Operations Review

Comparison of Operating Results for the Three-Month Periods Ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~

2020

Summarized financial results for the three months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 are as follows:


(in thousands)	2017			2016			(in thousands)	2021		2020
REVENUES:
REVENUES							REVENUES
Royalty fees	$	104,252		$	96,114		Royalty fees	$	106,242	$	50,152
Initial franchise and relicensing fees	6,403			6,284			Initial franchise and relicensing fees	7,328		6,676
Procurement services	8,103			7,615			Procurement services	12,092		10,697
Marketing and reservation system	167,763			152,018			Marketing and reservation system	135,988		79,677
Owned hotels							Owned hotels	8,993		2,108
Other	8,567			5,546			Other	7,701		2,423
Total revenues	295,088			267,577			Total revenues	278,344		151,733
OPERATING EXPENSES:
OPERATING EXPENSES							OPERATING EXPENSES
Selling, general and administrative	46,364			34,357			Selling, general and administrative	34,470		43,935
Depreciation and amortization	3,095			2,986			Depreciation and amortization	6,232		6,398
Marketing and reservation system	167,763			152,018			Marketing and reservation system	113,285		89,309
Owned hotels							Owned hotels	5,333		2,976

Total operating expenses	217,222			189,361			Total operating expenses	159,320		142,618
Gain (loss) on sale of assets, net	(32		)	402
Operating Income	77,834			78,618
OTHER INCOME AND EXPENSES, NET:

Loss on impairment of assets							Loss on impairment of assets	—		(1,226)

Operating income							Operating income	119,024		7,889
OTHER INCOME AND EXPENSES, NET							OTHER INCOME AND EXPENSES, NET
Interest expense	11,399			11,150			Interest expense	11,691		13,082
Interest income	(1,575		)	(836		)	Interest income	(1,234)		(2,245)
Other gains	(778		)	(746		)
Equity in net (income) loss of affiliates	274			(1,150		)
Loss on extinguishment of debt							Loss on extinguishment of debt	—		—
Other (gains) losses							Other (gains) losses	(2,108)		(3,556)
Equity in net (gain) loss of affiliates							Equity in net (gain) loss of affiliates	(1,179)		3,486
Total other income and expenses, net	9,320			8,418			Total other income and expenses, net	7,170		10,767
Income before income taxes	68,514			70,200
Income taxes	20,919			22,635
Net income	$	47,595		$	47,565
Income (loss) before income taxes							Income (loss) before income taxes	111,854		(2,878)
Income tax expense (benefit)							Income tax expense (benefit)	25,972		(437)
Net income (loss)							Net income (loss)	$	85,882	$	(2,441)

Results of Operations

The Company recorded income before income taxes of ~~$68.5~~$111.9 million for the ~~three month~~three-month period ended ~~September~~June 30, ~~2017,~~2021, a ~~$1.7~~$114.8 million ~~or 2% decrease~~increase from the same period of the prior year. The ~~decrease~~increase in income before income taxes primarily reflects a ~~$0.8~~$111.1 million ~~decrease~~increase in operating income, a $4.7 million increase in equity in net (gain) loss of affiliates, and a $1.4 million decrease in ~~equity in net (gains) losses from affiliates,~~interest expense, partially offset by a ~~$0.7~~$1.5 million ~~increase~~decrease in other (gains) losses and a $1.0 million decrease in interest income ~~and a $0.2 million increase in interest expense.~~

for the three-month period ended June 30, 2020.

Operating income ~~decreased $0.8~~increased $111.1 million primarily due to ~~the one time compensation charges of $12~~a $56.0 million ~~related to the acceleration of the Company's chief executive officer succession plan. Excluding this item, operating income would have increased by approximately $11.2~~increase in royalty revenues, a $32.3 million ~~primarily due to an $11.3 million or 10%~~ increase in the ~~Company's hotel franchising revenues.~~ net surplus generated from marketing and reservation system activities, a $9.4 million decrease in SG&A expenses, a $5.3 million increase in other revenues, a $4.6 million increase in owned hotels revenues in excess of expenses, a $1.4 million increase in procurement services revenues, and a $0.6 million increase in initial franchise and relicensing fees.

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The primary reasons for these fluctuations, including the impact of the COVID-19 pandemic, are described in more detail below.

~~Hotel Franchising Revenues~~

Hotel franchising revenues were $124.5 million for the three months ended September 30, 2017 compared to $113.1 million for the three months ended September 30, 2016, an increase of $11.3 million or 10%. The increase in hotel franchising revenues is primarily due to a $8.1 million or 8% increase in royalty revenues, a $0.5 million or 6% increase in procurement services revenues, and an increase of approximately $2.6 million in non-compliance and other revenues.

Royalty Fees

Domestic royalty fees for the three months ended ~~September~~June 30, ~~2017~~,2021 increased ~~$7.6~~$54.4 million to ~~$98.3~~$102.8 million ~~an increase of 8% compared to~~from $48.3 million for the three months ended ~~September~~June 30, ~~2016~~2020, an increase of 112.6%. The increase in domestic royalties reflect a 96.2% increase in domestic RevPAR. System-wide RevPAR increased due to a 23.1% increase in average daily rates and a 2,320 basis point increase in occupancy. The increase in domestic royalties is ~~primarily attributable~~also due to a ~~2.1%~~ ~~increase in RevPAR, a 2.1%~~1.6% increase in the number of domestic franchised hotel rooms and ~~an increase in the effective royalty rate. System-wide RevPAR increased due to~~ a ~~1.2% increase in average daily rates, accompanied by a 70~~7 basis point increase in occupancy rates. The Company's effective royalty rate for the domestic hotel system increased from 4.39% for the three months ended September 30, 2016 to 4.58% for the three months ended September 30, 2017. The increase in the effective royalty rate ~~is attributable~~from 4.94% for the three months ended June 30, 2020 to ~~improved royalty rate pricing on recently executed domestic franchise agreements as well as annual contractual royalty rate increases contained in existing franchise agreements.~~5.01% for the three months ended June 30, 2021.

A summary of the Company's domestic franchised hotels operating information is as follows:


	Three Months Ended						Three Months Ended						Change
	June 30, 2021						June 30, 2020
	Average Daily Rate		Occupancy		RevPAR		Average Daily Rate		Occupancy		RevPAR		Average Daily Rate		Occupancy		RevPAR
Comfort	$	96.67	65.3	%	$	63.11	$	79.57	36.6	%	$	29.10	21.5	%	2,870	bps	116.9	%
Sleep	86.47		64.2	%	55.54		74.38		37.9	%	28.18		16.3	%	2,630	bps	97.1	%
Quality	82.72		59.0	%	48.80		68.97		35.5	%	24.51		19.9	%	2,350	bps	99.1	%
Clarion	85.75		46.2	%	39.62		69.24		25.6	%	17.71		23.8	%	2,060	bps	123.7	%
Econo Lodge	67.47		54.9	%	37.04		57.05		37.9	%	21.64		18.3	%	1,700	bps	71.2	%
Rodeway	67.15		55.4	%	37.18		57.10		40.9	%	23.36		17.6	%	1,450	bps	59.2	%
WoodSpring	50.49		85.8	%	43.31		44.96		69.2	%	31.09		12.3	%	1,660	bps	39.3	%
MainStay	79.01		67.6	%	53.38		73.82		48.6	%	35.86		7.0	%	1,900	bps	48.9	%
Suburban	54.03		75.3	%	40.67		50.79		60.9	%	30.95		6.4	%	1,440	bps	31.4	%
Cambria Hotels	127.76		58.6	%	74.82		96.82		24.2	%	23.46		32.0	%	3,440	bps	218.9	%
Ascend Hotel Collection	133.07		56.9	%	75.68		109.46		32.2	%	35.24		21.6	%	2,470	bps	114.8	%
Total	$	82.72	62.3	%	$	51.54	$	67.21	39.1	%	$	26.27	23.1	%	2,320	bps	96.2	%

For the Three Months Ended September 30, 2017 For the Three Months Ended September 30, 2016* Change

Average
Daily
Rate
Occupancy RevPAR
Average
Daily
Rate
Occupancy RevPAR
Average
Daily
Rate
Occupancy RevPAR
Comfort Inn $ 101.25
73.9 % $ 74.82
$ 100.02
73.4 % $ 73.41
1.2 % 50
bps 1.9 %
Comfort Suites 101.43
75.5 % 76.55
100.95
74.6 % 75.35
0.5 % 90
bps 1.6 %
Sleep 86.85
71.3 % 61.88
86.59
70.6 % 61.15
0.3 % 70
bps 1.2 %
Quality 85.44
67.2 % 57.43
84.31
66.4 % 55.96
1.3 % 80
bps 2.6 %
Clarion 89.83
67.3 % 60.46
88.98
66.4 % 59.08
1.0 % 90
bps 2.3 %
Econo Lodge 68.87
61.7 % 42.51
67.44
60.9 % 41.08
2.1 % 80
bps 3.5 %
Rodeway 70.78
63.0 % 44.56
69.72
62.3 % 43.45
1.5 % 70
bps 2.6 %
MainStay 80.42
74.8 % 60.17
79.91
71.5 % 57.13
0.6 % 330
bps 5.3 %
Suburban 52.46
78.9 % 41.39
51.09
78.2 % 39.96
2.7 % 70
bps 3.6 %
Cambria hotel & suites 142.84
79.1 % 112.95
NA
NA
NA
NA
NA
NA
Ascend Hotel Collection 137.02
60.9 % 83.40
138.97
63.0 % 87.50
(1.4 )% (210 ) bps (4.7 )%
Total $ 89.78
69.2 % $ 62.08
$ 88.74
68.5 % $ 60.81
1.2 % 70
bps 2.1 %

*Totals for the three months ended September 30, 2016 have been revised from previous disclosures to include the operating statistics for the Cambria hotel & suites brand. Operating statistics for Cambria hotel & suites have been excluded for 2016 since the brand had fewer than 25 units open and operating for the trailing twelve month period.

The number of domestic rooms on-line increased by 2.1% to 406,452 as of September 30, 2017, from 398,207 as of September 30, 2016. The total number of domestic hotels on-line increased by 2.8% to 5,421 as of September 30, 2017, from 5,275 as of ~~September 30, 2016~~. Our unit growth has outpaced the growth in our rooms primarily due to the Company's multi-year strategy to rejuvenate the Comfort family of brands by terminating under-performing hotels that no longer meet the Comfort brand standards. Hotels terminated from the Comfort brand family may be repositioned to a more suitable brand within the Company's family of brands or exit our franchise system. As a result of this strategy our unit growth has been driven primarily by brands with lower average room counts than the Comfort family of brands. A summary of domestic hotels and rooms ~~on-line~~in our franchise system at ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 by brand is as follows:


	June 30, 2021		June 30, 2020		Variance
	Hotels	Rooms	Hotels	Rooms	Hotels	Rooms	%		%
Comfort	1,661	130,762	1,620	127,583	41	3,179	2.5	%	2.5	%
Sleep	411	29,027	399	28,251	12	776	3.0	%	2.7	%
Quality	1,681	126,603	1,690	128,909	(9)	(2,306)	(0.5)	%	(1.8)	%
Clarion	180	21,702	179	22,651	1	(949)	0.6	%	(4.2)	%
Econo Lodge	747	45,096	779	46,992	(32)	(1,896)	(4.1)	%	(4.0)	%
Rodeway	532	30,683	578	33,107	(46)	(2,424)	(8.0)	%	(7.3)	%
WoodSpring	298	35,876	281	33,797	17	2,079	6.0	%	6.2	%
MainStay	93	6,559	73	4,629	20	1,930	27.4	%	41.7	%
Suburban	69	6,349	60	6,082	9	267	15.0	%	4.4	%
Cambria Hotels	58	8,166	51	7,347	7	819	13.7	%	11.1	%
Ascend Hotel Collection	225	28,258	207	22,136	18	6,122	8.7	%	27.7	%
Total Domestic Franchises	5,955	469,081	5,917	461,484	38	7,597	0.6	%	1.6	%

September 30, 2017 September 30, 2016 Variance
Hotels Rooms Hotels Rooms Hotels Rooms % %
Comfort Inn 1,083
84,427
1,126
87,346
(43 ) (2,919 ) (3.8 )% (3.3 )%
Comfort Suites 566
43,857
565
43,610
1
247
0.2 % 0.6 %
Sleep 382
27,365
378
27,035
4
330
1.1 % 1.2 %
Quality 1,509
117,948
1,407
111,564
102
6,384
7.2 % 5.7 %
Clarion 160
21,267
164
22,456
(4 ) (1,189 ) (2.4 )% (5.3 )%
Econo Lodge 839
51,322
853
52,773
(14 ) (1,451 ) (1.6 )% (2.7 )%
Rodeway 595
34,331
526
30,058
69
4,273
13.1 % 14.2 %
MainStay 57
4,135
54
4,020
3
115
5.6 % 2.9 %
Suburban 59
6,578
58
6,471
1
107
1.7 % 1.7 %
Cambria hotel & suites 31
4,160
25
3,113
6
1,047
24.0 % 33.6 %
Ascend Hotel Collection 140
11,062
119
9,761
21
1,301
17.6 % 13.3 %
Total Domestic Franchises 5,421
406,452
5,275
398,207
146
8,245
2.8 % 2.1 %
As of both June 30, 2021 and June 30, 2020, there were less than 1% of the Company's domestic hotel system that had temporarily suspended operations due to governmental restriction or a franchisee’s election. These temporarily suspended hotels are included in the summary table above of domestic hotels in our franchise system.

Domestic hotels open and operating increased by 12 during the three months ended September 30, 2017, compared to a net increase of 2 during the three months ended September 30, 2016. Gross domestic franchise additions increased from 49International royalty fees for the three months ended ~~September~~June 30, ~~2016~~2021 increased $1.7 million to ~~60 for the same period of 2017. New construction hotels represented 10 of the gross domestic additions during~~$3.5 million compared to the three months ended ~~September~~June 30, ~~2017, compared to 10 hotels~~2020 as a result of improvements in ~~the same period~~RevPAR performance, despite reductions of the ~~prior year. Gross domestic additions for conversion~~international franchise system size by 45 hotels ~~during~~(from 1,201 as of June 30, 2020 to 1,156 as of June 30, 2021) and 3,370 rooms (from

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135,534 as of June 30, 2020 to 132,164 as of June 30, 2021). As of June 30, 2021 and June 30, 2020, approximately 2% and 7%, respectively, of the three months ended September 30, 2017 increased by 11 units to 50 from 39 for the three months ended September 30, 2016. The number of new construction and conversion hotel openings during a particular quarter are impacted by various factors including the level of franchise sales in prior periods, the complexity of property improvement plans required to be completed prior to opening or other local economic and market conditions that may impact the pace of new hotel construction. The timing of new construction hotel openings typically averages 18 to 36 months to open after the franchise agreement is executed. ConversionCompany's international branded hotels ~~typically open three to four months after the execution of a franchise agreement.~~

~~Net domestic franchise terminations increased from 47 in the three months ended~~ ~~September 30, 2016~~ ~~to 48 for the three months ended~~ ~~September 30, 2017~~.

