Comfort Inn 2004 Annual Report Download - page 41

CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
included in other non-current assets in the accompanying consolidated balance sheets at fair value. As of
December 31, 2004 and 2003, the fair value of the Company’s investment in CHS was $1.0 million and $0.7
million, respectively, based on quoted market prices. During the years ended December 31, 2004, 2003 and 2002,
the Company recognized approximately $0.2 million, $0.1 million and $0.1 million, respectively, of unrealized
gains attributable to this investment as a component of other comprehensive income.
Choice Hotels Canada, Inc.
The Company has a 50% interest in Choice Hotels Canada, Inc. (“CHC”), a joint venture with a third party.
During 2004, 2003 and 2002, the Company recorded $0.7 million, $0.6 million and $0.5 million, respectively,
based on CHC’s results for the twelve months ended November 30, 2004, 2003 and 2002 of equity method
income related to this investment pursuant to APB Opinion No. 18 in the accompanying consolidated statements
of income. The Company received dividends from CHC of $0.8 million, and $0.4 million for the years ended
December 31, 2004 and 2003, respectively. During 2004, 2003 and 2002, the Company recognized in the
accompanying consolidated statements of income, revenues of $7.1 million, $6.2 million and $4.7 million,
respectively, including royalty, marketing, reservation fees and other franchise revenues from CHC.
11. Pension, Profit Sharing, and Incentive Plans
The Company sponsors a 401(k) retirement plan for all eligible employees. For the years ended
December 31, 2004, 2003 and 2002, the Company recorded compensation expense of $2.8 million, $1.7 million
and $1.5 million, respectively, representing matching contributions for plan participants. In accordance with the
plan, the Company makes its matching contribution with Company stock. On an annual basis, the Company
purchases shares with a fair value equal to the Company’s matching contribution and deposits the shares in the
participant’s accounts with the plan investment custodian.
The Company sponsors an unfunded non-qualified defined benefit plan (“SERP”) for certain senior
executives. No assets are held with respect to the plan, therefore benefits are funded as paid to participants. The
Company accounts for the SERP in accordance with SFAS No. 87, “Employers Accounting for Pensions.” For
the years ended December 31, 2004, 2003 and 2002, the Company recorded $0.7 million, $0.4 million and $0.3
million, respectively, of expense related to the SERP which was included in selling, general and administrative
expense in the accompanying consolidated statements of income. Based on the plan retirement age of 65 years
old, no benefit payments are anticipated over the next ten years. The following table presents the components of
net periodic benefit costs for the three years ended December 31, 2004.
Years ended December 31,
2004 2003 2002
(In thousands)
Components of net periodic pension cost:
Service cost ..................................................... $ 416 $ 259 $ 219
Interest cost ..................................................... 205 139 68
Amortizations
Prior service cost ............................................ 51 52 19
(Gain)/Loss ................................................. 28 — (1)
Net periodic pension .............................................. $ 700 $ 450 $ 305
Weighted average assumptions:
Discount rate .................................................... 6.25% 7.00% 7.00%
Average compensation increase ..................................... 4.50% 4.50% 4.50%
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