Comfort Inn 2011 Annual Report Download - page 53

Table of Contents
capital expenditures primarily reflects the completion of improvements related to newly leased office space in 2010. During the years ended 2011, 2010 and
2009, capital expenditures total $10.9 million, $24.4 million and $11.1 million, respectively. Capital expenditures for 2011 primarily included upgrades of
system-wide properties and yield management systems, upgrades to information systems infrastructure and the purchase of computer software and
equipment.
The Company occasionally provides financing to franchisees for property improvements, hotel development efforts and other purposes. During 2011,
2010 and 2009, the Company advanced $12.8 million, $11.8 million and $2.0 million for these purposes, respectively. The Company collected $4.8 million,
$5.1 million and $0.3 million of these advances during the years ended December 31, 2011, 2010 and 2009, respectively. At December 31, 2011, the
Company had commitments to extend an additional $5.5 million for these purposes provided certain conditions are met by its franchisees, of which $3.1
million is expected to be advanced in the next twelve months.
Financing Activities
Financing cash flows relate primarily to the Company’s borrowings, treasury stock purchases and dividends.
Debt
On February 24, 2011, the Company entered into a new $300 million senior unsecured revolving credit agreement (the “Revolver”), with Wells Fargo
Bank, National Association, as administrative agent and a syndicate of lenders. Simultaneously with the closing of the Revolver, the $350 million unsecured
revolving credit agreement dated as of June 2006 (the “Old Revolver”) was terminated. The Revolver provides for a $300 million unsecured revolving credit
facility with a final maturity date on February 24, 2016. Up to $30 million of borrowings under the Revolver may be used for letters of credit and up to $20
million of borrowings under the Revolver may be used for swing-line loans.
The Revolver is unconditionally guaranteed, jointly and severally, on a senior unsecured basis by all of the Company's subsidiaries that currently
guarantee the obligations under the Company's Indenture governing the terms of its 5.70% senior notes due 2020.
The Company may at any time prior to the final maturity date increase the amount of the Revolver by up to an additional amount of $150 million to the
extent that any one or more of the lenders commit to being a lender for the additional amount and certain other customary conditions are met.
The Company may elect to have borrowings under the Revolver bear interest at (i) a base rate plus a margin ranging from 5 to 80 basis points based on
the Company's credit rating or (ii) LIBOR plus a margin ranging from 105 to 180 basis points based on the Company's credit rating. In addition, the Revolver
requires the Company to pay a quarterly facility fee on the full amount of the commitments under the Revolver (regardless of usage) ranging from 20 to 45
basis points based upon the credit rating of the Company.
The Revolver requires that the Company and its restricted subsidiaries comply with various covenants, including with respect to restrictions on liens,
incurring indebtedness, making investments and effecting mergers and/or asset sales. In addition, the Revolver imposes financial maintenance covenants
requiring the Company to maintain a total leverage ratio of not more than 3.5 to 1.0 and an interest coverage ratio of at least 3.5 to 1.0. At December 31, 2011,
the Company maintained a total leverage ratio of approximately 1.3x and an interest ratio coverage of approximately 11.5x. The Revolver includes customary
events of default, the occurrence of which, following any applicable cure period, would permit the lenders to, among other things, declare the principal,
accrued interest and other obligations of the Company under the Revolver to be immediately due and payable. At December 31, 2011, the Company was in
compliance with all covenants under the Revolver.
The proceeds of the Revolver are used for general corporate purposes, including working capital, debt repayment, stock
repurchases, dividends, investments and other permitted uses. At December 31, 2011, no amounts were outstanding under the
Revolver.
On August 25, 2010, the Company completed a $250 million senior unsecured note offering (“the Senior Notes”) at a discount of $0.6 million, bearing
a coupon of 5.7% with an effective rate of 6.19%. The Senior Notes will mature on August 28, 2020, with interest on the Senior Notes to be paid semi-
annually on February 28th and August 28th. The Company used the net proceeds from the offering, after deducting underwriting discounts and other offering
expenses, to repay outstanding borrowings under the Old Revolver and other general corporate purposes. The Company’s Senior Notes are guaranteed jointly,
severally, fully and unconditionally, subject to certain customary limitations, by eight 100%-owned domestic subsidiaries.
The Company may redeem the Senior Notes at its option at a redemption price equal to the greater of (a) 100% of the principal amount of the notes to be
redeemed and (b) the sum of the present values of the remaining scheduled principal and interest payments from the redemption date to the date of maturity
discounted to the redemption date on a semi-annual basis at
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