What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-02-24 compared with 2021-02-26 · 376 added, 421 removed, 1149 unchanged (41% of the section changed)

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Statements of Income

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Consolidated Balance Sheets

Consolidated Statements of Cash Flow

Consolidated Statements of Shareholders' Deficit

Consolidated Statements of Cash Flows

Consolidated Statements of Shareholders' Equity (Deficit)

Notes to Consolidated Financial Statements

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We have audited the accompanying consolidated balance sheets of Choice Hotels International, Inc.

and subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, shareholders’ deficit and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, shareholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S.

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As discussed in Note 1 to the consolidated financial statements, loyalty points earned represent a performance obligation attributable to usage of the points, and thus revenues are recognized at the point in time when the loyalty points are redeemed by members for benefits.

The liability for the Loyalty Program is developed based on an estimate of the eventual redemption rates and point values using various actuarial methods.

The liability for the Loyalty Program is developed based on an estimate of the eventual redemption rates, including the on-going impacts anticipated from the COVID-19 pandemic on future redemption behavior, and point values using various actuarial methods.

The amount of the Loyalty Program fees in excess of the point liability represents deferred revenue, which is recognized to revenue as points are redeemed including an estimate of future forfeitures.

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How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process of accounting for the Loyalty Program during the year.

For example, we tested controls over management’s review of the assumptions and data inputs used in the accounting model and the actuarial methods used to estimate the redemption rate of Loyalty Program points.

For example, we tested controls over management’s review of the assumptions and data inputs used in the accounting model and the actuarial methods used to estimate the ultimate redemption rate of Loyalty Program points.

To test the recognition of revenues and liabilities associated with the Loyalty Program, we performed audit procedures that included, among others, testing the completeness and accuracy of the data and significant assumptions used in the model and assessing the accounting model developed by the Company to recognize the related revenue and the liabilities.

For example, we tested significant inputs into the accounting model, including the Loyalty Program point value and the recognition of points earned and redeemed during the period.

With the assistance of our actuarial specialists, we evaluated management’s methodologies as well as the actuarial assumptions used in estimating the Loyalty Program redemption rate.

With the assistance of our actuarial specialists, we evaluated management’s methodologies as well as the actuarial assumptions used in estimating the Loyalty Program expected redemption rate.

/s/ Ernst & Young LLP

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Impairment of long-lived assets ( 282 ) ( 14,751 ) ( 7,259 )

Loss on sale of business — ( 4,674 ) —

Gain on sale of assets, net — 100 82

Gain (loss) on sale of business and assets, net 13 — ( 4,574 )

Operating income 428,933 121,667 318,538

OTHER INCOME AND EXPENSES, NET

OTHER EXPENSES AND INCOME, NET

Interest expense 46,680 49,028 46,807

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Loss on extinguishment of debt — 16,565 7,188

Other (gain) loss ( 4,147 ) ( 4,862 ) 1,437

Other gains, net ( 5,134 ) ( 4,533 ) ( 4,966 )

Equity in net loss of affiliates 15,876 15,289 9,576

Total other income and expenses, net 69,047 48,713 45,216

Total other expenses (income), net 52,441 68,661 48,609

Income before income taxes 376,492 53,006 269,929

Income tax (benefit) expense ( 22,381 ) 47,051 56,903

Income tax expense (benefit) 87,535 ( 22,381 ) 47,051

Net income $ 288,957 $ 75,387 $ 222,878

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Cash and cash equivalents $ 511,605 $ 234,779

Receivables (net of allowance for credit losses of $ 59,424 and $ 18,482 , respectively)

Accounts receivables (net of allowance for credit losses of $ 34,149 and $ 59,424 , respectively)

153,147 149,921

Income taxes receivable 12,511 4,186

Notes receivable 28,227 26,265

Allowance for notes receivable credit losses ( 4,179 ) ( 861 )

Other current assets 19,980 24,727

Notes receivable (net of allowance for credit losses of $ 4,318 and $ 4,179 , respectively)

54,453 24,048

Prepaid expenses and other current assets 29,945 19,980

Total current assets 761,661 432,914

Property and equipment, at cost, net 334,901 351,502

Property and equipment, net 377,367 334,901

Operating lease right-of-use assets 34,183 17,688

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Intangible assets, net 312,389 303,725

Notes receivable 111,090 106,749

Allowance for notes receivable credit losses ( 15,305 ) ( 3,695 )

Notes receivable (net of allowance for credit losses of $ 12,461 and $ 15,305 , respectively)

66,451 95,785

Investments, employee benefit plans, at fair value 33,946 29,104

Investments in unconsolidated entities 57,879 78,655

Investments in affiliates 27,967 57,879

Deferred income taxes 68,643 67,745

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Total assets $ 1,931,824 $ 1,587,333

LIABILITIES AND SHAREHOLDERS’ DEFICIT

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)

Current liabilities

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Retained earnings 1,275,220 1,024,500

Total shareholders’ deficit ( 5,752 ) ( 23,511 )

Total liabilities and shareholders’ deficit $ 1,587,333 $ 1,386,672

Total shareholders’ equity (deficit) 265,882 ( 5,752 )

Total liabilities and shareholders’ equity (deficit) $ 1,931,824 $ 1,587,333

The accompanying notes are an integral part of these consolidated financial statements.

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Impairment of long-lived assets 282 14,751 7,259

Loss on sale of business — 4,674 —

Loss on debt extinguishment 16,565 7,188 —

Gain on disposal of assets, net — ( 2,103 ) ( 56 )

Loss on sale of business, net — — 4,674

Loss on extinguishment of debt — 16,565 7,188

Loss (gain) on sale and disposal of assets, net 530 — ( 2,103 )

Non-cash stock compensation and other charges 35,731 9,690 17,615

Non-cash interest and other investment (income) loss ( 6,723 ) ( 4,010 ) 3,695

Non-cash interest, investment, and affiliate income ( 13,509 ) ( 6,723 ) ( 4,010 )

Deferred income taxes ( 1,006 ) ( 44,826 ) 9,810

Equity in net losses from unconsolidated joint ventures, less distributions received 15,439 12,562 7,389

Equity in net loss of affiliates, less distributions received 23,985 15,439 12,562

Franchise agreement acquisition costs, net of reimbursements ( 38,230 ) ( 36,479 ) ( 38,944 )

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Asset acquisitions, net of cash acquired — — ( 168,954 )

Proceeds from sale of unconsolidated joint venture 7,435 8,937 —

Cash received from extinguishment of notes receivable 301 — —

Proceeds from sale of tax credits for rehabilitation of historic building — 9,197 —

Business acquisition, net of cash acquired — — ( 231,317 )

Payment on business disposition, net — — ( 10,783 )

Contributions to equity method investments ( 5,454 ) ( 27,828 ) ( 9,604 )

Distributions from equity method investments 3,363 10,241 1,429

Contributions to investments in affiliates ( 2,778 ) ( 5,454 ) ( 27,828 )

Distributions and sales proceeds from investments in affiliates 15,554 10,798 19,178

Purchases of investments, employee benefit plans ( 1,705 ) ( 2,562 ) ( 3,175 )

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Dividends paid ( 25,044 ) ( 25,274 ) ( 48,089 )

(Payments on) proceeds from transfer of interest in notes receivable — ( 24,409 ) 173

Payments on transfer of interest in notes receivable — — ( 24,409 )

Proceeds from exercise of stock options 11,054 10,203 21,410

Net cash provided by (used in) financing activities 115,398 ( 12,495 ) ( 129,417 )

Net cash (used in) provided by financing activities ( 27,720 ) 115,398 ( 12,495 )

Net change in cash and cash equivalents 277,050 200,980 6,894

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Dividends declared but not paid $ 13,208 $ — $ 12,535

Asset acquisition from extinguishment of note receivable $ 21,133 $ — $ —

Investment in property, equipment and intangibles acquired in accounts payable and accrued liabilities $ 3,518 $ 1,421 $ 959

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

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Value Additional

Capital Accumulated

Comprehensive

Income (Loss) Treasury

Capital Accumulated Other Comprehensive Loss Treasury

Stock Retained

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Net income — — — — — 222,878 222,878

Other comprehensive income (loss) — — — ( 747 ) — — ( 747 )

Other comprehensive income (loss), net of tax — — — 896 — — 896

Share-based payment activity 654,694 — 19,698 — 18,358 — 38,056

Dividends declared ($ 0.215 per share)

Dividends declared ($ 0.215 per share quarterly)

— — — — — ( 48,609 ) ( 48,609 )

Treasury purchases ( 631,273 ) — — — ( 50,638 ) — ( 50,638 )

— — ( 1,708 ) — — ( 614 ) ( 2,322 )

Balance as of December 31, 2019 55,702,628 $ 951 $ 231,160 $ ( 4,550 ) $ ( 1,219,905 ) $ 968,833 $ ( 23,511 )

Cumulative-effect adjustment (2)

— — — — — ( 6,831 ) ( 6,831 )

Net income — — — — — 75,387 75,387

Other comprehensive income (loss) — — — 896 — — 896

Other comprehensive income (loss), net of tax — — — ( 96 ) — — ( 96 )

Share-based payment activity (3)

Dividends declared ($ 0.215 per share)

506,953 — 2,761 — 14,877 ( 437 ) 17,201

Treasury purchases ( 631,273 ) — — — ( 50,638 ) — ( 50,638 )

Dividends declared (3)

— — — — — ( 12,452 ) ( 12,452 )

Treasury purchases ( 674,027 ) — — — ( 55,450 ) — ( 55,450 )

Balance as of December 31, 2020 55,535,554 $ 951 $ 233,921 $ ( 4,646 ) $ ( 1,260,478 ) $ 1,024,500 $ ( 5,752 )

Cumulative-effect adjustment (2)

— — — — — ( 6,831 ) ( 6,831 )

Net income — — — — — 288,957 288,957

Other comprehensive income (loss) — — — ( 96 ) — — ( 96 )

Other comprehensive income (loss), net of tax — — — 72 — — 72

Share-based payment activity (3)

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Balance as of December 31, 2021 55,609,226 $ 951 $ 259,317 $ ( 4,574 ) $ ( 1,265,032 ) $ 1,275,220 $ 265,882

(1) Impacts of i) adoption of Topic 606 related to a foreign joint venture accounted for as an equity method investment on Retained Earnings and ii) transaction resulting in an increase in ownership of a consolidated joint venture on Additional Paid-in-Capital.

(2) Reflects the cumulative effect of Topic 326, which was adopted on January 1, 2020.

Refer to Note 1 for additional details.

(1) Impacts of i) adoption of Topic 606 related to a foreign affiliate accounted for as an equity method investment on Retained Earnings and ii) transaction resulting in an increase in ownership of a consolidated affiliate on Additional Paid-in-Capital.

(2) R eflects the cumulative effect of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) and subsequent amendments issued thereafter (collectively "Topic 326"), which was adopted on January 1, 2020.

Refer to Note 4.

(3) During the fourth quarter of 2019, the Company's board of directors announced a 5 % increase to the quarterly dividend rate to $ 0.225 per share from $ 0.215 per share, beginning with the dividend payable in the first quarter of 2020.

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The dividend was payable on April 16, 2020 to shareholders of record on April 2, 2020.

Subsequent to the payment of the dividend, in light of uncertainty resulting from the COVID-19 pandemic, we suspended future, undeclared dividends while the pandemic is significantly impacting travel.

During 2020, accumulated dividends were paid to certain shareholders upon vesting of certain performance-based stock grants which are captured in Share based payment activity.

In April 2020, subsequent to the payment of the dividend and in light of uncertainty resulting from the COVID-19 pandemic, we suspended future, undeclared dividends.

During 2020 and 2021, accumulated dividends were paid to certain shareholders upon vesting of certain performance vested restricted stock units ("PVRSU") which are captured in Share-based payment activity.

On May 7, 2021 and September 9, 2021, the Company's board of directors declared a quarterly cash dividend of $ 0.225 per share of common stock.

On December 6, 2021, the Company's board of directors approved a 6 % increase in the quarterly cash dividend and declared a quarterly cash dividend of $ 0.2375 per share of common stock.

The accompanying notes are an integral part of these consolidated financial statements.

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The accompanying consolidated financial statements of Choice Hotels International, Inc.

and its subsidiaries (together the "Company") have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP").

and its subsidiaries (together the "Company") have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP") pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC").

All significant intercompany accounts and transactions have been eliminated in consolidation.

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Actual results could differ from those estimates.

In the opinion of management, the accompanying consolidated financial statements include all normal and recurring adjustments that are necessary to fairly present the consolidated financial statements.

In the opinion of management, the accompanying consolidated financial statements include all adjustments that are necessary to fairly present the Company's consolidated financial statements.

Certain prior year amounts in our consolidated financial statements have been reclassified in order to maintain comparability with current year presentation.

Foreign currency transaction gains and losses that were previously presented in SG&A expenses are now presented within other gains in the consolidated statements of income.

The reclassification had no effect on the Company’s previously reported net income.

Revenue Recognition

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Fees generated from brand intellectual property are recognized to revenue over time as hotel owners pay for access to these services for the duration of the franchise agreement.

Franchise fees are typically based on the sales or usage of the underlying hotel, with the exception of fixed up-front fees that usually represent an insignificant portion of the transaction price.

The variable consideration is recognizable after the completion of a hotel stay.

As a result, variable transaction price is determined for the period when the underlying gross room revenues and transactions or events which generate fees are known.

Franchise fees are typically based on the sales or usage of the underlying hotel (i.e., after the completion of a hotel stay), with the exception of fixed up-front fees that usually represent an insignificant portion of the transaction price.

Variable transaction price is determined for the period when the underlying gross room revenues and transactions or events which generate fees are known.

Franchise fees include the following:

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or (iii) existing franchise agreements are extended.

These fees are recognized as revenue ratably as services are provided over the enforceable period of the franchise agreement.

These fees are recognized as revenue ratably as services are provided over the enforceable period of the

franchise agreement.

The enforceable period is the period from hotel opening to the first point the franchisee or the Company can terminate the franchise agreement without incurring a significant penalty.

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The Company’s franchise agreements provide the Company the right to advance monies to the franchise system when the needs of the system surpass the balances currently available and recover such advances in future periods through additional fee assessments or reduced spending.

During the years ended December 31, 2020, and 2019, marketing and reservation system expenses exceeded revenues by $ 44.3 million and $ 1.7 million, respectively.

During the year ended December 31, 2018, marketing and reservation system revenues exceeded expenses by $ 9.4 million.

The deficit generated during the year ended December 31, 2020 is a result of lower marketing and reservation fees generated and incremental spend by the Company to support franchisees during the COVID-19 pandemic.

Material rights for free or discounted goods or services to hotel guests

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The Company is an agent in coordinating delivery of the services between the loyalty program member and franchisee or third party, and as a result, revenues are recognized net of the cost of redemptions.

