Comfort Inn 2005 Annual Report Download - page 54

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CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The effect of dilutive securities is computed using the treasury stock method and average market prices
during the period.
19. Leases
The Company enters into operating leases primarily for office space and computer equipment. Rental expense
under non-cancelable operating leases was approximately $8.0 million, $12.6 million and $15.2 million for the
years ended December 31, 2005, 2004 and 2003, respectively. The Company received sublease rental income
related to computer equipment leased to franchisees totaling $4.1 million, $8.8 million and $10.2 million during the
years ended December 31, 2005, 2004 and 2003, respectively. Future minimum lease payments are as follows:
2006 2007 2008 2009 2010 Thereafter Total
(In thousands)
Minimum lease payments ............ $5,055 $3,990 $3,956 $4,016 $4,110 $10,082 $31,209
Minimum sublease rentals ............ (1,330) (241) (229) (236) (60) — (2,096)
$ 3,725 $3,749 $3,727 $3,780 $4,050 $10,082 $29,113
20. Reportable Segment Information
The Company has a single reportable segment encompassing its franchising business. Revenues from the
franchising business include royalty fees, initial franchise and relicensing fees, marketing and reservation fees,
partner services revenue and other revenue. The Company is obligated under its franchise agreements to provide
marketing and reservation services appropriate for the successful operation of its systems. These services do not
represent separate reportable segments as their operations are directly related to the Company’s franchising
business. The revenues received from franchisees that are used to pay for part of the Company’s central on-going
operations are included in franchising revenues and are offset by the related expenses paid for marketing and
reservation activities to calculate franchising operating income. Corporate and other revenue consists of hotel
operations. Except as described in Note 6, the Company does not allocate interest and dividend income, interest
expense or income taxes to its franchising segment.
The following table presents certain financial information for the Company’s franchising segment.
Year Ended December 31, 2005
Franchising
Corporate
& Other
Elimination
Adjustments Consolidated
(In thousands)
Revenues .......................................... $473,106 $ 4,293 — $477,399
Operating income (loss) .............................. 185,525 (41,775) — 143,750
Depreciation and amortization ......................... 9,595 7,085 (7,629) 9,051
Capital expenditures ................................. 8,973 2,531 — 11,504
Total assets ........................................ 190,517 74,583 — 265,100
Year Ended December 31, 2004
Franchising
Corporate
& Other
Elimination
Adjustments Consolidated
(In thousands)
Revenues .......................................... $424,479 $ 3,729 — $428,208
Operating income (loss) .............................. 161,564 (36,581) — 124,983
Depreciation and amortization ......................... 11,429 7,576 (9,058) 9,947
Capital expenditures ................................. 5,376 1,483 — 6,859
Total assets ........................................ 187,710 75,642 — 263,352
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