Marketing and Reservations: The total marketing and reservation fees received by the Company were $146.0 million and $127.4 million for the years ended December 31, 1999 and 1998, respectively. Depreciation and amortization incurred by the marketing and reservation funds was $9.6 million and $6.2 million for the years ended December 31, 1999 and 1998, respectively. Interest expense incurred by the reservation fund was $3.3 million and $1.8 million for the years ended December 31, 1999 and 1998, respectively. As of December 31, 1999, the Company’s balance sheet includes a receivable of $32.8 million related to advances made to the marketing ($ 12.5 million) and reservation ($ 20.3 million) funds. As of December 31, 1998, the Company’s balance sheet includes a receivable of $18.7 million related to advances made to the marketing ($ 7.8 million) and reservation ($ 10.9 million) funds.

Product Sales: Sales made to franchisees through the Company’s group purchasing program declined $16.8 million to $3.9 million in 1999 from $20.7 million in 1998. Similarly, product cost of sales decreased $15.6 million to $3.9 million from 1998. In the fourth quarter of 1998, the Company discontinued this group purchasing program as previously operated.

European Hotel Operations: In January 1998, Friendly acquired from the Company ten hotels in France, two in Germany and one in the United Kingdom, in exchange for $22.2 million in 5.75% convertible preferred shares in Friendly.

Depreciation and Amortization: Depreciation and amortization increased to $7.7 million in 1999 from $6.7 million in 1998. This increase was primarily attributable to new computer systems installations and corporate office renovations.

Interest Expense and Interest Income: Interest expense of $16.4 million in 1999 is down slightly from $17.8 million in 1998. Included in 1999 and 1998 results is approximately $14.2 million and $10.4 million, respectively, of interest income earned on the note receivable from Sunburst. The Company’s investment in Friendly resulted in $2.2 million and $2.1 million in dividend income in 1999 and 1998, respectively.

Extraordinary Item: During 1998, the Company recorded an extraordinary gain from the early extinguishment of debt. The Company retired $13.7 million in debt and removed related assets of $1.8 million from the consolidated balance sheets. The extraordinary gain was $7.2 million, after income tax expense of $4.7 million, or $0.12 per diluted share.

Liquidity and Capital Resources

Net cash provided by operating activities was $67.6 million for the year ended December 31, 2000, a decrease of $2.4 million from $70.0 million for the year ended December 31, 1999. The reduction in cash provided was primarily due to changes in working capital.

Cash used in investing activities for the years ended December 31, 2000, 1999 and 1998, was $30.4 million, $40.9 million and $9.1 million, respectively. Investment in property and equipment includes installation of system-wide property and yield management systems and upgrades to financial and reservations systems. During the years ended December 31, 2000, 1999 and 1998, capital expenditures totaled $16.6 million, $30.6 million and $17.5 million, respectively. Capital expenditures in prior years included amounts for renovations to the Company’s corporate headquarters (including a franchisee learning and training center); computer hardware; and financial, reservation, and property and yield management systems.