What changed in this filing

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Item 1. Financial Statements

2022-05-10 compared with 2021-11-04 · 143 added, 250 removed, 417 unchanged (49% of the section changed)

4 unchanged sentences

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

Three Months Ended

Royalty fees $ 90,739 $ 66,047

12 unchanged sentences

158,359 138,949

Loss on impairment of assets — ( 4,290 ) — ( 5,516 )

Gain on sale of asset 29 —

Operating income 99,397 43,998

2 unchanged sentences

Interest income ( 1,280 ) ( 1,281 )

Loss on extinguishment of debt — 15,958 — 16,565

Other (gains) losses 1,716 ( 1,205 )

2 unchanged sentences

Income before income taxes 87,735 28,710

Income tax expense (benefit) 34,934 9,594 67,279 ( 15,907 )

Income tax expense 20,344 6,373

Net income $ 67,391 $ 22,337

7 unchanged sentences

(IN THOUSANDS)

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

Three Months Ended

Net income $ 67,391 $ 22,337

8 unchanged sentences

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Current assets

16 unchanged sentences

Investments, employee benefit plans, at fair value 34,173 33,946

Investments in unconsolidated entities 42,961 57,879

Investments in affiliates 28,126 27,967

Deferred income taxes 71,795 68,643

1 unchanged sentence

Total assets $ 1,972,028 $ 1,931,824

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities

16 unchanged sentences

160,000,000 shares authorized;

95,065,638 shares issued at September 30, 2021 and December 31, 2020;

55,630,704 and 55,535,554 shares outstanding at September 30, 2021 and December 31, 2020, respectively

95,065,638 shares issued at March 31, 2022 and December 31, 2021;

55,770,322 and 55,609,226 shares outstanding at March 31, 2022 and December 31, 2021, respectively

Additional paid-in-capital 265,385 259,317

1 unchanged sentence

Treasury stock, at cost;

39,434,934 and 39,530,084 shares at September 30, 2021 and December 31, 2020, respectively

39,295,316 and 39,456,412 shares at March 31, 2022 and December 31, 2021, respectively

( 1,276,348 ) ( 1,265,032 )

Retained earnings 1,329,365 1,275,220

Total shareholders’ equity (deficit) 212,146 ( 5,752 )

Total liabilities and shareholders’ equity (deficit) $ 1,865,934 $ 1,587,333

Total shareholders’ equity 314,645 265,882

Total liabilities and shareholders’ equity $ 1,972,028 $ 1,931,824

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

3 unchanged sentences

(IN THOUSANDS)

Nine Months Ended

September 30,

Three Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES

3 unchanged sentences

Depreciation and amortization – marketing and reservation system 7,154 5,815

Gain on sale of asset ( 29 ) —

Franchise agreement acquisition cost amortization 3,784 3,044

Loss on impairment of assets — 5,516

Loss on extinguishment of debt — 16,565

Non-cash stock compensation and other charges 24,277 4,748

Non-cash interest and other investment income ( 11,039 ) ( 465 )

Stock compensation and other charges 7,555 5,026

Interest and investment loss (income) 1,909 ( 2,059 )

Deferred income taxes ( 3,119 ) ( 1,378 )

Equity in net losses from unconsolidated joint ventures, less distributions received 8,421 7,320

Equity in net loss of affiliates, less distributions received 230 5,997

Franchise agreement acquisition costs, net of reimbursements ( 12,435 ) ( 6,770 )

4 unchanged sentences

Investment in intangible assets ( 1,208 ) ( 885 )

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

Contributions to equity method investments ( 2,150 ) ( 4,620 )

Distributions and sale proceeds from equity method investments 15,554 3,362

Proceeds from sale of asset 8,494 —

Contributions to investments in affiliates ( 268 ) ( 968 )

Purchases of investments, employee benefit plans ( 2,818 ) ( 551 )

Proceeds from sales of investments, employee benefit plans 1,853 1,992

Purchase/issuance of notes receivable ( 17,918 ) ( 9,845 )

Collection of notes receivable 63 5,113

Issuance of notes receivable ( 1,245 ) —

Collections of notes receivable 63 63

Other items, net ( 529 ) —

1 unchanged sentence

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from issuance of Term Loan — 249,500

Proceeds from issuance of 2020 Senior Notes — 447,723

Net borrowings pursuant to revolving credit facilities — ( 18,200 )

Principal payments on long-term debt — ( 466,915 )

Payments to extinguish long-term debt — ( 14,347 )

Debt issuance costs ( 365 ) ( 4,620 )

Purchase of treasury stock ( 14,802 ) ( 5,046 )

1 unchanged sentence

Proceeds from exercise of stock options 2,211 2,845

Net cash (used in) provided by financing activities ( 12,115 ) 119,324

Net cash used in financing activities ( 25,795 ) ( 2,201 )

Net change in cash and cash equivalents 15,662 ( 11,794 )

12 unchanged sentences

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

7 unchanged sentences

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 (1)

— — — — — ( 6,831 ) ( 6,831 )

Net income — — — — — 22,337 22,337

Other comprehensive income (loss) — — — ( 664 ) — — ( 664 )

Share-based payment activity (2)

294,826 — ( 9,607 ) — 8,089 ( 269 ) ( 1,787 )

Dividends declared ($ 0.225 per share) (2)