~~International royalties increased $0.5 million or 10% from $5.5 million for the three months ended September 30, 2016 to $6.0 million for the three months ended September 30, 2017, primarily~~temporarily suspended operations due to governmental restriction or a ~~2.3%~~franchisee’s election.

We expect the uncertainty surrounding the potential duration of the pandemic, including an increase in the ~~number~~prevalence in variants, as well as the rate and pace of ~~rooms available and improvements in RevPAR in~~vaccinations around the ~~countries in which we operate. International rooms increased by 2,597 from 110,945 as of September 30, 2016~~world, to ~~113,542 as of September 30, 2017. The total number of international hotels decreased by 8 from 1,144 as of September 30, 2016~~continue to ~~1,136 as of September 30, 2017. International rooms grew 2.3% despite a decline in~~impact the number of domestic and international hotels ~~open and operating primarily due to a focus on new entrants with higher per unit room counts than currently in the Company's international franchised hotel portfolio.~~

that temporarily suspend operations.

Initial Franchise and Relicensing Fees

~~Domestic initial~~Initial franchise ~~fee revenue, included in~~fees are fees paid to the ~~initial~~Company when a franchisee executes a franchise ~~and~~agreement; relicensing fees caption on the Company's statements of income, generated from executed franchise agreements decreased $0.2 million or 7% from $2.8 million to $2.6 million for the three months ended September 30, 2016 and ~~September 30, 2017~~, respectively. Domestic initial fee revenue decreased primarily due to a 17% decrease in executed franchise agreements partially offset by an increase in revenues recognized from previously deferred initial fees related to franchise agreements executed in prior periods containing forgivable promissory note incentives. Revenues associated with agreements including incentives are deferred and recognized when the incentive criteria are met or the agreement is terminated, whichever comes first. Executed franchise agreements decreased from

~~161 franchise agreements, representing 11,600 rooms, executed in the third quarter of 2016, to 133 franchise agreements, representing 11,241 rooms executed in the third quarter of 2017.~~

During the third quarter of 2017, 35 of the executed agreements were for new construction hotel franchises representing 3,123 rooms compared to 43 contracts representing 3,003 rooms for the three months ended September 30, 2016. Conversion hotel executed franchise agreements totaled 98 representing 8,118 rooms for the three months ended September 30, 2017 compared to 118 agreements representing 8,597 rooms for the same period a year ago.

~~Relicensing~~ fees include fees charged to ~~the~~ new owners of a franchised property whenever an ownership change occurs and the property remains in the franchise system, as well as fees required to renew ~~expiring~~existing franchise ~~contracts.~~agreements.

During the second quarter of 2021, the Company awarded 111 domestic franchise agreements representing 8,888 rooms compared to 93 franchising agreements representing 6,793 rooms for the second quarter of 2020. Domestic ~~relicensing~~franchise agreements awarded for new construction hotels totaled 41 contracts ~~increased 10% from 105~~representing 4,011 rooms during the three months ended June 30, 2021, compared to 34 contracts representing 2,936 rooms for the three months ended ~~September~~June 30, ~~2016 to 115~~2020. Conversion hotel awarded franchise agreements totaled 70 representing 4,877 rooms for the three months ended ~~September~~June 30, ~~2017, slightly offset by renewals of expired contracts which decreased from 9~~2021, compared to 59 agreements representing 3,857 rooms for the three months ended ~~September~~June 30, ~~2016 to 6~~2020.

The Company awarded 128 domestic relicensing contracts during the ~~current period. As a result~~three months ended June 30, 2021, compared to 35 executed during the three months ended June 30, 2020. The Company awarded 8 domestic renewal agreements during the three months ended June 30, 2021, compared to 10 awarded during the three months ended June 30, 2020.

Initial franchise and relicensing fees are generally collected at the time the franchise agreement is awarded. However, the recognition of revenue is deferred until the hotel is open or the franchise agreement is terminated. Upon hotel opening, revenue is recognized ratably as services are provided over the enforceable period of the ~~6% increase in~~franchise license agreement. Upon the termination of a franchise agreement, previously deferred initial and relicensing ~~and renewal contracts and an increase in average~~ fees ~~per contract, domestic relicensing and renewal revenues increased 9% from $3.4 million~~are recognized immediately in the ~~third quarter of 2016~~period the agreement is terminated. Initial franchise and relicensing fee revenue increased from $6.7 million for the three months ended June 30, 2020 to ~~$3.7~~$7.3 million infor the ~~third quarter of 2017.~~three months ended June 30, 2021.

~~As of September~~At June 30, ~~2017,~~2021, the Company had ~~751~~884 franchised hotels with ~~58,340~~72,312 rooms under construction, awaiting conversion or approved for development in its domestic system as compared to ~~649~~982 hotels and ~~50,953~~78,517 rooms at ~~September~~June 30, ~~2016.~~2020. The number of new construction franchised hotels in the Company's domestic pipeline ~~increased~~ ~~26%~~decreased from 741 at June 30, 2020 to ~~530~~663 at ~~September~~June 30, ~~2017~~ ~~from~~ ~~422~~ at ~~September 30, 2016~~. The growth in the number of new construction hotels in the domestic pipeline reflects the 16%, 9% and 79% increase in new construction franchise agreements executed in 2016, 2015 and 2014, respectively, as well as a 29% increase in the nine months ended September 30, 2017.2021. New construction hotels typically average 18 to 36 months to open after the franchise agreement is executed. The number of conversion franchised hotels in the Company's domestic pipeline decreased by 6 ~~hotels or~~ 3%from ~~227~~241 hotels at ~~September~~June 30, ~~2016~~2020 to 221 hotels at ~~September~~June 30, ~~2017, primarily due to the timing of hotel openings and the timing of signing new conversion franchise agreements.~~2021. Conversion hotels typically open three to ~~four~~six months after the execution of a franchise agreement. The Company had an additional 6660 franchised hotels with ~~6,261~~8,108 rooms under construction, awaiting conversion or approved for development in its international system as of ~~September~~June 30, ~~2017~~2021, compared to 9653 hotels and ~~10,464~~6,612 rooms at ~~September~~June 30, ~~2016~~.2020. Fluctuations in the Company’s pipeline are primarily due to the timing of hotel openings and the timing of signing new franchise agreements. While the Company's hotel pipeline provides a strong platform for growth, a hotel in the pipeline does not always result in an open and operating hotel due to various factors. Given the uncertainty as to the potential duration of the COVID-19 pandemic and its severity, there is additional uncertainty with respect to the opening of new construction hotels, which are reliant on, amongst other things, access to liquidity, availability of construction labor and materials, and local governmental approvals and entitlements, all of which may be constrained during the duration of the pandemic.

Procurement Services: Revenues increased ~~$0.5~~$1.4 million ~~or 6%~~ from ~~$7.6~~$10.7 million for the three months ended ~~September~~June 30, ~~2016~~2020 to ~~$8.1~~$12.1 million for the three months ended ~~September~~June 30, ~~2017. The increase in revenues primarily reflects the implementation of new brand programs as well as~~2021. These results reflect an increase in ~~the volume of business transacted with existing~~fees generated from travel-related partnerships and ~~new~~ qualified vendors ~~and strategic alliance partners.~~resulting from increased occupancy during the second quarter of 2021 at our franchised hotels.

Other ~~Income:~~ ~~Revenue~~Revenues: Other revenues increased ~~$3.0~~$5.3 million from ~~the three months ended September 30, 2016 to $8.6~~$2.4 million for the three months ended ~~September~~June 30, ~~2017. The~~2020 to $7.7 million for the three months ended June 30, 2021 driven by an increase in other income is primarily due to a $0.4 million increase in revenues related to the Company's non-hotel franchising divisions, $1.9 million related to the sale of chip-enabled card readers to our franchised hotels, and a $0.6 million increase in liquidated damages collections from terminated franchise agreements and non-compliance fees ~~related to franchisees not operating in accordance with the Company's brand standards.~~and other franchising revenues.

Selling, General and Administrative Expenses: The cost to operate the business is reflected in SG&A on the consolidated statements of income. SG&A expenses were ~~$46.4~~$34.5 million for the three months ended ~~September~~June 30, ~~2017, which increased $12.0~~2021, a decrease of $9.4 million from the three months ended ~~September~~June 30, ~~2016~~.2020.

SG&A expenses for the three months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 include approximately ~~$4.4~~$0.6 million and ~~$6.7~~$0.5 million, respectively, related to the Company's ~~SkyTouch and vacation rental divisions,~~alternative growth initiatives and expenses related to operations and maintenance of an office building leased to a third party. The decline in SG&A expenses related to non-franchising activities resulted primarily due to lower SkyTouch related costs. In addition, the Company recorded a $1.2 million impairmentbuilding.

Table of below market lease acquisition costs associated with the office building that reduced SG&A costs. SG&A expenses for the three months ended September 30, 2017 also include $12.0 million of compensation expenses related to the acceleration of the Company's chief executive officer succession plan.Contents

Excluding SG&A expenses for ~~non-hotel franchising activities~~alternative growth initiatives and ~~expenses related to the chief executive succession plan,~~office building operations, SG&A for the three months ended ~~September~~June 30, ~~2017 increased $3.6~~2021 decreased $9.5 million ~~or 13%~~ to ~~$31.2~~$33.9 million in the current ~~year~~quarter primarily due to ~~the impact of $1.4 million increased costs related to the distribution of chip-enabled card readers,~~ a ~~$0.6 million increase~~decrease in ~~commissions paid based on franchise sales~~provision for credit losses in Trade Receivables and ~~a $0.7 million increase in bad debt expense.~~

~~Marketing and Reservation System~~: The Company's franchise agreements require the payment of franchise fees, which include marketing and reservation system fees. The fees, which are primarily based on a percentage of the franchisees' gross room revenues, are used exclusively by the Company for expenses associated with providing franchise services such as central reservation systems, national marketing and media advertising. The Company is contractually obligated to expend the marketing and reservation system fees it collects from franchiseesNotes Receivables recorded in accordance with ~~the franchise agreements; as such, no net income or loss to the Company is generated. Cumulative marketing and reservation fees not expended are deferred and recorded as~~Topic 326, a ~~liability~~lesser increase in the Company's financial statements and carried over to the next year and expended in accordance with the franchise agreements. Conversely, cumulative marketing and reservation expenditures incurred in excess of fees billed for marketing and reservation activities are deferred ~~and recorded as an asset~~compensation liabilities based on lower relative increases in the ~~Company's financial statements~~underlying investments, and ~~recovered in future periods.~~continuous impact of implemented cost mitigation measures related to COVID-19 pandemic, including reductions of certain domestic and international positions and non-essential expenditures.

~~Total marketing and reservation system revenues increased 10% from $152.0~~Loss on impairment of assets: In the second quarter of 2020, the Company recognized $1.2 million charge related to a prospective self-development project the Company elected to no longer pursue.

Other (Gains) Losses: The Company recorded other net gains of $2.1 million for the three months ended ~~September~~June 30, ~~2016~~2021, compared to ~~$167.8~~other net gains of $3.6 million for the three months ended ~~September~~June 30, ~~2017. Marketing and reservation system revenues for the three months ended September 30, 2017 were impacted by increased revenues related~~2020. The gains relate to ~~new reservation delivery programs, as well as improved revenues from the Choice Privileges loyalty program resulting from the growth in program membership,~~ increases in ~~average daily rates as well as a reduction~~the Company's deferred compensation assets based on increases in the ~~actuarial estimate of points earned by members that will ultimately be redeemed.~~underlying investments.

At September 30, 2017, the Company's cumulative marketing and reservation system fee revenues exceeded expenses incurred by $3.9 million with the excess reflected as other long-term liability in the accompanying consolidated balance sheet. At December 31, 2016, cumulative marketing and reservation system costs exceeded cumulative marketing and reservation system revenues earned by $18.1 million, with the excess reflected as a long-term asset in the accompanying consolidated balance sheet.

Equity in Net ~~(Income)~~(Gain) Loss of Affiliates: The Company recorded net ~~losses~~gains of ~~$0.3~~$1.2 million from its unconsolidated joint ventures for the three months ended ~~September~~June 30, ~~2017,~~2021, compared to ~~income~~net losses of ~~$1.2~~$3.5 million for the three months ended ~~September~~June 30, 2016. The fluctuations in net income and loss from affiliates is primarily attributable to the results from operations during the ramp-up period of operations for several recently opened hotel projects owned by unconsolidated joint ventures.2020. These investments relate to the Company's program to offer equity support to qualified franchisees to develop and operate Cambria ~~hotel & suites~~Hotels in strategic markets. The fluctuation is primarily attributable to the sale of the ownership interest of an unconsolidated joint venture resulting in a gain of $2.6 million in the second quarter of 2021, in addition to increased losses for the three months ended June 30, 2020 of operating joint venture hotels as impacted by the COVID-19 pandemic. Refer to Note 4 to our consolidated financial statements for additional information. We anticipate the results recognized from these investments will continue to be impacted by the uncertainty of the COVID-19 pandemic for the remainder of 2021.

Income ~~Taxes:~~Tax Expense (Benefit): The effective income tax rates were ~~30.5%~~23.2% and ~~32.2%~~11.8% for the three months ended ~~September~~June 30, ~~2017~~2021 and ~~2016,~~2020, respectively.

The effective income tax ~~rates~~rate for the three months ended ~~September~~June 30, ~~2017 and 2016, were~~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 $1.2 million of excess tax benefits from share-based compensation.

The effective income tax rate for the three months ended June 30, 2020 was lower than the U.S. federal income tax rate of ~~35%~~21.0% primarily due to excess tax benefits from share-based compensation and the impact of foreign operations, ~~and ASU 2016-09 benefits from share-based compensation,~~ partially offset by state income ~~taxes.~~taxes and a change in estimated uncertain tax positions.