The estimated fair value of future redemptions is reflected in current and non-current Liability for guest loyalty program in our consolidated balance sheets.

The liability for guest loyalty program is developed based on an estimate of the eventual redemption rates and point values using various actuarial methods.

The estimated value of future redemptions is reflected in current and non-current Liability for guest loyalty program in our consolidated balance sheets.

The liability for guest loyalty program is developed based on an estimate of the eventual redemption rates, including the on-going impacts anticipated from the COVID-19 pandemic on future redemption behavior, and point values using various actuarial methods.

These significant judgments determine the required point liability attributable to outstanding points, which is relieved as redemption costs are processed.

The amount of the loyalty program fees in excess of the point liability represents current and non-current Deferred revenue , which is recognized to revenue as points are redeemed including an estimate of future forfeitures (“breakage”).

The anticipated redemption pattern of the points is the basis for current and non-current designation of each liability, which was adjusted in the first quarter of 2020 to reflect an anticipated longer issuance to redemption period in light of impacts from the COVID-19 pandemic.

The anticipated redemption pattern of the points is the basis for current and non-current designation of each liability.

As of December 31, 2021, the current and non-current deferred revenue balances are $ 55.8 million and $ 26.9 million, respectively.

Loyalty points are typically redeemed within three years of issuance.

program point redemption revenues are recognized within marketing and reservation system revenue in the consolidated statements of income.

Loyalty points are typically

redeemed within three years of issuance.

Loyalty program point redemption revenues are recognized within marketing and reservation system revenue in the consolidated statements of income.

The Company also earns revenues on contracts incidental to the support of operations for franchised hotels, including purchasing operations.

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The Company generates procurement services revenues from qualified vendors.

Procurement services revenues are generally based on marketing services provided by the Company on behalf of the qualified vendors to hotel owners and guests.

Qualified vendor revenues are generally based on marketing services provided by the Company on behalf of and access provided to the qualified vendors to hotel owners and guests.

The Company provides these services in exchange for either fixed consideration or a percentage of revenues earned by the qualified vendor pertaining to purchases by the Company’s franchisees or guests.

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Variable consideration is determined at the conclusion of each period, and allocated to and recognized in the current period.

The Company owned five hotels at December 31, 2020 and December 31, 2019, from which the Company derives revenues.

The Company owned six hotels at December 31, 2021 and five hotels at December 31, 2020, from which the Company derives revenues.

As a hotel owner, the Company has performance obligations to provide accommodations to hotel guests and in return the Company earns a nightly fee for an agreed upon period that is generally payable at the time the hotel guest checks out of the hotel.

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The Company presents taxes collected from customers and remitted to governmental authorities on a net basis and, therefore, they are excluded from revenues in the consolidated financial statements.

Accounts & Notes Receivable and Allowances for Credit Losses

Refer to the Recently Adopted Accounting Standards section below and Note 4.

Notes & Accounts Receivable and Allowances for Credit Losses

The Company provides financing in the form of notes receivable loans to franchisees to support the development of properties in strategic markets.

The Company has developed a systematic methodology to determine its allowance for credit losses across our portfolio of notes receivable loans.

The Company monitors the risk and performance of our portfolio by the level of security in collateral (i.e., senior, subordinated or unsecured), which is the Company's credit quality indicator.

As each of the Company’s notes receivable loans has unique risk characteristics, the Company deploys its methodology to calculate allowances for credit losses at the individual notes receivable loan level.

The Company primarily utilizes a discounted cash flow ("DCF") technique to measure the credit allowance, influenced by the key economic variables of each note receivable loan.

The Company identified the key economic variables for these loans to be loan-to-cost ("LTC") or loan-to-value ("LTV") ratios and debt service coverage ratio ("DSCR").

The LTC or LTV ratio represents the loan principal relative to the project cost or value and is an indication of the ability to be re-paid principal at loan maturity.

The DSCR represents property-specific net operating income as a percentage of the interest and principal payments incurred (i.e., debt service) on all debt of the borrower for the property and is an indication of the ability of the borrower to timely pay amounts due during the term of the loan.

The LTC or LTV ratios and DSCR are considered during loan underwriting as indications of risk and, accordingly, we believe these factors are the most representative risk indicators for calculating the allowance for credit loss.

Loans with higher LTC or LTV ratios and lower DSCR ratios generally are representative of loans with greater risk and, accordingly, have higher credit allowances as a percentage of loan principal.

Conversely, loans with lower LTC or LTV ratios and higher DSCR ratios generally are representative of loans with lesser risk and, accordingly, have lower credit allowances as a percentage of loan principal.

In preparing or updating a DCF model as the basis for the credit allowance, the Company develops various recovery scenarios and, based on the key economic variables and present status of the loan and underlying collateral, applies a probability-weighting to the outputs of the scenarios.

Collateral-dependent financial assets are financial assets for which repayment is expected to be derived substantially through the operation or sale of the collateral and where the borrower is experiencing financial difficulty.

For collateral-dependent loans, expected credit losses are based on the fair value of the collateral, less selling costs if repayment will be from the sale of the collateral.

The Company calculates fair value of the collateral using a DCF technique to project cash flows or a market approach via quoted market prices.

In developing cash flow projections, the Company will review the borrower's financial statements for the property, economic trends, industry projections for the market where the property is located, and comparable sales capitalization rates.

Management assesses the credit quality of the notes receivable portfolio and adequacy of credit loss allowances on an at least quarterly basis and records provisions for credit losses in SG&A expenses.

Significant judgment is required in this analysis.

Accounts receivable consist primarily of franchise and related fees due from hotel franchisees and are recorded at the invoiced amount.

The allowance for credit losses is the Company’s best estimate of the amount of expected credit losses inherent in the accounts receivable balance.

The Company determines the allowance considering historical write-off experience, review of aged receivable balances and customer payment trends, the economic environment, and other available evidence.

The Company records provisions for credit losses on accounts receivable in SG&A expenses and marketing and reservation system expenses in the accompanying consolidated statements of income.

When the Company determines that an account is not collectible, the account is written-off to the associated allowance for credit losses.

Refer to Note 4 for further discussion of receivables and allowances for credit losses.

Advertising Costs

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Capitalization Policies

Property and equipment are recorded at cost and depreciated for financial reporting purposes using the straight-line method over the estimated useful lives of the assets.

Property and equipment are generally recorded at cost and depreciated for financial reporting purposes using the straight-line method over the estimated useful lives of the assets.

Leasehold improvements are amortized over the shorter of the lease term or their useful lives.

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The Company capitalizes interest incurred during construction of property and equipment.

Interest capitalized as a cost of property and equipment totaled $ 0.1 million and $ 0.2 million for the years ended December 31, 2020 and 2019.

Interest capitalized as a cost of property and equipment totaled $ 0.7 million and $ 0.1 million during the years ended December 31, 2021 and 2020, respectively.

As construction in progress and software development are completed and placed in service, they are transferred to appropriate property and equipment categories and depreciation begins.

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Maintenance, repairs and minor replacements are charged to expense as incurred.

A summary of the ranges of estimated useful lives upon which depreciation rates are based follows:

The Company has made certain acquisitions of hotel assets which are recorded at the fair value of consideration exchanged.

Refer to Note 24.

A summary of the ranges of estimated useful lives from original place in service date for depreciation and amortization purposes are as follows:

Computer equipment and software 2 - 7 years

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• The asset is actively being marketed for sale at a price that is reasonable given its current market value.

Upon designation as an asset held for sale, the Company records the carrying value of each asset at the lower of its carrying value or its estimated fair value, less estimated costs to sell, and ceases recording depreciation.

Upon designation as an asset held for sale, the Company records the carrying value of each asset as a component of other current assets at the lower of its carrying value or its estimated fair value, less estimated costs to sell, and ceases recording depreciation.

Refer to Note 3.

If at any time these criteria are no longer met, subject to certain exceptions, the assets previously classified as held for sale are reclassified as held and used and measured individually at the lower of (a) the carrying amount before the asset was classified as held for sale, adjusted for any depreciation or amortization expense that would have been recognized had the asset been continuously classified as held and used, or (b) the fair value at the date of the subsequent decision not to sell.

Valuation of Long-Lived Assets, Intangibles, and Goodwill

The Company evaluates the potential impairment of property and equipment and other long-lived assets, including franchise rights and other intangible assets with definite lives, annually or earlier upon the occurrence of an event or when other circumstances indicate that the Company may not be able to recover the carrying value of the asset.

The Company groups its long-lived assets, including property and equipment and definite-lived intangible assets (e.g., franchise rights, franchise agreement acquisition costs), at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.

The Company evaluates the potential impairment of its long-lived asset groups annually as of December 31 or earlier when other circumstances indicate that the Company may not be able to recover the carrying value of the asset group.

When indicators of impairment are present, recoverability is assessed based on undiscounted expected cash flows.

If the undiscounted expected cash flows are less than the carrying amount of the assets, an impairment charge is recorded for the excess of the carrying value over the fair value of the asset.

The fair value of intangibles and long-lived assets are estimated primarily using undiscounted cash flow analyses.

Significant management judgment is involved in evaluating indicators of impairment and developing any required projections to test for recoverability or estimate the fair value of an asset.

If the undiscounted expected cash flows are less than the carrying amount of the asset group, an impairment charge is measured and recorded, as applicable, for the excess of the carrying value over the fair value of the asset group.

The fair value of long-lived asset groups are estimated primarily using discounted cash flow analyses representing the highest and best use by an independent market participant.

Significant management judgment is involved in evaluating

indicators of impairment and developing any required projections to test for recoverability or estimate fair value.

Furthermore, if management uses different projections or if different conditions occur in future periods, future-operating results could be materially impacted.

The Company did not identify any indicators of impairment of long-lived assets from the Hotel Franchising reporting unit during the years ended December 31, 2020, 2019 and 2018, other than impairments on franchise sales commission assets and franchise agreement acquisition cost intangibles resulting from terminations of franchisees from the Choice system as discussed in Note 2.

The Company did not identify any indicators of impairment of long-lived assets from the Hotel Franchising reporting unit during the years ended December 31, 2021, 2020 and 2019, other than impairments on franchise sales commission assets and franchise agreement acquisition cost intangibles recorded within SG&A expenses and marketing and reservation system expenses as discussed in Note 2.

During 2020, the Company recognized impairments of long-lived assets attributable to a commercial office building and a real estate parcel.

During 2019, the Company recognized impairments of long-lived assets attributable to the SaaS for vacation rentals reporting unit.

During 2019, the Company recognized impairments for the full amount of long-lived assets attributable to the SaaS for vacation rentals reporting unit of $ 7.3 million.

Refer to Note 6.

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If the conclusion is that it is not more likely than not that the fair value of the asset is less than its carrying value, then no further testing is required.

If the conclusion is that it is more likely than not that the fair value of the asset is less than its carrying value, then a quantitative impairment test is performed whereby the carrying value is compared to the fair value of the asset and an impairment charge is recognized for any excess.

The Company may elect to forgo the qualitative assessment and move directly to the quantitative impairment tests for goodwill and indefinite-lived intangibles.

The Company determines the fair value of its reporting units and indefinite-lived intangibles using income and market methods.

Goodwill is allocated to the Company's reporting units, which are determined by the availability of discrete financial information relied upon by segment management.

As of December 31, 2020, the Company's goodwill is allocated to the Hotel Franchising reporting unit.

Goodwill is allocated to the Company's reporting units.

The Company's reporting units are determined primarily by the availability of discrete financial information relied upon by chief operating decision maker ("CODM") to assess performance and make operating segment resource allocation decisions.

As of December 31, 2021, the Company's goodwill is allocated solely to the Hotel Franchising reporting unit.

The Company performed the qualitative impairment analysis for the Hotel Franchising reporting unit, concluding that it is more likely than not that the fair value of the reporting unit is greater than its carrying amount.

As such, a quantitative test was not required and no impairment was recorded.

Historically, goodwill has been partially allocated to the SaaS for vacation rentals reporting unit.

The Company performed the quantitative test for the SaaS for vacation rentals reporting unit during the fourth quarter of 2018 and first quarter of 2019 determining that the carrying value of the reporting unit exceeded the fair value.

As a result, the Company recognized a goodwill impairment of $ 4.3 million and $ 3.1 million in the fourth quarter of 2018 and first quarter of 2019, respectively.

The SaaS for vacation rentals reporting unit was sold during the second quarter of 2019, resulting in the write-off of the remaining goodwill.

Historically, goodwill was partially allocated to the SaaS for vacation rentals reporting unit.

The Company performed the quantitative test for the SaaS for vacation rentals reporting unit during prior periods, including the first quarter of 2019, determining that the carrying value of the reporting unit exceeded the fair value.

As a result, the Company recognized a goodwill impairment of $ 3.1 million in the first quarter of 2019.

The SaaS for vacation rentals reporting unit was sold during the second quarter of 2019, resulting in the derecognition of net assets of the reporting unit, including the remaining goodwill, and the recognition of a loss on sale of $ 4.7 million.

Refer to Note 6.

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Investments in unconsolidated affiliates where the Company is not deemed to be the primary beneficiary but where the Company exercises significant influence over the operating and financial policies of the investee are accounted for using the equity method.

Valuation of Investments in Equity Method Investments

The Company evaluates an investment in a venture for impairment when circumstances indicate that the carrying value may not be recoverable, for example due to loan defaults, significant under performance relative to historical or projected operating performance, and significant negative industry or economic trends.

Valuation of Investments in Affiliates

The Company evaluates an investment in an affiliate for impairment when circumstances indicate that the carrying value may not be recoverable, for example due to loan defaults, significant under performance relative to historical or projected operating performance, and significant negative industry, market or economic trends.

When there is indication that a loss in value has occurred, the Company evaluates the carrying value compared to the estimated fair value of the investment.

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For declines in value that are deemed other-than-temporary, impairments are charged to earnings.

During the year ended December 31, 2020, the Company recognized impairment charges of $ 7.3 million related to four separate equity method investments.

During the years ended December 31, 2021 and 2020, the Company recognized impairment charges of $ 19.3 million and $ 7.3 million, respectively, related to multiple investments in affiliates accounted for under the equity method.

The impairment charges are classified as equity in net loss of affiliates in the consolidated statements of income.

The Company recognized no impairment charges during the year ended December 31, 2019.

Refer to Note 8.

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The Company translates the financial statements of consolidated entities whose functional currency is not the United States dollar into United States dollars.

The Company translates assets and liabilities at the exchange rate in effect as of the financial statement date and translates income statement accounts using the weighted average exchange rate for the period.

The Company includes translation adjustments from foreign exchange and the effect of exchange rate changes on intercompany transactions of a long-term investment nature as a separate component of shareholders’ deficit.

The Company translates assets and liabilities at the exchange rate in effect as of the financial statement date and translates income statement accounts using the approximate weighted average exchange rate for the period.