— — — — — ( 12,452 ) ( 12,452 )

Treasury purchases ( 657,031 ) — — — ( 54,072 ) — ( 54,072 )

Balance as of March 31, 2020 55,340,423 $ 951 $ 221,553 $ ( 5,214 ) $ ( 1,265,888 ) $ 1,004,744 $ ( 43,854 )

Net income — — — — — ( 2,441 ) ( 2,441 )

Other comprehensive income (loss) — — — 187 — — 187

Share-based payment activity (2)

29,997 — 2,166 — 1,825 ( 171 ) 3,820

Dividends declared (2)

— — — — — — —

Treasury purchases ( 6,525 ) — — — ( 464 ) — ( 464 )

Balance as of June 30, 2020 55,363,895 $ 951 $ 223,719 $ ( 5,027 ) $ ( 1,264,527 ) $ 1,002,132 $ ( 42,752 )

Net income — — — — — 14,500 14,500

Other comprehensive income (loss) — — — 240 — — 240

Other comprehensive income (loss), net of tax — — — 52 — — 52

Share-based payment activity (1)

3 unchanged sentences

Treasury purchases ( 46,499 ) — — — ( 5,046 ) — ( 5,046 )

Balance as of September 30, 2020 55,458,248 951 228,521 ( 4,787 ) ( 1,262,724 ) 1,016,635 ( 21,404 )

Balance as of March 31, 2021 55,537,836 $ 951 $ 237,538 $ ( 4,594 ) $ ( 1,261,494 ) $ 1,046,834 $ 19,235

Outstanding Common

7 unchanged sentences

Net income — — — — — 67,391 67,391

Other comprehensive income (loss) — — — 52 — — 52

Share-based payment activity (2)

48,781 — 3,617 — 4,030 ( 3 ) 7,644

Dividends declared (2)

— — — — — — —

Treasury purchases ( 46,499 ) — — — ( 5,046 ) — ( 5,046 )

Balance as of March 31, 2021 55,537,836 $ 951 $ 237,538 $ ( 4,594 ) $ ( 1,261,494 ) $ 1,046,834 $ 19,235

Net income — — — — — 85,882 85,882

Other comprehensive income (loss) — — — 71 — — 71

Share-based payment activity (2)

111,895 — 9,066 — 3,516 1 12,583

Dividends declared ($ 0.225 per share) (2)

— — — — — ( 12,521 ) ( 12,521 )

Treasury purchases ( 2,738 ) — — — ( 317 ) — ( 317 )

Balance as of June 30, 2021 55,646,993 $ 951 $ 246,604 $ ( 4,523 ) $ ( 1,258,295 ) $ 1,120,196 $ 104,933

Net income — — — — — 116,655 116,655

Other comprehensive income (loss) — — — ( 57 ) — — ( 57 )

Other comprehensive income (loss), net of tax — — — ( 134 ) — — ( 134 )

Share-based payment activity (1)

3 unchanged sentences

Treasury purchases ( 100,912 ) — — — ( 14,802 ) — ( 14,802 )

Balance as of September 30, 2021 55,630,704 951 253,361 ( 4,580 ) ( 1,261,926 ) 1,224,340 212,146

(1) Reflects 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 3.

(2) 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.

Balance as of March 31, 2022 55,770,322 $ 951 $ 265,385 $ ( 4,708 ) $ ( 1,276,348 ) $ 1,329,365 $ 314,645

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

In May 2021, the Company resumed the payment of quarterly dividends, subject to future declarations by our board of directors, and 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.

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

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.

During all periods presented, 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.

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

14 unchanged sentences

Interim results are not necessarily indicative of the entire year results.

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 selling, general and administrative ("SG&A") expenses are now presented within other gain (loss) in the consolidated statements of income.

The reclassification had no effect on the Company’s previously reported results of operations.

Summary of Significant Accounting Policies

The Company’s significant accounting policies are detailed in the “Summary of Significant Accounting Policies” section of Note 1 in the Annual Report on Form 10-K for the year ended December 31, 2021.

The significant accounting policies that changed in 2021 are set forth below.

Recently Adopted 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 does not have material impacts on our consolidated financial statements and disclosures .

Recently Issued Accounting Standards

In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses ("ASU 2022-02").

ASU 2022-02 eliminates the recognition and measurement guidance on troubled debt restructuring for creditors that have adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) ("Topic 326"), requires enhanced disclosures about loan modifications for borrowers experiencing financial difficulty, and includes new guidance on current-period gross write-offs presentation.

The guidance is effective for annual reporting periods beginning after December 15, 2022 and interim periods within those fiscal years.

Early adoption is permitted.

The Company is currently assessing the potential impact that ASU 2022-02 will have on the consolidated financial statements and disclosures.

Contract Liabilities

Contract liabilities relate to (i) advance consideration received, such as initial franchise and relicensing fees paid when a franchise agreement is executed and system implementation fees paid at time of installation, for services considered to be part of the brand intellectual property performance obligation and (ii) amounts received when Choice Privileges points are issued, but for which revenue is not yet recognized since the related points have not been redeemed.

Deferred revenues from initial and relicensing fees and system implementation fees will typically be recognized over a five - to ten-year period, unless the franchise agreement is terminated and the hotel exits the franchise system whereby remaining deferred amounts will be recognized to revenue in the period of termination.

