Comfort Inn 2011 Annual Report Download - page 59

Table of Contents
Moody’s Average Corporate Bond Rate Yield Index plus 300 basis points, or a return based on a selection of available diversified investment options. Effective
January 1, 2010, the Moody’s Average Corporate Bond Rate Yield Index plus 300 basis points is no longer an investment option for salary deferrals made on
compensation earned after December 31, 2009. The Company recorded a deferred compensation liability of $17.2 and $17.6 million at both December 31,
2011 and 2010, respectively, related to these deferrals and credited investment returns. Compensation expense is recorded in SG&A expense on the Company’s
consolidated statements of income based on the change in the deferred compensation obligation related to earnings credited to participants as well as changes in
the fair value of diversified investments. Compensation expense recorded in SG&A for the years ended December 31, 2011, 2010 and 2009 were $0.8 million,
$0.9 million and $1.1 million, respectively.
The Company has invested the employee salary deferrals in diversified long-term investments which are intended to provide investment returns that
partially offset the earnings credited to the participants. The diversified investments held in the trusts totaled $14.2 million and $13.6 million as of December
31, 2011 and 2010, respectively, and are recorded at their fair value, based on quoted market prices. At December 31, 2011, the Company expects $12.1
million of the assets held in the trust to be distributed during the year ended December 31, 2012 to participants or to the Company to reimburse it for prior year
participant distributions. These investments are considered trading securities and therefore the changes in the fair value of the diversified assets is included in
other gains and losses in the accompanying consolidated statements of income. The Company recorded investment gains (losses) during the years ended
December 31, 2011, 2010 and 2009 of $(0.1) million, $1.4 million and $3.7 million respectively.
In 1997, the Company adopted the Choice Hotels International, Inc. Non-Qualified Retirement Savings and Investment Plan (“Non-Qualified Plan”).
The Non-Qualified Plan allows certain employees who do not participate in the EDCP to defer a portion of their salary and invest these amounts in a selection
of available diversified investment options. As of December 31, 2011 and 2010, the Company had recorded a deferred compensation liability of $10.4 million
and $10.6 million, respectively related to these deferrals. Compensation expense is recorded in SG&A expense on the Company’s consolidated statements of
income based on the change in the deferred compensation obligation related to earnings credited to participants as well as changes in the fair value of diversified
investments. The net increase (decrease) in compensation expense recorded in SG&A for the years ended December 31, 2011, 2010 and 2009 were $(0.5)
million, $0.8 million and $1.9 million, respectively.
The diversified investments held in the trusts were $9.5 million and $9.7 million as of December 31, 2011 and 2010, respectively, and are recorded at
their fair value, based on quoted market prices. These investments are considered trading securities and therefore the changes in the fair value of the diversified
assets is included in other gains and losses in the accompanying consolidated statements of income. The Company recorded investment gains (losses) during
the years ended December 31, 2011, 2010 and 2009 of $(0.5) million, $0.7 million and $1.9 million respectively. In addition, the Non-Qualified Plan held
shares of the Company’s common stock with a market value of $0.9 million at both December 31, 2011 and 2010.
The Company is subject to risk from changes in debt and equity prices from our non-qualified retirement savings plan investments in debt securities
and common stock. The diversified investments held in the Non-Qualified Plan and EDCP include investments primarily in equity and debt securities, and
cash and cash equivalents.
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See Footnotes No. 1 “Recently Adopted Accounting Guidance” and Note 29 "Future Adoption of Accounting Standards"of the Notes to our Financial
Statements for information related to our adoption of new accounting standards in 2011 and for information on our anticipated adoption of recently issued
accounting standards.
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Certain matters discussed in this report, including those in the section entitled Management’s Discussion and Analysis of Financial Condition and
Results of Operation, constitute forward-looking statements within the meaning of the federal securities law. Generally, our use of words such as “expect,”
“estimate,” “believe,” “anticipate,” “will,” “forecast,” “plan,” project,” “assume” or similar words of futurity identify statements that are forward-looking and
that we intend to be included within the Safe Harbor protections provided by Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934. Such forward-looking statements are based on management’s current beliefs, assumptions and expectations regarding future events, which in turn are
based on information currently available to management. Such statements may relate to projections of the Company’s revenue, earnings and other financial
and operational measures, Company debt levels, payment of stock dividends, and future operations. We caution you not to place undue reliance on any
forward-looking statements, which are made as of the date of this report. Forward-looking statements do not guarantee future performance and involve known
and unknown risks, uncertainties and other factors.
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