The Company reports foreign currency transaction gains and losses and the effect of inter-company transactions of a short-term or trading nature in SG&A expenses on the consolidated statements of income.

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The Company periodically uses derivative instruments as part of its overall strategy to manage exposure to market risks associated with fluctuations in interest rates.

All outstanding derivative financial instruments are recognized at their fair values

as assets or liabilities.

The impact on earnings from recognizing the fair values of these instruments depends on their intended use, their hedge designation and their effectiveness in offsetting changes in the fair values of the exposures they are hedging.

All outstanding derivative financial instruments are recognized at their fair values as assets or liabilities.

The impact on earnings from recognizing the fair values of these instruments depends on their intended

use, their hedge designation and their effectiveness in offsetting changes in the fair values of the exposures they are hedging.

The Company does not use derivatives for trading purposes.

The effective portion of changes in fair value of derivatives designated as cash flow hedging instruments are recorded as a component of accumulated other comprehensive income (loss) and the ineffective portion is reported currently in earnings.

The amounts included in accumulated other comprehensive income (loss) are reclassified into earnings in the same period during which the hedged item affects earnings.

The effective portion of changes in fair value of derivatives designated as cash flow hedging instruments are recorded as a component of accumulated other comprehensive loss and the ineffective portion is reported currently in earnings.

The amounts included in accumulated other comprehensive loss are reclassified into earnings in the same period during which the hedged item affects earnings.

Amounts reported in earnings are classified consistent with the item being hedged.

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At December 31, 2021 and 2020, there were no outstanding derivative positions.

Recently Adopted Accounting Standards

In June 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) and issued subsequent amendments to the initial guidance at various points thereafter ("Topic 326").

Under legacy standards, we recognized an impairment of receivables when it was probable that a loss had been incurred.

Topic 326 requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts (which includes losses that may be incurred in future periods), and enhanced disclosures to provide insight to significant estimates and judgments used in estimating credit losses.

The scope and provisions of Topic 326 impact the allowance for the Company's notes and accounts receivables.

The Company adopted Topic 326 on January 1, 2020 using the modified retrospective approach resulting in a cumulative-effect adjustment of $ 6.8 million with respect to notes receivable (inclusive of deferred taxes), recorded in retained earnings as of the date of adoption.

The Company has developed a systematic methodology to determine its allowance for credit losses across our portfolio of notes receivable loans.

The Company monitors the risk and performance of our portfolio by the level of security in collateral (i.e., senior, subordinated or unsecured).

The Company primarily utilizes a discounted cash flow ("DCF") approach to measure the credit allowance, influenced by the key economic variables of each note receivable loan.

The Company identified the key economic variables for these loans to be loan-to-cost ("LTC") or loan-to-value ("LTV") ratios and debt service coverage ratio ("DSCR").

The LTC or LTV ratio represents the loan principal relative to the project cost or value and is an indication of the ability to be re-paid principal at loan maturity.

The DSCR represents borrower net operating income as a percentage of the interest and principal payments incurred (i.e., debt service) on all debt of the borrower and is an indication of the ability of the borrower to timely pay amounts due during the term of the loan.

Loans with higher LTC or LTV ratios and lower DSCR ratios generally are representative of loans with greater risk and, accordingly, have higher credit allowances as a percentage of loan principal.

For collateral-dependent loans, expected credit losses are based on the fair value of the collateral, less selling costs if repayment will be from the sale of the collateral.

Management assesses the credit quality of the portfolio and adequacy of credit loss allowances on an at least quarterly basis.

Significant judgment is required in this analysis.

Accounts receivable consist primarily of franchise and related fees due from hotel franchisees and are recorded at the invoiced amount.

The allowance for credit losses is the Company’s best estimate of the amount of expected credit losses inherent in the

accounts receivable balance.

The Company records provisions for credit losses in SG&A expenses and marketing and reservation system expenses in the accompanying consolidated statements of income.

When the Company determines that an account is not collectible, the account is written-off to the associated allowance for credit losses.

Historically, the Company has considered its credit risk associated with accounts receivables to be partially mitigated due to the dispersion of these receivables across a large number of geographically diverse franchisees.

During the year ended December 31, 2020, the Company recorded provisions for credit losses on accounts receivable of $ 15.6 million in SG&A expenses and $ 26.0 million in marketing and reservation system expenses, with contemplation to economic and credit conditions resulting from the COVID-19 pandemic and estimates of other expected credit losses.

These provisions represent the material valuation activity for the accounts receivable allowance for credit losses.

Refer to Note 4 for further discussion of notes receivable and rollforward of our allowance for credit losses.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement ("ASU 2018-13").

ASU 2018-13 modifies disclosure requirements on fair value measurements.

The Company adopted ASU 2018-13 on a retrospective basis on January 1, 2020, with limited modifications to its fair value footnote disclosure.

Refer to Note 14.

In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40) :

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract ("ASU 2018-15").

ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license).

The Company adopted ASU 2018-15 on a prospective basis on January 1, 2020.

As the majority of the Company's hosting arrangements are service contracts, the capitalization and subsequent amortization of implementation costs incurred after adoption are expected to impact the timing, but not classification, of expense recognition.

Recently Adopted & Issued Accounting Standards

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes ("ASU 2019-12").

ASU 2019-12 enhances and simplifies various aspects of the income tax accounting guidance in Accounting Standards Codification ("ASC") 740, Income Taxes .

The Company adopted ASU 2019-12 on January 1, 2021 and the adoption did not have material impacts on our consolidated financial statements and disclosures.

Contract Liabilities

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The aggregate transaction price allocated to unsatisfied or partially unsatisfied performance obligations is $ 175.4 million as of December 31, 2021.

This amount represents fixed transaction price that will be recognized as revenue in future periods, which is primarily captured in the balance sheet as current and non-current deferred revenue.

This amount represents fixed transaction price that will be recognized as revenue in future periods, which is primarily captured in the balance sheet within current and non-current deferred revenue.

Based on practical expedient elections permitted by ASU 2014-09, Revenue From Contracts with Customers (Topic 606) and subsequent amendments ("Topic 606"), the Company does not disclose the value of unsatisfied performance obligations for (i) variable consideration subject to the sales or usage-based royalty constraint or comprising a component of a series (including franchise, partnership, qualified vendor, and SaaS agreements), (ii) variable consideration for which we recognize revenue at the amount to which we have the right to invoice for services performed, or (iii) contracts with an expected original duration of one year or less.

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Capitalized franchise sales commission are amortized on a straight-line basis over the estimated benefit period of the arrangement, unless the franchise agreement is terminated and the hotel exits the system whereby remaining capitalized amounts will be expensed in the period of termination.

The estimated benefit period is the Company's estimate of the duration a hotel will remain in the Choice system.

The estimated benefit period is the Company's estimate of the duration a hotel will remain in the Choice

Capitalized franchise sales commissions are $ 55.5 million and $ 54.3 million within Other assets as of December 31, 2021 and 2020, respectively.

Amortization expense and impairment loss for the years ended December 31, 2020, 2019 and 2018 were $ 9.7 million, $ 10.0 million and $ 9.0 million, respectively, and are reflected within SG&A expenses.

Amortization expense and impairment charges for the years ended December 31, 2021, 2020 and 2019 were $ 11.9 million, $ 9.7 million and $ 10.0 million, respectively, and are recorded within SG&A expenses.

The Company makes certain payments to customers as an incentive to enter into new franchise agreements (“franchise agreement acquisition cost”).

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Franchise agreement acquisition cost intangibles are amortized on a straight-line basis over the estimated benefit period of the arrangement as an offset to royalty fees and marketing and reservation system fees.

Impairments from hotel terminations for the years ended December 31, 2020, 2019 and 2018 were $ 2.0 million, $ 1.0 million and $ 0.3 million, respectively, and are recorded within SG&A expenses and marketing and reservation system expenses.

Impairments from adverse franchise agreement activity, including terminations and significant delinquencies in construction or invoice payments, for the years ended December 31, 2021, 2020 and 2019 were $ 11.1 million, $ 2.0 million and $ 1.0 million, respectively, and are recorded within SG&A expenses and marketing and reservation system expenses.

Disaggregation of Revenue

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Total revenues $ 1,114,820

Marketing and reservation system and Procurement services point in time revenues represent loyalty points redeemed by members for benefits (including with third-party partners) including adjustments to estimated redemption rates, net of the cost of redemptions of $ 79.1 million, $ 81.2 million, and $ 56.2 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Non-Topic 606 revenues represent revenue from leasing (refer to Note 19) and are presented in Owned hotels and Other revenues in the consolidated statements of income.

Marketing and reservation system and Procurement services point in time revenues represent loyalty points redeemed by members for benefits (with both franchisees and third-party partners), net of the cost of redemptions.

For the years ended

December 31, 2021, 2020 and 2019, these net revenues, inclusive of adjustments to estimated redemption rates, were $ 66.2 million, $ 79.1 million, and $ 81.2 million, respectively.

Non-Topic 606 revenues represent revenue from leasing and are presented in Owned hotels and Other revenues in the consolidated statements of income.

As presented in Note 20, the Corporate & Other segment amounts represent $ 45.7 million, $ 28.3 million, and $ 30.7 million for the years ended December 31, 2021, 2020 and 2019, respectively, and are included in the Over time column of Other revenues and the Owned hotels and Non-Topic 606 revenues rows.

The remaining revenues relate to the Hotel Franchising segment.

Royalty fees and Marketing and reservation system revenues are presented net of intersegment revenues of $ 1.5 million, $ 1.7 million, and zero for the years ended December 31, 2020, 2019 and 2018, respectively.

Other Current Assets

Other current assets consist of the following:

Royalty fees and Marketing and reservation system revenues are presented net of intersegment revenues of $ 2.9 million, $ 1.5 million, and $ 1.7 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following:

(in thousands) 2021 2020

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Other current assets 5,870 3,816

Total other current assets $ 19,980 $ 24,727

Notes Receivable and Allowance for Credit Losses

The Company has provided financing in the form of notes receivable loans to franchisees to support the development of properties in strategic markets.

The composition of notes receivable balances based on the level of security credit quality indicator and the allowance for credit losses is as follows:

Land held for sale 8,465 —

Total prepaid expenses and other current assets $ 29,945 $ 19,980

Land held for sale represents a parcel of land previously acquired to support the Company's program to stimulate development of certain brands.

In October 2021, the Company committed to a plan to market the land for sale and executed a purchase and sale agreement.

As a result, the land is deemed to meet held for sale classification during the fourth quarter of 2021, and the Company recognized a $ 0.3 million charge, reflected within Impairment of long-lived assets on the consolidated statements of income, for the carrying value in excess of fair value less costs to sell.

The agreed upon transaction price in the purchase and sale agreement was determined to approximate fair value under a market valuation approach.

The impairment of the land is included in the Corporate & Other segment in Note 20.

The land was subsequently sold on January 18, 2022.

Receivables and Allowance for Credit Losses

Notes Receivable

The composition of notes receivable balances based on the level of security credit quality indicator and the allowances for credit losses is as follows:

(in thousands) 2021 2020

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Total notes receivable $ 2,166 $ — $ 31,830 $ 103,687 $ 137,683

As disclosed in Note 1, Topic 326 required a cumulative-effect adjustment to the consolidated balance sheet as of the beginning of the first reporting period in which the guidance was effective.

As of the adoption date of January 1, 2020, the Company established a credit allowance on its notes receivable loans of $ 12.9 million, an increase of $ 8.3 million from the previous loan allowance of $ 4.6 million as of December 31, 2019.

The adoption of Topic 326 required a cumulative-effect adjustment to the consolidated balance sheet as of the beginning of the first reporting period in which the guidance was effective.

As of the adoption date of January 1, 2020, the Company established an incremental credit allowance on its notes receivable loans of $ 8.3 million.

The following table summarizes the activity related to the Company’s notes receivable allowance for credit losses, including the impacts of adopting Topic 326:

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Ending balance $ 16,779 $ 19,484 $ 4,556

The provisions recorded in the year ended December 31, 2020 reflect the increased likelihood of adverse outcomes on loans to borrowers with contemplation to impacts of the COVID-19 pandemic and estimates of other expected credit losses.

As of December 31, 2020, one of the Company’s loans with senior and subordinated tranches met the definition of collateral-dependent and is collateralized by an operating hotel and membership interests in the borrowing entity.

This loan was previously restructured with concessions to the borrower in 2019 and 2020.

The Company uses a DCF technique to project cash flows based upon the underlying property.

In projecting these cash flows, the Company reviewed the borrower's financial statements, economic trends, industry projections for the market, and comparable sales capitalization rates.

These nonrecurring fair value measurements are considered to be in level three of the fair value measurement hierarchy as there are unobservable inputs, which are significant to the overall fair value.

Based on this analysis, the fair value of the collateral secures the carrying value of the loan to a significant extent.

As of December 31, 2020, the Company's provision for credit losses attributable to this loan is $ 7.8 million.

The provisions recorded in the year ended December 31, 2021 primarily result from changes in the classification of certain loans as collateral-dependent and associated revisions to their allowances.

The write-offs for the year ended December 31, 2021 are associated with a loan that was settled in exchange for an operating hotel on October 1, 2021;

refer to acquisition disclosures in Note 24.

Allowances for credit losses attributable to collateral-dependent loans are $ 6.3 million and $ 7.8 million as of December 31, 2021 and December 31, 2020, respectively.

As of December 31, 2021, two loans with senior and/or subordinated tranches met the definition of collateral-dependent and are collateralized by the membership interests in the borrowing entities and either the associated land parcels or an operating hotel.

The Company used a DCF technique to project cash flows or a market approach via quoted market prices to value the underlying collateral.

The Company reviewed the borrower's financial statements, economic trends, industry projections for the market, and comparable sales capitalization rates, which represent significant inputs to the cash flow projections.

These nonrecurring fair value measurements are classified as level three of the fair value measurement hierarchy, as there are unobservable inputs which are significant to the overall fair value.

Based on these analyses, the fair value of collateral secures the carrying value of each loan to a significant extent.

During the first quarter of 2021, a loan with senior and subordinated tranches, that met the definition of collateral-dependent as of December 31, 2020, was restructured and as a result, no longer meets the classification of collateral-dependent as of December 31, 2021.

As a result of the COVID-19 pandemic, the Company extended interest deferral terms on certain notes receivable.

The Company considers loans to be past due and in default when payments are not made when due in accordance with then current loan provisions or terms extended to borrowers, including loans with concessions or interest deferral.

Although the Company considers loans to be in default if payments are not received on the due date, the Company does not suspend the accrual of

interest until those payments are more than 30 days past due.

The Company considers loans to be past due when payments are not made when due in accordance with then current loan provisions or terms extended to borrowers, including loans with concessions or interest deferral.

