Comfort Inn 2013 Annual Report Download - page 57

Table of Contents
During the years ended December 31, 2013, 2012 and 2011, capital expenditures totaled $31.5 million, $15.4 million and $10.9 million, respectively.
The increase in capital expenditures from 2012 to 2013 primarily reflect tenant improvements related to the relocation of the Company's corporate headquarters
and computer equipment purchases made in conjunction with the relocation of the Company's technology data center.
The Company provides financing to franchisees for hotel development efforts and other purposes in the form of mezzanine and other notes receivable.
These loans bear interest and are expected to be repaid in accordance with the terms of the loan agreements. During the years ended December 31, 2013, 2012
and 2011, the Company advanced $1.1 million, $23.7 million and $9.2 million for these purposes, respectively. In addition, the Company collected $9.7
million, $3.3 million and $4.7 million of these advances during the years ended December 31, 2013, 2012 and 2011, respectively. At December 31, 2013, the
Company had commitments to extend an additional $3.3 million for these purposes within the next twelve months provided certain conditions are met by its
franchisees.
During the year ended December 31, 2013, 2012 and 2011, the Company invested $5.7 million, $20.3 million and $5.0 million in joint ventures
accounted for under the equity method of accounting. The Company's investment in these joint ventures primarily pertain to ventures that either support the
Company's efforts to increase business delivery to its franchisees or promote growth of our emerging brands.
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. At December 31, 2013 and 2012, the
Company had approximately $64 million and $68 million invested under this program. Over the next several years, we expect to continue to deploy capital
opportunistically pursuant to this program to promote growth of our emerging brands. 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. However, the amount and
timing of the investment in this program will be dependent on market and other conditions.
Financing Activities
Financing cash flows relate primarily to the Company’s borrowings, treasury stock purchases and dividends.
Debt
Senior Unsecured Notes due 2022
On June 27, 2012 the Company issued unsecured notes with a principal amount of $400 million ("the 2012 Senior Notes") at par, bearing a coupon of
5.75% with an effective rate of 5.94%. The 2012 Senior Notes will mature on July 1, 2022, with interest to be paid semi-annually on January 1st and July
1st. The Company utilized the net proceeds of this offering, after deducting underwriting discounts and commissions and other offering expenses, together
with borrowings under the Company's senior credit facility, to pay the special cash dividend totaling approximately $600.7 million paid to stockholders on
August 23, 2012. The Company's 2012 Senior Notes are guaranteed jointly, severally, fully and unconditionally, subject to certain customary limitations by
eight wholly-owned domestic subsidiaries.
The Company incurred debt issuance costs in connection with the 2012 Senior Notes totaling approximately $7.5 million. These debt issuance costs are
amortized, on a straight-line basis, which is not materially different than the effective interest method, through the maturity of the 2012 Senior Notes.
Amortization of these costs is included in interest expense in the consolidated statements of income.
The Company may redeem the 2012 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 the Treasury rate, plus 50 basis points.
Senior Unsecured Notes due 2020
On August 25, 2010, the Company issued unsecured senior notes in the principal amount of $250 million (“the 2010 Senior Notes”) at a discount of
$0.6 million, bearing a coupon of 5.70% with an effective rate of 6.19%. The 2010 Senior Notes will mature on August 28, 2020, with interest on the 2010
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 and other general corporate purposes. The Company's 2010 Senior Notes are
guaranteed jointly, severally, fully and unconditionally, subject to certain customary limitations, by eight wholly-owned domestic subsidiaries.
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