Deferred revenues from initial and relicensing fees and system implementation fees are typically recognized over a five - to ten-year period, unless the franchise agreement is terminated and the hotel exits the franchise system whereby remaining deferred amounts are recognized to revenue in the period of termination.

Loyalty points are typically redeemed within three years of issuance.

Significant changes in the contract liabilities balances during the period December 31, 2020 to September 30, 2021 are as follows:

Significant changes in the contract liabilities balances during the period December 31, 2021 to March 31, 2022 are as follows:

(in thousands)

2 unchanged sentences

Revenue recognized in the period ( 22,602 )

Balance as of September 30, 2021 $ 174,899

Balance as of March 31, 2022 $ 179,579

Remaining Performance Obligations

The aggregate amount of transaction price allocated to unsatisfied or partially unsatisfied performance obligations is $ 174.9 million as of September 30, 2021.

The aggregate amount of transaction price allocated to unsatisfied or partially unsatisfied performance obligations is $ 179.6 million as of March 31, 2022.

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

2 unchanged sentences

Three Months Ended Three Months Ended

September 30, 2021 September 30, 2020

(in thousands) Over time Point in time Total Over time Point in time Total

Royalty fees $ 127,317 $ — $ 127,317 $ 79,666 $ — $ 79,666

Initial franchise and relicensing fees 6,149 — 6,149 6,071 — 6,071

Procurement services 12,285 725 13,010 9,620 495 10,115

Marketing and reservation system 145,216 11,655 156,871 93,327 13,814 107,141

Owned hotels 9,614 1,652 11,266 3,498 595 4,093

Other 8,645 — 8,645 3,317 — 3,317

Total Topic 606 revenues $ 309,226 $ 14,032 323,258 $ 195,499 $ 14,904 210,403

Non-Topic 606 revenues 111 368

Total revenues $ 323,369 $ 210,771

Nine Months Ended Nine Months Ended

September 30, 2021 September 30, 2020

March 31, 2022 March 31, 2021

(in thousands) Over time Point in time Total Over time Point in time Total

8 unchanged sentences

Total revenues $ 257,727 $ 182,947

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

As presented in Note 11, the Corporate & Other segment amounts represent $ 13.5 million and $ 6.4 million for the three months ended September 30, 2021 and 2020, respectively, and $ 30.5 million and $ 21.8 million for the nine months ended September 30, 2021 and 2020, respectively, and are included in the Over time column of Other revenues and the Owned hotels and Non-Topic 606 revenues rows.

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.

As presented in Note 11, the Corporate & Other segment amounts represent $ 14.3 million and $ 6.0 million for the three months ended March 31, 2022 and 2021, 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 $ 0.9 million and $ 0.3 million for the three months ended September 30, 2021 and 2020, respectively, and $ 1.9 million and $ 1.2 million for the nine months ended September 30, 2021 and 2020, respectively.

Royalty fees and Marketing and reservation system revenues are presented net of intersegment revenues of $ 0.9 million and $ 0.3 million for the three months ended March 31, 2022 and 2021, respectively.

Receivables and Allowance for Credit Losses

3 unchanged sentences

The composition of notes receivable balances by credit quality indicator and the allowance for credit losses is as follows:

(in thousands) September 30, 2021 December 31, 2020

(in thousands) March 31, 2022 December 31, 2021

Senior $ 109,628 $ 108,370

6 unchanged sentences

Long-term portion, net of allowance $ 67,649 $ 66,451

During the second quarter of 2021, the Company acquired a senior note collateralized by an operating hotel for $ 17.9 million.

The acquired senior note has an origination date in June 2018.

Amortized cost basis by year of origination and credit quality indicator are as follows:

4 unchanged sentences

Total notes receivable $ — $ 3,453 $ — $ 135,758 $ 139,211

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

(in thousands) September 30, 2021 December 31, 2020

The following table summarizes the activity related to the Company’s notes receivable allowance for credit losses:

(in thousands) March 31, 2022 December 31, 2021

Beginning balance $ 16,779 $ 19,484

Allowances established from adoption of Topic 326 — 8,348

Provision for credit losses 39 709

1 unchanged sentence

Ending balance $ 16,816 $ 16,779

The provisions recorded in the nine months ended September 30, 2021 primarily result from changes in the classification of certain loans as collateral-dependent and associated revisions to their allowances.

Allowances for credit losses attributable to collateral-dependent loans are $ 9.1 million and $ 7.8 million as of September 30, 2021 and December 31, 2020, respectively.

As of September 30, 2021, three loans with senior and/or subordinated tranches met the definition of collateral-dependent and are collateralized by either land parcels, an operating hotel, or membership interests in the borrowing entities.

As of both March 31, 2022 and December 31, 2021, two loans with senior and/or subordinated tranches met the definition of collateral-dependent and are collateralized by membership interests in the borrowing entities and either the associated land parcels or an operating hotel.

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

2 unchanged sentences

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 September 30, 2021.

In September 2021, the Company reached a settlement with a borrower holding a loan classified as collateral-dependent, collateralized by an operating hotel.

Allowances for credit losses attributable to collateral-dependent loans are $ 6.3 million as of both March 31, 2022 and December 31, 2021, respectively.

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

In April 2022, the Company reached a settlement with a borrower holding a loan classified as collateral-dependent, collateralized by an operating hotel.