Although the Company considers loans to be past due if payments are not received on the due date, the Company does not suspend the accrual of interest until those payments are more than 30 days past due.

The Company applies payments received for loans on non-accrual status first to interest and then to principal.

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Past Due 30-89 days

Past Due > 90 days

Past Due Total

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These loans have stated fixed and/or variable interest amounts.

For collateral-dependent loans, the Company has no exposure to the borrowing VIE beyond the note receivable and limited commitments addressed in Note 23.

Accounts Receivable

Accounts receivable consist primarily of franchise and related fees due from hotel franchisees and are recorded at the invoiced amount.

During the year ended December 31, 2020, the Company recorded provisions for credit losses on accounts receivable of $ 15.6 million in SG&A expenses and $ 26.0 million in marketing and reservation system expenses, in consideration of the economic and credit conditions resulting from the COVID-19 pandemic and estimates of other expected credit losses.

During the year ended December 31, 2021, the Company recorded reversals of provisions for credit losses on accounts receivable of $ 4.4 million in SG&A expenses and $ 7.3 million in marketing and reservation system expenses, after considering improved collection patterns and economic and credit conditions.

During the years ended December 31, 2020 and December 31, 2021, the Company recorded write-offs, net of recoveries, through the accounts receivable allowance for credit losses of $ 0.6 million and $ 13.5 million, respectively.

Property and Equipment

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Furniture, fixtures, vehicles and equipment 62,703 62,530

Property and equipment, at cost 558,322 538,210

Property and equipment 609,859 558,322

Accumulated depreciation and amortization ( 232,492 ) ( 223,421 )

Property and equipment, at cost, net $ 334,901 $ 351,502

Property and equipment, net $ 377,367 $ 334,901

Unamortized capitalized software development costs at December 31, 2021 and 2020 totaled $ 52.0 million and $ 52.2 million, respectively.

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Depreciation expense, excluding amounts attributable to marketing and reservation activities, for the years ended December 31, 2021, 2020 and 2019 was $ 16.5 million, $ 16.9 million and $ 9.7 million, respectively.

In the third quarter of 2019, the Company completed an asset acquisition for four Cambria Hotels with a total net asset basis of $ 194.0 million.

In the fourth quarter of 2021, the Company acquired a hotel property through a deed in lieu foreclosure at the fair value of $ 21.1 million as of the acquisition date of October 1, 2021.

In the third quarter of 2019, the Company completed an asset acquisition of four Cambria Hotels with a total net asset basis of $ 194.0 million.

Refer to Note 24.

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Refer to Note 6.

Goodwill, Impairment of Assets, and Loss on Sale of Business

Goodwill, Impairment of Assets, and Sale of Business and Assets

The following table details the carrying amount of our goodwill:

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Accumulated impairment losses ( 7,578 ) ( 7,578 )

Disposition — ( 6,296 )

Goodwill, net carrying amount $ 159,196 $ 159,196

The following is a summary of changes in the carrying amount of goodwill:

(in thousands) December 31, 2019 Acquisitions Foreign Exchange Impairment Disposition December 31, 2020

Hotel Franchising $ 159,196 $ — $ — $ — $ — $ 159,196

Other — — — — — —

Total $ 159,196 $ — $ — $ — $ — $ 159,196

(in thousands) December 31, 2018 Acquisitions Foreign Exchange Impairment Disposition December 31, 2019

Hotel Franchising $ 159,196 $ — $ — $ — $ — $ 159,196

Other 9,800 — ( 407 ) ( 3,097 ) ( 6,296 ) —

Total $ 168,996 $ — $ ( 407 ) $ ( 3,097 ) $ ( 6,296 ) $ 159,196

Goodwill has historically been allocated to two reporting units:

(1) Hotel Franchising and (2) SaaS for vacation rentals ("Other" in the table above).

Activity by reporting unit in the current and prior periods is organized by reporting unit below.

Hotel Franchising

The Company assessed the qualitative factors attributable to the Hotel Franchising reporting unit and determined it is not more likely than not that the fair value of the reporting unit is less than its carrying amount.

The Hotel Franchising reporting unit is included in the Hotel Franchising reportable segment in Note 20.

SaaS for vacation rentals

Fourth Quarter of 2018 evaluation

The Company acquired the SaaS for vacation rentals reporting unit on August 11, 2015 as a complementary adjacent business line to its Vacation Rentals initiative with the intention of leveraging the established SaaS based platform to acquire new customers and expand into new markets.

During the period from acquisition through 2017, the performance of the reporting unit was in line with the assumptions at the time the acquisition was consummated.

In the fourth quarter of 2018, the Company concluded the reporting unit did not achieve the annual revenue and customer acquisition targets.

As part of the Company’s long range planning process, the Company assessed the long-term prospects for the reporting unit, determining certain investments are required to maintain the growth trajectory and achieve the customer acquisition assumed at the time of the acquisition.

The Company elected not to make these investments as there was no longer a strategic alignment with the Vacation Rentals initiative.

In contemplation of this strategic shift in combination with lower than expected revenues and customer acquisition in 2018, the Company revised its future outlook for the reporting unit.

To estimate a fair value for the reporting unit, the Company utilized a combination of market and income approach valuation methods via quoted market prices, market multiples of comparable businesses, and performance of a discounted cash flow analysis.

During 2018, the Company early adopted ASU 2017-04, Intangibles-Goodwill and Other (Topic 350) Simplifying the Test for Goodwill Impairment ("ASU 2017-04"), which eliminated Step 2 from the goodwill impairment test.

Based on the guidance in

ASU 2017-04, the Company recognized a non-cash pre-tax impairment charge on the SaaS for vacation rentals reporting unit's goodwill in the amount by which the carrying amount exceeded fair value of $ 4.3 million.

Prior to performing the goodwill impairment test, the Company assessed if any indicators of impairment were present in the long-lived assets related to the SaaS for vacation rentals reporting unit, including intangible assets.

We concluded the reporting unit’s long-lived assets were not impaired as of December 31, 2018.

As of December 31, 2018, the $ 9.8 million of carrying value remaining in Other goodwill was fully attributable to the SaaS for vacation rentals reporting unit.

First Quarter of 2019 evaluation

On January 29, 2019, the Company became aware that a key customer of the SaaS for vacation rentals reporting unit provided the unit’s management team with a letter purporting to terminate the customer’s contract.

The unit’s management team asserted, and the Company believed, that the purported termination notice was not valid.

The customer was contemplated in the SaaS for vacation rentals reporting unit's projected revenues, and the Company determined that the unit’s receipt of the purported termination notice, even though the validity of the notice was being actively contested by the unit, represented a triggering event which required an interim reevaluation of the reporting unit's long-lived assets group and goodwill in the first quarter of 2019.

The long-lived assets of the SaaS for vacation rentals reporting unit were comprised of $ 4.3 million of intangible assets, $ 1.7 million of operating lease ROU assets, and $ 1.3 million of property and equipment.

The long-lived asset group was determined to be at the SaaS for vacation rentals reporting unit level.

Recoverability of the long-lived asset group was assessed based on undiscounted expected cash flows of the asset group, which were less than the carrying amount of the asset group.

An impairment charge was recorded for the excess of the carrying value over the fair value of the asset group.

To estimate the fair value of the long-lived asset group, the Company utilized a combination of income and market approach valuation methods via performance of a discounted cash flow analysis and quoted market prices.

The Company recognized a non-cash pre-tax long-lived asset group impairment charge for the full amount of SaaS for vacation rentals long-lived assets of $ 7.3 million.

The carrying value of the SaaS for vacation rentals reporting unit was adjusted after the $ 7.3 million long-lived asset impairment.

The adjusted carrying value exceeded the fair value of the reporting unit by $ 3.1 million, resulting in an additional non-cash pre-tax impairment charge on the SaaS for vacation rentals reporting unit's goodwill in this amount.

As of March 31, 2019, the carrying value of the reporting unit's goodwill was $ 6.4 million.

Second Quarter of 2019 evaluation

On June 3, 2019, the SaaS for vacation rentals reporting unit was sold.

As a result of costs incurred in completing the disposition and the derecognition of net assets of the reporting unit, including the remaining goodwill of $ 6.3 million, the Company recognized a loss on sale of $ 4.7 million.

Goodwill was historically allocated to two reporting units:

(1) Hotel Franchising and (2) SaaS for vacation rentals.

In 2019, the Company recognized non-cash pre-tax impairment charges for the SaaS for vacation rentals long-lived asset group and goodwill.

In January 2019, the Company became aware that a key customer of the SaaS for vacation rentals reporting unit provided the unit’s management team with a letter purporting to terminate the customer’s contract.

Recoverability of the $ 7.3 million SaaS for vacation rentals long-lived asset group was assessed based on undiscounted expected cash flows of the asset group, which were less than the carrying amount of the asset group.

The Company recognized a non-cash pre-tax long-lived asset group impairment charge for the full amount of SaaS for vacation rentals long-lived assets.

The carrying value of the SaaS for vacation rentals reporting unit, after adjustment for the long-lived asset impairment, exceeded the fair value of the reporting unit by $ 3.1 million, resulting in an additional non-cash pre-tax impairment charge on the SaaS for vacation rentals reporting unit's goodwill in this amount.

The SaaS for vacation rentals reporting unit was subsequently sold in 2019, and as a result of costs incurred in completing the disposition and the derecognition of net assets of the reporting unit, including the remaining goodwill of the SaaS for vacation rentals reporting unit, the Company recorded a loss on sale of $ 4.7 million.

The results of the SaaS for vacation rentals reporting unit prior to the disposition are included in the Corporate & Other segment in Note 20.

The impairment charges and loss on sale did not have an impact on the Company's liquidity or calculation of financial covenants under existing debt arrangements.

For the years ended December 31, 2021 and 2020, goodwill is entirely attributable to the Hotel Franchising reporting unit.

The Hotel Franchising reporting unit is

included in the Hotel Franchising reportable segment in Note 20.

There were no changes in the carrying amount of goodwill during the years ended December 31, 2021 and 2020.

Long-lived asset group impairments

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On December 30, 2014, a court awarded the Company title to a commercial office building as settlement of a portion of an outstanding loan receivable for which the building was pledged as collateral.

At the time of settlement, a single tenant fully occupied the building.

The initial lease term expiration was in December 2020 and the tenant had extension options for up to 30 years.

Prior to initial lease term expiration, the tenant provided notice that the lease renewal options would not be exercised.

Prior to initial lease term expiration of the building's single tenant, the tenant provided notice that lease renewal options would not be exercised.

Management identified this as a triggering event requiring the interim reevaluation of the commercial office building's long-lived assets.

The long-lived asset group had a carrying value prior to recoverability evaluation of $ 11.1 million in property and equipment and $ 0.2 million in intangible assets as of September 30, 2020.

During the third quarter of 2020, recoverability of the long-lived asset group was assessed based on undiscounted expected cash flows of the asset group aligned with management’s present long-term strategy for the building, and management concluded the undiscounted expected cash flows were less than the carrying amount of the asset group.

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The Company recognized a non-cash pretax long-lived asset group impairment charge in the amount of $ 4.3 million during the third quarter of 2020.

In 2021, the Company committed to a plan to sell the commercial office building, meeting held for sale classification in the third quarter of 2021.

The building was sold in November 2021 for $ 6.1 million, resulting in a gain of $ 13 thousand reflected within gain (loss) on sale of business and assets, net on the consolidated statements of income in the fourth quarter of 2021.

The results of the commercial office building are included in the Corporate & Other segment in Note 20.

The impairment charge does not have an impact on the Company's liquidity or compliance with financial covenants under existing debt arrangements.

Real estate parcel

The Company purchases real estate as part of its program to incent franchise development in strategic markets for the Cambria brand.

The real estate is classified in other assets to the extent it is not presently under active construction.

During the third quarter of 2018, the Company purchased the remaining membership interests in a VIE previously accounted for under the equity method of accounting.

The VIE held a real estate parcel and the purchase was accounted for an asset acquisition.

The VIE held a real estate parcel and the purchase was accounted for as an asset acquisition.

The financial results of the 100% owned entity have been consolidated in the Company's financial statements since August 2018.

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The results of the real estate parcel are included in the Corporate & Other segment in Note 20.

The impairment charge does not have an impact on the Company's liquidity or compliance with financial covenants under existing debt arrangements.

Intangible Assets

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The franchise rights are being amortized over lives ranging from 12 to 20 years on a straight-line basis.

(2) Represents certain payments to customers as an incentive to enter into new franchise agreements generally amortized as an offset to royalty fees and marketing and reservation system fees over lives ranging from 5 to 30 years on a straight-line basis commencing at hotel opening.

hotel opening.

Gross and accumulated amortization amounts are written off upon full amortization recognition, including at termination of an associated franchise agreement.

Refer to Note 2.

Refer to Note 2 for discussion of impairments recognized.

(3) Represents definite-lived trademarks and other various amortizing assets generally amortized on a straight-line basis over a period of 8 years to 40 years.

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Amortization expense for the years ended December 31, 2021, 2020 and 2019 amounted to $ 25.2 million, $ 23.6 million, and $ 19.4 million, respectively.

The estimated annual amortization expense related to the Company’s amortizing intangible assets for each of the years ending December 31, 2021 through 2025 is as follows:

The estimated annual amortization expense related to the Company’s amortizing intangible assets for each of the next five years is as follows:

(in thousands)

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2026 $ 20,341

During the year ended 2019, the SaaS for vacation rentals reporting unit experienced a triggering event requiring the interim reevaluation of the reporting unit's long-lived assets group resulting in the recognition of an impairment of $ 7.3 million.

The reporting unit was subsequently sold.

Refer to Note 6.

Investments in Unconsolidated Entities

The Company maintains a portfolio of investments owned through noncontrolling interests in equity method investments with one or more partners.

The Company has equity method investments in joint ventures that represent VIEs totaling $ 56.9 million and $ 74.4 million on the consolidated balance sheets at December 31, 2020 and 2019, respectively.

These investments relate to the Company's program to offer equity support to qualified franchisees to develop and operate Cambria Hotels in strategic markets.

The Company has determined that it is not the primary beneficiary of any of these VIEs, however it does exercise significant influence through its equity ownership and as a result the investment in these entities is accounted for under the equity method.

Investments in Affiliates

The Company maintains equity method investments in affiliates related to the Company's program to offer equity support to qualified franchisees to develop and operate Cambria Hotels in strategic markets.

The Company has investments in affiliates that represent VIEs totaling $ 25.2 million and $ 56.9 million on the consolidated balance sheets at December 31, 2021 and 2020, respectively.

The Company's maximum exposure to losses related to its investments in VIEs is limited to its equity investments as well as certain guaranties as described in Note 23 of these financial statements.

For the years ended December 31, 2020, 2019 and 2018, the Company recognized losses, inclusive of impairments and gains or losses upon sale, totaling $ 15.4 million, $ 11.3 million and $ 8.0 million from the investment in these entities, respectively.