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Operations Review

Comparison of Operating Results for the ~~Nine-Month~~Six-Month Periods Ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~

2020

Summarized financial results for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 are as follows:


(in thousands)	2017			2016
REVENUES:
(In thousands)							(In thousands)	2021		2020
REVENUES							REVENUES
Royalty fees	$	265,727		$	247,168		Royalty fees	$	172,289	$	120,491
Initial franchise and relicensing fees	18,390			17,146			Initial franchise and relicensing fees	12,755		13,960
Procurement services	25,647			23,719			Procurement services	23,283		24,494
Marketing and reservation system	435,273			412,193			Marketing and reservation system	227,509		190,062
Owned hotels							Owned hotels	13,347		11,530
Other	24,748			16,220			Other	12,108		9,371
Total revenues	769,785			716,446			Total revenues	461,291		369,908
OPERATING EXPENSES:
OPERATING EXPENSES							OPERATING EXPENSES
Selling, general and administrative	117,418			109,515			Selling, general and administrative	64,737		72,318
Depreciation and amortization	9,215			8,707			Depreciation and amortization	12,594		12,927
Marketing and reservation system	435,273			412,193			Marketing and reservation system	211,458		219,756
Owned hotels							Owned hotels	9,480		9,010

Total operating expenses	561,906			530,415			Total operating expenses	298,269		314,011
Gain (loss) on sale of assets, net	(32		)	402

Loss on impairment of assets							Loss on impairment of assets	—		(1,226)

Operating income	207,847			186,433			Operating income	163,022		54,671
OTHER INCOME AND EXPENSES, NET:
OTHER INCOME AND EXPENSES, NET							OTHER INCOME AND EXPENSES, NET
Interest expense	33,884			33,466			Interest expense	23,468		24,462
Interest income	(4,277		)	(2,502		)	Interest income	(2,515)		(4,533)
Other gains	(2,251		)	(1,005		)
Equity in net losses of affiliates	3,213			286
Loss on extinguishment of debt							Loss on extinguishment of debt	—		607
Other (gains) losses							Other (gains) losses	(3,313)		1,173
Equity in net (gain) loss of affiliates							Equity in net (gain) loss of affiliates	4,818		5,441
Total other income and expenses, net	30,569			30,245			Total other income and expenses, net	22,458		27,150
Income before income taxes	177,278			156,188
Income taxes	55,944			48,638
Net income	$	121,334		$	107,550
Income (loss) before income taxes							Income (loss) before income taxes	140,564		27,521
Income tax expense (benefit)							Income tax expense (benefit)	32,345		(25,501)
Net income (loss)							Net income (loss)	$	108,219	$	53,022

Results of Operations

The Company recorded income before income taxes of ~~$177.3~~$140.6 million for the ~~nine month~~six-month period ended ~~September~~June 30, ~~2017,~~2021, a ~~$21.1~~$113.1 million ~~or 14%~~ increase from the same period of the prior year. The increase in income before income taxes ~~primarily~~ reflects a ~~$21.4~~$108.3 million increase in operating income, ~~as well as~~ a ~~$1.2~~$4.5 million increase in other ~~gains,~~(gains) losses, and a ~~$1.8~~$1.0 million ~~increase~~decrease in interest ~~income,~~expense, partially offset by ~~an increase~~$2.0 million decrease in ~~net loss of affiliates of $2.9 million.~~interest income.

Operating income increased ~~$21.4~~$108.3 million asprimarily due to a $51.8 million increase in royalty revenues, a $45.7 million increase in the ~~Company's hotel franchising revenues increased by $28.8~~net surplus generated from marketing and reservation system activities, a $7.6 million ~~or 10% and~~decrease in SG&A expenses, ~~increased~~a $2.7 million increase in other revenues, and recognition of $1.2 million loss on impairment of long-lived assets during the six-month period ended June 30, 2020, partially offset by ~~$7.9~~a $1.2 million ~~or 7%.~~ decrease in initial franchise and relicensing fees and $1.2 million decrease in procurement services revenues.

The ~~key drivers of~~primary reasons for these fluctuations are described in more detail below.

~~Hotel Franchising Revenues~~

Hotel franchising revenues were $326.5 million for the nine months ended September 30, 2017 compared to $297.7 million for the nine months ended September 30, 2016, a $28.8 million or 10% increase. The increase in hotel franchising revenues is primarily due to a $18.6 million or 8% increase in royalty revenues, a $1.9 million or 8% increase in procurement services revenues, a $1.2 million or 7% increase in initial franchising and relicensing revenues and a $7.1 million increase in non-compliance and other revenues.

Royalty Fees

Domestic royalty fees for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 increased ~~$17.5~~$51.1 million to ~~$249.7~~$165.8 million, a 8%45% increase compared to the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2020. The increase in royalties ~~is attributable~~reflect a 39.2% increase in RevPAR. System-wide RevPAR increased due to a ~~2.6%~~1,210 basis point increase in ~~RevPAR,~~occupancy rates and a ~~2.1%~~8.5% increase in average daily rates. The increase in domestic royalties is also due to a 1.6% increase in the number of domestic franchised hotel rooms and ~~an increase in the effective royalty rate. System-wide RevPAR increased due to~~ a ~~1.5% increase in average daily rates accompanied by a 70~~7 basis point ~~increase in occupancy rates. The effective royalty rate increased to 4.57% for the nine months ended September 30, 2017, compared to 4.39% for the prior year period. The~~ increase in the effective royalty rate ~~is attributable~~from 4.94% for the six months ended June 30, 2020 to ~~improved royalty rate pricing on recently executed domestic franchise agreements as well as annual contractual royalty rate increases contained in existing franchise agreements.~~5.01% for the six months ended June 30, 2021.

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A summary of the Company's domestic franchised hotels operating information is as follows:


	Six Months Ended						Six Months Ended						Change
	June 30, 2021						June 30, 2020
	Average Daily Rate		Occupancy		RevPAR		Average Daily Rate		Occupancy		RevPAR		Average Daily Rate		Occupancy		RevPAR
Comfort	$	89.83	57.2	%	$	51.36	$	84.20	42.6	%	$	35.85	6.7	%	1,460	bps	43.3	%
Sleep	80.68		56.0	%	45.20		76.92		43.5	%	33.46		4.9	%	1,250	bps	35.1	%
Quality	77.41		50.7	%	39.21		71.07		38.7	%	27.49		8.9	%	1,200	bps	42.6	%
Clarion	79.03		39.7	%	31.37		72.51		31.4	%	22.75		9.0	%	830	bps	37.9	%
Econo Lodge	63.54		48.2	%	30.61		57.15		38.1	%	21.79		11.2	%	1,010	bps	40.5	%
Rodeway	63.53		49.6	%	31.49		58.39		40.9	%	23.87		8.8	%	870	bps	31.9	%
WoodSpring	49.03		80.1	%	39.26		45.99		69.7	%	32.07		6.6	%	1,040	bps	22.4	%
MainStay	75.34		59.5	%	44.83		76.21		51.3	%	39.07		(1.1)	%	820	bps	14.7	%
Suburban	51.97		70.5	%	36.62		52.52		61.4	%	32.24		(1.0)	%	910	bps	13.6	%
Cambria Hotels	116.93		50.8	%	59.40		120.89		36.7	%	44.41		(3.3)	%	1,410	bps	33.8	%
Ascend Hotel Collection	123.91		50.1	%	62.04		115.48		39.7	%	45.89		7.3	%	1,040	bps	35.2	%
Total	$	77.09	54.8	%	$	42.23	$	71.08	42.7	%	$	30.33	8.5	%	1,210	bps	39.2	%

For the Nine Months Ended September 30, 2017 For the Nine Months Ended September 30, 2016* Change

Average
Daily
Rate
Occupancy RevPAR
Average
Daily
Rate
Occupancy RevPAR
Average
Daily
Rate
Occupancy RevPAR
Comfort Inn $ 95.42
67.8 % $ 64.70
$ 93.78
67.2 % $ 63.00
1.7 % 60
bps 2.7 %
Comfort Suites 98.05
71.4 % 70.01
97.44
70.8 % 69.01
0.6 % 60
bps 1.4 %
Sleep 83.93
67.1 % 56.34
83.09
66.4 % 55.14
1.0 % 70
bps 2.2 %
Quality 80.46
61.5 % 49.50
78.97
60.8 % 48.00
1.9 % 70
bps 3.1 %
Clarion 85.09
61.7 % 52.53
83.67
59.7 % 49.95
1.7 % 200
bps 5.2 %
Econo Lodge 63.71
56.1 % 35.74
62.33
55.3 % 34.47
2.2 % 80
bps 3.7 %
Rodeway 65.73
57.9 % 38.04
64.14
57.3 % 36.74
2.5 % 60
bps 3.5 %
MainStay 76.65
69.7 % 53.42
77.34
66.2 % 51.18
(0.9 )% 350
bps 4.4 %
Suburban 51.99
77.1 % 40.10
50.15
76.0 % 38.11
3.7 % 110
bps 5.2 %
Cambria hotel & suites 136.93
75.1 % 102.83
NA
NA
NA
NA
NA
NA
Ascend Hotel Collection 128.86
56.6 % 72.87
130.34
59.0 % 76.95
(1.1 )% (240 ) bps (5.3 )%
Total $ 84.98
63.9 % $ 54.28
$ 83.71
63.2 % $ 52.91
1.5 % 70
bps 2.6 %

~~___________________~~

*TotalsInternational royalty fees for the ~~nine~~six months ended ~~September~~June 30, ~~2016 have been revised from previous disclosures~~2021 increased $0.7 million to ~~include~~$6.5 million compared to the operating statistics for the Cambria hotel & suites brand. Operating statistics for Cambria hotel & suites have been excluded for 2016 since the brand had fewer than 25 units open and operating for the trailing twelve month period.

~~Domestic hotels open and operating increased by 59 hotel during the nine~~six months ended ~~September~~June 30, ~~2017 compared to~~2020 as a ~~decrease~~result of 1 domestic hotels open and operating during the nine months ended September 30, 2016. Gross domestic franchise additions increased from 180 for the nine months ended September 30, 2016 to 222 for the same period of 2017. New construction hotels represented 31increases in RevPAR performance, despite reductions of the ~~gross domestic additions during the nine months ended September~~international franchise system decreasing by 45 hotels (from 1,201 as of June 30, ~~2017~~2020 to 1,156 as ~~compared~~of June 30, 2021) and 3,370 rooms (from 135,534 as of June 30, 2020 to ~~33 new construction hotel openings in the same period~~132,164 as of June 30, 2021). As of June 30, 2021 and June 30, 2020, approximately 2% and 7%, respectively, of the ~~prior year. The decrease in new construction openings reflects the variability in the timing of~~Company's international branded hotels from period to period. New construction hotels typically average 18 to 36 months to open after the franchise agreement is executed. Gross domestic additions for conversion hotels during the nine months ended September 30, 2017 increased by 44 units to 191 from 147 for the nine months ended September 30, 2016. The timing of conversion hotel openings are impacted by various factors including the complexity of the property improvement plans required to be completed prior to opening but typically open within three to four months after the execution of the franchise agreement.

~~Net domestic franchise terminations decreased from 181 in the nine months ended September 30, 2016 to 163 for the nine months ended September 30, 2017.~~

~~International royalties increased by $1.1 million or 7% from the nine months ended September 30, 2016 to $16.0 million for the same period of 2017, primarily~~temporarily suspended operations due to governmental restriction or a ~~2.3%~~franchisee’s election.

We expect the uncertainty surrounding the pandemic, including an increase in the ~~number~~prevalence in variants as well as the rate and pace of ~~rooms available and improvements in RevPAR in~~vaccinations around the ~~countries in which we operate. International rooms increased by 2,597 from 110,945 as of September 30, 2016~~world, to ~~113,542 as of September 30, 2017. The total number of international hotels decreased by 8 from 1,144 as of September 30, 2016~~continue to ~~1,136 as of September 30, 2017. International rooms grew 2.3% despite a decline in~~impact the number of domestic and international hotels ~~open and operating primarily due to a focus on new entrants with higher per unit room counts than currently in the Company's international franchised hotel portfolio.~~that temporarily suspend operations.

Initial Franchise and Relicensing Fees

~~Domestic initial fee revenue, included in the initial~~Initial franchise ~~and relicensing~~ fees caption on the Company's statements of income, generated from executed franchise agreements decreased $0.6 million to $7.6 million for the nine months ended September 30, 2017 from $8.2 million for the nine months ended September 30, 2016. Domestic initial fee revenue decreased approximately 7% despite a 10% increase in executed franchise agreements primarily due to an increase in franchise agreements containing forgivable promissory note incentives when comparedare fees paid to the ~~same period of the prior year. Revenues associated with agreements including incentives are deferred and recognized~~Company when ~~the incentive criteria are met or the agreement is terminated, whichever comes first. Executed~~a franchisee executes a franchise ~~agreements increased from 378 franchise agreements,~~

~~representing 29,976 rooms, executed in the nine months ended September 30, 2016, to 415 franchise agreements, representing 31,833 rooms executed in the nine months ended September 30, 2017.~~

During the nine months ended September 30, 2017, 129 of the executed agreements were for new construction hotel franchises representing 9,768 rooms, compared to 100 contracts representing 8,041 rooms for the nine months ended September 30, 2016. Conversion hotel executed franchise agreements totaled 286 representing 22,065 rooms for the nine months ended September 30, 2017 compared to 278 agreements representing 21,935 rooms for the same period a year ago.

~~Relicensing~~agreement; relicensing fees include fees charged to ~~the~~ new owners of a franchised property whenever an ownership change occurs and the property remains in the franchise system, as well as fees required to renew ~~expiring~~existing franchise ~~contracts.~~agreements.

During the six months ended June 30, 2021, the Company awarded 200 domestic franchise agreements representing 20,668 rooms compared to 151 franchise agreements representing 11,449 rooms for the six months ended June 30, 2020. Domestic franchise agreements awarded for new construction hotels totaled 56 representing 5,293 rooms during the six months ended June 30, 2021 compared to 50 franchise agreements representing 4,297 rooms for the six months ended June 30, 2020. Conversion hotel awarded franchise agreements totaled 144 representing 15,375 rooms for the six months ended June 30, 2021 compared to 101 franchise agreements representing 7,152 rooms for the six months ended June 30, 2020.

The Company awarded 180 domestic relicensing contracts ~~increased 16%~~during the six months ended June 30, 2021, compared to 110 executed during the six months ended June 30, 2020. The Company awarded 20 domestic renewal agreements during both the six months ended June 30, 2021 and 2020.

