Comfort Inn 2004 Annual Report Download - page 35

CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
3. Property and Equipment
The components of property and equipment in the consolidated balance sheets are:
December 31,
2004 2003
(In thousands)
Land and land improvements ........................................ $ 2,628 $ 2,617
Land held for sale ................................................. 1,540 1,556
Facilities in progress .............................................. 2,862 2,313
Computer equipment and software ................................... 92,491 88,051
Buildings and improvements ........................................ 36,241 35,330
Furniture, fixtures and equipment .................................... 14,142 13,262
149,904 143,129
Less: Accumulated depreciation and amortization ....................... (102,412) (88,876)
Property and Equipment, at cost, net .................................. $ 47,492 $ 54,253
On February 3, 2005, the land held for sale was sold for $1.7 million resulting in a gain on disposition of
property totaling $0.1 million.
As facilities in progress are completed and placed in service, they are transferred to appropriate property and
equipment categories and depreciation begins. Depreciation expense, excluding amounts attributable to
marketing and reservation activities, for the years ended December 31, 2004, 2003 and 2002 was $5.0 million,
$6.5 million and $5.6 million, respectively. Depreciation has been computed for financial reporting purposes
using the straight-line method. A summary of the ranges of estimated useful lives upon which depreciation rates
are based follows:
Computer equipment and software ............................................ 3-7years
Buildings and improvements ................................................ 10-40 years
Furniture, fixtures and equipment ............................................ 3-15 years
4. Goodwill, Franchise Rights and Other Intangibles
Goodwill relates to the purchase price of a minority interest in the Company for consideration in excess of
the recorded minority interest. Pursuant to SFAS No. 142, the Company is not required to amortize goodwill.
Franchise rights represent the unamortized purchase price assigned to acquire long-term franchise contracts.
As of December 31, 2004 and 2003, the unamortized balance relates primarily to the Econo Lodge and Flag
franchise rights. The franchise rights are being amortized over lives ranging from 5 to 17 years. Amortization
expense for the years ended December 31, 2004, 2003 and 2002 amounted to $3.4 million, $3.4 million and $3.1
million, respectively. Franchise rights are net of accumulated amortization of $42.1 million and $38.6 million at
December 31, 2004 and 2003, respectively. The estimated annual amortization expense related to the Company’s
franchise rights for each of the years ending December 31, 2005 through 2009 is $3.4 million.
Other non-current assets include approximately $2.7 million of unamortized intangible assets related to
trademarks at December 31, 2004 and 2003, respectively. The trademarks are being amortized over ten years.
Amortization expense for the years ended December 31, 2004, 2003 and 2002 amounted to $0.4 million, $0.3
million and $0.4 million, respectively. Trademarks are net of accumulated amortization of $3.3 million and $2.9
million at December 31, 2004 and 2003, respectively. The estimated annual amortization expense related to the
Company’s trademarks for each of the years ending December 31, 2005 through 2009 is $0.4 million.
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