shareholders’ (deficit) equity	(258,601		)	217,995		304,611		(522,606		)	(258,601		)
Total liabilities and shareholders’ deficit	$	780,200		$	526,138	$	389,253	$	(700,400	)	$	995,191

Condensed Consolidating Statement Of Cash Flows

Choice Hotels International, Inc. and Subsidiaries

Condensed Consolidating Statement of Cash Flows

For the Three Months EndedMarch 31, 2018

(Unaudited, in thousands)

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by operating activities	$	197,590		$	4,159		$	5,087		$	(202,284	)	$	4,552
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in property and equipment	(2,904		)	(837		)	(1,255		)	—			(4,996		)
Investment in intangible assets	(1,193		)	—			—			—			(1,193		)
Business acquisition, net of cash acquired	(231,317		)	—			—			—			(231,317		)
Contributions to equity method investments	—			(1,432		)	(23		)	—			(1,455		)
Distributions from equity method investments	—			564			202			—			766
Issuance of mezzanine and other notes receivable	(2,500		)	—			—			—			(2,500		)
Collections of mezzanine and other notes receivable	150			—			—			—			150
Purchases of investments, employee benefit plans	—			(1,669		)	—			—			(1,669		)
Proceeds from sales of investments, employee benefit plans	—			1,029			—			—			1,029
Advances to and investments in affiliates	—			(2,450		)	—			2,450			—
Divestment in affiliates	—			650			—			(650		)	—
Net cash used in investing activities	(237,764		)	(4,145		)	(1,076		)	1,800			(241,185		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings pursuant to revolving credit facilities	70,000			—			—			—			70,000
Principal payments on long-term debt	—			—			(111		)	—			(111		)
Proceeds from the issuance of long-term debt	—			—			212			—			212
Purchase of treasury stock	(41,869		)	—			—			—			(41,869		)
Debt issuance costs	—			—			(914		)	—			(914		)
Proceeds from exercise of stock options	23,052			—			—			—			23,052
Proceeds from contributions from affiliates	—			—			2,450			(2,450		)	—
Distributions to affiliates	—			—			(650		)	650			—
Dividends paid	(12,265		)	—			(202,284		)	202,284			(12,265		)
Net cash provided by (used in) financing activities	38,918			—			(201,297		)	200,484			38,105
Net change in cash and cash equivalents	(1,256		)	14			(197,286		)	—			(198,528		)
Effect of foreign exchange rate changes on cash and cash equivalents	—			—			26			—			26
Cash and cash equivalents at beginning of period	12,671			38			222,627			—			235,336
Cash and cash equivalents at end of period	$	11,415		$	52		$	25,367		$	—		$	36,834

Choice Hotels International, Inc. and Subsidiaries

Condensed Consolidating Statement of Cash Flows

For the Three Months EndedMarch 31, 2017

(Unaudited, in thousands)

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided (used) by operating activities	$	(13,926	)	$	33,440		$	4,700		$	—		$	24,214
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in property and equipment	(3,832		)	(710		)	(176		)	—			(4,718		)
Investment in intangible assets	(1,369		)	(719		)	—			—			(2,088		)
Contributions to equity method investments	—			(31,592		)	(18		)	—			(31,610		)
Distributions from equity method investments	—			—			510			—			510
Issuance of mezzanine and other notes receivable	(330		)	—			(9,533		)	—			(9,863		)
Collections of mezzanine and other notes receivable	522			—			—			—			522
Purchases of investments, employee benefit plans	—			(1,424		)	—			—			(1,424		)
Proceeds from sales of investments, employee benefit plans	—			843			—			—			843
Advances to and investments in affiliates	—			(484		)	—			484			—
Divestment in affiliates	—			510			—			(510		)	—
Other items, net	—			—			(4		)	—			(4		)
Net cash used in investing activities	(5,009		)	(33,576		)	(9,221		)	(26		)	(47,832		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings pursuant to revolving credit facilities	22,800			—			—			—			22,800
Principal payments on long-term debt	—			—			(153		)	—			(153		)
Purchase of treasury stock	(7,271		)	—			—			—			(7,271		)
Proceeds from exercise of stock options	4,963			—			—			—			4,963
Proceeds from contributions from affiliates	—			—			484			(484		)	—
Distributions to affiliates	—			—			(510		)	510			—
Dividends paid	(12,139		)	—			—			—			(12,139		)
Net cash provided by (used in) financing activities	8,353			—			(179		)	26			8,200
Net change in cash and cash equivalents	(10,582		)	(136		)	(4,700		)	—			(15,418		)
Effect of foreign exchange rate changes on cash and cash equivalents	—			—			427			—			427
Cash and cash equivalents at beginning of period	14,696			159			187,608			—			202,463
Cash and cash equivalents at end of period	$	4,114		$	23		$	183,335		$	—		$	187,472