Comfort Inn 2013 Annual Report Download - page 41

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Franchising Revenues: The Company utilizes franchising revenues, which exclude revenues from marketing and reservation system activities, the
SkyTouch division and hotel operations, rather than total revenues when analyzing the performance of the business. Marketing and reservation activities are
excluded from franchising revenues since the Company is contractually required by its franchise agreements to use the fees collected for marketing and
reservation activities; as such, no income or loss to the Company is generated. Cumulative marketing and reservation system fees not expended are recorded as
a liability in the Company’s financial statements and are carried over to the next fiscal year and expended in accordance with the franchise agreements.
Cumulative marketing and reservation expenditures incurred in excess of fees collected for marketing and reservation activities are deferred and recorded as an
asset in the Company’s financial statements and recovered in future periods. Hotel operations reflect the Company's ownership of three MainStay Suites
hotels. SkyTouch is a division of the Company that develops and markets cloud-based technology products, including inventory management, pricing and
connectivity to third party channels, to hoteliers not under franchise agreements with the Company. Hotel and SkyTouch operations are excluded from
franchising revenue since they do not reflect the Company's core franchising business but are adjacent, complimentary lines of business. This non-GAAP
measure is a commonly used measure of performance in our industry and facilitates comparisons between the Company and its competitors.






 
$691,509
$638,793
Less Adjustments:
Marketing and reservation system revenues 
(384,784)
(349,036)
SkyTouch division 
—
—
Hotel operations 
(4,573)
(4,356)
 


Adjusted EBITDA: We also utilize adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") to analyze our results
which reflects earnings excluding the impact of interest expense, interest income, loss on extinguishment of debt, provision for income taxes, depreciation and
amortization, other (gains) and losses and equity in net income of unconsolidated affiliates. We consider Adjusted EBITDA to be an indicator of operating
performance because we use it to measure our ability to service debt, fund capital expenditures, and expand our business. We also use Adjusted EBITDA, as
do analysts, lenders, investors and others, to evaluate companies because it excludes certain items that can vary widely across different industries or among
companies within the same industry. For example, interest expense can be dependent on a company’s capital structure, debt levels and credit ratings.
Accordingly, the impact of interest expense on earnings can vary significantly among companies. The tax positions of companies can also vary because of
their differing abilities to take advantage of tax benefits and because of the tax policies of the jurisdictions in which they operate. As a result, effective tax rates
and provision for income taxes can vary considerably among companies. Adjusted EBITDA also excludes depreciation and amortization because companies
utilize productive assets of different ages and use different methods of both acquiring and depreciating productive assets. These differences can result in
considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies. Additionally, Adjusted
EBITDA is also utilized as a performance indicator as it excludes equity in net income of unconsolidated affiliates and other (gains) and losses which
primarily reflect the performance of investments held in the Company's non-qualified retirement, savings and investment plans which can vary widely from
period to period based on market conditions.
41