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 will be recorded at fair value as of the acquisition date of October 1, 2021.

The Company will account for the acquisition of the hotel as an asset acquisition in the fourth quarter of 2021.

The property was exchanged in full settlement of the senior and mezzanine loans and will be recorded at fair value as of the acquisition date of April 14, 2022.

The Company will account for the acquisition of the hotel as an asset acquisition in the second quarter of 2022.

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

3 unchanged sentences

The Company does not resume interest accrual until all delinquent payments are received based on then current loan provisions.

The amortized cost basis of notes receivable on non-accrual status was $ 68.7 million and $ 28.9 million at September 30, 2021 and December 31, 2020, respectively.

The Company has identified loans totaling approximately $ 13.1 million as of both September 30, 2021 and December 31, 2020, with stated interest rates that are less than market rate, representing a total unamortized discount of $ 0.4 million and $ 0.8 million as of September 30, 2021 and December 31, 2020, respectively.

The amortized cost basis of notes receivable on non-accrual status was $ 44.1 million at both March 31, 2022 and December 31, 2021, respectively.

The Company has identified loans totaling approximately $ 7.5 million as of both March 31, 2022 and December 31, 2021, respectively, with stated interest rates that are less than market rate, representing a total unamortized discount of $ 0.3 million as of both March 31, 2022 and December 31, 2021, respectively.

These discounts are reflected as a reduction of the outstanding loan amounts and are amortized over the life of the related loan.

6 unchanged sentences

Notes Receivable

As of September 30, 2021

As of March 31, 2022

Senior $ — $ 15,200 $ — $ 15,200 $ 94,428 $ 109,628

7 unchanged sentences

$ — $ — $ 2,209 $ 2,209 $ 135,474 $ 137,683

The Company evaluated its off-balance-sheet credit exposure for loan commitments and determined the likelihood of having to perform is remote as of September 30, 2021.

The Company evaluated its off-balance-sheet credit exposure for loan commitments and determined the likelihood of having to perform is remote as of March 31, 2022.

Refer to Note 12.

The Company has issued notes receivables to certain entities that have created variable interests in these borrowers totaling $ 138.5 million and $ 119.3 million as of September 30, 2021 and December 31, 2020, respectively.

Variable Interest through Notes Issued

The Company has issued notes receivables to certain entities that have created variable interests in these borrowers totaling $ 121.6 million and $ 120.2 million as of March 31, 2022 and December 31, 2021, respectively.

The Company has determined that it is not the primary beneficiary of these variable interest entities ("VIEs").

2 unchanged sentences

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

During the nine months ended September 30, 2020, the Company recorded provisions for credit losses on accounts receivable of $ 10.4 million in SG&A expenses and $ 18.0 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 nine months ended September 30, 2021, the Company recorded reversals of provisions for credit losses on accounts receivable of $ 2.2 million in SG&A expenses and $ 4.2 million in marketing and reservation system expenses, after considering improved collection patterns and economic and credit conditions.

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 $ 40.5 million and $ 56.9 million on the consolidated balance sheets at September 30, 2021 and December 31, 2020, 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.

Based on an analysis of who has the power to direct the activities that most significantly impact these entities performance and who has an obligation to absorb losses of these entities or a right to receive benefits from these entities that could potentially be significant to the entity, the Company determined that it is not the primary beneficiary of any of these VIEs.

The Company based its qualitative analysis on its review of the design of the entity, its organizational structure including decision-making ability and the relevant development, operating management and financial agreements.

Although the Company is not the primary beneficiary of these VIEs, it does exercise significant influence through its equity ownership and as a result the Company's investment in these entities is accounted for under the equity method.

For the three months ended September 30, 2021 and 2020, the Company recognized (gains) losses totaling $( 2.5 ) million and $ 2.3 million, respectively, from these investments that represent VIEs.

For the nine months ended September 30, 2021 and 2020, the Company recognized losses totaling $ 3.0 million and $ 6.9 million, respectively, from these investments that represent VIEs.

During the three months ended March 31, 2021, the Company recorded provisions for credit losses on accounts receivable of $ 2.6 million in SG&A expenses and $ 3.9 million in marketing and reservation system expenses.

During three months ended March 31, 2022, the Company recorded reversals of provisions for credit losses on accounts receivable of $ 0.5 million in SG&A expenses and provisions of $ 0.3 million in marketing and reservation system expenses.

During the three months ended March 31, 2021 and 2022, the Company recorded write-offs, net of recoveries, through the accounts receivable allowance for credit losses of $ 0.3 million and $ 6.3 million, respectively.

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 $ 24.7 million and $ 25.2 million on the consolidated balance sheets at March 31, 2022 and December 31, 2021, respectively.

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 affiliates is accounted for under the equity method.

For the three months ended March 31, 2022 and 2021, the Company recognized losses totaling $ 0.8 million and $ 6.4 million, respectively, from these investments that represent VIEs.

The Company's maximum exposure to losses related to its investments in VIEs is limited to its equity investments as well as certain limited payment guaranties described in Note 12 of these financial statements.

The Company recognized no impairment charges related to equity method investments during the three months ended March 31, 2022.

During the first quarter of 2021, the Company recognized an other-than-temporary impairment of $ 4.8 million related to an equity method investment.

The Company assessed the estimated fair value of the investment from comparable market transactions of the investment.