Initial franchise and relicensing fees are generally collected at the time the franchise agreement is awarded. However, the recognition of revenue is deferred until the hotel is open or the franchise agreement is terminated. Upon hotel opening, revenue is recognized ratably as services are provided over the enforceable period of the franchise license agreement. Upon the termination of a franchise agreement, previously deferred initial and relicensing fees are recognized immediately in the period the agreement is terminated. Initial franchise and relicensing fee revenue decreased $1.2 million from ~~304~~$14.0 million during the six months ended June 30, 2020 to $12.8 million during six months ended June 30, 2021.

Given the uncertainty as to the duration of the COVID-19 pandemic and virus variants, there is additional uncertainty with respect to the opening of new construction hotels, which are reliant on, amongst other things, access to liquidity, availability of

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construction labor and materials, and local governmental approvals and entitlements, all of which may be constrained during the duration of the pandemic.

Procurement Services: Revenues decreased $1.2 million from $24.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2020 to ~~352~~$23.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017, offset by~~2021. These results reflect a decrease in ~~renewals~~fees generated from travel-related partnerships and qualified vendors resulting from lower occupancy at our franchised hotels in the first quarter of ~~expired contracts~~2021 stemming from 24impacts of the COVID-19 pandemic.

Other Revenues: Other revenues increased $2.7 million from $9.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2020 to 12$12.1 million in the ~~current period. As a result~~same period of the ~~11% net increase in relicensing and renewal contracts and~~current year driven by an increase in ~~the average fee per contract, domestic relicensing~~non-compliance fees and ~~renewal revenues increased $1.9 million or 22% from $8.6 million for the nine months ended September 30, 2016 to $10.5 million for the nine months ended September 30, 2017.~~other franchising revenues.

~~Procurement Services:~~ Revenues increased $1.9 million or 8% from $23.7 million for the nine months ended September 30, 2016 to $25.6 million for the nine months ended September 30, 2017. The increase in revenues primarily reflects the implementation of new brand programs as well as an increase in the volume of business transacted with existing and new qualified vendors and strategic alliance partners.

~~Other Income:~~ Revenue increased $8.5 million from the nine months ended September 30, 2016 to $24.7 million for the nine months ended September 30, 2017. The increase in other income is primarily due to a $1.5 million increase in revenues related to the Company's non-hotel franchising divisions, $4.9 million related to the sale of chip-enabled credit card readers to our franchisees, as well as a $2.1 million increase in non-compliance and termination awards.

Selling, General and Administrative Expenses: The cost to operate the business is reflected in SG&A on the consolidated statements of income. SG&A expenses were ~~$117.4~~$64.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017, an increase~~2021, a decrease of ~~$7.9~~$7.6 million ~~or 7%~~ from the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2020.

SG&A expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 include approximately ~~$13.5~~$0.8 million and ~~$20.4~~$1.5 million, respectively, related to the Company's ~~SkyTouch and vacation rental divisions,~~alternative growth initiatives and expenses related to ~~the~~ operations and maintenance of an office ~~building leased to a third party. The decline in~~building.

Excluding SG&A ~~expenses related~~for alternative growth initiatives and office building operations, SG&A for the six months ended June 30, 2021 decreased $6.9 million to ~~non-hotel franchising activities resulted~~$63.9 million in the current year primarily due to a decrease in provision for credit losses in Trade Receivables and Notes Receivables recorded in accordance with Topic 326, continuous impact of implemented cost mitigation measures resulting from the COVID-19 pandemic, including reductions of certain domestic and international positions and non-essential expenditures, offset by increases in the Company's deferred compensation liabilities based on relative net increases in the underlying investments.

Loss on impairment of assets: In the second quarter of 2020, the Company recognized $1.2 million charge related to a prospective self-development project the Company was no longer pursuing.

Interest Expense: The Company recorded interest expense of $23.5 million for the six months ended June 30, 2021, a decrease of $1.0 million from the six months ended June 30, 2020. The decrease in interest expense is a result of lower ~~SkyTouch related costs. In addition,~~effective interest rates on outstanding borrowings in the comparative periods.

Interest Income: The Company recorded interest income of $2.5 million for the six months ended June 30, 2021, a decrease of $2.0 million from the six months ended June 30, 2020. The decrease in interest income is primarily a result of an increase in loans on non-accrual of interest status.

Loss on Extinguishment of Debt: Duringthe first quarter of 2020, the Company recorded a ~~$1.2~~loss on the extinguishment of debt of $0.6 million impairment of below market lease acquisition costs associated with the office building that reduced SG&A costs. SG&A expenses for the nine months ended September 30, 2017 also include $12 million of compensation expenses related to the ~~acceleration~~early pay off of a construction loan in the ~~Company's chief executive officer succession plan.~~amount of $33.1 million, inclusive of accrued and unpaid interest.

~~Excluding SG&A for non-hotel franchising activities, expenses related to the chief executive officer succession plan and $2.2~~Other (Gains) Losses: The Company recorded other net gains of $3.3 million ~~of executive termination benefits incurred in 2016, SG&A~~ for the ~~nine~~six months ended ~~September~~June 30, ~~2017 would have increased $6.3 million or 7%~~2021, compared to ~~$93.2 million. SG&A increased from the prior year primarily due to $3.6 million~~other net losses of ~~increased costs related to the distribution of chip-enabled card readers to our franchisees, a~~ $1.2 million ~~increase in expenses related~~for the six months ended June 30, 2020. The gains relate to ~~the fluctuation of the fair market value of investments held~~increases in the Company's ~~non-qualified~~ deferred compensation ~~plans, as well as increased costs related to franchise support activities.~~

~~Marketing and Reservation System: The Company's franchise agreements require the payment of franchise fees, which include marketing and reservation system fees. The fees, which are primarily~~assets based on a percentage of the franchisees' gross room revenues, are used exclusively by the Company for expenses associated with providing franchise services such as central reservation systems, national marketing and media advertising. The Company is contractually obligated to expend the marketing and reservation system fees it collects from franchisees in accordance with the franchise agreements; as such, no net income or loss to the Company is generated. Cumulative marketing and reservation fees not expended are deferred and recorded as a liabilityincreases in the Company's financial statements and carried over to the next year and expended in accordance with the franchise agreements. Conversely, cumulative marketing and reservation expenditures incurred in excess of fees billed for marketing and reservation activities are deferred and recorded as an asset in the Company's financial statements and recovered in future periods.underlying investments.

Total marketing and reservation system revenues increased 6% from $412.2 million for the nine months ended September 30, 2016 to $435.3 million for the nine months ended September 30, 2017. Marketing and reservation system revenues for the nine months ended September 30, 2016 were impacted by the recognition of $30.7 million of previously deferred revenues. The

recognition of deferred revenues during the prior year period was primarily due to a change in the expiration policy for the Choice Privileges membership program. Excluding the impact of the recognition of these deferred revenues, marketing and reservation system revenues increased approximately $53.7 million or 14%. Revenues growth for the nine months ended September 30, 2017 primarily reflect new reservation delivery programs as well as improved revenues from the Choice Privileges loyalty program resulting from the growth in program membership, increases in average daily rates as well as a reduction in the actuarial estimate of points earned by members that will ultimately be redeemed.

~~Other Gains~~: Other gains increased from a gain of $1.0 million for the nine months ended September 30, 2016 to a gain of $2.3 million for same period of the current year due to fluctuations in the fair value of investments held in the Company's non-qualified employee benefit plans.

Equity in Net ~~Losses~~(Gain) Loss of Affiliates: The Company recorded net losses of ~~$3.2~~$4.8 million from its unconsolidated joint ventures for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021 compared to net losses of ~~$0.3~~$5.4 million for the ~~nine~~six months ended ~~September~~June 30, 2016. The fluctuations in net income and loss from affiliates is primarily attributable to the results from operations during the ramp-up period of operations for several recently opened hotel projects owned by unconsolidated joint ventures.2020. These investments relate to the Company's program to offer equity support to qualified franchisees to develop and operate Cambria ~~hotel & suites~~Hotels in strategic markets. The fluctuation is primarily attributable to the sale of the ownership interest of an unconsolidated joint venture resulting in a gain of $2.6 million in the second quarter of 2021, in addition to increased losses for the three months ended June 30, 2020 of operating joint venture hotels as impacted by the COVID-19 pandemic, partially offset by the impairment of an unconsolidated joint venture resulting in a loss of $4.8 million in the first quarter of 2021. We anticipate the results recognized from these investments will continue to be impacted by the COVID-19 pandemic for the remainder of 2021.

Income ~~Taxes:~~Tax Expense (Benefit): The effective income tax rates were ~~31.6%~~23.0% and ~~31.1%~~(92.3)% for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016,~~2020, respectively.

The effective income tax ~~rates~~rate for the ~~nine~~six months ended ~~September~~June 30, ~~2017 and 2016 were~~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 $2.0 million of excess tax benefits from share-based compensation. The effective income tax rate for the six months ended June 30, 2020 was lower than the U.S. federal income tax rate of ~~35%~~21.0% primarily due to the impact of our international reorganization in accordance with 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, that resulted in a $30.6 million tax benefit. The effective income tax rate was also lower due to $2.7 million of

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excess tax benefits from share-based compensation and the impact of foreign operations, ~~and ASU 2016-09 benefits from share-based compensation,~~ partially offset by state income ~~taxes.~~taxes and a change in estimated uncertain tax positions.

On March 27, 2020, the "Coronavirus Aid, Relief and Economic Security Act" ("CARES") Act was signed into law. The CARES Act provided opportunities to support companies affected by the COVID-19 pandemic and contained numerous income tax provisions. The provisions in the CARES Act do not have any significant impact to our consolidated financial statements.

Liquidity and Capital Resources

In response to the COVID-19 pandemic, we have taken steps to adjust the Company’s cost structure and increase its financial flexibility and liquidity. At June 30, 2021, the Company had approximately $908.0 million in cash and available borrowing capacity through its senior unsecured revolving credit facility.

Based on our business model and information known at this time, the Company believes that cash flows from operations and available financing capacity are adequate to meet the expected future operating, investing and financing needs of the business. As of June 30, 2021, we were in compliance with the financial covenants of our credit agreements and expect to remain in such compliance.

In April 2020, in light of uncertainty resulting from the COVID-19 pandemic, we determined to suspend future, undeclared dividends and temporarily suspended activity under the Company's share repurchase program. Given our strong liquidity and credit profile, the Company's board of directors declared on May 7, 2021, a quarterly cash dividend of $0.225 per share of common stock and approved resumption of the share repurchase program. Based on the current quarterly dividend rate of $0.225 per share of common stock, the company expects to pay dividends totaling approximately $25 million during 2021, subject to declaration by the Board of Directors.

Operating Activities

During the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016,~~2020, net cash provided by operating activities totaled ~~$165.0~~$102.4 million and ~~$88.4~~$1.5 million, respectively. Operating cash flows increased ~~$76.6~~$100.9 million primarily due to ~~improvements~~an increase in operating income, ~~an increase in cash flows from marketing and reservation activities,~~excluding certain non-cash charges, and timing of working capital items.

In conjunction with brand and development programs, ~~the Company provides financing~~we make certain payments to franchisees ~~for property~~as an incentive to enter into new franchise agreements or perform designated improvements ~~and other purposes in the form of forgivable notes receivable.~~to properties under existing franchise agreements ("franchise agreement acquisition costs"). If the franchisee remains in the franchise system in good standing over the term ofspecified in the ~~promissory note,~~incentive agreement, the Company forgives the ~~outstanding principal balance and related~~incentive ratably. If the franchisee exits our franchise system or is not operating their franchise in accordance with our quality or credit standards, the franchisee must repay the unamortized incentive payment plus interest. Since these forgivable notes are predominantly forgiven ratably over the term of the promissory note rather than repaid, the Company classifies the related issuance and collections of these notes as operating activities. During the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~,2020, the Company's net advances for these purposes totaled ~~$21.4~~$18.1 million and ~~$15.1~~$12.6 million, respectively. The timing and amount of these cash flows isare dependent on various factors including the implementation of various development and brand incentive programs, the level of franchise sales and the ~~timing~~ability of ~~hotel openings.~~our franchisees to complete construction or convert their hotels to one of the Company’s brands. At ~~September~~June 30, ~~2017~~,2021, the Company had commitments to extend an additional ~~$205.9~~$271.4 million for these purposes provided ~~certain~~the conditions of the payment are met by its ~~franchisees,~~franchisees.

The Company’s franchise agreements require the payment of ~~which $77.7 million~~marketing and reservation system fees. In accordance with the terms of our franchise agreements, the Company is ~~scheduled~~obligated to ~~be advanced~~use these marketing and reservation system fees to provide marketing and reservation services. 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 ~~next twelve months.~~extent expenditures incurred exceed revenues collected, the Company has the contractual enforceable right to recover such advances in future periods through additional fee assessments or reduced spending. During the six months ended June 30, 2021, marketing and reservation system revenues exceeded expenses by $16.0 million. During the six months ended June 30, 2020, marketing and reservation system expenses exceeded revenues by $29.7 million.

Investing Activities

Cash utilized for investing activities totaled ~~$78.3~~$33.0 million and ~~$66.0~~$29.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016,~~2020, respectively. The increase in cash utilized for investing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 primarily reflects the following items:

During the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~,2020, capital expenditures in ~~intangible assets~~property and equipment totaled ~~$2.4~~$23.4 million and ~~$0.5~~$21.1 million, respectively. The increase in capital expenditures ~~from 2016~~ primarily reflects costs incurred to support the ~~adoption~~continued growth of ~~Accounting Standards Update 2015-05,~~ ~~Intangibles - Goodwill and Other - Internal Use Software, which provides for capitalization~~the Cambria Hotels brand.

Table of ~~qualifying Software as a Service licenses as intangible assets.~~Contents

During the nine months ended September 30, 2016, the Company completed three acquisitions of real estate as part of a program to incent franchise development in strategic markets for certain brands for cash totaling $25.3 million. The Company did not have any acquisitions during the ~~nine~~ ~~months ended September 30, 2017.~~

During the ~~nine months ended September 30, 2016,~~second quarter of 2021, the Company realized proceeds of $11.8 million from the sale of ~~real estate related to~~membership interests on three separate variable interest entity ("VIE") previously accounted for under the ~~development~~equity method of ~~the Cambria hotel & suites brand totaling $8.4 million.~~accounting.