During the year ended December 31, 2020, the Company recognized impairment charges of $ 7.3 million related to four separate equity method investments.

The Company assessed the estimated fair value of each investment on an individual basis and derived the value from observable prices from offers received for either the underlying collateral or the ownership interest of the unconsolidated joint venture, comparable market transactions, and DCF techniques to project cash flows based upon the underlying property.

For the years ended December 31, 2021, 2020 and 2019, the Company recognized losses from investments in VIEs, inclusive of impairments and gains/losses upon sales of ownership interests in or distributions resulting from sales of underlying assets of affiliates, totaling $ 18.9 million, $ 15.4 million and $ 11.3 million, respectively.

These amounts are classified as equity in net loss of affiliates in the consolidated statements of income and captured in the Hotel Franchising reportable segment in Note 20.

During the years ended December 31, 2021 and 2020, the Company recognized impairment charges of $ 19.3 million and $ 7.3 million, respectively, related to certain equity method investments.

The Company estimated the fair value of each investment on an individual basis and derived the value from a combination of observable prices from offers received for either the underlying collateral or the ownership interest of the unconsolidated affiliate, comparable market transactions, and DCF techniques to project cash flows for the investment based upon the underlying property.

There are judgments and assumptions in each of these fair value determinations, including our selection of comparable market transactions, the amount and timing of expected future cash flows, long-term growth rates, and sales capitalization rates.

These nonrecurring fair value measurements are classified as level three of the fair value measurement hierarchy, as the Company utilized unobservable inputs which are significant to the overall fair value.

Based on these analyses, in each case the Company determined that the fair market value declined below the carrying value and the decline is other-than-temporary.

As a result, the Company recorded impairment charges from the carrying value to the estimated fair value for each investment.

The impairment charges are classified as equity in net loss of affiliates in the consolidated statements of income and captured in the Hotel Franchising reportable segment in Note 20.

During the third quarter of 2019, the Company redeemed the remaining 60 % ownership interest in four of the hotels under the equity method investment and sold its 40 % ownership interest in the fifth hotel.

Following the redemption, the Company consolidated the operations of the four acquired hotels, and recognized a $ 6.0 million loss on the sale of the fifth hotel which is recorded in equity in net loss of affiliates.

The financial results of the 100% owned hotels have been consolidated in the Company's financial statements since July 23, 2019.

Refer to Note 24.

Equity method investment ownership interests at December 31, 2020 and 2019 are as follows:

The Company recognized no impairment charges during the year ended December 31, 2019.

During the years ended December 31, 2021, 2020 and 2019, the Company recognized net gains (losses) upon sales of ownership interests in or distributions resulting from sales of underlying assets of affiliates of $ 6.9 million, $ 0.5 million, and $( 5.0 ) million, respectively.

Investment in affiliate ownership interests at December 31, 2021 and 2020 are as follows:

Ownership Interest

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CS Hotel 30W46th, LLC (2)

CS Brickell, LLC (2)

CS Hotel West Orange, LLC 50 % 50 %

Hotel JV Services, LLC (1), (3)

City Market Hotel Development, LLC 43 % 43 %

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(1) Non-VIE investments

(2) During the fourth quarter of 2020, the Company sold its ownership interest in the equity method investment recognizing a gain of $ 1.1 million.

(3) During the second quarter of 2020, the Company terminated its ownership interest in the equity method investment and recognized a loss of $ 0.6 million.

The following tables present summarized financial information for all unconsolidated ventures in which the Company holds an investment that is accounted for under the equity method:

(2) The Company sold its ownership interest in the equity method investment or received distributions resulting from the sale of underlying assets of the affiliate during 2021

The following tables present summarized financial information for all unconsolidated ventures in which the Company holds an investment in affiliate that is accounted for under the equity method:

Year Ended December 31,

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Total other assets $ 90,021 $ 88,396

Land and buildings represents the Company's purchase of real estate as part of its program to incent franchise development in strategic markets for the Cambria Hotels brand and is classified as Other Assets as the real estate is not presently under active construction.

Land and buildings represents the Company's purchase of real estate as part of its program to stimulate development of certain brands and is classified as Other assets as the real estate is not presently under active construction.

The Company recognized a non-cash pre-tax long-lived asset group impairment charge for a real estate parcel in the amount of $ 9.2 million during the fourth quarter of 2020.

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Current operating lease liabilities 11,998 10,603

Other liabilities and contingencies 6,273 11,055

Other liabilities 8,354 6,273

Total $ 104,472 $ 78,920

(1) In light of uncertainty resulting from the COVID-19 pandemic, in the second quarter of 2020 the Company suspended future, undeclared dividends while the pandemic is significantly impacting travel.

(1) In light of uncertainty resulting from the COVID-19 pandemic, in the second quarter of 2020 the Company suspended future, undeclared dividends.

In the second quarter of 2021, the Company resumed the declaration of dividends.

Refer to Note 16.

Deferred Revenue

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(in thousands) 2021 2020

$ 400 million senior unsecured notes due 2022 with an effective interest rate of 6.0 % less deferred issuance costs of $ 0.7 million and $ 2.3 million at December 31, 2020 and December 31, 2019, respectively

$ 450 million senior unsecured notes due 2031 ("2020 Senior Notes") with an effective interest rate of 3.86 %, less a discount and deferred issuance costs of $ 5.5 million and $ 6.1 million at December 31, 2021 and December 31, 2020, respectively

444,470 443,860

$ 400 million senior unsecured notes due 2029 with an effective interest rate of 3.88 %, less a discount and deferred issuance costs of $ 5.4 million and $ 6.0 million at December 31, 2020 and December 31, 2019, respectively

$ 400 million senior unsecured notes due 2029 ("2019 Senior Notes") with an effective interest rate of 3.88 %, less a discount and deferred issuance costs of $ 4.8 million and $ 5.4 million at December 31, 2021 and December 31, 2020, respectively

395,237 394,635

$ 600 million senior unsecured credit facility with an effective interest rate of 2.76 %, less deferred issuance costs of $ 2.7 million at December 31, 2019 (1)

$ 450 million senior unsecured notes due 2031 with an effective interest rate of 3.86 %, less a discount and deferred issuance costs of $ 6.1 million at December 31, 2020

Construction loan with an effective interest rate of 6.23 %, less deferred issuance costs of $ 0.6 million at December 31, 2019

Fixed rate collateralized mortgage with an effective interest rate of 4.57 %, plus a fair value adjustment of $ 0.2 million at December 31, 2019

$ 400 million senior unsecured notes due 2022 ("2012 Senior Notes") with an effective interest rate of 6.0 % less deferred issuance costs of $ 0.2 million and $ 0.7 million at December 31, 2021 and December 31, 2020, respectively

$ 216,351 $ 215,827

$ 600 million senior unsecured credit facility (1)

Economic development loans with an effective interest rate of 3.0 % at December 31, 2021 and December 31, 2020, respectively

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(1) During the third quarter of 2020, the Company utilized excess cash on hand to pay down its senior unsecured revolving credit facility balance in full.

As there are no outstanding borrowings at December 31, 2020, deferred issuance costs of $ 2.4 million for the senior unsecured revolving credit facility are presented in other assets in the consolidated balance sheets.

As there are no outstanding borrowings at December 31, 2021 and December 31, 2020, deferred issuance costs for the senior unsecured revolving credit facility of $ 2.3 million and $ 2.4 million, respectively, are presented in non-current Other assets in the consolidated balance sheets.

Scheduled principal maturities of debt, net of unamortized discounts, premiums and deferred issuance costs, as of December 31, 2021 were as follows:

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On July 2, 2019, the Company exercised a one-year extension option on the Restated Credit Agreement, extending the maturity date from August 20, 2023 to August 20, 2024.

On August 12, 2020, the Company exercised an additional one-year extension

on the Restated Credit Agreement for $ 525 million of the $ 600 million total capacity in exchange for a fee of $ 0.3 million.

On August 12, 2020, the Company exercised an additional one-year extension on the Restated Credit Agreement for $ 525 million of the $ 600 million total capacity in exchange for a fee of $ 0.3 million.

The extended maturity date is August 20, 2025.

On August 11, 2021, the Company executed a one-year extension on the senior unsecured credit facility for $ 540 million of the $ 600 million total capacity in exchange for fees of $ 0.4 million.

The extended maturity date is August 20, 2026.

There are no subsidiary guarantors under the Restated Credit Agreement.

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The Restated Credit Agreement provides that the Company may elect to have borrowings bear interest at a rate equal to (i) LIBOR plus a margin ranging from 90 to 150 basis points or (ii) a base rate plus a margin ranging from 0 to 50 basis points, in each case, with the margin determined according to the Company’s senior unsecured long-term debt rating or under circumstances as set forth in the Restated Credit Agreement, the Company’s total leverage ratio in the event that such total leverage ratio is less than 2.5 to 1.0.

On August 11, 2021, we amended the Restated Credit Agreement to provide customary provisions for the replacement of LIBOR with an alternative benchmark rate if it is publicly announced that the administrator of LIBOR has ceased or will cease to provide LIBOR, or if it is publicly announced by the applicable regulatory supervisor that LIBOR is no longer representative.

The Restated Credit Agreement requires the Company to pay a fee on the total commitments, calculated on the basis of the actual daily amount of the commitments (regardless of usage) times a percentage per annum ranging from 0.075 % to 0.25 % (depending on the Company’s senior unsecured long-term debt rating or under circumstances as set forth in the Restated Credit Agreement, the Company’s total leverage ratio in the event that such total leverage ratio is less than 2.5 to 1.0).

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At December 31, 2021, the Company was in compliance with all financial covenants under the Restated Credit Agreement.

During the year ended December 31, 2020, the Company utilized excess cash on hand to pay down the senior unsecured revolving credit facility balance in full.

In the third quarter of 2020, the Company utilized excess cash on hand to pay down the senior unsecured revolving credit facility balance in full;

the facility remains undrawn as of December 31, 2020 and December 31, 2021.

Debt issuance costs incurred in connection with the Restated Credit Agreement are amortized on a straight-line basis, which is not materially different than the effective interest method, through maturity.

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The proceeds of the Restated Credit Agreement are generally expected to be used for general corporate purposes, including working capital, debt repayment, stock repurchases, dividends, investments and other permitted uses set forth in the Restated Credit Agreement.

However, in light of uncertainty resulting from the COVID-19 pandemic, we determined to suspend future, undeclared dividends while the pandemic is significantly impacting travel and have temporarily suspended activity under our share repurchase program.

To preserve financial flexibility and liquidity during the COVID-19 pandemic, on April 16, 2020, the Company entered into a credit agreement (the "Credit Agreement"), which provided for the $ 250 million Term Loan (the "Term Loan") with a scheduled maturity date of April 15, 2021, subject to an optional one-year extension if requested by the Company prior to the initial maturity date.

The effectiveness of such extension was subject to the consent of the lenders under the Credit Agreement and certain customary conditions.

The Term Loan and all accrued but unpaid interest thereon was required to be repaid in full on the maturity date.

Upon the occurrence of certain asset sales, debt issuances and equity issuances, subject to the exceptions set forth in the Credit Agreement, the Company was required to make certain mandatory principal prepayments of the Term Loan in an amount equal to 100 % of the net cash proceeds of such transactions.

The Credit Agreement provided that the Company may elect to have the Term Loan bear interest at a rate equal to (i) LIBOR (subject to a floor of 1.00 %) plus a margin ranging from 200 to 275 basis points or (ii) a base rate plus a margin ranging from 100 to 175 basis points, in each case, with the margin determined according to the Company’s senior unsecured long-term debt rating.

The Credit Agreement required that the Company and its restricted subsidiaries comply with various covenants, including with respect to restrictions on liens, incurring indebtedness, making investments and effecting mergers and/or asset sales.

With respect to dividends and stock repurchases, the Company could not declare or make any payment, subject to certain exceptions set forth in the Credit Agreement, if (i) there is an existing event of default or if the payment would create an event of default or (ii) (x) the Company’s total leverage ratio exceeds 4.0 to 1.0 or (y) liquidity (defined in the Credit Agreement as the Company’s unrestricted cash and cash equivalents plus undrawn amounts under the Company’s existing senior unsecured revolving credit facility) is less than $ 250 million, in each case, both before or immediately after giving effect to such payment.

The Credit Agreement imposed financial maintenance covenants requiring the Company to maintain a consolidated fixed charge coverage ratio of at least 2.5 to 1.0 and a total leverage ratio of not more than 4.5 to 1.0.

If the Company maintained an Investment Grade Rating, as defined in the Credit Agreement, then the Company would not need to comply with the consolidated fixed charge coverage ratio covenant.

The Credit Agreement included customary events of default, the occurrence of which, following any applicable cure period, would permit the lenders to, among other things, declare the principal, accrued interest and other obligations of the Company under the Credit Agreement to be immediately due and payable.

The proceeds of the Term Loan were utilized to reduce borrowings on the Company’s senior unsecured revolving credit facility.

The Term Loan was subsequently paid off in full in July 2020 utilizing the proceeds of the 2020 Senior Notes.

The Term Loan was subsequently paid off in full in July 2020 utilizing the proceeds of the 2020 Senior Notes described below.

In combination with the Tender Offer, the Company recorded a loss on extinguishment of debt of $ 16.0 million in the third quarter of 2020.

Senior Unsecured Notes Due 2031

On July 23, 2020, the Company issued unsecured senior notes in the principal amount of $ 450 million (the "2020 Senior Notes") bearing a coupon of 3.70 %.

On July 23, 2020, the Company issued unsecured senior notes in the principal amount of $ 450 million (the "2020 Senior Notes") bearing a coupon of 3.70 % with an effective rate of 3.86 %.

The 2020 Senior Notes will mature on January 15, 2031, with interest to be paid semi-annually on January 15th and July 15th beginning January 15, 2021.

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If the Company redeems the 2019 Senior Notes on or after the 2019 Notes Par Call Date, the redemption price will equal 100 % of the principal amount of the notes to be redeemed, plus accrued and unpaid interest.

Additionally, at the option of the holders of the 2019 Senior Notes, the Company may be required to repurchase all or a portion of the 2019 Senior Notes of a holder upon the occurrence of a change of control event at a price equal to 101 % of their aggregate principal amount, plus accrued and unpaid interest, to the date of repurchase.

Additionally, at the option of the holders of the

2019 Senior Notes, the Company may be required to repurchase all or a portion of the 2019 Senior Notes of a holder upon the occurrence of a change of control event at a price equal to 101 % of their aggregate principal amount, plus accrued and unpaid interest, to the date of repurchase.

Senior Unsecured Notes Due 2022

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In combination with the early pay off of the Term Loan, the Company recorded a loss on extinguishment of debt of $ 16.0 million in the third quarter of 2020.