The Company assessed the estimated fair value of the investment from comparable market transactions of the investment, which was a key judgment in the fair value determination.

This nonrecurring fair value measurement was 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 this analysis, 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 an other-than-temporary impairment from the carrying value to the estimated fair value for the investment.

As a result, the Company recorded an other-than-

temporary impairment from the carrying value to the estimated fair value for the investment.

The other-than-temporary impairment is classified as equity in net loss of affiliates in the consolidated statements of income and captured in the Hotel Franchising reportable segment in Note 11.

During the second quarter of 2021, the Company sold its ownership interest in three separate equity method investments.

The Company recognized a cumulative gain of $ 2.6 million on the sales of these investments, which is recorded in equity in net (gain) loss of affiliates.

During the third quarter of 2021, a joint venture for which the Company maintains an ownership interest sold its underlying assets.

The Company received a distribution and recognized a gain of $ 4.3 million, which is recorded in equity in net (gain) loss of affiliates.

Debt consists of the following:

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

(in thousands)

$ 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 $ 5.7 million and $ 6.1 million at September 30, 2021 and December 31, 2020, 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 $ 5.4 million and $ 5.5 million at March 31, 2022 and December 31, 2021, respectively

$ 444,622 $ 444,470

$ 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 $ 4.9 million and $ 5.4 million at September 30, 2021 and December 31, 2020, 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 $ 4.6 million and $ 4.8 million at March 31, 2022 and December 31, 2021, respectively

395,388 395,237

$ 400 million senior unsecured notes due 2022 ("2012 Senior Notes") with an effective interest rate of 6.00 %, less deferred issuance costs of $ 0.4 million and $ 0.7 million at September 30, 2021 and December 31, 2020, respectively

$ 400 million senior unsecured notes due 2022 ("2012 Senior Notes") with an effective interest rate of 6.00 %, less deferred issuance costs of $ 0.1 million and $ 0.2 million at March 31, 2022 and December 31, 2021, respectively (2)

216,486 216,351

$ 600 million senior unsecured revolving credit facility (1)

Economic development loans with an effective interest rate of 3.00 % at September 30, 2021 and December 31, 2020, respectively

Economic development loans with an effective interest rate of 3.00 % at March 31, 2022 and December 31, 2021, respectively

Total debt $ 1,060,912 $ 1,060,474

Less current portion (2)

216,486 216,351

Long-term debt $ 844,426 $ 844,123

(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 and the facility remains undrawn as of September 30, 2021 and December 31, 2020.

As there are no outstanding borrowings at September 30, 2021 or December 31, 2020, deferred issuance costs for the senior unsecured revolving credit facility of $ 2.4 million and $ 2.4 million, respectively, are presented in non-current Other assets in the consolidated balance sheets.

In August 2021, the Company executed a one-year extension on the senior unsecured revolving 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.

As there are no outstanding borrowings at March 31, 2022 or December 31, 2021, deferred issuance costs for the senior unsecured revolving credit facility of $ 2.1 million and $ 2.3 million, respectively, are presented in non-current Other assets in the consolidated balance sheets.

(2) The Company's 2012 Senior Notes mature on July 1, 2022 with a principal maturity, net of unamortized deferred issuance costs, of $ 216.5 million.

Refer to Note 12 and the Liquidity and Capital Resources header of "Management's Discussion and Analysis of Financial Condition and Results of Operations" for more information.

Accumulated Other Comprehensive Loss

The changes in accumulated other comprehensive loss, net of tax, for the nine months ended September 30, 2021 and 2020 are as follows:

The changes in accumulated other comprehensive loss, net of tax, for the three months ended March 31, 2022 and 2021 are as follows:

(in thousands)

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Net current period other comprehensive income (loss) ( 134 )

Balance as of September 30, 2021 $ ( 4,580 )

Balance as of March 31, 2022 $ ( 4,708 )

(in thousands)

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Net current period other comprehensive income (loss) 52

Balance as of September 30, 2020 $ ( 4,787 )

The other comprehensive income (loss) before reclassification for both the nine months ended September 30, 2021 and 2020 relate to foreign currency items.

Balance as of March 31, 2021 $ ( 4,594 )

The other comprehensive income (loss) before reclassification for both the three months ended March 31, 2022 and 2021 relate to foreign currency items.

Fair Value Measurements

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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 nine months ended September 30, 2021.

As of September 30, 2021 and December 31, 2020, the Company had the following assets recorded in the consolidated balance sheets measured at fair value on a recurring basis:

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 three months ended March 31, 2022.

As of March 31, 2022 and December 31, 2021, the Company had the following assets recorded in the consolidated balance sheets measured at fair value on a recurring basis:

Fair Value Measurements at Reporting Date Using

(in thousands) Total Level 1 Level 2 Level 3

As of September 30, 2021

As of March 31, 2022

Mutual funds (1)

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Total $ 36,075 $ 33,555 $ 2,520 $ —

(1) Included in Investments, employee benefit plans, at fair value and Other current assets on the consolidated balance sheets.

(1) Included in Investments, employee benefit plans, at fair value and Prepaid expenses and other current assets on the consolidated balance sheets.

Other financial instruments disclosure

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Refer to Note 5 for further information on debt.

