Comfort Inn 2013 Annual Report Download - page 40

Table of Contents
board of directors. In the fourth quarter of 2012, the Company's board of directors elected to pay prior to December 31, 2012 the regular quarterly dividend
initially scheduled to be paid in the first quarter of 2013. As a result, the Company did not pay a regular quarterly dividend during the first quarter of 2013.
During the year ended December 31, 2013, the Company paid cash dividends totaling approximately $32.8 million. We expect to continue to pay dividends in
the future, subject to declaration by our board of directors as well as future business performance, economic conditions, changes in income tax regulations and
other factors. Based on our present dividend rate and outstanding share count, we expect that aggregate annual regular dividends for 2014 would be
approximately $43.1 million.
The Company also allocates capital to exploring growth opportunities in business areas that are adjacent or complementary to our core hotel franchising
business, which leverage our core competencies and are additive to our franchising business model. The timing and amount of these investments are subject to
market and other conditions and include the following:
Our board of directors authorized a program which permits us to offer financing, investment and guaranty support to qualified franchisees as well as
allows us to acquire and resell real estate to incent franchise development for certain brands in strategic markets. Recent market conditions have resulted in an
increase in opportunities to incentivize development under this program and as a result over the next several years we expect to deploy capital pursuant to this
program opportunistically to promote growth of our emerging brands. The amount and timing of the investment in this program will be dependent on market
and other conditions. Our current expectation is that our annual investment in this program will range from $20 million to $40 million per year and we
generally expect to recycle these investments within a five year period.
In March 2013, the Company announced the launch of a new division, SkyTouch Technology ("SkyTouch"), which develops and markets cloud-
based technology products for the hotel industry. In conjunction with this new division, the Company incurred selling, general and administrative ("SG&A")
expenses of $11.5 million during the year ending December 31, 2013 primarily related to business development, sales and marketing and continued software
development.
Notwithstanding investments in SkyTouch and other alternative growth strategies, the Company expects to continue to return value to its
shareholders through a combination of share repurchases and dividends, subject to the discretion of our board of directors as well as to business performance,
economic conditions, changes in income tax regulations and other factors.
We believe these investments and strategic priorities, when properly implemented, will enhance our profitability, maximize our financial returns and
continue to generate value for our shareholders. The ultimate measure of our success will be reflected in the items below.
Results of Operation: Royalty fees, operating income, net income and diluted earnings per share ("EPS") represent key measurements of these value
drivers. These measurements are primarily driven by the operations of our franchise system and therefore our analysis of the Company's operations is
primarily focused on the size, performance and potential growth of the franchise system as well as our variable overhead costs.
Refer to MD&A heading "Operations Review" for additional analysis of our results.
Liquidity and Capital Resources: Historically, the Company has generated significant cash flows from operations . Since our business does not
currently require significant reinvestment of capital, we typically utilize cash in ways that management believes provide the greatest returns to our shareholders
which include share repurchases and dividends. However, we may determine to utilize cash for acquisitions and other investments in the future. We believe the
Company’s cash flow from operations and available financing capacity is sufficient to meet the expected future operating, investing and financing needs of the
business.
Refer to MD&A heading "Liquidity and Capital Resources" for additional analysis.
Inflation: Inflation has been moderate in recent years and has not had a significant impact on our business.
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The Company utilizes certain measures which do not conform to generally accepted accounting principles accepted in the United States ("GAAP") when
analyzing and discussing its results with the investment community. This information should not be considered as an alternative to any measure of
performance as promulgated under GAAP. The Company’s calculation of these measurements may be different from the calculations used by other companies
and therefore comparability may be limited. We have included a reconciliation of these measures to the comparable GAAP measurement below as well as our
reasons for reporting these non-GAAP measures.
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