The Company's 2012 Senior Notes mature on July 1, 2022 with a principal maturity, net of unamortized deferred issuance costs, of $ 216.4 million.

Construction Loan

In March 2018, the Company entered into a construction loan agreement for the rehabilitation and development of a former office building into a Cambria Hotel through a consolidating joint venture with a commercial lender, which is secured by the building.

The construction loan can be drawn up to $ 34.9 million.

In March 2018, the Company entered into a construction loan agreement for the rehabilitation and development of a former office building into a Cambria Hotel through a consolidating affiliate with a commercial lender, which is secured by the building.

The construction was completed and the hotel opened in the third quarter of 2019, resulting in the satisfaction of the completion guaranty.

On March 5, 2020, the Company paid off the

construction loan in the amount of $ 33.1 million inclusive of accrued and unpaid interest and recorded a loss on extinguishment of debt of $ 0.6 million.

On March 5, 2020, the Company paid off the construction loan in the amount of $ 33.1 million inclusive of accrued and unpaid interest and recorded a loss on extinguishment of debt of $ 0.6 million.

Fixed Rate Collateralized Mortgage

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In conjunction with the court award, the Company also assumed the $ 9.5 million mortgage on the property with a fixed interest rate of 7.26 %.

The mortgage is collateralized by the office building, requires monthly payments of principal and interest and matures in December 2020 with a balloon payment due of $ 6.9 million.

At the time of acquisition, the Company determined that the fixed interest rate of 7.26 % exceeded market interest rates and therefore the Company increased the carrying value of the debt by $ 1.2 million to record the debt at fair value.

The fair value adjustment will be amortized over the remaining term of the mortgage utilizing the effective interest method.

The mortgage principal and outstanding interest was paid off in the amount of $ 6.9 million at maturity in December 2020.

The mortgage was collateralized by the office building, required monthly payments of principal and interest and matured in December 2020 with a balloon payment due of $ 6.9 million.

Payments were made in each quarter of 2020, with the balloon payment of $ 6.9 million made at maturity in December 2020.

Economic Development Loans

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Performance conditions are measured annually on December 31 st and primarily relate to maintaining certain levels of employment within the various jurisdictions.

If the Company fails to meet an annual performance condition, the Company may be required to repay a portion or all of the advances including accrued interest by April 30 th following the measurement date.

Any outstanding advances at the expiration of the Company's ten-year corporate headquarters lease in 2023 will be forgiven in full.

If the Company fails to meet an annual performance condition, the Company may be required to repay a portion

or all of the advances including accrued interest by April 30 th following the measurement date.

Any outstanding advances at the expiration in 2023 of the Company's current ten-year corporate headquarters lease will be forgiven in full.

The advances will be included in long-term debt in the Company's consolidated balance sheets until the Company determines that the future performance conditions will be met over the entire term of the agreement and the Company will not be required to repay the advances.

The Company accrues interest on the portion of the advances that it expects to repay.

On December 28, 2020, the Company reached an agreement to amend the performance conditions and waive any defaults associated with employment levels until April 1, 2021.

The Company was in compliance with all applicable current performance conditions in accordance with the amended terms of the agreement as of December 31, 2020.

The Company was in compliance with all applicable current performance conditions as of December 31, 2021.

Non-Qualified Retirement, Savings and Investment Plans

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Compensation expense is recorded in SG&A expense on the Company’s consolidated statements of income based on the change in the deferred compensation obligation related to earnings credited to participants as well as changes in the fair value of diversified investments.

The net increase (decrease) in compensation expense recorded in SG&A for the years ended December 31, 2020, 2019 and 2018 were $ 4.5 million, $ 5.3 million, and $( 0.7 ) million, respectively.

The net increase in compensation expense recorded in SG&A for the years ended December 31, 2021, 2020 and 2019 were $ 6.1 million, $ 4.5 million, and $ 5.3 million, respectively.

Under the Deferred Compensation Plan, the Company has invested the employee salary deferrals in diversified long-term investments which are intended to provide investment returns that offset the earnings credited to the participants.

The diversified investments held in the trusts totaled $ 36.1 million and $ 31.4 million as of December 31, 2021 and 2020, respectively, and are recorded at their fair value, based on quoted market prices.

At December 31, 2020, the Company expects

$ 2.3 million of the assets held in the trust to be distributed during the year ended December 31, 2021 to participants.

These investments are considered trading securities and therefore the changes in the fair value of the diversified assets is included in other gains and losses in the accompanying consolidated statements of income.

The Company recorded investment gains (losses) during the years ended December 31, 2020, 2019 and 2018 of $ 4.2 million, $ 4.9 million, and $( 1.3 ) million, respectively.

At December 31, 2021, the Company expects $ 2.1 million of the assets held in the trust to be distributed during the year ended December 31, 2022 to participants.

These investments are considered trading securities and therefore the changes in the fair value of the diversified assets is included in other gains, net in the accompanying consolidated statements of income.

The Company recorded investment gains during the years ended December 31, 2021, 2020 and 2019 of $ 5.6 million, $ 4.2 million, and $ 4.9 million, respectively.

The Deferred Compensation Plan held no shares of the Company's common stock at December 31, 2021 and 2020.

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Unobservable inputs, supported by little or no market data available, where the reporting entity is required to develop its own assumptions to determine the fair value of the instrument.

The Company does not currently have any assets recorded at fair value whose fair value was determined using Level 3 inputs and there were no transfers of Level 3 assets during the years ended December 31, 2020 and 2019.

The Company does not currently have any assets recorded at fair value on a recurring basis whose fair value was determined using Level 3 inputs and there were no transfers of Level 3 assets during the years ended December 31, 2021 and 2020.

As of December 31, 2021 and 2020, the Company had the following assets measured at fair value on a recurring basis:

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accordingly we believe its carrying amount, when amounts are drawn, approximates fair value.

The fair values of the Company's $ 400 million 2012 Senior Notes, $ 400 million 2019 Senior Notes, and $ 450 million 2020 Senior Notes are classified as Level 2 as the significant inputs are observable in an active market.

At December 31, 2019, the $ 400 million 2012 Senior Notes had an approximate fair value of $ 432.0 million.

On July 23, 2020, the Company purchased approximately $ 183.4 million aggregate principal amount of the 2012 Senior Notes.

At December 31, 2020, the $ 216.6 million remaining 2012 Senior Notes had an approximate fair value of $ 232.4 million.

At December 31, 2020 and 2019, the $ 400 million 2019 Senior Notes had an approximate fair value of $ 438.1 million and $ 403.4 million, respectively.

At December 31, 2020, the $ 450 million 2020 Senior Notes had an approximate fair value of $ 498.3 million.

The fair values of the Company's senior unsecured notes are classified as Level 2, as the significant inputs are observable in an active market.

Refer to Note 12 for further information on debt.

At December 31, 2021 and December 31, 2020, the carrying amounts and fair values are as follows:

December 31, 2021 December 31, 2020

(in thousands) Carrying Amount Fair Value Carrying Amount Fair Value

2020 Senior Notes $ 444,470 $ 477,675 $ 443,860 $ 498,290

2019 Senior Notes 395,237 425,984 394,635 438,104

2012 Senior Notes 216,351 221,702 215,827 232,381

Fair value estimates are made at a specific point in time, are subjective in nature and involve uncertainties and matters of significant judgment.

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Foreign 3,260 ( 29,043 ) ( 1,293 )

Income taxes $ ( 22,381 ) $ 47,051 $ 56,903

Net deferred tax assets consisted of:

Income tax expense (benefit) $ 87,535 $ ( 22,381 ) $ 47,051

Net deferred tax assets as of December 31, 2021 were as follows:

(in thousands) 2021 2020

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Operating lease liabilities 6,621 6,359

Partnership interests 4,398 —

Foreign net operating losses 7,478 5,749

Non-US intellectual property 30,243 —

intellectual property 21,402 30,243

Other 5,727 5,420

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The Company assesses available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets.

Based on this evaluation, the Company recorded a net change to its valuation allowance of $ 9.3 million.

In 2020, the Company identified $ 14.3 million of state tax credit carryforwards due to expire at various dates but no later than 2035.

Based on this evaluation, the Company recorded a net change to its valuation allowance of $ 0.4 million due to a $ 2.9 million decrease in the foreign valuation allowance, primarily related to the Dutch deferred tax asset, partially offset by a $ 2.5 million increase in the valuation allowance related to state tax credits.

In 2021, the Company identified $ 14.2 million of state tax credit carryforwards due to expire between 2030 and 2035.

The Company believes that it is more likely than not that these benefits will not be realized.

Accordingly, the Company has provided a valuation allowance of $ 11.7 million for these credits.

As of December 31, 2020, the Company had foreign net operating losses ("NOLs") of $ 19.8 million.

Accordingly, the Company has provided a tax-effected valuation allowance of $ 14.2 million for these credits.

Additionally, the Company has provided a tax-effected valuation allowance of $ 5.5 million on its foreign deferred tax assets.

As of December 31, 2021, the Company had gross foreign net operating losses ("NOLs") of $ 26.6 million.

The Company believes that it is more likely than not that some of these benefits will not be realized.

Accordingly, the Company recorded a valuation allowance of $ 8.4 million on the deferred tax assets related to these foreign net operating losses.

Accordingly, the Company recorded a gross valuation allowance of $ 7.0 million on the deferred tax assets related to these foreign net operating losses.

We have $ 26.0 million of foreign NOLs with an indefinite carryforward life.

The remaining NOLs with limited carryforward periods will expire beginning in 2026.

On January 1, 2018, the Company adopted ASU 2016-16, Income Taxes (Topic 740) - Intra-Entity Transfers of Assets Other than Inventory ("ASU 2016-16"), which provides guidance on recognition of current income tax consequences for intercompany asset transfers (other than inventory) at the time of transfer.

On January 1, 2020, the Company completed a reorganization of its foreign legal entity structure.

In accordance with ASU 2016-16, the Company recorded a $ 34.6 million tax benefit and a corresponding deferred tax asset due to the reorganization.

As of December 31, 2020, the balance of this deferred tax asset is $ 30.2 million, net of current year amortization utilization.

Due to a decrease in the forecasted international income resulting from adverse impacts of the COVID-19 pandemic, the Company recorded a valuation allowance of $ 5.7 million reflecting a change in the anticipated realizability of this deferred tax asset.

In accordance with ASU 2016-16, the Company recorded a tax benefit of $ 34.6 million and a corresponding deferred tax asset due to the reorganization.

In 2020, due to a decrease in our forecasted international income resulting from adverse impacts of the COVID-19 pandemic, the Company recorded a valuation allowance of $ 5.7 million reflecting a change in the anticipated realizability of this deferred tax asset.

In 2021, due to changes in Dutch tax law, the Company reduced the carrying value of the deferred tax asset by $ 4.2 million and decreased the corresponding valuation allowance by $ 2.7 million.

As of December 31, 2021, the balance of this deferred tax asset is $ 21.4 million, net of current year amortization, and the balance of the corresponding valuation allowance is $ 3.0 million.

The statutory United States federal income tax rate reconciles to the effective income tax rates for continuing operations as follows:

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Benefits related to foreign operations ( 0.2 ) % ( 4.2 ) % ( 0.6 ) %

Benefits related to compensation ( 5.8 ) % ( 1.3 ) % ( 1.5 ) %

Expenses (benefits) related to compensation, net 0.5 % ( 5.8 ) % ( 1.3 ) %

Unrecognized tax positions 0.2 % 4.7 % 2.0 %

Transition Tax imposed on unrepatriated foreign earnings — % — % ( 0.1 ) %

Write-down of net deferred tax assets due to U.S.

rate change — % — % 0.4 %

International Reorganization 1.1 % ( 65.2 ) % — %

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The Company's effective income tax rates from continuing operations were 23.3 %, ( 42.2 )% and 17.4 % for the years ended December 31, 2021, 2020 and 2019, respectively.

The Tax Cuts and Jobs Act subjects a U.S.

shareholder to a minimum tax on "global intangible low-taxed income" ("GILTI") earned by certain foreign subsidiaries.

The FASB Staff Q&A, Topic 740 No.

5, Accounting for GILTI states that an entity can make an accounting policy election to either recognize deferred taxes for temporary differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI resulting from those items in the year the tax is incurred.

The Company has elected to recognize the resulting tax on GILTI as a period expense in the period the tax is incurred and has incurred tax for the year ended December 31, 2020.

The effective income tax rate for the year ended December 31, 2020 was lower than the U.S.

federal income tax rate of 21.0% due to the impact of our international reorganization under ASU 2016-16 (partially offset by the related valuation allowance), tax credits recognized during the year of $ 3.0 million, $ 4.2 million of excess tax benefits from share-based compensation, and the impact of foreign operations, partially offset by state income taxes, and a change in estimated uncertain tax positions.

The effective income tax rate for the year ended December 31, 2021 was higher than the U.S.

federal income tax rate of 21.0% primarily due to state income taxes, $ 1.7 million of additional tax expense related to compensation, and a $ 1.5 million reduction in the net carrying value of our Dutch deferred tax asset, partially offset by tax credits of $ 3.7 million.

The effective income tax rate for the year ended December 31, 2020 was lower than the U.S.

federal income tax rate of 21% due to tax credits recognized during the year of $ 11.6 million, $ 4.4 million of excess tax benefits from share-based compensation and the impact of foreign operations, partially offset by the impact of state income taxes.

federal income tax rate of 21% due to the impact of our international reorganization under ASU 2016-16 (partially offset by the related valuation allowance), tax credits of $ 3.0 million, $ 3.1 million of additional tax benefit related to compensation, and the impact of foreign operations, partially offset by state income taxes, and a change in estimated uncertain tax positions.

As of December 31, 2021, 2020 and 2019, the Company’s gross unrecognized tax benefits totaled $ 11.1 million, $ 10.2 million, and $ 7.7 million, respectively.

After considering the deferred income tax accounting impact, it is expected that about $ 6.9 million of the total as of December 31, 2020 would favorably affect the effective tax rate if resolved in the Company’s favor.

After considering the deferred income tax accounting impact, it is expected that approximately $ 8.0 million of the total as of December 31, 2021 would favorably affect the effective tax rate if resolved in the Company’s favor.

The following table presents a reconciliation of the beginning and ending amounts of unrecognized tax benefits:

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The Company's federal income tax return for tax years 2017 and 2018 are also under examination by the Internal Revenue Service.

Further, the Company's federal income tax return for tax year 2019 is subject to examination by the Internal Revenue Service.

Further, the Company's federal income tax returns for tax years 2019 and 2020 are subject to examination by the Internal Revenue Service.

The practice of the Company is to recognize interest and penalties related to income tax matters in the provision for income taxes.

The Company did not incur any material interest or penalties for 2021 and 2020.

The Company had $ 0.5 million and $ 0.3 million of accrued interest and penalties at December 31, 2020 and 2019, respectively.

