|
Operations Review
Comparison of 2004 Operating Results and 2003 Operating Results
The Company recorded net income of $74.3 million for the year ended December 31, 2004, an increase of $2.4 million from $71.9 million for the year ended December 31, 2003. The increase in net income for the year is primarily attributable to an $11.0 million improvement in operating income partially offset by an $8.9 million increase in other income and expenses. Interest and other investment income in 2003 included $4.5 million of interest income and a $3.4 million gain on the prepayment attributable to the Sunburst note receivable. As a result of Sunburst’s prepayment, these items did not recur in 2004. Operating income increased as a result of a $16.7 million increase in franchising revenues (total revenues excluding marketing and reservation revenues and hotel operations) and a decrease in depreciation and amortization expense partially offset by an increase in selling, general and administrative expense. Net other income and expenses for 2004 increased primarily as a result of a $0.7 million loss on extinguishment of debt, a reduction of the $3.4 million prepayment gain and $4.5 million of interest income attributable to the December 2003 repayment of a note receivable from Sunburst and reductions in investment income attributable to non-qualified benefit plan assets.
Summarized financial results for the years ended December 31, 2004 and 2003 are as follows:
| |
2004 |
|
2003 |
 |
|
|
| |
(In thousands) |
| REVENUES: |
| Royalty fees |
$ |
167,151 |
|
$ |
151,326 |
|
| Initial franchise and relicensing fees |
|
20,112 |
|
|
16,799 |
|
| Partner services |
|
12,524 |
|
|
13,227 |
|
| Marketing and reservation |
|
221,313 |
|
|
195,420 |
|
| Hotel operations |
|
3,729 |
|
|
3,565 |
|
| Other |
|
3,977 |
|
|
5,767 |
|
|
|
|
| Total revenues |
|
428,806 |
|
|
386,104 |
|
|
|
|
| OPERATING EXPENSES: |
|
|
| Selling, general and administrative |
|
69,654 |
|
|
62,860 |
|
| Depreciation and amortization |
|
9,947 |
|
|
11,225 |
|
| Marketing and reservation |
|
221,313 |
|
|
195,420 |
|
| Hotel operations |
|
2,892 |
|
|
2,616 |
|
|
|
|
| Total operating expenses |
|
303,806 |
|
|
272,121 |
|
|
|
|
| Operating income |
|
125,000 |
|
|
113,983 |
|
|
|
|
| Interest expense |
|
11,605 |
|
|
11,597 |
|
| Interest and other investment income |
|
(1,093 |
) |
|
(6,185 |
) |
| Gain on prepayment of note receivable from Sunburst |
|
— |
|
|
(3,383 |
) |
| Equity in net (income) losses of affiliates |
|
(722 |
) |
|
(582 |
) |
| Loss on extinguishment of debt |
|
696 |
|
|
— |
|
| Other |
|
(10 |
) |
|
129 |
|
|
|
|
| Total other income and expenses |
|
10,476 |
|
|
1,576 |
|
|
|
|
| Income before income taxes |
|
114,524 |
|
|
112,407 |
|
| Income taxes |
|
40,179 |
|
|
40,544 |
|
|
|
|
| Net income |
$ |
74,345 |
|
$ |
71,863 |
|
|
|
|
|
|
|
|
| Weighted average shares outstanding-diluted |
|
34,500 |
|
|
36,674 |
|
|
|
|
| Diluted earnings per share |
$ |
2.15 |
|
$ |
1.96 |
|
|
|
|
|
|
|
|
|
