Comfort Inn 2002 Annual Report Download - page 36

CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
corporate realignment initiatives. The restructuring was initiated and completed in 2002. Approximately
$0.3 million of the expense related to stock compensation for certain severed employees and was credited
directly to additional paid-in capital. The Company paid approximately $0.4 million in cash related to this
restructuring during 2002 and the remaining liability of $0.9 million, included in accrued expenses and other in
the accompanying consolidated balance sheet, is expected to be paid in cash during 2003.
During 2001, the Company recognized a restructuring charge expense of $5.9 million, pursuant to Emerging
Issues Task Force (“EITF”) No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)”. The restructuring charges
include $5.3 million related to a corporate realignment designed to increase its strategic focus on delivering
value-added services to franchisees, including centralizing the Company’s franchise service and sales operations,
consolidating its brand management functions and realigning its call center operations. Of this $5.3 million,
$5.1 million relates to severance and termination benefits for 64 employees (consisting of brand management and
new hotels support, reservation sales and administrative personnel and franchise sales and operations support)
and $0.2 million relates to the cancellation of preexisting contracts for termination of domestic leases. The
remaining $0.6 million of the $5.9 million is due to exit costs related to the termination of a corporate hotel
construction project. Through December 31, 2002, the Company has paid cash of $4.4 million related to this
restructuring. Approximately $0.9 million of the expense related to stock compensation for certain severed
employees was reclassified from the restructuring liability during 2002 to additional paid-in capital. As of
December 31, 2002, a $0.6 million liability is included in accrued expenses and other on the accompanying
consolidated balance sheet. The Company expects the remaining liability to be substantially paid in 2003.
During 2000, the Company recognized a restructuring charge expense of $5.6 million, pursuant to Emerging
Issues Task Force (“EITF”) No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)”. The restructuring charges
include $4.7 million related to a corporate-wide reorganization to improve service and support to the Company’s
franchisees and to create a more competitive overhead structure. Of this $4.7 million, $4.1 million relates to
severance and termination benefits for 176 employees (consisting of property and yield management system
installers, reservation agents and field service administrative support) and $0.6 million relates to the cancellation
of pre-existing contracts for termination of international leases. The remaining $0.9 million of the $5.6 million is
due to the termination of an in-room internet initiative launched in 1999. The Company paid $0.2 million related
to the 2000 restructuring liability for the year ended December 31, 2002, which completed the restructuring.
9. Accrued Expenses and Other
Accrued expenses and other consisted of the following at:
December 31,
2002 2001
(In thousands)
Accrued salaries and benefits .................................. $15,175 $13,131
Accrued interest ............................................. 2,343 2,616
Accrued restructuring ........................................ 1,518 4,884
Deferred loyalty program ..................................... 6,569 6,397
Other ..................................................... 4,081 3,026
Total ................................................. $29,686 $30,054
Deferred loyalty program accrued expenses consist primarily of liabilities associated with the Company’s
Choice Privileges program. Choice Privileges is a frequent guest incentive program that enables members to earn
points based on their spending levels at participating brands. The points may be redeemed for free
accommodation or other benefits. Points can not be redeemed for cash.
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