Comfort Inn 2013 Annual Report Download - page 49

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Table of Contents
As discussed in the accompanying critical accounting policies, the Company sponsors two non-qualified retirement and savings plans: the Non-
Qualified Plan and the EDCP plan. The fair value of the Non-Qualified Plan investments increased $1.3 million during 2013 compared to an appreciation of
$0.8 million in the fair value during 2012. The fair value of the Company's investments held in the EDCP plan increased $0.3 million during the year ended
December 31, 2013 compared to an appreciation in fair value of $1.2 million during the same period of the prior year.
The Company accounts for the EDCP Plan and Non-Qualified Plan in accordance with accounting for deferred compensation arrangements when
investments are held in a rabbi trust and invested. Therefore, the Company also recognizes compensation expense or benefits in SG&A related to changes in
the fair value of investments held in the Non-Qualified Plan and a portion of the investments held in the EDCP Plan, excluding investments in the Company's
stock. As a result, during the year ended December 31, 2013 and 2012, the Company's SG&A expense was increased by $2.2 million and $1.0 million
respectively, due to the change in fair value of these investments.
Income Taxes: In 2013 and 2012, the effective income tax rates were 28.2% and 28.7%, respectively. The effective income tax rate for the period ended
December 31, 2013 was lower than the United States federal statutory rate of 35% primarily due to the recurring impact of foreign operations, partially offset
by state income taxes, and reflects adjustments to our federal accruals. Additionally, the effective income tax rate was further reduced by the settlement of
unrecognized tax positions and legislation retroactively extending the U.S. controlled foreign corporation look-through rules. The effective income tax rate for
the period ended December 31, 2012 was lower than the United States federal statutory rate of 35% primarily due to the recurring impact of foreign operations,
partially offset by state income taxes. Additionally, the 2012 effective income tax rate includes a $4.5 million benefit related to a change in estimate of the
benefit from foreign operations.
Net Income and Diluted EPS: Diluted EPS declined 8% to $1.91 for 2013 from the $2.07 reported for 2012 due to a 7% decline in net income. The
decline in net income reflects the items discussed above.
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