The Company had $ 0.4 million and $ 0.5 million of accrued interest and penalties on December 31, 2021 and 2020, respectively.

The Tax Cuts and Jobs Act subjects a U.S.

shareholder to a minimum tax on "global intangible low-taxed income" ("GILTI") earned by certain foreign subsidiaries.

The FASB Staff Q&A, Topic 740 No.

The Company has elected to recognize the resulting tax on GILTI as a period expense in the period the tax is incurred and has incurred tax for the year ended December 31, 2021.

On March 27, 2020, in response to the COVID-19 pandemic, the “Coronavirus Aid, Relief and Economic Security Act” (“CARES”) was signed into law by the President of the United States.

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The Company recognizes compensation cost related to share-based payment transactions in the financial statements based on the fair value of the equity or liability instruments issued.

Compensation expense related to the fair value of share-based awards is recognized over the requisite service period based on an estimate of those awards that will ultimately vest.

The Company estimates the share-based compensation expense for awards that will ultimately vest at the inception of the grant.

Over the life of the grant, the estimate of share-based compensation expense for awards with performance and/or service requirements is adjusted so that compensation cost is generally recognized only for awards that ultimately vest.

Compensation expense related to the fair value of share-based awards is recognized over the requisite service period.

Over the life of the grant, the estimate of share-based compensation expense for awards with performance and/or service requirements is adjusted so that compensation cost i s rec ognized only for awards that ultimately vest;

for the grants with market conditions, the fair value of the award is determined at grant date and expensed over the life of the grant.

The Company has stock compensation plans pursuant to which it is authorized to grant stock-based awards of which 2.1 million shares of the Company's common stock remain available for grant as of December 31, 2021.

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Range of Exercise Prices Number Outstanding at December 31, 2021 Weighted Average

Contractual Life Weighted

Contractual Life (Years) Weighted

Exercise Price Number Exercisable at December 31, 2021 Weighted

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$ 45.59 to $ 55.00

223,012 2.12 years $ 51.27 223,012 $ 51.27

156,462 1.16 $ 51.49 156,462 $ 51.49

$ 55.01 to $ 65.00

194,337 2.2 years $ 62.15 169,042 $ 62.34

84,038 2.10 60.86 84,038 60.86

$ 65.01 to $ 85.00

247,337 4.7 years $ 81.32 88,201 $ 81.39

239,981 3.75 81.31 142,673 81.35

$ 85.01 to $ 91.28

154,924 9.2 years $ 91.28 — $ —

819,610 4.2 years $ 70.48 480,255 $ 60.70

153,692 8.17 91.28 38,419 91.28

$ 91.29 to $ 104.87

276,771 9.16 104.87 — —

910,944 5.54 $ 83.14 421,592 $ 67.09

Restricted Stock

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The Company has granted performance vested restricted stock units (“PVRSU”) to certain employees.

The Company grants two types of PVRSU awards:

PVRSUs with performance conditions based on internal performance metrics and PVRSUs with market conditions based on the Company's total shareholder return ("TSR") relative to a predetermined peer group.

The vesting of PVRSU stock awards is contingent upon the Company achieving internal performance or TSR targets over a specified period and the employees' continued employment for a service period.

The Company grants three types of PVRSU awards:

i) PVRSUs with performance conditions based on internal performance metrics, ii) PVRSUs with market conditions based on the Company's total shareholder return ("TSR") relative to a predetermined peer group, and iii) PVRSUs with both performance and market conditions.

The vesting of PVRSU awards is contingent upon the Company achieving internal performance and/or TSR targets over a specified period and the employees' continued employment for a service period.

These performance and market conditions affect the number of shares that will ultimately vest.

During the year ended December 31, 2020, PVRSU awards granted had service periods ranging from 31 - 36 months with award vesting ranges generally between 0 % and 200 % of the initial units granted.

The fair value of PVRSUs based on internal performance metrics is measured by the market price of the Company's common stock on the date of award grant.

During the year ended December 31, 2021, the Company granted PVRSUs with market conditions, PVRSUs with performance conditions and PVRSUs with performance and market conditions with requisite service periods between 9 months and 60 months with award vesting ranges generally between 0 % and 300 % of the initial units granted.

The fair value of PVRSUs with only internal performance metrics is measured by the market price of the Company's common stock on the date of award grant.

Compensation expense is recognized ratably over the requisite service period based on the Company's estimate of the achievement of the performance conditions.

Management monitors current results and forecasts of the relevant internal performance metrics and, as necessary, adjusts the performance-based leveraging of unvested PVRSUs.

Compensation expense is recognized only on those PVRSUs that ultimately vest.

The Company has currently estimated that between 0 % and 115 % of the various award targets will be achieved.

During the year ended December 31, 2020, the Company reduced the leveraging factor for 230,647 unvested PVRSUs granted in the current and prior periods to 0 %, based on management's estimate of achievement of performance targets with contemplation to impacts from the COVID-19 pandemic.

The fair value of TSR PVRSUs are estimated using a Monte Carlo simulation method as of the date of award grant.

The fair value of PVRSUs with market conditions is estimated using a Monte Carlo simulation method as of the date of award grant.

Compensation expense is recognized ratably over the requisite service period, regardless of whether the market conditions are achieved and the awards ultimately vest.

The fair value of PVRSUs with both performance and market conditions is estimated using a Monte Carlo simulation as of the date of award grant.

Compensation is recognized ratable over the requisite service period based on the Company's estimate of the achievement of the performance conditions, with subsequent adjustments made for performance-based leveraging of unvested PVRSUs, as necessary.

The Company has currently estimated that between 0 % and 300 % of the various award targets will be achieved.

The following table is a summary of activity related to PVRSU grants:

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During the year ended December 31, 2020, an additional 30,116 units were awarded because the Company's performance exceeded the conditions provided in the awards.

During the year ended December 31, 2018, PVRSU award vested at target, therefore no additional PVRSU units were awarded.

As a result of the Company's operating results not achieving certain performance conditions contained in the PVRSU awards, there were PVRSUs that expired of 16,117 shares for the year ended December 31, 2020, zero for the year ended December 31, 2019, and 416 shares for the year ended December 31, 2018.

During the year ended December 31, 2019, an additional 1,583 units were awarded because the Company's performance exceeded the conditions provided in the awards.

As a result of the Company's operating results not achieving certain performance conditions contained in the PVRSU awards, the number of PVRSUs that expired was 72,944 shares for the year ended December 31, 2021, 16,117 shares for the year ended December 31, 2020, and no shares for the year ended December 31, 2019.

A summary of stock-based award activity as of December 31, 2021, 2020 and 2019 and the changes during those years are presented below:

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Granted 141,827 81.15 167,731 81.92 83,934 81.15

Performance-based leveraging* — — — — 1,583 51.49

Exercised/vested ( 446,456 ) 47.96 ( 126,664 ) 60.39 ( 73,242 ) 50.69

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Options exercisable as of December 31, 2019 513,924 $ 55.10 2.6 years

* PVRSU units outstanding have been increased by 1,583 units during the year ended December 31, 2019, due to the Company exceeding the targeted performance conditions contained in PVRSU's granted in prior periods.

The components of the Company’s pretax stock-based compensation expense and associated income tax benefits are as follows:

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During the fourth quarter of 2021, the Company's board of directors announced a 6 % increase to the quarterly dividend rate to $ 0.2375 per share from $ 0.225 per share, beginning with the dividend payable in the first quarter of 2022.

During the fourth quarter of 2019, the Company's board of directors announced a 5 % increase to the quarterly dividend rate to $ 0.225 per share from $ 0.215 per share, beginning with the dividend payable in the first quarter of 2020.

On February 28, 2020, the Company’s board of directors declared a quarterly cash dividend of $ 0.225 per share of common stock for $ 12.5 million.

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Subsequent to the payment of the dividend, in light of uncertainty resulting from the COVID-19 pandemic, the Company’s board of directors suspended future, undeclared dividends while the pandemic is significantly impacting travel.

During the year ended December 31, 2019, the Company's quarterly dividend rate was $ 0.215 per share for the first three quarters and was $ 0.225 per share in the fourth quarter of 2019.

On May 7, 2021, the Company's board of directors declared a quarterly cash dividend of $ 0.225 per share of common stock and approved resumption of the share repurchase program.

Additionally, on September 9, 2021, the Company's board of directors declared a quarterly cash dividend of $ 0.225 per share of common stock.

During the year ended December 31, 2021, the Company's quarterly dividend rate was $ 0.225 per share for the second and third quarter and was $ 0.2375 per share in the fourth quarter of 2021.

Annual dividends declared during the year ended December 31, 2021 were $ 0.688 per share or $ 38.2 million.

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Annual dividends declared during the year ended December 31, 2020 were $ 0.225 per share or $ 12.5 million.

During the year ended December 31, 2019, the Company's quarterly dividend rate was $ 0.215 per share for the first three quarters and was $ 0.225 per share in the fourth quarter of 2019.

Annual dividends declared during the year ended December 31, 2019 were $ 0.87 per share or $ 48.5 million.

The Company may not declare or make any payment if under the Restated Credit agreement there is an existing event of default or if the payment would create an event of default.

In addition, during the years ended December 31, 2020, 2019 and 2018, the Company paid previously declared but unrecorded dividends totaling $ 0.4 million, $ 0.2 million, and $ 0.1 million, respectively, that were contingent upon the vesting of performance vested restricted units.

In addition, during the years ended December 31, 2021, 2020 and 2019, the Company paid previously declared but unrecorded dividends totaling $ 8 thousand, $ 0.4 million, and $ 0.2 million, respectively, that were contingent upon the vesting of performance vested restricted units.

Share Repurchases and Redemptions

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Treasury stock activity is recorded at cost in the accompanying consolidated financial statements.

The Company repurchased 0.5 million shares of common stock under the share repurchase program at a total cost of $ 43.3 million during the three months ended March 31, 2020.

In light of uncertainty resulting from the COVID-19 pandemic, the Company subsequently temporarily suspended activity under the share repurchase program and no additional repurchases were made pursuant to the program for the balance of 2020.

During the year ended December 31, 2019, the Company repurchased 0.6 million shares of its common stock under the repurchase program at a total cost of $ 44.1 million.

During the year ended December 31, 2018, the Company repurchased 1.8 million shares of its common stock under the repurchase program at a total cost of $ 141.2 million.

During the three months ended March 31, 2020, the Company repurchased 0.5 million shares of common stock under the share repurchase program at a total cost of $ 43.3 million.

On May 7, 2021, the Company's board of directors approved resumption of the share repurchase program.

During the year ended December 31, 2021, the Company repurchased 57,754 shares of its common stock under the repurchase program at a total cost of $ 7.3 million.

On a cumulative basis through December 31, 2021, the Company repurchased 51.7 million shares of its common stock (including 33.0 million prior to the two -for-one stock split effected in October 2005) under the share repurchase program at a total cost of $ 1.5 billion.

During 2020, the Company redeemed 0.1 million shares of common stock at a total cost of approximately $ 12.2 million from employees to satisfy the option exercise price and statutory minimum tax-withholding requirements related to the exercising of stock options and vesting of performance vested restricted stock units and restricted stock grants.

During 2019 and 2018, the Company redeemed 79,603 and 92,366 shares of common stock at a total cost of $ 6.5 million and $ 7.4 million, respectively, from employees to satisfy the option price and minimum tax-withholding requirements related to the exercising of options and vesting of performance vested restricted stock units and restricted stock grants.

During 2021, the Company redeemed 54,441 shares of common stock at a total cost of approximately $ 6.0 million from employees to satisfy the option exercise price and statutory minimum tax-withholding requirements related to the exercising of stock options and vesting of performance vested restricted stock units and restricted stock grants.

During 2020 and 2019, the Company redeemed 0.1 million and 79,603 shares of common stock at a total cost of $ 12.2 million and $ 6.5 million, respectively, from employees to satisfy the option price and minimum tax-withholding requirements related to the exercising of

options and vesting of performance vested restricted stock units and restricted stock grants.

These redemptions were outside the share repurchase program initiated in June 1998.

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Foreign currency translation adjustments $ ( 4,574 ) $ ( 4,646 ) $ ( 4,550 )

Deferred loss on cash flow hedge — — ( 1,436 )

Total accumulated other comprehensive loss $ ( 4,574 ) $ ( 4,646 ) $ ( 4,550 )

1 unchanged sentence

Year Ended December 31, 2021 Year Ended December 31, 2020

(in thousands) Loss on Cash Flow Hedge Foreign Currency Items Total Loss on Cash Flow Hedge Foreign Currency Items Total

(in thousands) Foreign Currency Items Total Foreign Currency Items Total

Beginning Balance $ ( 4,646 ) $ ( 4,646 ) $ ( 4,550 ) $ ( 4,550 )

Other comprehensive loss before reclassification — ( 96 ) ( 96 ) — ( 540 ) ( 540 )

Amounts reclassified from accumulated other comprehensive income — — — 1,436 — 1,436

Net current period other comprehensive (loss) income — ( 96 ) ( 96 ) 1,436 ( 540 ) 896

Other comprehensive gain (loss) before reclassification 72 72 ( 96 ) ( 96 )

Ending Balance $ ( 4,574 ) $ ( 4,574 ) $ ( 4,646 ) $ ( 4,646 )

1 unchanged sentence

There was no income tax expense or benefit.

There were no amounts reclassified during the year ended December 31, 2020, as the debt related to the Interest rate contract was paid off in December 2019.

There were no amounts reclassified during the year ended December 31, 2020 or December 31, 2021, as the debt related to the Interest rate contract was paid off in December 2019.

Earnings Per Share

The Company’s unvested restricted shares contain rights to receive nonforfeitable dividends and thus are participating securities requiring the computation basic earnings per share (“EPS”) using the two-class method.

The unvested restricted shares are both potential common shares and participating securities, the Company calculates diluted earnings per share by the more dilutive of the treasury stock method or the two-class method.

The calculation of EPS for net income available to common shareholders shown below excludes the distribution of dividends and undistributed earnings attributable to participating securities from the numerator.

Stock options are included in the diluted earnings per share calculation unless the stock options are anti-dilutive.

PVRSUs are also included in the diluted earnings per share calculation if the performance or market conditions have been met as of the reporting date.

The Company’s shares of restricted stock contain rights to receive nonforfeitable dividends and thus are participating securities requiring the computation of basic earnings per share (“EPS”) using the two-class method.

As the shares of restricted stock are both potential shares of common stock and participating securities, the Company calculates diluted earnings per share by the more dilutive of the treasury stock method or the two-class method.

The calculation of EPS for net income available to common shareholders excludes the distribution of dividends and undistributed earnings attributable to participating securities from the numerator.

The diluted earnings weighted average shares of common stock outstanding includes stock options, PVRSUs and RSUs.

The computation of basic and diluted earnings per common share is as follows:

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The Company has operating leases primarily for office space, buildings, and equipment.

