Comfort Inn 2003 Annual Report Download - page 11

Summarized financial results for the years ended December 31, 2003 and 2002 are as follows:
2003 2002
(In thousands)
REVENUES:
Royalty fees .......................................................... $151,326 $142,943
Initial franchise and relicensing fees ....................................... 16,799 12,881
Partner services ....................................................... 13,227 11,860
Marketing and reservation ............................................... 195,420 190,145
Hotel operations ...................................................... 3,565 3,331
Other ............................................................... 5,767 4,402
Total revenues .................................................... 386,104 365,562
OPERATING EXPENSES:
Selling, general and administrative ........................................ 62,860 56,520
Depreciation and amortization ........................................... 11,225 11,251
Marketing and reservation ............................................... 195,420 190,145
Hotel operations ...................................................... 2,616 2,946
Total operating expenses ............................................ 272,121 260,862
Operating income ..................................................... 113,983 104,700
Interest expense ....................................................... 11,597 13,136
Interest and other investment income ...................................... (6,185) (4,549)
Gain on prepayment of note receivable from Sunburst ........................ (3,383) —
Equity in net (income) losses of affiliates ................................... (582) 71
Other ............................................................... 129 224
Income before income taxes ............................................. 112,407 95,818
Income taxes ......................................................... 40,544 34,974
Net income ...................................................... $ 71,863 $ 60,844
Management analyzes its business based on 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. Franchise revenues were $187.1 million for the year ended December 31, 2003
compared to $172.1 million for the year ended December 31, 2002. Royalty fees increased $8.4 million to $151.3
million from $142.9 million in 2002, an increase of 5.9%. The increase in royalties is attributable to a 4.2%
increase in the number of domestic franchised hotel rooms and an increase in the effective royalty rate of the
domestic hotel system to 4.01% from 3.97%, partially offset by a 0.8% decrease in RevPAR. Domestic initial fee
revenue, included in the initial franchise and relicensing fees caption above, generated from executed franchise
contracts increased 36.1% to $11.3 million for the year ended December 31, 2003 from $8.3 million for the year
ended December 31, 2002. In addition, international royalty fees increased approximately $2.9 million during
2003 as a result of the consolidation of Flag Choice Hotels beginning in July 2002. The increase reflects
domestic franchise agreements executed in 2003 of 470, compared to 304 agreements executed in 2002.
Relicensing fees increased 19.6% to $5.5 million for the year ended December 31, 2003 from $4.6 million for the
year ended December 31, 2002. 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. Revenues generated
from partner services increased 10.9% to $13.2 million for the year ended December 31, 2003 from $11.9 million
for the year ended December 31, 2002.
The number of domestic rooms on-line increased to 294,268 from 282,423, an increase of 4.2% for the year
ended December 31, 2003. For 2003, the total number of domestic hotels on-line grew 4.4% to 3,636 from 3,482
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