Comfort Inn 2007 Annual Report Download - page 43

Financing cash flows relate primarily to the Company’ s borrowings under its credit lines, treasury stock purchases
and dividends. On June 16, 2006, the Company entered into a $350 million senior unsecured revolving credit agreement
(the “Revolver”), with a syndicate of lenders. The proceeds from the Revolver were used to refinance and terminate a
previous revolving facility. The Revolver allows the Company to borrow, repay and reborrow revolving loans up to $350
million (which includes swingline loans for up to $20 million and standby letters of credit up to $30 million) until the
scheduled maturity date of June 16, 2011. The Company has the ability to request an increase in available borrowings
under the Revolver by an additional amount of up to $150 million by obtaining the agreement of the existing lenders to
increase their lending commitments or by adding additional lenders. The rate of interest generally applicable for revolving
loans under the Revolver are, at the Company’ s option, equal to either (i) the greater of the prime rate or the federal funds
effective rate plus 50 basis points, or (ii) an adjusted LIBOR rate plus a margin between 22 and 70 basis points based on
the Company’ s credit rating. The Revolver requires the Company to pay a quarterly facility fee, based upon the credit
rating of the Company, at a rate between 8 and 17 1/2 basis points, on the full amount of the commitment (regardless of
usage). The Revolver also requires the payment of a quarterly usage fee, based upon the credit rating of the Company, at a
rate between 10 and 12 1/2 basis points, on the amount outstanding under the commitment, at all times when the amount
borrowed under the Revolver exceeds 50% of the total commitment. The Revolver includes customary financial and other
covenants that require the maintenance of certain ratios including maximum leverage and interest coverage. The Revolver
also restricts the Company’ s ability to make certain investments, incur certain debt, and dispose of assets, among other
restrictions. At December 31, 2007, the Company was in compliance with all covenants under the Revolver. As of
December 31, 2007, the Company had $172.4 million of revolving loans outstanding pursuant to the Revolver.
The proceeds from the Revolver are used for general corporate purposes, including working capital, debt repayment,
stock repurchases, dividends and investments.
In 1998, the Company completed a $100 million senior unsecured note offering (“the Senior Notes”) at a discount of
$0.6 million, bearing a coupon rate of 7.13% with an effective rate of 7.22%. The Company used the net proceeds from
the offering of approximately $99 million to repay amounts outstanding under the Company’ s previous credit facility. The
Senior Notes will mature on May 1, 2008, with interest to be paid semi-annually. The Senior Notes have been classified as
a long-term liability at December 31, 2007, since the Company’ s intention is to repay the Senior Notes upon maturity by
utilizing the available capacity of the Revolver.
The Senior Notes contain a call provision that would require the Company to pay a premium if the Senior Notes
were redeemed prior to their maturity. At December 31, 2007, the call provision would have resulted in a premium of $2.4
million.
The Company’ s Senior Notes are guaranteed jointly, severally, fully and unconditionally by 7 wholly-owned
domestic subsidiaries. There are no legal or regulatory restrictions on the payment of dividends to Choice Hotels
International, Inc. from subsidiaries that do not guarantee the Senior Notes.
The Company has a line of credit with a bank providing up to an aggregate of $10 million of borrowings which is
due upon demand. The line of credit ranks pari-pasu (or equally) with the Revolver. Borrowings under the line of credit
bear interest at rates established at the time of the borrowings based on prime minus 175 basis points. As of December 31,
2007, no amounts were outstanding pursuant to this line of credit.
In the second quarter of 2007, the Company repaid an outstanding note with a balance of $0.4 million by utilizing
proceeds from the Revolver. The note had an original maturity date of January 1, 2009. This loan bore interest based on
seventy percent of prime and required monthly principal and interest payments.
As December 31, 2007, total debt outstanding for the Company was $272.4 million. With the exception of the
Company’ s Senior Notes, which are scheduled to mature in May 2008, no outstanding debt amounts at December 31,
2007 were scheduled to mature in the twelve months ending December 31, 2008.
Through December 31, 2007, the Company had purchased 38.6 million shares (including 33.0 million prior to the
two-for-one stock split) of its common stock under its share repurchase program at a total cost of $895.9 million.
Considering the effect of the two-for-one stock split in October 2005, the Company has repurchased 71.5 million shares at
an average price of $12.52 per share. In September 2007, the board of directors authorized an increase under the
Company’ s existing stock repurchase program to acquire up to an additional 3 million shares of its outstanding common
stock. At December 31, 2007, the Company had approximately 62.1 million shares of common stock outstanding and had
remaining authorization to purchase up to 3.2 million shares. Subsequent to December 31, 2007 through February 29,
2008, the Company had not repurchased any additional shares of its common stock.
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