Our leases have remaining lease terms of one month to four years , some of which may include options to extend leases for up to fifteen years and some which may include options to terminate the leases within one year .

Our leases have remaining lease terms of one month to eleven years , some of which may include options to extend leases for up to five years and some which may include options to terminate the leases within one year .

The Company's lease costs were as follows:

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Total lease liabilities $ 47,490 $ 23,342

On October 4, 2021, an office lease with an approximate 10 -year term with an unrelated third party commenced.

The Company accounted for this lease as an operating lease and established a lease liability and right-of-use asset of approximately $ 34.6 million and $ 25.3 million, respectively, during the fourth quarter of 2021.

Other information related to the Company's lease arrangements is as follows:

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2022 $ 13,119

Thereafter 20,443

Total minimum lease payments $ 52,518

1 unchanged sentence

Present value of minimum lease payments $ 47,490

During the year ended December 31, 2019, the Company entered into a sale and leaseback transaction in which we sold an office building for a gain of $ 2.0 million within the Marketing and reservation system line item on the consolidated statements of income and entered into a lease that terminated in 2020.

This lease is included in the tables above.

In the third quarter of 2019, we entered into one office lease agreement with an unrelated third-party that we expect to account for as an operating lease.

This lease is not reflected in our consolidated balance sheets or in the table above as the leases have not commenced.

The lease has an approximate 10 -year term and expected to commence in the third quarter of 2021.

The Company leases to third-party tenants (i) a commercial office building with a lease term that expired as of December 31, 2020 and (ii) a restaurant space within an operating hotel with a remaining lease term of less than nine years .

Income for the two leases comprises of fixed and fixed escalating lease payments of $ 1.4 million and $ 1.2 million, respectively, for the years ended December 31, 2020 and 2019.

Neither lease contains an option to purchase the underlying assets.

The Company elected to not separate lease and nonlease components.

In the fourth quarter of 2021, the Company entered into one office lease agreement with an unrelated third-party that we expect to account for as an operating lease.

This lease is not reflected in our consolidated balance sheets or in the table above as the lease has not commenced.

The lease has an approximate 11 -year term and expected to commence in the fourth quarter of 2023.

Related Party

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The terms of the lease agreements are consistent with the terms of lease agreements that the Company has entered into with unrelated third parties for use of the aircraft.

During the years ended December 31, 2020 and 2019, the Company received $ 0.2 million and $ 12 thousand, respectively, pursuant to this arrangement.

In December 2013, the Company's board of directors approved an arrangement between the Company and an entity controlled by the family members of the Company's largest shareholder to sublease approximately 2,200 square feet of office space located in Chevy Chase, Maryland.

During the years ended December 31, 2021 and 2020, the Company received $ 0.2 million and $ 0.2 million, respectively, pursuant to this arrangement.

located in Chevy Chase, Maryland.

The sublease had a month-to-month term, with a 90 -day notice period and annual lease payments totaling approximately $ 0.1 million.

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The revenues received from franchisees that are used to pay for part of the Company's ongoing operations are included in hotel franchising revenues and are offset by the related expenses paid for marketing and reservation system activities to calculate hotel franchising operating income.

Equity in earnings or losses from hotel franchising related joint ventures is allocated to the Company's hotel franchising segment.

Equity in earnings or losses from hotel franchising related investments in affiliates is allocated to the Company's hotel franchising segment.

The Company evaluates its hotel franchising segment based primarily on the results of the segment without allocating corporate expenses, indirect general and administrative expenses, interest expense, interest income, other gains and losses or income taxes, which are included in the Corporate & Other column.

1 unchanged sentence

The intersegment revenue adjustment is from the elimination of Hotel Franchising revenue which include royalty and marketing and reservation system fees charged to our owned hotels against franchise fee expense recognized by our owned hotels in Corporate & Other operating income (loss).

Our President and Chief Executive Officer, who is our chief operating decision maker (“CODM”), does not use assets by operating segment when assessing performance or making operating segment resource allocations and therefore assets by segment are not disclosed below.

Our President and Chief Executive Officer, who is our CODM, does not use assets by operating segment when assessing performance or making operating segment resource allocation decisions and therefore assets by segment are not disclosed below.

The following tables present the financial information for the Company's segments:

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The liquidated damage provisions extend through the life of the existing Sunburst franchise agreements.

On June 5, 2019, the Strategic Alliance Agreement was terminated and replaced with addenda to each of the five hotels under franchise.

On June 5, 2019, the Strategic Alliance Agreement was terminated and replaced with addenda to each of the five hotels under franchise at that time.

The addenda preserve certain terms from the Strategic Alliance Agreement with respect to the five hotels, including the revised royalty and system fee and liquidated damage provisions, which would also apply to new franchise agreements signed for the five hotels (as either a renewal or a change to another Choice brand not contemplated at the time of original agreement execution).

No terms were substantially modified with respect to the five operating hotels under franchise.

In June 2019, the Company and Sunburst entered into master development agreements which provide Sunburst geographic exclusivity in two specified regions for development of six WoodSpring branded hotels.

For each of the years ended December 31, 2020 and 2019, there was one new franchise agreement signed between the Company and Sunburst.

As of December 31, 2020, Sunburst operates 4 hotels under franchise with the Company.

In June 2019, the Company and Sunburst entered into master development agreements which provide Sunburst geographic exclusivity in two specified regions for development of five WoodSpring branded hotels.

For the years ended December 31, 2021 and 2020, there were zero and one new franchise agreement signed between the Company and Sunburst, respectively.

As of December 31, 2021, Sunburst operates four hotels under franchise with the Company.

Total franchise fees, including royalty and marketing and reservation system fees, paid by Sunburst to the Company included in the accompanying consolidated financial statements were $ 0.4 million, $ 0.5 million, and $ 1.8 million for the years ended December 31, 2021, 2020 and 2019, respectively.

As of December 31, 2020 and 2019, accounts receivable included $ 0.1 million and $ 0.2 million, respectively, due from Sunburst.

Transactions with Unconsolidated Joint Ventures

The Company extends loans to various unconsolidated joint ventures or members of our unconsolidated joint ventures.

The Company has a total principal balance on these loans of $ 90.7 million and $ 96.0 million as of December 31, 2020 and December 31, 2019, respectively.

These loans mature at various dates and bear interest at fixed and variable rates that is typically payable monthly.

The Company signed a management fee arrangement for marketing services with a joint venture partner.

As of both December 31, 2021 and 2020, accounts receivable due from Sunburst were $ 0.1 million.

Transactions with Unconsolidated Affiliates

The Company extends loans to various unconsolidated affiliates or members of our unconsolidated affiliates.

The Company has a total principal balance on these loans of $ 90.7 million as of both December 31, 2021 and December 31, 2020, respectively.

These loans mature at various dates and bear interest at fixed and variable rates.

The Company signed a management fee arrangement for marketing services with a partner in an unconsolidated affiliate.

For the years ended December 31, 2021, 2020 and 2019, fees earned and payroll costs reimbursed under this arrangement totaled $ 1.4 million, $ 1.3 million and $ 2.3 million, respectively.

The Company entered into franchise agreements with certain of the unconsolidated joint ventures listed within Note 8.

The Company entered into franchise agreements with certain of the unconsolidated affiliates listed within Note 8.

Pursuant to these franchise agreements, the Company recorded royalty and marketing and reservation system fees of approximately $ 20.2 million, $ 13.9 million, and $ 25.2 million for the years ended December 31, 2021, 2020 and 2019, respectively.

The Company recorded $ 2.4 million and $ 1.4 million as a receivable due from these joint ventures as of December 31, 2020 and 2019, respectively.

The Company recorded $ 2.7 million and $ 2.4 million as a receivable due from these unconsolidated affiliates as of December 31, 2021 and 2020, respectively.

Commitments and Contingencies

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The maximum exposure of principal incidental to these limited payment guaranties is $ 5.7 million, plus unpaid expenses and accrued unpaid interest.

As of December 31, 2020 and December 31, 2019, the Company believed the likelihood of having to perform under the aforementioned limited payment guaranties was remote.

As of December 31, 2021 and

December 31, 2020, the Company believed the likelihood of having to perform under the aforementioned limited payment guaranties was remote.

In the event of performance, the Company has recourse for one of the transactions in the form of a membership interest pledge as collateral for the guaranty.

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At December 31, 2021, the Company had commitments to extend an additional $ 278.6 million for these purposes provided the conditions of the payment are met by its franchisees.

• To the extent existing unconsolidated joint ventures proceed to the hotel construction phase, the Company is committed to make capital contributions totaling $ 8.4 million to support their efforts to construct Cambria hotels.

• The Company committed to provide financing in the form of mezzanine loans or credit facilities to franchisees for Choice brand development efforts.

• To the extent existing unconsolidated affiliates proceed to the hotel construction phase, the Company is committed to make capital contributions totaling $ 7.5 million to support their efforts to construct Cambria hotels.

• The Company committed to provide financing in the form of loans or credit facilities to franchisees for Choice brand development efforts.

For the year ended December 31, 2021, the Company has committed to provide an aggregate of approximately $ 9.7 million, upon certain conditions being met.

As of December 31, 2020, no amounts have been disbursed.

• In March 2018, the Company entered into a construction loan agreement for the rehabilitation and development of a former office building into a hotel through a consolidated joint venture with a commercial lender, which was secured by the building.

The Company had a carve-out guaranty on the loan to the extent amounts drawn were outstanding.

On March 5, 2020, the Company paid off the construction loan in the amount $ 33.1 million inclusive of accrued and unpaid interest and recorded a loss on extinguishment of debt of $ 0.6 million.

As of December 31, 2021, $ 2.2 million has been disbursed.

• The Company’s franchise agreements require the payment of franchise fees, which include marketing and reservation system fees.

In accordance with terms of our franchise agreements, the Company is obligated to use the marketing and reservation system revenues it collects from the current franchisees comprising its various hotel brands to provide marketing and reservation services appropriate to support the operation of the overall system.

To the extent revenues

collected exceed expenditures incurred, the Company has a commitment to the franchisee system to make expenditures in future years.

To the extent revenues collected exceed expenditures incurred, the Company has a commitment to the franchisee system to make expenditures in future years.

Conversely, to the extent expenditures incurred exceed revenues collected, the Company has the contractual enforceable right to assess and collect such amounts.

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2021 Asset Acquisition

Prior to July 23, 2019, the Company held a 40 % ownership interest of a joint venture that owned five Cambria hotels recorded as an investment in unconsolidated entities.

In September 2021, the Company reached a settlement with a borrower holding a senior and mezzanine loan classified as collateral-dependent, collateralized by an operating hotel.

As a collateral-dependent financial asset, the expected credit losses as of September 30, 2021 were determined based on the fair value of the operating hotel.

As of September 30, 2021, the notes receivable, net of allowance for credit losses, balance was $ 21.1 million.

The key terms of the settlement resulted in a deed in lieu of foreclosure on the operating hotel in exchange for releasing obligations pursuant to the senior and mezzanine loans and the associated franchise agreement.

The property was exchanged in full settlement of the senior and mezzanine loans and recorded at the fair value of $ 21.1 million as of the acquisition date of October 1, 2021.

The fair value was estimated using an income approach valuation method based on discounted cash flows of the collateralized operating hotel utilizing historical operating performance, industry projections for the market, and comparable sales capitalization rates.

In accordance with the provisions of ASU 2017-01, Business Combinations (Topic 805):

Clarifying the Definition of a Business ("ASU 2017-01") , the purchase represents an asset acquisition based on the concentration of value in the acquired land and building.

The $ 21.1 million was re-characterized from Notes receivable, net of allowance for credit losses, and attributed to each asset class based on a relative fair value allocation to qualifying assets, resulting in $ 4.8 million to land, $ 14.2 million to building and improvements, $ 1.8 million to furniture, fixtures, and equipment, and $ 0.3 million to net assets assumed (inclusive of cash).

The relative fair values for each asset class were estimated using a combination of income and market approach valuations methods.

2019 Asset Acquisition

Prior to July 23, 2019, the Company held a 40 % ownership interest of an affiliate that owned five Cambria hotels recorded as an investment in unconsolidated entities.

On July 23, 2019, the Company redeemed the remaining 60 % ownership interest in four of the hotels for approximately $ 169.0 million cash paid (inclusive of $ 0.7 million in capitalized transaction costs), net of cash acquired.

The transaction was funded with cash and borrowings under the Company's revolving credit facility.

In accordance with the provisions of ASU 2017-01, Business Combinations (Topic 805):

Clarifying the Definition of a Business , the purchase represents an asset acquisition based on the concentration of value in the acquired land and buildings.

In accordance with the provisions of ASU 2017-01, the purchase represents an asset acquisition based on the concentration of value in the acquired land and buildings.

This assessment was performed on the four hotels as a group of similar identifiable assets based on the similar risk characteristics as operating Cambria Hotels.

1 unchanged sentence

The total net asset basis was attributed to each asset and asset class based on a relative fair value allocation to qualifying assets, resulting in $ 21.7 million to land, $ 148.4 million to building and improvements, $ 27.0 million to furniture, fixtures, and equipment, $ 0.8 million to an in-place lease intangible asset, and $ 3.9 million to net liabilities assumed.

2018 WoodSpring Suites Business Combination

On February 1, 2018, the Company acquired 100 % of the issued and outstanding equity interest of WoodSpring Suites.

At the time of the acquisition, WoodSpring franchised 239 economy extended stay hotels across 35 U.S.

The total consideration was $ 231.6 million, which consisted of cash paid, net of cash acquired, of $ 231.3 million as well as liabilities assumed of $ 0.4 million and a preliminary working capital adjustment of $ 0.1 million.

The transaction has been accounted for as a business combination and accordingly, assets acquired, and liabilities assumed were recorded at their fair values as of the acquisition date.

The results of WoodSpring have been consolidated with the Company since February 1, 2018 and are included in the Company’s Hotel Franchising segment.

The fair value of the assets and liabilities is as follows:

(in thousands)

Accounts receivables 1,258

Contract assets 115,000

Tradename 22,000

Goodwill 93,384

Accounts payable ( 348 )

Total Consideration $ 231,567

Future Adoption of Accounting Standards

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes ("ASU 2019-12").

ASU 2019-12 enhances and simplifies various aspects of the income tax accounting guidance in ASC 740.

The guidance is effective for annual reporting periods beginning after December 15, 2020 and interim periods within those fiscal years.

Early adoption is permitted.

T he Company is evaluating the effect of adopting ASU 2019-12 but does not expect adoption will have a material impact on the consolidated financial statements and disclosures.

Subsequent Events

On February 24, 2022, the Company's board of directors declared a quarterly cash dividend of $ 0.2375 per share of common stock.

The dividend is payable on April 15, 2022 to shareholders of record on April 1, 2022 .

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data