Comfort Inn 2007 Annual Report Download - page 44

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In September 2005, the Company’ s board of directors increased the quarterly dividend rate to $0.13, or a 15.6%
increase from the previously quarterly rate of $0.1125. This increase raised the annual dividend rate on the Company’ s
common stock from $0.45 to $0.52 per share. Dividends paid in 2005 were approximately $30.2 million. In 2006, the
Company’ s board of directors again increased the quarterly dividend rate to $0.15, a 15.4% increase from the previous
quarterly rate of $0.13. This increase raised the annual dividend rate on the Company’ s common stock from $0.52 to
$0.60 per share. Dividends paid in 2006 were approximately $35.4 million. In 2007, the Company’ s board of directors
again increased the quarterly dividend rate to $0.17, a 13% increase from the previous quarterly rate of $0.15. This
increase raises the annual dividend rate on the Company’ s common stock from $0.60 to $0.68 per share. Dividends paid
in 2007 were approximately $40.1 million. Based on our present dividend rate and outstanding share count, aggregate
annual dividends for 2008 would be approximately $42.0 million.
The Company expects to continue to return value to its shareholders through a combination of dividends and share
repurchases, subject to market and other conditions.
During the first quarter of 2007, the Company recorded a $3.7 million charge in selling, general and administrative
expenses for employee termination benefits relating to the termination of certain executive officers. Termination benefits
include salary continuation of approximately $2.5 million, SERP curtailment expenses of $0.2 million and $1.0 million of
accelerated share based compensation. As a result of those separations, the Company will remit to those officers
approximately $1.5 million of cash termination benefits over the next twelve months as well as $1.0 million of deferred
compensation and retirement plan obligations.
As of January 1, 2007 and December 31, 2007, the Company had $7.1 million and $6.7 million, respectively of total
unrecognized tax benefits of which approximately $4.0 million and $3.5 million, respectively would affect the effective
tax rate if recognized. These unrecognized tax benefits relate principally to state tax filing positions and stock-based
compensation deductions. The Company believes it is reasonably possible it will recognize tax benefits of up to
$1.6 million within the next twelve months. This is due to the anticipated lapse of applicable statutes of
limitations regarding state tax positions and stock-based compensation deductions.
During 2005, the Company acquired 100% of the stock of Suburban Franchise Holding Company, Inc. (“Suburban”)
and its wholly owned subsidiary, Suburban Franchise Systems, Inc. Beginning on the third anniversary of the closing, the
merger provided for contingent cash payments of up to $5.0 million to be made upon the satisfaction of certain criteria.
During 2007, the Company has determined that the performance conditions can no longer be satisfied and therefore the
contingent consideration will not be earned.
The following table summarizes our contractual obligations as of December 31, 2007
Payment due by period
Contractual Obligations
Total
Less than
1 year
1-3 years
3-5 years
More than
5 years
(in millions)
Long-term debt(1) ..................................................................................... $ 274.8 $ 2.4 $ — $ 272.4 $ —
Operating lease obligations...................................................................... 32.9 5.8 10.8 10.5 5.8
Purchase obligations ................................................................................ 0.5 0.5 — — —
Other long-term liabilities(2) ..................................................................... 57.6 — 20.2 6.4 31.0
Total contractual cash obligations............................................................ $ 365.8 $ 8.7 $ 31.0 $ 289.3 $ 36.8
(1) Long-term debt amounts include interest on fixed rate debt obligations. The Senior Notes have been classified as a
long term liability, since the Company’ s intention is to repay the Senior Notes upon maturity by utilizing the
available capacity of the Revolver.
(2) The total amount of unrecognized tax benefits and the related interest and penalties totaled $8.0 million at
December 31, 2007 and is not reflected in the Contractual Obligations table. We have several open tax positions, and
it is possible that the amount of the liability for unrecognized tax benefits could change over the next year. While it
is possible that one or more of these open positions may be resolved in the next year, it is not anticipated that a
significant impact to the unrecognized tax benefit balance will occur.
The Company believes that cash flows from operations and available financing capacity are adequate to meet
expected future operating, investing and financing needs of the business.
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