During the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~,2020, the Company invested ~~$44.9~~$1.1 million and ~~$24.2~~$3.0 million, respectively, in joint ventures accounted for under the equity method of accounting. In addition, the Company received

distributions from these joint ventures totaling ~~$4.3 million and $3.7~~$3.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020, and ~~2016, respectively.~~no distributions for the six months ended June 30, 2021. The Company's investment in these joint ventures primarily ~~relate~~relates to ventures that support the Company's efforts to promote the growth of our ~~emerging brands. The~~Cambria Hotels brand. To the extent existing unconsolidated joint ventures proceed to the hotel construction phase, the Company ~~expects~~is committed to make additional capital contributions totaling ~~$17.1~~$8.3 million to ~~existing joint ventures supporting~~support these efforts.

The Company provides financing to franchisees for hotel development efforts and other purposes in the form of notes ~~receivables.~~receivable. These loans bear interest and are expected to be repaid in accordance with the terms of the loan arrangements. During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, the Company advanced no amounts and received repayments totaling $0.1 million for these purposes, and acquired a senior note with collateral in an underlying operating hotel for $17.9 million. For the six months ended June 30, 2020, the Company advanced and received repayments totaling ~~$18.6~~$7.7 million and ~~$0.6~~$0.1 million for these purposes, respectively. ~~For the~~ ~~nine~~ ~~months ended September~~At June 30, ~~2016, the Company advanced $20.3 million and received $11.0 million in repayments related to hotel development efforts. At September 30, 2017,~~2021, the Company had commitments to extend an additional ~~$1.2~~$7.7 million for these purposes ~~within the next twelve months~~ provided certain conditions are met by its franchisees.

From time to time, our board of directors authorizes specific transactions and general programs which permit us to provide financing, investment and ~~guarantees~~guaranties, and similar credit support to qualified franchisees, as well as to acquire, develop, and resell real estate and hotels to incent franchise development. Since 2006, we have engaged in these financial support activities to encourage acceleration of the growth of our Cambria ~~hotel & suites~~Hotels brand, primarily in strategic markets and locations. Over the next three to five years, ~~depending on market and other conditions,~~ we expect to continue to deploy capital in support of this brand and expect our outstanding investment not to ~~total approximately $475~~exceed $725 million over that time period. The deployment and annual pace of future financial support activities will depend upon market and other conditions including among others, our franchise sales results, the environment for new construction hotel development and the hotel lending ~~environment.~~environment, and our assessment of the ongoing impacts of the COVID-19 pandemic. Our support of the Cambria Hotels brand’s growth is expected to be primarily in the form of franchise agreement acquisition costs, joint venture investments, ~~forgivable key money loans,~~hotel ownership and development, senior mortgage loans, development loans, mezzanine lending, and through the operation of a land-banking program. With respect to our lending, hotel ownership and joint venture investments, we generally expect to recycle these loans and investments within a five year period. At ~~September~~June 30, ~~2017,~~2021, the Company had approximately ~~$243.6~~$541.7 million outstanding pursuant to these financial support activities.

Financing Activities

Financing cash flows relate primarily to the Company's borrowings, open market treasury stock repurchases, acquisition of shares in connection with the exercise or vesting of equity awards, and dividends.

Debt

Restated Senior Unsecured Credit Facility

On August 20, 2018, the Company entered into the Restated Senior Unsecured Credit Agreement (the "Restated Credit Agreement"), which amended and restated the Company’s existing senior unsecured revolving credit agreement, dated July 21, 2015.

The Restated Credit Agreement provides for a $600 million unsecured credit facility with a maturity date of August 20, 2023, subject to optional one-year extensions that can be requested by the Company prior to each of the first, second and third anniversaries of the closing date of the Restated Credit Agreement. The effectiveness of such extensions are subject to the consent of the lenders under the Restated Credit Agreement and certain customary conditions. The Restated Credit Agreement also provides that up to $35 million of borrowings under the Restated Credit Agreement may be used for alternative currency loans and up to $25 million of borrowings under the Restated Credit Agreement may be used for swingline loans. The Company may from time to time designate one or more wholly owned subsidiaries of the Company as additional borrowers under the Restated Credit Agreement, subject to the consent of the lenders and certain customary conditions.

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. The extended maturity date is August 20, 2025.

There are no subsidiary guarantors under the Restated Credit Agreement. However, if certain subsidiaries of the Company subsequently incur certain recourse debt or become obligors in respect of certain recourse debt of the Company or certain of its

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other subsidiaries, the Restated Credit Agreement requires such obligated subsidiaries to guarantee the Company’s obligations under the Restated Credit Agreement (the "springing guarantee"). In the event that these subsidiary guarantees are triggered under the Restated Credit Agreement, the same subsidiary guarantees would be required under the Company’s $400 million senior unsecured notes due 2022 and certain hedging and bank product arrangements, if any, with lenders that are parties to the Restated Credit Agreement.

On February 18, 2020, the Company entered into the First Amendment to the Amended and Restated Senior Unsecured Credit Agreement (the "Amendment") among the Company, Deutsche Bank AG New York Branch, as administrative agent and the lenders party thereto. The Amendment, among other things, removes the springing guarantee and other provisions and references in the Restated Credit Agreement related to the potential existence of subsidiary guarantors.

The Company may at any time prior to the final maturity date increase the amount of the Restated Credit Agreement or add one or more term loan facilities under the Restated Credit Agreement by up to an additional $250 million in the aggregate to the extent that any one or more lenders commit to being a lender for the additional amount of such term loan facility and certain other customary conditions are met.

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.

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 orunder 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).

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

The Restated Credit Agreement imposes 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 or, on up to two nonconsecutive occasions, 5.5 to 1.0 for up to three consecutive quarters following a material acquisition commencing with the fiscal quarter in which such material acquisition occurred. The Company maintains an Investment Grade Rating, as defined in the Restated Credit Agreement, and therefore is not currently required to comply with the consolidated fixed charge coverage ratio covenant.

The Restated Credit Agreement includes 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 Restated Credit Agreement to be immediately due and payable. At June 30, 2021, the Company maintained a total leverage ratio of 3.08x and was in compliance with all financial covenants under the Restated Credit Agreement. The senior unsecured revolving credit facility was paid down in full during the third quarter of 2020 and remains undrawn as of December 31, 2020 and June 30, 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. Amortization of these costs is included in interest expense in the consolidated statements of income.

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.

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%. 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. The Company used the net proceeds of the 2020 Senior Notes, after deducting underwriting discounts, commissions and other offering expenses, to repay in full the $250 million Term Loan entered in April 2020 and fund the purchase price of the 2012 Senior Notes tendered and accepted by the Company for purchase pursuant to the tender offer (discussed below under "Senior Unsecured Notes due 2022").

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Interest on the 2020 Senior Notes is payable semi-annually on January 15th and July 15th of each year, commencing on January 15, 2021. The interest rate payable on the 2020 Senior Notes will be subject to adjustment based on certain rating events. The Company may redeem the 2020 Senior Notes, in whole or in part, at its option at the applicable redemption price before maturity. If the Company redeems the 2020 Senior Notes prior to October 15, 2030 (three months prior to the maturity date) (the “2020 Notes Par Call Date”), the redemption price will be equal to the greater of (a) 100% of the principal amount of the notes to be redeemed, or (b) the sum of the present values of the remaining scheduled principal and interest payments that would have been payable had the 2020 Senior Notes matured on the 2020 Notes Par Call Date, discounted to the redemption date on a semi-annual basis at the applicable Treasury Rate plus 50 basis points, plus accrued and unpaid interest. If the Company redeems the 2020 Senior Notes on or after the 2020 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 2020 Senior Notes, the Company may be required to repurchase all or a portion of the 2020 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 2029

On November 27, 2019, the Company issued unsecured senior notes in the principal amount of $400 million (the "2019 Senior Notes") at a discount of $2.4 million, bearing a coupon of 3.70% with an effective rate of 3.88%. The 2019 Senior Notes will mature on December 1, 2029, with interest to be paid semi-annually on December 1st and June 1st. The Company used the net proceeds of this offering, after deducting underwriting discounts, commissions and other offering expenses, to repay previously outstanding senior notes in the principal amount of $250 million due August 28, 2020, and for working capital and other general corporate purposes.

The Company may redeem the 2019 Senior Notes, in whole or in part, at its option at the applicable redemption price before maturity. If the Company redeems the 2019 Senior Notes prior to September 1, 2029 (three months prior to the maturity date) (the “2019 Notes Par Call Date”), the redemption price will be equal to the greater of (a) 100% of the principal amount of the notes to be redeemed, or (b) the sum of the present values of the remaining scheduled principal and interest payments that would have been payable had the 2019 Senior Notes matured on the 2019 Notes Par Call Date, discounted to the redemption date on a semi-annual basis at the applicable Treasury Rate plus 30 basis points, plus accrued and unpaid interest. 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.

Senior Unsecured Notes Due 2022

On June 27, 2012, the Company issued unsecured senior notes with a principal amount of $400 million (the "2012 Senior Notes") at par, bearing a coupon of 5.75% with an effective rate of ~~6.0%~~6.00%. The 2012 Senior Notes will mature on July 1, 2022, with interest to be paid semi-annually on January 1^st and July 1^st. The Company utilized the net proceeds of this offering, after deducting underwriting discounts, ~~and~~ commissions and other offering expenses, together with borrowings under the Company's senior unsecured senior credit facility, to pay a special cash dividend to stockholders totaling approximately $600.7 million paid ~~to stockholder~~ on August 23, 2012. ~~The Company's 2012 Senior Notes are guaranteed jointly, severally, fully and unconditionally, subject to certain customary limitations by certain of the Company's domestic subsidiaries.~~

The Company may redeem the 2012 Senior Notes at its option at a redemption price equal to the greater of (a) 100% of the principal amount of the notes to be redeemed and (b) the sum of the present values of the remaining scheduled principal and interest payments from the redemption date to the date of maturity discounted to the redemption date on a semi-annual basis at the Treasury ~~rate,~~Rate, plus 50 basis points.

Additionally, at the option of the holders of the 2012 Senior ~~Unsecured~~ Notes, ~~due 2020~~

~~On August 25, 2010,~~ the Company ~~issued unsecured senior notes with~~may be required to repurchase all or a ~~principal amount~~portion of ~~$250 million (the "2010 Senior Notes") at a discount of $0.6 million, bearing a coupon of 5.70% with an effective rate of 6.19%. The 2010~~the 2012 Senior Notes ~~will mature on August 28, 2020, with interest on~~of a holder upon the ~~2010 Senior Notes to be paid semi-annually on February 28~~^th ~~and August 28~~^th. The Company used the net proceeds from the offering, after deducting underwriting discounts and other offering expenses, to repay outstanding borrowings and other general corporate purposes. The Company's 2010 Senior Notes are guaranteed jointly, severally, fully and unconditionally, subject to certain customary limitations, by certainoccurrence of ~~the Company’s domestic subsidiaries.~~

~~The Company may redeem the 2010 Senior Notes~~a change of control event at ~~its option at~~ a ~~redemption~~ price equal to 101% of their aggregate principal amount, plus accrued and unpaid interest, to the ~~greater~~date of ~~(a) 100% of~~repurchase.

On July 9, 2020, the Company commenced the tender offer (the "Tender Offer") to purchase up to $160.0 million aggregate principal amount of the ~~notes~~Company’s 2012 Senior Notes subject to ~~be redeemed and (b) the sum~~increase or decrease. The Tender Offer was subsequently upsized to $180.0 million aggregate principal amount of the ~~present values~~2012 Notes. On July 23, 2020, the Company amended the Tender Offer by increasing the aggregate principal maximum tender amount from $180.0 million to $183.4 million. The Tender Offer settled on July 24, 2020 for $197.8 million, including an early tender premium, settlement fees, and accrued interest paid. In combination with the early pay off of the ~~remaining scheduled principal and~~

~~interest payments from the redemption date to the date of maturity discounted to the redemption date on a semi-annual basis at the Treasury rate, plus 45 basis points.~~

~~Revolving Credit Facility~~

~~On July 21, 2015,~~Term Loan, the Company ~~refinanced its existing $350~~recorded a loss on extinguishment of debt of $16.0 million ~~senior secured credit facility, comprised~~in the third quarter of 2020.

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Construction Loan

In March 2018, the Company entered into a construction loan agreement for the rehabilitation and development of a ~~$200 million revolving credit tranche and a $150 million term loan tranche by entering~~former office building into a ~~new senior unsecured revolving credit agreement (“Credit Agreement”),~~Cambria Hotel through a consolidating joint venture with ~~Deutsche Bank AG New York Branch, as administrative agent.~~

~~The Credit Agreement provides for~~ a ~~$450 million unsecured revolving credit facility (the “Revolver”) with an initial maturity date of July 21, 2020, subject to optional one-year extensions that can be requested~~commercial lender, which was secured by the ~~Company prior to each~~building. The construction was completed and the hotel opened in the third quarter of 2019, resulting in the satisfaction of the first, second and third anniversaries of the closing date of the Revolver. The effectiveness of any such extensions is subject to the consent of the lenders under the Credit Agreement and certain customary conditions.completion guaranty. On ~~July~~March 5, ~~2016,~~2020, the Company ~~exercised its option to extend~~paid off the maturity date of the Revolver by one year. The new maturity date of the Revolver is July 21, 2021. Up to $35 million of borrowings under the Revolver may be used for alternative currency loans and up to $15 million of borrowings under the Revolver may be used for swing line loans.

The Revolver is unconditionally guaranteed, jointly and severally, by certain of the Company’s domestic subsidiaries, which are considered restricted subsidiaries under the Credit Agreement. The subsidiary guarantors currently include all subsidiaries that guarantee the obligations under the Company's Indenture governing the terms of its 5.75% senior notes due 2022 and its 5.70% senior notes due 2020. If the Company achieves and maintains an Investment Grade Rating, as definedconstruction loan in ~~the Credit Agreement, then the subsidiary guarantees will at the election of the Company be released and the Revolver will not be guaranteed.~~

~~The Company may at any time prior to the final maturity date increase~~ the amount of ~~the Revolver by up to an additional $150~~$33.1 million ~~to the extent that any one or more lenders commit to being a lender for the additional amount~~inclusive of accrued and ~~certain other customary conditions are met.~~

The Company currently may elect to have borrowings under the Revolver bear interest at a rate equal to (i) LIBOR plus a margin ranging from 135 to 175 basis points based on the Company’s total leverage ratio or (ii) a base rate plus a margin ranging from 35 to 75 basis points based on the Company’s total leverage ratio. If the Company achieves an Investment Grade Rating, then the Company may elect to use a different, ratings-based, pricing grid set forth in the Credit Agreement.