At September 30, 2021 and December 31, 2020, the carrying amounts and fair values are as follows:

September 30, 2021 December 31, 2020

At March 31, 2022 and December 31, 2021, the carrying amounts and fair values are as follows:

March 31, 2022 December 31, 2021

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

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Settlement of such fair value amounts may not be possible or a prudent management decision.

The effective income tax rates were 23.1 % and 39.4 % for the three months ended September 30, 2021 and 2020, respectively.

The effective income tax rates were 23.0 % and ( 30.8 )% for the nine months ended September 30, 2021 and 2020, respectively.

The effective income tax rate for the three months ended September 30, 2021 was higher than the U.S.

federal income tax rate of 21.0% primarily due to the impact of state income taxes, partially offset by $ 0.4 million of excess tax benefits from share-based compensation and $ 0.7 million of additional federal research and development ("R&D") tax credits.

The effective income tax rate for the nine months ended September 30, 2021 was higher than the U.S.

federal income tax rate of 21.0% primarily due to the impact of state income taxes, partially offset by $ 2.4 million of excess tax benefits from share-based compensation and $ 0.7 million of additional federal R&D tax credits.

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 inter-company 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 that resulted in a $ 30.6 million tax benefit.

In accordance with ASU 2016-16, the Company recorded the $ 30.6 million benefit and a corresponding deferred tax asset in the first quarter of 2020.

Due to a decrease in the forecasted income of international entities resulting from adverse impacts of the COVID-19 pandemic, the Company recorded a valuation allowance of $ 5.1 million in the third quarter of 2020 reflecting a change in the anticipated realizability of this deferred tax asset.

The effective income tax rate for the three months ended September 30, 2020 was higher than the U.S.

federal income tax rate of 21.0% primarily due to the establishment of a valuation allowance of $ 5.1 million and state income taxes, partially offset by the impact of foreign operations, a $ 1.5 million adjustment to our deferred taxes, and $ 0.7 million of excess tax benefits from share-based compensation.

The effective income tax rate for the nine months ended September 30, 2020 was lower than the U.S.

federal income tax rate of 21.0% due to the impacts of ASU-2016 and the corresponding valuation allowance, $ 3.4 million of excess tax benefits from share-based compensation, an adjustment to our deferred taxes, and the impact of foreign operations, partially offset by state income taxes and a change in estimated uncertain tax positions.

The effective income tax rates were 23.2 % and 22.2 % for the three months ended March 31, 2022 and 2021, respectively.

The effective income tax rate for the three months ended March 31, 2022 was higher than the U.S.

federal income tax rate of 21.0% primarily due to the impact of state income taxes, partially offset by excess tax benefits from share-based compensation.

The effective income tax rate for the three months ended March 31, 2021 was higher than the U.S.

federal income tax rate of 21.0% due to the impact of state income taxes and foreign operations, partially offset by excess tax benefits from share-based compensation.

Share-Based Compensation and Capital Stock

The components of the Company’s pretax share-based compensation activity and associated income tax expense are as follows for the three and nine months ended September 30, 2021 and 2020:

Three Months Ended September 30, Nine Months Ended September 30,

The components of the Company’s pretax share-based compensation activity and associated income tax expense are as follows for the three months ended March 31, 2022 and 2021:

Three Months Ended March 31,

(in thousands) 2022 2021

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Income tax expense $ 1,805 $ 1,157

A summary of share-based award activity as of and changes during the nine months ended September 30, 2021 are presented below:

A summary of share-based award activity as of and changes during the three months ended March 31, 2022 are presented below:

Stock Options Restricted Stock Performance Vested

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Forfeited — — ( 1,407 ) 94.19 ( 194 ) 114.36

Outstanding at September 30, 2021 917,334 $ 83.10 5.8 years 238,310 $ 91.12 415,507 $ 114.05

Options exercisable at September 30, 2021 425,571 $ 67.02 3.1 years

(1) PVRSUs outstanding have been increased by 75,476 units in the nine months ended September 30, 2021 due to the Company exceeding the targeted performance conditions contained in PVRSUs.

Outstanding at March 31, 2022 1,025,664 $ 93.96 6.2 years 400,796 $ 126.12 457,943 $ 135.65

Options exercisable at March 31, 2022 549,980 $ 76.12 4.0 years

(1) PVRSUs outstanding have been increased by 12,280 units in the three months ended March 31, 2022 due to the Company exceeding the targeted performance conditions contained in PVRSUs.

Stock Options

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Weighted average fair value of options granted (per option) $ 43.25

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

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.

Restricted Stock Awards

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Restricted stock awards generally vest ratably over the service period beginning with the first anniversary of the grant date.

The fair value of restricted stock awards is measured by the market price of the Company's common stock on the date of grant.

The service period of restricted stock awards granted during the nine months ended September 30, 2021 range from 9 to 48 months.

The fair value of restricted stock awards is measured by the market price of the Company's common stock on the

date of grant.

The service period of restricted stock awards granted during the three months ended March 31, 2022 range from 9 to 60 months.

Performance Vested Restricted Stock Units

The Company grants three types of PVRSU awards:

i) PVRSUs with performance conditions based on internal performance conditions, 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.

i) PVRSUs with performance conditions based on internal performance conditions, including earnings per share ("EPS") relative to Company established targets, 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 nine months ended September 30, 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 between 0 % and 300 % of the initial units granted.

During the three months ended March 31, 2022, 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 between 0 % and 300 % of the initial units granted.

