|
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
for 2002. International rooms on-line increased to 94,350 as of December 31, 2003 from 91,299 as of December 31, 2002, an increase of 3.3%. The total number of international hotels on-line decreased slightly to 1,174 from 1,182, a decrease of 0.7% for the year ended December 31, 2003. As of December 31, 2003, the Company had 401 franchised hotels with 31,409 rooms either in design or under construction in its domestic system. The Company has an additional 90 franchised hotels with 8,468 rooms under development in its international system as of December 31, 2003.
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