The Credit Agreement requires the Company to pay a fee on the undrawn portion of the Revolver, calculated on the basis of the average daily unused amount of the Revolver multiplied by 0.20% per annum. If the Company achieves an Investment Grade Rating and it elects to use the ratings-based pricing grid set forth in the Credit Agreement, then the Company will be required to pay a fee on the total commitments under the Revolver, calculated on the basis of the actual daily amount of the commitments under the Revolver (regardless of usage) times a percentage per annum ranging from 0.10% to 0.25% (depending on the Company’s senior unsecured long-term debt rating).

The Credit Agreement requires 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, the Company may not declare or make any payment if there is an existing event of default or if the payment would create an event of default. In addition, if the Company’s total leverage ratio exceeds 4.0 to 1.0, the Company is generally restricted from paying aggregate dividends in excess of $50 million in any calendar year.

The Credit Agreement imposes financial maintenance covenants requiring the Company to maintain a total leverage ratio of not more than 4.5 to 1.0 and a consolidated fixed charge coverage ratio of at least 2.5 to 1.0. If the Company achieves and maintains an Investment Grade Rating, then the Company will not need to comply with the consolidated fixed charge coverage ratio covenant.

The Credit Agreement includes customary events of default, the occurrence of which, following any applicable cure period, would permit the lenders to, among other things, declare the principal, accruedunpaid interest and ~~other obligations~~recorded a loss on extinguishment of ~~the Company under the Credit Agreement to be immediately due and payable.~~

~~At September 30, 2017, the Company maintained a total leverage ratio~~debt of ~~2.48x and a consolidated fixed charge ratio of 7.63x and was in compliance with all financial covenants under the credit agreement.~~

The proceeds of the Revolver are 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 Credit Agreement.$0.6 million.

Fixed Rate Collateralized Mortgage

On December 30, 2014, a court awarded the Company title to an office building as settlement for a portion of an outstanding loan receivable for which the building was pledged as collateral. 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 ~~which is~~was collateralized by the office building, ~~requires~~required monthly payments of principal and interest and ~~matures~~matured in December 2020 with a balloon payment due of $6.9 million. AtPayments were made in each quarter of 2020, with the ~~time~~balloon payment 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~~$6.9 million ~~to record the debt~~made at ~~fair value. The fair value adjustment will be amortized over the remaining term of the mortgage utilizing the effective interest method.~~maturity in December 2020.

Economic Development Loans

The Company entered into economic development agreements with various governmental entities in conjunction with the relocation of its corporate headquarters in April 2013. In accordance with these agreements, the governmental entities agreed to advance approximately $4.4 million to the Company to offset a portion of the corporate headquarters relocation and tenant improvement costs in consideration of the employment of permanent, full-time employees within the jurisdictions. At ~~September~~June 30, ~~2017,~~2021, the Company had been fully advanced ~~approximately $3.7 million~~the amounts due pursuant to these ~~agreements and expects to receive the remaining $0.7 million over the next several years, subject to annual appropriations by the governmental entities.~~agreements. These advances bear interest at a rate of 3% per annum.

Repayment of the advances is contingent upon the Company achieving certain performance conditions. Performance conditions are measured annually on December 31^stand 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. 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. ~~The~~

At June 30, 2021, the Company was in ~~compliance~~active discussions with ~~all current performance conditions as of September 30, 2017.~~

~~Transfer of Interest~~

~~On September 12, 2017,~~ the ~~Company entered into an agreement~~lending governmental entities to ~~transfer $24.2 million of a $49.1 million outstanding note receivable with a maturity date of November 30, 2019~~amend the agreements to ~~a third party. The transaction did not qualify as a sale~~modify the Company’s employment level requirements for 2020 and ~~therefore the outstanding notes receivable was not derecognized~~future years based on the ~~balance sheet. The one-time cash proceeds were recorded as unrestricted cash~~impact of the COVID-19 pandemic and to waive prior and existing items of non-compliance associated with the ~~future obligation to transfer principal and interest received under the note has been recorded within Other Long-Term liabilities.~~ employment level requirements.

Dividends

In ~~addition, the proceeds~~April 2020, in light of uncertainty resulting from the ~~transfer of the interest in the note receivable have been reflected on the statement of cash flows as a financing activity.~~COVID-19 pandemic, we determined to suspend future, undeclared dividends. The Company retains responsibility for collecting and distributing cash received on the note and interest paid to the participant is reflected as interest expense in the Company’s consolidated statements of income. At September 30, 2017, Other Long-Term liabilities includes $24.2 million pursuant to this transaction.

~~Dividends~~

~~The Company currently maintains the payment of a quarterly~~most recent dividend ~~on its common shares outstanding; however, the~~ declaration ~~of future dividends is subject to the discretion of our board of directors. In December 2016,~~from the Company's board of directors ~~increased~~was on May 7, 2021, the Company's board of directors declared a quarterly cash dividend ~~rate~~of $0.225 per share of common stock (total $12.5 million) to ~~$0.215 per common share, beginning with the first dividend payable~~be paid in ~~2017, representing a 5% increase from previous quarterly declarations.~~July 2021.

During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, the Company paid no cash ~~dividends totaling $36.5 million. We expect to continue to pay dividends~~dividends.

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

Share Repurchases

In 1998, we instituted a share repurchase program which has generated substantial value for our shareholders.

In April 2020 in light of uncertainty resulting from the ~~future, subject to~~COVID-19 pandemic, we temporarily suspended activity under our share repurchase program. On May 7, 2021, the ~~declaration of our~~Company's board of directors ~~as well as to future business performance, economic conditions, changes in income tax regulations and other factors including limitations in~~approved resumption of the ~~Company's credit facility. Based on~~share repurchase program.

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During the ~~present dividend rate and outstanding share count, we expect that aggregate annual regular dividends for 2017 would be approximately $48.6 million.~~

~~Share Repurchases~~

~~The~~six months ended June 30, 2021, the Company ~~purchased 3,100~~repurchased 1,582 shares of its common stock under the share repurchase program at a total cost of ~~$0.2~~$0.1 million. Through June 30, 2021, the Company repurchased 51.6 million ~~under the share repurchase program during the nine months ended September 30, 2017. Since the program's inception through September 30, 2017, we have repurchased 48.7 million~~ shares of its common stock (including 33.0 million prior to the two-for-one stock split effected in October 2005) ~~of common stock~~under the program at a total cost of ~~$1.3~~$1.5 billion. Considering the effect of the two-for-one stock split, the Company has repurchased ~~81.7~~84.6 million shares at an average price of ~~$15.38~~$17.56 per share. As of ~~September~~June 30, ~~2017,~~2021, the Company had ~~approximately 4.0~~3.4 million shares remaining under the current share repurchase authorization.

During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, the Company redeemed ~~142,068~~47,655 shares of common stock at a total cost of ~~approximately $8.7~~$5.4 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. These redemptions were outside the share repurchase program.

~~Other items~~

Approximately $212.8 million of the Company's cash and cash equivalents at September 30, 2017 pertains to undistributed earnings of the Company's consolidated foreign subsidiaries. Since the Company's intent is for such earnings to be reinvested by the foreign subsidiaries, the Company has not provided additional U.S. income taxes on these amounts. While the Company has no intention to utilize these cash and cash equivalents in its domestic operations, any change to this policy would result in the Company incurring additional U.S. income taxes on any amounts utilized domestically.

~~The Company believes that cash flows from operations and available financing capacity are adequate to meet the expected future operating, investing and financing needs of the business.~~

Off Balance Sheet Arrangements

~~On October 9, 2012, the~~The Company has entered into avarious limited payment ~~guaranty~~guaranties with regards to ~~a VIE's~~ ~~$18.0 million~~ ~~bank loan for~~ the ~~construction of a hotel~~Company’s VIEs supporting the VIE’s efforts to develop and own hotels franchised under ~~one of~~ the ~~Company's brands in the United States.~~Company’s brands. Under ~~the terms of the~~these limited ~~guaranty,~~payment guaranties, the Company has agreed to guarantee ~~25%~~a portion of the outstanding ~~principal balance for a maximum exposure of $4.5 million and accrued and unpaid interest,~~debt until certain conditions are met, such as ~~well as any unpaid expenses incurred by~~(a) the ~~lender. The limited guaranty shall remain in effect until~~loan matures, (b) certain debt covenants are achieved, (c) the maximum amount guaranteed by the Company is paid in ~~full. In addition to the limited guaranty, the Company entered into an environmental indemnity agreement which indemnifies the lending institution from and against any damages relating to~~full or ~~arising out of possible environmental contamination issues with regards to the property.~~

On September 4, 2015, the Company entered into a limited payment guaranty with regards to a VIE's $13.3 million bank loan for the design, development and construction of a new hotel franchised under one of the Company's brands in the United States. Under the terms of the limited guaranty, the Company has agreed to guarantee a maximum of $1.8 million of the VIE’s obligations under the loan. The limited guaranty shall remain in effect until (i) the VIE’s bank loan is paid in full to the lender; (ii) the maximum amount guaranteed by the Company is paid in full; or (iii)(d) the Company, through its ~~affiliate,~~affiliates, ceases to be a member of the VIE.

OnThe maximum exposure of principal incidental to these limited payment guaranties is $5.7 million, plus unpaid expenses and accrued unpaid interest. As of June ~~2, 2016, one of the Company’s VIEs obtained a $61.0 million term loan for purposes of refinancing a $46.2 million construction loan. In connection with the refinancing,~~30, 2021 and December 31, 2020, the Company entered into three limited guarantees. Under the terms of the limited guarantees, the Company has agreed to guarantee a maximum obligation of $3.3 million in the aggregate, in addition to a percentage of any operating expenses and capital expenditures not covered by operating revenues and unpaid expenses incurred. The limited guarantees will remain in effect until the loan is repaid in full or the VIE reaches a specified debt yield for two consecutive quarters under the loan covenants. The maturity date of the VIE's loan is June 2019.

~~The Company believes~~believed the likelihood of having to perform under the aforementioned limited payment ~~guarantees~~guaranties was ~~remote atSeptember 30, 2017 and December 31, 2016.~~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 our guaranty. Refer to Note 12 for further discussion of our off-balance sheet arrangements.

Critical Accounting Policies

Our accounting policies comply with principles generally accepted in the United States. ~~We have described below those policies that we believe are critical and require the use of complex judgment or significant estimates in their application. Additional discussion~~Discussion of these policies is included in Note 1 to our consolidated financial statements as of and for the year ended December 31, ~~2016~~2020 included in our Annual Report on Form ~~10-K.~~

~~Revenue Recognition~~

We recognize continuing franchise fees, including royalty, marketing and reservations system fees, when earned and realizable from our franchisees. Franchise fees are typically based on a percentage of gross room revenues or the number of hotel rooms of each franchisee. Franchise fees based on a percentage of gross room revenues are recognized in the same period that the underlying gross room revenues are earned by our franchisees. Our estimate of the allowance for uncollectible royalty fees is charged to SG&A expense and our estimate of the allowance for uncollectible marketing and reservation system fees is charged to marketing and reservation expenses.

Initial franchise and relicensing fees are recognized, in most instances, in the period the related franchise agreement is executed because the initial franchise and relicensing fees are non-refundable and the Company is not required to provide initial services to the franchisee prior to hotel opening. We defer the initial franchise and relicensing fee revenue related to franchise agreements10-K, which ~~include incentives until the incentive criteria are met or the agreement is terminated, whichever occurs first.~~

The Company recognizes procurement services revenues from qualified vendors when the services are performed or the product delivered, evidence of an arrangement exists, the fee is fixed or determinable and collectability is reasonably assured. We defer the recognition of procurement services revenues related to certain upfront fees and recognize them over a period corresponding to the Company’s estimate of the life of the arrangement.

~~Marketing and Reservation System Revenues and Expenses~~

The Company's franchise agreements require the payment of certain marketing and reservation system fees, which are used exclusively by the Company for expenses associated with providing franchise services such as national marketing, media advertising, central reservation systems and technology services. The Company is contractually obligated to expend the marketing and reservation system fees it collects from franchisees in accordance with the franchise agreements; as such, no net income or loss to the Company is generated. In accordance with our contracts, we include in marketing and reservation expenses an allocation of costs for certain activities, such as human resources, facilities, legal and accounting, required to carry out marketing and reservation activities.

The Company records marketing and reservation system revenues and expenses on a gross basis since the Company is the primary obligor in the arrangement, maintains the credit risk, establishes the price and nature of the marketing or reservation services and retains discretion in supplier selection. In addition, net advances to and recoveries from the franchise system for marketing and reservation activities are presented as cash flows from operating activities.

Marketing and reservation system fees not expended in the current year are recorded as a liability in the Company's balance sheet and are carried over to the next fiscal year and expended in accordance with the franchise agreements or utilized to repay previous advances. Marketing and reservation expenses incurred in excess of revenues are recorded as an asset in the Company's balance sheet, with a corresponding reduction in costs, and are similarly recovered in subsequent years. Under the terms of the franchise agreements, the Company may advance capital and incur costs as necessary for marketing and reservation activities and recover such advances through future fees. The Company believes that any credit risk associated with cost advances for marketing and reservation system activities is mitigated due to our contractual right to recover these amounts from a large geographically dispersed group of franchisees. However, our ability to recover advances may be adversely impacted by certain factors, including, among others, declines in the abilityincorporates description of our franchisees to generate revenues at properties they franchise from us, lower than expected franchise system growth, an extended period of occupancy or room rate declines or a decline in the number of hotel rooms in our franchise system. If these factors exist itcritical accounting policies that involve subjective and complex judgments that could ~~result in the generation of insufficient funds to recover marketing and reservation advances as well as meet the ongoing marketing and reservation needs of the overall system.~~

The Company evaluates the recoverability of marketing and reservation costs incurred in excess of cumulative marketing and reservation system revenues earned on a periodic basis. The Company will record a reserve when, based on current information and events, it is probable that it will be unable to recover the cumulative amounts advanced for marketing and reservation activities according to the contractual terms of the franchise agreements. These advances are considered to be unrecoverable if the expected net, undiscounted cash flows from marketing and reservation activities are less than the carrying amount of the asset.

Choice Privileges is our frequent guest incentive marketing program. Choice Privileges enables members to earn points based on their spending levels with our franchisees and, to a lesser degree, through participation in affiliated partners' programs, such as those offered by credit card companies. The points, which we accumulate and track on the members' behalf, may be redeemed for free accommodations or other benefits.

We provide Choice Privileges as a marketing program to franchised hotels and collect a percentage of program members' room revenue from franchises to operate the program. Revenues are deferred in an amount equal to the estimated fair value of the future redemption obligation. The Company develops an estimate of the eventual redemption rates and point values using various actuarial methods. These judgmental factors determine the required liability attributable to outstanding points. Upon redemption of points, the Company recognizes the previously deferred revenue as well as the corresponding expense relating to the cost of the awards redeemed. Revenues in excess of the estimated future redemption obligation are recognized when earned to reimburse the Company for costs incurred to operate the program, including administrative costs, marketing, promotion and performing member services.