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

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Compensation expense is recognized ratably 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.

During the nine months ended September 30, 2020, the Company reduced the leveraging factor for 230,647 unvested PVRSUs to 0 %.

Share Repurchases and Redemptions

In April 2020, in light of uncertainty resulting from the COVID-19 pandemic, the Company temporarily suspended activity under the Company's share repurchase program.

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

In April 2020, in light of uncertainty resulting from the COVID-19 pandemic, the Company suspended activity under the Company's share repurchase program.

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

Refer to the Liquidity and Capital Resources header of "Management's Discussion and Analysis of Financial Condition and Results of Operations" for more information.

During the three and nine months ended September 30, 2021, there were 34,746 and 36,328 purchases of common stock under the share repurchase program at a total cost of $ 4.0 million and $ 4.2 million, respectively.

During the three and nine months ended September 30, 2021, the Company redeemed 5,300 and 52,955 shares of common stock at a total cost of $ 0.7 million and $ 5.8 million, respectively, 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 the three months ended March 31, 2022 there were 68,486 purchases of common stock under the share repurchase program at a total cost of $ 9.9 million.

During the three months ended March 31, 2021 there were no purchases of common stock under the share repurchase program.

During the three months ended March 31, 2022 and 2021, the Company redeemed 32,426 and 46,499 shares of common stock at a total cost of $ 4.9 million and $ 5.1 million, respectively, 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.

These redemptions were outside the share repurchase program.

Earnings Per Share

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.

The Company’s shares of restricted stock contain rights to receive nonforfeitable dividends and thus are participating securities requiring the computation of basic 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.

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

Three Months Ended Nine Months Ended

September 30, September 30,

Three Months Ended

(in thousands, except per share amounts) 2022 2021

Net income $ 67,391 $ 22,337

(Income) loss allocated to participating securities ( 420 ) ( 78 ) ( 910 ) ( 378 )

Net income (loss) available to common shareholders $ 116,235 $ 14,422 $ 223,964 $ 67,144

Income allocated to participating securities ( 324 ) ( 110 )

Net income available to common shareholders $ 67,067 $ 22,227

Weighted average shares of common stock outstanding – basic 55,412 55,263

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Net income $ 67,391 $ 22,337

(Income) loss allocated to participating securities ( 420 ) ( 78 ) ( 910 ) ( 377 )

Net income (loss) available to common shareholders $ 116,235 $ 14,422 $ 223,964 $ 67,145

Income allocated to participating securities ( 324 ) ( 110 )

Net income available to common shareholders $ 67,067 $ 22,227

Weighted average shares of common stock outstanding – basic 55,412 55,263

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Diluted earnings per share $ 1.20 $ 0.40

The following securities have been excluded from the calculation of diluted weighted average shares of common stock outstanding as the inclusion of these securities would have an anti-dilutive effect or the performance or market conditions have not been met:

Three Months Ended Nine Months Ended

September 30, September 30,

Three Months Ended

(in thousands) 2022 2021

Stock options 156 —

PVRSUs 155 234 155 234

Reportable Segment Information

Hotel Franchising:

Hotel Franchising includes the Company's hotel franchising operations consisting of its fourteen brands.

The Hotel Franchising reportable segment includes the Company's hotel franchising operations consisting of its fourteen brands.

The fourteen brands are aggregated within this segment considering their similar economic characteristics, types of customers, distribution channels and regulatory business environments.

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The Company is obligated under its hotel franchise agreements to provide marketing and reservation services appropriate for the operation of its systems.

These services do not represent separate reportable segments as their operations are directly related to the Company's hotel franchising business.

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 investment 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.

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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, 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 chief operating decision maker, does not use assets by operating segment when assessing performance or making operating segment resource allocations decisions and therefore assets by segment are not disclosed below.

The following table presents the financial information for the Company's segments:

Three Months Ended September 30, 2021 Three Months Ended September 30, 2020

(in thousands) Hotel

Franchising Corporate &

Other Intersegment Eliminations Consolidated Hotel

Franchising Corporate &

Other Intersegment Eliminations Consolidated

Revenues $ 310,703 $ 13,532 $ ( 866 ) $ 323,369 $ 204,717 $ 6,368 $ ( 314 ) $ 210,771

Operating income (loss) $ 169,516 $ ( 10,410 ) $ — $ 159,106 $ 70,940 $ ( 20,240 ) $ — $ 50,700

Income (loss) before income taxes $ 172,338 $ ( 20,749 ) $ — $ 151,589 $ 69,208 $ ( 45,114 ) $ — $ 24,094

Nine Months Ended September 30, 2021 Nine Months Ended September 30, 2020

Three Months Ended March 31, 2022 Three Months Ended March 31, 2021

(in thousands) Hotel

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The Company entered into various limited payment guaranties with regards to the Company’s VIEs supporting their efforts to develop and own hotels franchised under the Company’s brands.

Under these limited payment guaranties, the Company has agreed to guarantee a portion of the outstanding debt until certain conditions are met such as (a) the loan matures, (b) certain debt covenants are achieved, (c) the maximum amount guaranteed by the Company is paid in full or (d) the Company, through

its affiliates, ceases to be a member of the VIE.

The maximum exposure of principal incidental to these limited payment guaranties is $ 5.7 million, plus unpaid expenses and accrued unpaid interest.

