Comfort Inn 2002 Annual Report Download - page 13

Summarized financial results for the years ended December 31, 2002 and 2001 are as follows:
2002 2001
(In thousands)
REVENUES:
Royalty fees .......................................................... $142,943 $140,185
Initial franchise and relicensing fees ....................................... 12,881 12,887
Partner services ....................................................... 11,860 12,042
Marketing and reservation ............................................... 190,145 168,170
Hotel operations ...................................................... 3,331 3,215
Other ............................................................... 4,402 4,929
Total revenues ...................................................... 365,562 341,428
OPERATING EXPENSES:
Selling, general and administrative ........................................ 54,904 56,075
Restructuring charges .................................................. 1,616 5,940
Impairment of Friendly investment ........................................ —22,713
Depreciation and amortization ........................................... 11,251 12,452
Marketing and reservation expense ........................................ 190,145 168,170
Hotel operations ...................................................... 2,946 2,501
Total operating expenses .............................................. 260,862 267,851
Operating income ..................................................... 104,700 73,577
Interest expense ....................................................... 13,136 15,445
Interest and other investment income ...................................... (4,549) (4,329)
Equity in net losses of affiliates .......................................... 71 16,436
Other ............................................................... 224 608
Income before income taxes ............................................. 95,818 45,417
Income taxes ......................................................... 34,974 31,090
Net income ........................................................ $ 60,844 $ 14,327
Management analyzes its business based on net franchise revenues, which is total revenues excluding marketing
and reservation revenues and hotel operations, and franchise operating expenses that are reflected as selling,
general and administrative expenses.
Franchise Revenues: Net franchise revenues were $172.1 million for the year ended December 31, 2002
compared to $170.0 million for the year ended December 31, 2001. Royalty fees increased $2.7 million to $142.9
million from $140.2 million in 2001, an increase of 1.9%. The increase in royalties is primarily attributable to a
4.4% increase in the number of domestic franchised hotel rooms and an increase in the effective royalty rate of
the domestic hotel system to 3.97% from 3.95%, offset by a 3.8% decrease in RevPAR. Domestic initial fee
revenue, included in the initial franchise and relicensing fees caption above, generated from executed franchise
contracts increased 7.8% to $8.3 million for the year ended December 31, 2002 from $7.7 million for the year
ended December 31, 2001. Relicensing fees declined 11.5% to $4.6 million for the year ended December 31,
2002 from $5.2 million for the year ended December 31, 2001. Relicensing fees are charged to the new property
owner of a franchised property whenever an ownership change occurs and the property remains in the franchise
system. The decrease in relicensing fees in 2002 reflects a lower number of such ownership changes in 2002
compared to 2001. Total domestic franchise agreements executed in 2002 were 304, compared to 300 total
agreements executed in 2001. The number of rooms covered by contracts executed were 25,657 in 2002
compared to 25,757 in 2001. Revenues generated from partner services was $11.9 million, compared to $12.0
million in 2001.
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