~~Valuation of Intangibles and Long-Lived Assets~~

The Company evaluates the potential impairment of property and equipment and other long-lived assets, including franchise rights and other definite-lived intangibles, whenever an event or other circumstances indicates that the Company may not be able to recover the carrying value of the asset. When indicators of impairment are present, recoverability is assessed based on net, undiscounted expected cash flows. If the net, 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. We estimate the fair value of intangibles and long lived assets primarily using undiscounted cash flow analysis. 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. Furthermore, if management uses different projections or if different conditions occur in future periods, future-operating results could be materially impacted.

The Company evaluates the impairment of goodwill and trademarks with indefinite lives on an annual basis, or during the year if an event or other circumstance indicates that the Company may not be able to recover the carrying amount of the asset. In evaluating these assets for impairment, the Company may elect to first assess qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit or the indefinite lived intangible asset is less than its carrying amount. 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 two-step impairment test is performed for goodwill. The Company may elect to forego the qualitative assessment and move directly to the two-step impairment test for goodwill and the fair value determination for indefinite-lived intangibles. The Company determines the fair value of its reporting units and indefinite-lived intangibles using income and market methods.

~~Valuation of Investments in Equity Method Investments~~

The Company evaluates an investment in an equity method investment 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. 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. Fair value is based upon internally developed discounted cash flow models, third-party appraisals, and if appropriate, current estimated net sales proceeds from pending offers. If the estimated fair value is less than carrying value, management uses its judgment to determine if the decline in value is other-than-temporary. In determining this, the Company considers factors including, but not limited to, the length of time and extent of the decline, loss of values as a percentage of the cost, financial condition and near-term financial projections, the Company's intent and ability to recover the lost value and current economic conditions. For declines in value that are deemed other-than-temporary, impairments are charged to earnings.

~~Loan Loss Reserves~~

The Company segregates its notes receivable for the purposes of evaluating allowances for credit losses between two categories: Mezzanine and Other Notes Receivable and Forgivable Notes Receivable. The Company utilizes the level of security it has in the various notes receivable as its primary credit quality indicator (i.e. senior, subordinated or unsecured) when determining the appropriate allowances for uncollectible loans within these categories.

~~Mezzanine and Other Notes Receivables~~

The Company has provided financing to franchisees in support of the development of properties in strategic markets. The Company expects the owners to repay the loans in accordance with the loan agreements, or earlier as the hotels mature and capital markets permit. The Company estimates the collectability and records an allowance for loss on its mezzanine and other notes receivable when recording the receivables in the Company’s financial statements. These estimates are updated quarterly based on available information.

The Company considers a loan to be impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. All amounts due according to the contractual terms means that both the contractual interest payments and the contractual principal payments of a loan will be collected as scheduled in the loan agreement. The Company measures loan impairment based on the present value of expected future cash flows discounted at the loan’s original effective interest rate or the estimated fair value of the collateral. For impaired loans, the Company establishes a specific impairment reserve for the difference between the recorded investment in the loan and the present value of the expected future cash flows or the estimated fair value of the collateral. The Company applies its loan impairment policy individually to all mezzanine and other notes receivable in the portfolio and does not aggregate loans for the purpose of applying such policy. For impaired loans, the Company recognizes interest income on a cash basis. If it is likely that a loan will not be collected based on financial or other business indicators it is the Company’s policy to charge off these loans to SG&A expenses in the accompanying consolidated statements of income in the quarter when it is deemed uncollectible. Recoveries of impaired loans are recorded as a reduction of SG&A expenses in the quarter received.

The Company assesses the collectability of its senior notes receivable by comparing the market value of the underlying assets to the carrying value of the outstanding notes. In addition, the Company evaluates the property’s operating performance, the borrower’s compliance with the terms of the loan and franchise agreements, and all related personal guarantees that have been provided by the borrower. For subordinated or unsecured receivables, the Company assesses the property’s operating performance, the subordinated equity available to the Company, the borrower’s compliance with the terms of the loan and franchise agreements, and the related personal guarantees that have been provided by the borrower.

The Company considers loans to be past due and in default when payments are not made when due. 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 applies payments received for loans on non-accrual status first to interest and then principal. The Company does not resume interest accrual until all delinquent payments are received.

~~Forgivable Notes Receivable~~

In conjunction with brand and development programs, the Company may provide financing to franchisees for property improvements and other purposes in the form of forgivable promissory notes which bear interest at market rates. Under these promissory notes, the franchisee promises to repay the principal balance together with interest upon maturity unless certain conditions are met throughout the term of the promissory note. The principal balance and related interest are forgiven ratably over the term of the promissory note if the franchisee remains in the system in good standing. If during the term of the promissory note, the franchisee exits our franchise system or is not operating their franchise in accordance with our quality or credit standards, the Company may declare a default under the promissory note and commence collection efforts with respect to the full amount of the then-current outstanding principal and interest.

In accordance with the terms of the promissory notes, the initial principal balance and related interest are ratably reduced over the term of the loan on each anniversary date until the outstanding amounts are reduced to zero as long as the franchisee remains within the franchise system and operates in accordance with our quality and brand standards. As a result, the amounts recorded as an asset on the Company's consolidated balance sheet are also ratably reduced since the amounts forgiven no longer represent probable future economic benefits to the Company. The Company records the reduction of its recorded assets through amortization and marketing and reservation expense on its consolidated statements of income. Since these forgivable promissory notes receivable are predominately forgiven ratably over the term of the promissory note rather than repaid, the Company classifies the issuance and collection of these notes receivable as operating activities in its consolidated statement of cash flows.

The Company fully reserves all defaulted notes in addition to recording a reserve on the estimated uncollectible portion of the remaining notes. For those notes not in default, the Company calculates an allowance for losses and determines the ultimate collectibility on these forgivable notes based on the historical default rates for those unsecured notes that are not forgiven but are required to be repaid. The Company records bad debt expense in SG&A and marketing and reservation system expenses in the accompanying consolidated statements of income in the quarter when the note is deemed uncollectible.

~~Stock Compensation~~

The Company’s policy is to recognize 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 upon inception of the

grant and adjusts the estimate of share-based compensation for those awards with performance and/or service requirements that will not be satisfied so that compensation cost is recognized only for awards that ultimately vest.

~~Income Taxes~~

Income taxes are recorded using the asset and liability method of accounting for income taxes. Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not such assets will be unrealized. Deferred U.S. income taxes have not been recorded for temporary differences related to investments in certain foreign subsidiaries and corporate affiliates. The temporary differences consist primarily of undistributed earnings that are considered permanently reinvested in operations outside the U.S. If management’s intentions change in the future, deferred taxes may need to be provided.

With respect to uncertain income tax positions, a tax liability is recorded in full when management determines that the position does not meet the more likely than not threshold of being sustained on examination. A tax liability may also be recognized for a position that meets the more likely than not threshold, based upon management’s assessment of the position’s probable settlement value. The Company records interest and penalties on unrecognized tax benefits in the provision for income taxes.

potentiallyaffect reported results.

New Accounting Standards

~~See Footnote No. 1,~~Refer to the "Recently Adopted Accounting ~~Guidance" and "Future Adoption~~Standards" section of ~~Recently Announced Accounting Guidance," of the Notes to our Financial Statements~~Note 1 for information related to our adoption of new accounting standards in ~~2017 and for information on our anticipated adoption of recently issued accounting standards.~~2021.

FORWARD-LOOKING STATEMENTS

Certain matters discussed in this quarterly report constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. ~~Generally, our~~Certain, but not necessarily all, of such forward-looking statements can be identified by the use of ~~words~~forward-looking terminology, such as "expect," "estimate," "believe," "anticipate," ~~"should",~~"should," "will," "forecast," "plan," "project," "assume" or similar words of ~~futurity identify such~~futurity. All statements other than historical facts are forward-looking statements. These forward-looking statements are based on management's current beliefs, assumptions and expectations regarding future events, which in turn are based on information currently available to management. Such statements may relate to projections of the Company's revenue, expenses, earnings, ~~and other financial and operational measures, Company~~ debt levels, ability to repay outstanding indebtedness, payment of dividends, repurchases of common stock, and other financial and operational measures, including occupancy and open hotels, the our ability to benefit from any rebound in travel demand, our liquidity, our ability to assist franchisees through relief or other financial measures, our ability to achieve cost savings and reduce discretionary spending and investments, and the impact of COVID-19 and economic conditions on our future operations, among other matters. We caution you not to place undue reliance on any such forward-looking statements. Forward-looking statements do not guarantee future performance and involve known and unknown risks, uncertainties and other factors.

Several factors could cause our actual results, performance or achievements ~~of the Company~~ to differ materially from those expressed in or contemplated by the forward-looking statements. Such risks include, but are not limited to, continuation or resurgence of the COVID-19 pandemic, including with respect to new strains or variants; the rate and pace of vaccination in the broader population; changes in consumer demand and confidence, including the impact of the COVID-19 pandemic on unemployment rates, consumer discretionary spending and the demand for travel, transient and group business; the impact of COVID-19 on the global hospitality industry, particularly but not exclusively in the U.S. travel market; the success of our mitigation efforts in response to the COVID-19 pandemic; the performance of our brands and categories in any recovery from the COVID-19 pandemic disruption; the timing and amount of future dividends and share repurchases; changes to general, domestic and

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foreign economic ~~conditions;~~conditions, including access to liquidity and capital as a result of COVID-19; future domestic or global outbreaks of epidemics, pandemics or contagious diseases or fear of such outbreaks; changes in law and regulation applicable to the travel, lodging ~~and~~or franchising ~~industries~~industries; foreign currency fluctuations; impairments or declines in the value of our assets; operating risks common in the travel, lodging ~~and~~or franchising industries; changes to the desirability of our brands as viewed by hotel operators and customers; changes to the terms or termination of our contracts with franchisees and our relationships with our franchisees; our ability to keep pace with improvements in technology utilized for marketing and reservations systems and other operating systems; the commercial acceptance of our ~~SkyTouch~~SaaS technology solutions division's products and services; our ability to grow our franchise system; ~~exposures~~exposure to risks ~~relating~~related to our hotel development, financing, and ~~financing~~ownership activities; exposures to risks associated with our investments in new businesses; fluctuations in the supply and demand for ~~hotels~~hotel rooms; our ability to realize anticipated benefits offrom acquired businesses; impairments or losses relating to acquired businesses; the level of acceptance of alternative growth strategies we may implement; cyber security and data breach risks; ownership and financing activities; hotel closures or financial difficulties of our franchisees; operating risks associated with our international ~~operations;~~operations, especially in areas currently most affected by COVID-19; the outcome of litigation; and our ability to effectively manage our indebtedness and secure our indebtedness. These and other risk factors are discussed in detail in the Risk Factors section of this quarterly report on Form 10-Q and of the Company's Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2020, filed with the ~~Securities and Exchange Commission~~SEC on February ~~27, 2017.~~26, 2021. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risk from changes in interest rates and the impact of fluctuations in foreign currencies on the Company's foreign investments and operations. The Company manages its exposure to these market risks through the monitoring of its available financing alternatives including, in certain circumstances, the use of derivative financial instruments. We are also subject to risk from changes in debt and equity prices from our non-qualified retirement savings plan investments in debt securities and common stock, which have a carrying value of ~~$21.4~~$33.8 million and ~~$19.1~~$31.4 million at ~~September~~June 30, ~~2017~~

2021 and December 31, ~~2016~~,2020, respectively, which we account for as trading securities. The Company will continue to monitor the exposure in these areas and make the appropriate adjustments as market conditions dictate.

At ~~September~~June 30, ~~2017~~,2021, the Company had ~~$145.0 million of~~no variable interest rate debt instruments outstanding ~~at an effective rate of 2.59%. A hypothetical change of 10% in the Company’s effective interest rate from September 30, 2017 levels would increase~~ or ~~decrease annual interest expense by $0.4 million. The Company expects to refinance its fixed and variable long-term debt obligations prior to their scheduled maturities.~~

~~The Company does not presently have any~~ derivative financial instruments.


~~ITEM 4.~~	~~CONTROLS AND PROCEDURES~~

ITEM 4.CONTROLS AND PROCEDURES

Management’s Evaluation of Disclosure Controls and Procedures

The Company has a disclosure review committee whose membership includes the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), among others. The disclosure review committee’s procedures are considered by the CEO and CFO in performing their evaluations of the Company’s disclosure controls and procedures and in assessing the accuracy and completeness of the Company’s disclosures.

Our management, with the participation of our CEO and CFO, ~~have~~has evaluated the effectiveness of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), as of the end of the period covered by this quarterly report as required by Rules 13a-15(b) or 15d-15(b) under the Exchange Act. Our management, including our CEO and CFO, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met.

An evaluation was performed under the supervision and with the participation of the Company’s CEO and CFO, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the Company’s management, including the CEO and CFO, concluded that the Company’s disclosure controls and procedures were effective as of ~~September~~June 30, ~~2017.~~2021.

Changes in internal control over financial reporting

There have been no changes in the Company’s internal control over financial reporting that occurred during the quarter ended ~~September~~June 30, ~~2017,~~2021, that materially affected, or is reasonably likely to materially affect the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION


~~ITEM 1.~~	~~LEGAL PROCEEDINGS~~

ITEM 1.LEGAL PROCEEDINGS

The Company is not a party to any material litigation other than litigation in the ordinary course of business. The Company's management and legal counsel do not expect that the ultimate outcome of any of its currently ongoing legal proceedings, individually or collectively, will have a material adverse effect on the Company's financial position, results of operations or cash flows.


~~ITEM 1A.~~	~~RISK FACTORS~~

ITEM 1A.RISK FACTORS

There have been no material changes in our risk factors from those disclosed in Part I, ~~Item 1A~~"Item 1A. Risk Factors" to our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016~~2020 filed on February ~~27, 2017.~~26, 2021. In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2020, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.