As of September 30, 2021 and December 31, 2020, the Company believed the likelihood of having to perform under the aforementioned limited payment guaranties was remote.

As of March 31, 2022 and December 31, 2021, 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.

The Company has the following commitments outstanding at September 30, 2021:

The Company has the following commitments outstanding at March 31, 2022:

• The Company provides financing in the form of franchise agreement acquisition payments to franchisees for property improvements, hotel development efforts and other purposes.

These payments are typically made at commencement of construction or hotel opening, in accordance with agreed upon provisions in individual franchise agreements.

At September 30, 2021, the Company had commitments to extend an additional $ 269.2 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 $ 7.5 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.

At September 30, 2021, the Company has committed to provide an aggregate of approximately $ 7.7 million, upon certain conditions being met, and none of these amounts have been disbursed.

At March 31, 2022, the Company had commitments to extend an additional $ 277.0 million for these purposes provided the conditions of the payment are met by its franchisees.

• To the extent existing unconsolidated affiliates proceed to the hotel construction phase, the Company is committed to make capital contributions totaling $ 7.8 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.

At March 31, 2022, the Company has remaining commitments of approximately $ 6.2 million, upon certain conditions being met.

• The Company’s franchise agreements require the payment of franchise fees, which include marketing and reservation system fees.

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In the ordinary course of business, the Company enters into numerous agreements that contain standard indemnities whereby the Company indemnifies another party for breaches of representations and warranties.

Such indemnifications are granted under various agreements, including those governing (i) purchases or sales of assets or businesses, (ii) leases of real estate, (iii) licensing of trademarks, (iv) access to credit facilities, (v) issuances of debt or equity securities, and (vi) certain operating agreements.

Such indemnifications are granted under various agreements, including those governing (i) purchases or sales of assets or businesses, (ii) leases of real estate,

(iii) licensing of trademarks, (iv) access to credit facilities, (v) issuances of debt or equity securities, and (vi) certain operating agreements.

The indemnifications issued are for the benefit of the (i) buyers in sale agreements and sellers in purchase agreements, (ii) landlords in lease contracts, (iii) franchisees in licensing agreements, (iv) financial institutions in credit facility arrangements, (v) underwriters in debt or equity security issuances and (vi) parties under certain operating agreements.

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With respect to certain of the aforementioned indemnities, such as indemnifications of landlords against third-party claims for the use of real estate property leased by the Company, the Company maintains insurance coverage that mitigates potential liability.

Transactions with Unconsolidated Joint Ventures

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

For the three months ended September 30, 2021 and 2020, fees earned and payroll costs reimbursed under this arrangement totaled $ 0.6 million and $ 0.5 million, respectively.

For both the nine months ended September 30, 2021 and 2020, fees earned and payroll costs reimbursed under this arrangement totaled $ 1.1 million and $ 0.9 million, respectively.

The Company has entered into franchise agreements with certain of the unconsolidated joint ventures discussed in Note 4.

Pursuant to these franchise agreements, for the three months ended September 30, 2021 and 2020, the Company recorded royalty, marketing reservation system, and other fees of approximately $ 8.0 million and $ 3.6 million, respectively.

For the nine months ended September 30, 2021 and 2020, the Company recorded royalty, marketing reservation system, and other fees of approximately $ 15.0 million and $ 10.4 million, respectively.

The Company recorded $ 3.0 million and $ 2.4 million as a receivable due from these joint ventures as of September 30, 2021 and December 31, 2020, respectively.

Assets Held for Sale

Assets held for sale of $ 6.4 million are recorded within Prepaid expenses and other current assets on the consolidated balance sheets and relate to a commercial office building previously awarded to the Company pursuant to a court settlement.

No revision to the carrying value was recorded upon reaching held for sale classification.

As a result of the Company's long range planning process, management pursued a sale of the commercial office building.

The building was sold in November 2021 .

Transactions with Unconsolidated Affiliates

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

For the three months ended March 31, 2022 and 2021, fees earned and payroll costs reimbursed under this arrangement totaled $ 0.4 million and $ 0.2 million, respectively.

The Company has entered into franchise agreements with certain of the unconsolidated affiliates discussed in Note 4.

Pursuant to these franchise agreements, the Company recorded royalty and marketing reservation system fees of approximately $ 4.2 million and $ 2.9 million for the three months ended March 31, 2022 and 2021, respectively.

The Company recorded $ 3.0 million and $ 2.7 million as a receivable due from these affiliates as of March 31, 2022 and December 31, 2021, respectively.

Subsequent Events

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

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

On October 12, 2021, the Company executed a purchase and sale agreement for a parcel of land recorded at $ 8.7 million within Property and equipment, at cost, net on the consolidated balance sheets.

As a result, this parcel of land is deemed to meet held for sale classification in October 2021.

Management expects to sell the parcel of land in 2022.

On October 21, 2021, the Company entered into an office lease agreement with an unrelated third-party with an approximately 11 year term.

This office lease is expected to commence in 2023.

The Company committed to a plan to market two owned hotel assets for sale and executed purchase and sale agreements in April and May 2022.

As a result, each owned hotel is deemed to meet held for sale classification as of May 2022.

Management expects to sell the assets in 2022 and recognize a gain on sale upon consummation of each transaction.

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-Q

Item 1. Financial Statements