~~ITEM 2.~~	~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

The following table sets forth purchases and redemptions of Choice Hotels International, Inc. common stock made by the Company during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~:2021:


Month Ending	Total Number of Shares Purchased or Redeemed	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1), (2)	Maximum Number of Shares that may yet be Purchased Under the Plans or Programs, End of Period (3)
January 31, 2021	—	$	—	—	3,399,216
February 28, 2021	11,039	109.21		—	3,399,216
March 31, 2021	35,460	108.29		—	3,399,216
April 30, 2021	222	113.88		—	3,399,216
May 31, 2021	934	113.80		—	3,399,216
June 30, 2021	—	117.04		1,582	3,397,634






Total	47,655	$	108.64	1,582	3,397,634

(1) The Company’s share repurchase program was initially approved by the board of directors on June 25, 1998. The program has no fixed dollar amount or expiration date. The share repurchase program is discretionary in nature and the board of directors has the ability to modify, suspend, or discontinue the program at any time. Since the program's inception through June 30, 2021, the Company has repurchased 51.6 million shares (including 33.0 million prior to the two-for-one stock split effected in October 2005) of common stock at a total cost of $1.5 billion. Considering the effect of the two-for-one stock split, the Company has repurchased 84.6 million shares at an average price of $17.56 a share.

(2) During the six months ended June 30, 2021, the Company redeemed 47,655 shares of common stock from employees to satisfy the option price and minimum tax-withholding requirements related to the exercising of options and vesting of restricted stock and performance vested restricted stock unit grants. These redemptions were not part of the board repurchase authorization.

(3) In April 2020, in light of uncertainty resulting from the COVID-19 pandemic, we 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.

Month Ending
Total Number of
Shares Purchased
or Redeemed

Average Price
Paid per Share

Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs^(1),(2)

Maximum Number of
Shares that may yet be
Purchased Under the Plans
or Programs, End of Period
January 31, 2017 —
$ —
—
4,019,895
February 28, 2017 39,214
59.13
—
4,019,895
March 31, 2017 79,717
62.13
—
4,019,895
April 30, 2017 879
63.06
—
4,019,895
May 31, 2017 —
—
—
4,019,895
June 30, 2017 1,324
65.35
—
4,019,895
July 31, 2017 729
64.73
—
4,019,895
August 31, 2017 —
—
—
4,019,895
September 30, 2017 23,305
61.24
3,100
4,016,795
Total 145,168
$ 61.23
3,100
4,016,795

~~_______________________~~

~~(1)~~

The Company’s share repurchase program was initially approved by the board of directors on June 25, 1998. The program has no fixed dollar amount or expiration date. Since the program's inception through September 30, 2017, the Company has repurchased 48.7 million shares (including 33.0 million prior to the two-for-one stock split effected in October 2005) of common stock at a total cost of $1.3 billion. Considering the effect of the two-for-one stock split, the Company has repurchased 81.7 million shares at an average price of $15.38 a share.


~~(2)~~	~~During the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2017~~, the Company redeemed 142,068 shares of common stock from employees to satisfy the option price and minimum tax-withholding requirements related to the exercising of options and vesting of restricted stock and performance vested restricted stock unit grants. These redemptions were not part of the board repurchase authorization.


~~ITEM 3.~~	~~DEFAULTS UPON SENIOR SECURITIES~~

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None.


~~ITEM 4.~~	~~MINE SAFETY DISCLOSURES~~

ITEM 4.MINE SAFETY DISCLOSURES

None.


~~ITEM 5.~~	~~OTHER INFORMATION~~

ITEM 5.OTHER INFORMATION

None.

Table of Contents


~~ITEM 6.~~	~~EXHIBITS~~

ITEM 6.EXHIBITS

Exhibit Number and Description


Exhibit Number		Description

~~Exhibit~~ ~~Number~~ 3.01(a)		~~Description~~

~~3.01(a)~~	Restated Certificate of Incorporation of Choice Hotels Franchising, Inc. (renamed Choice Hotels International, Inc.)

3.02(b)		Amendment to the Restated Certificate of Incorporation of Choice Hotels International, Inc.

3.03(c)		Amended and Restated Bylaws of Choice Hotels International, Inc.

3.04(d)		Amendment to the Amended and Restated Bylaws of Choice Hotels International, Inc.

3.05(e)		Amendment to the Amended and Restated Bylaws of Choice Hotels International, Inc.

4.01*		~~Third Supplemental Indenture, dated as of August 4, 2017, among Choice Hotels International, Inc., Choice Privileges Loyalty Services, LLC, and Wells Fargo Bank, National Association~~
31.1*
4.02*	~~Guarantee Agreement Supplement, dated as of August 3, 2017, by Choice Privileges Loyalty Services, LLC~~

~~10.01(f)~~	~~Amendment to Second Amended and Restated Employment Agreement, dated August 9, 2017, between Stephen P. Joyce and Choice Hotels International, Inc.~~

~~10.02(g)~~	~~Amended and Restated Non-Competition, Non-Solicitation & Severance Benefit Agreement between the Company and Patrick S. Pacious~~

31.1*	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a)

31.2*		Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a)

32*		Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350

101.INS*		Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH*		Inline XBRL Taxonomy Extension Schema Document

101.CAL*		Inline XBRL Taxonomy Calculation Linkbase Document

101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*		Inline XBRL Taxonomy Label Linkbase Document

101.PRE*		Inline XBRL Taxonomy Presentation Linkbase Document

~~_______________________~~



*104	~~Filed herewith~~	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


~~(a)~~*			~~Incorporated by reference to the identical document filed as an exhibit to Choice Hotels International, Inc.'s Registration Statement on Form S-4, filed August 31, 1998 (Reg. No. 333-62543).~~Filed herewith


~~(b)~~	~~Incorporated by reference to the identical document filed as an exhibit to Choice Hotels International, Inc.'s Current Report on Form 8-K filed May 1, 2013.~~


~~(c)~~	~~Incorporated by reference to the identical document filed as an exhibit to Choice Hotels International, Inc.'s Current Report on Form 8-K filed February 16, 2010.~~


~~(d)~~	~~Incorporated by reference to the identical document filed as an exhibit to Choice Hotels International, Inc.'s Current Report on Form 8-K filed April 29, 2015.~~


~~(e)~~	~~Incorporated by reference to the identical document filed as an exhibit to Choice Hotels International, Inc.'s Current Report on Form 8-K filed on January 13, 2016.~~


~~(f)~~	~~Incorporated by reference to the identical document filed as an exhibit to Choice Hotels International, Inc.'s Current Report on Form 8-K filed on August 14, 2017.~~


~~(g)~~	~~Incorporated by reference to the identical document filed as an exhibit to Choice Hotels International, Inc.'s Current Report on Form 8-K filed on September 18, 2017.~~

(a) Incorporated by reference to the identical document filed as an exhibit to Choice Hotels International, Inc.'s Registration Statement on Form S-4, filed August 31, 1998 (Reg. No. 333-62543).

~~SIGNATURE~~(b) Incorporated by reference to the identical document filed as an exhibit to Choice Hotels International, Inc.'s Current Report on Form 8-K filed May 1, 2013.

(c) Incorporated by reference to the identical document filed as an exhibit to Choice Hotels International, Inc.'s Current Report on Form 8-K filed February 16, 2010.

(d) Incorporated by reference to the identical document filed as an exhibit to Choice Hotels International, Inc.'s Current Report on Form 8-K filed April 29, 2015.

(e) Incorporated by reference to the identical document filed as an exhibit to Choice Hotels International, Inc.'s Current Report on Form 8-K filed on January 13, 2016.

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			CHOICE HOTELS INTERNATIONAL, INC.

August 5, 2021			~~CHOICE HOTELS INTERNATIONAL, INC.~~
By:
~~November 9, 2017~~	~~By:~~	/s/ PATRICK S. PACIOUS
				Patrick S. Pacious
				President & Chief Executive Officer

			CHOICE HOTELS INTERNATIONAL, INC.

~~November 9, 2017~~August 5, 2021			By:	/s/ DOMINIC E. DRAGISICH
				Dominic E. Dragisich
				Chief Financial Officer


Delaware			52-1209792
(State or Other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification No.)

~~DELAWARE~~		~~52-1209792~~
~~(State or other jurisdiction of~~ ~~incorporation or organization)~~ 1 Choice Hotels Circle,	Suite 400		20850
Rockville,	Maryland
(~~I.R.S. Employer~~ ~~Identification No.)~~ Address of Principal Executive Offices)			(Zip Code)



~~CLASS~~		~~SHARES OUTSTANDING AT SEPTEMBER 30, 2017~~
~~Common Stock, Par Value $0.01 per share~~		~~56,593,820~~



			PAGE NO.
			~~PAGE NO.~~

PART I. FINANCIAL INFORMATION:

Item 1—Financial Statements (Unaudited)			3
Consolidated Statements of Income -- For the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020			3
Consolidated Statements of Comprehensive Income -- For the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020			4
Consolidated Balance Sheets -- As of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016~~2020			5
Consolidated Statements of Cash Flows -- For the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020			6
Consolidated Statements of Shareholders' Equity (Deficit) -- For the three and six months ended June 30, 2021 and 2020			7
Notes to Consolidated Financial Statements			78
Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations			3516
Item 3—Quantitative and Qualitative Disclosures About Market Risk			5534
Item 4—Controls and Procedures			5634

PART II. OTHER INFORMATION:

Item 1—Legal Proceedings			5635
Item 1A—Risk Factors			5635
Item 2—Unregistered Sales of Equity Securities and Use of Proceeds			5735
Item 3—Defaults Upon Senior Securities			5835
Item 4—Mine Safety Disclosures			5835
Item 5—Other Information			5835
Item 6—Exhibits			5936

~~SIGNATURE~~SIGNATURES			6037


	September 30, 2017			December 31, 2016				June 30, 2021		December 31, 2020
ASSETS							ASSETS
Current assets							Current assets
Cash and cash equivalents	$	238,848		$	202,463		Cash and cash equivalents	$	307,975	$	234,779
Receivables (net of allowance for doubtful accounts of $11,332 and $8,557, respectively)	151,672			107,336
Receivables (net of allowance for credit losses of $57,726 and $59,424, respectively)							Receivables (net of allowance for credit losses of $57,726 and $59,424, respectively)	201,038		149,921
Income taxes receivable	19,676			316			Income taxes receivable	346		4,186
Notes receivable, net of allowance	10,789			7,873
Notes receivable (net of allowance for credit losses of $7,428 and $4,179, respectively)							Notes receivable (net of allowance for credit losses of $7,428 and $4,179, respectively)	70,887		24,048
Other current assets	34,338			26,885			Other current assets	27,294		19,980
Total current assets	455,323			344,873			Total current assets	607,540		432,914
Property and equipment, at cost, net	83,611			84,061			Property and equipment, at cost, net	342,121		334,901
Operating lease right-of-use assets							Operating lease right-of-use assets	13,163		17,688
Goodwill	80,519			78,905			Goodwill	159,196		159,196
Intangible assets, net	14,749			15,738			Intangible assets, net	307,559		303,725
Notes receivable, net of allowances	139,803			110,608
Notes receivable (net of allowance for credit losses of $12,611 and $15,305, respectively)							Notes receivable (net of allowance for credit losses of $12,611 and $15,305, respectively)	67,922		95,785
Investments, employee benefit plans, at fair value	19,749			16,975			Investments, employee benefit plans, at fair value	31,484		29,104
Investments in unconsolidated entities	131,128			94,839			Investments in unconsolidated entities	42,793		57,879
Deferred income taxes	7,835			52,812			Deferred income taxes	71,161		67,745
Other assets	28,475			53,657			Other assets	85,855		88,396
Total assets	$	961,192		$	852,468		Total assets	$	1,728,794	$	1,587,333
LIABILITIES AND SHAREHOLDERS’ DEFICIT
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)							LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current liabilities							Current liabilities
Accounts payable	$	68,261		$	48,071		Accounts payable	$	90,407	$	83,329
Accrued expenses and other current liabilities	66,515			80,388			Accrued expenses and other current liabilities	103,160		78,920
Deferred revenue	136,956			133,218			Deferred revenue	63,394		50,290
Current portion of long-term debt	1,302			1,195
Income taxes payable	—			796

Liability for guest loyalty program							Liability for guest loyalty program	59,014		43,308
Total current liabilities	273,034			263,668			Total current liabilities	315,975		255,847
Long-term debt	800,001			839,409			Long-term debt	1,059,602		1,058,738
Long-term deferred revenue							Long-term deferred revenue	113,392		122,406
Deferred compensation and retirement plan obligations	24,355			21,595			Deferred compensation and retirement plan obligations	36,010		33,756
Deferred income taxes	—			292
Income taxes payable							Income taxes payable	20,642		23,394

Operating lease liabilities							Operating lease liabilities	7,822		12,739
Liability for guest loyalty program							Liability for guest loyalty program	60,591		77,071
Other liabilities	64,182			38,853			Other liabilities	9,827		9,134
Total liabilities	1,161,572			1,163,817			Total liabilities	1,623,861		1,593,085
Commitments and Contingencies							Commitments and Contingencies	0		0
Common stock, $0.01 par value, 160,000,000 shares authorized; 95,065,638 shares issued at September 30, 2017 and December 31, 2016 and 56,593,820 and 56,299,949 shares outstanding at September 30, 2017 and December 31, 2016, respectively	951			951
Common stock, $0.01 par value; 160,000,000 shares authorized; 95,065,638 shares issued at June 30, 2021 and December 31, 2020; 55,646,993 and 55,535,554 shares outstanding at June 30, 2021 and December 31, 2020, respectively							Common stock, $0.01 par value; 160,000,000 shares authorized; 95,065,638 shares issued at June 30, 2021 and December 31, 2020; 55,646,993 and 55,535,554 shares outstanding at June 30, 2021 and December 31, 2020, respectively	951		951
Additional paid-in-capital	178,231			159,045			Additional paid-in-capital	246,604		233,921
Accumulated other comprehensive loss	(5,034		)	(8,522		)	Accumulated other comprehensive loss	(4,523)		(4,646)
Treasury stock (38,471,818 and 38,765,689 shares at September 30, 2017 and December 31, 2016, respectively), at cost	(1,066,915		)	(1,070,383		)
Treasury stock, at cost; 39,418,645 and 39,530,084 shares at June 30, 2021 and December 31, 2020, respectively							Treasury stock, at cost; 39,418,645 and 39,530,084 shares at June 30, 2021 and December 31, 2020, respectively	(1,258,295)		(1,260,478)
Retained earnings	692,387			607,560			Retained earnings	1,120,196		1,024,500
Total shareholders’ deficit	(200,380		)	(311,349		)
Total liabilities and shareholders’ deficit	$	961,192		$	852,468
Total shareholders’ equity (deficit)							Total shareholders’ equity (deficit)	104,933		(5,752)
Total liabilities and shareholders’ equity (deficit)							Total liabilities and shareholders’ equity (deficit)	$	1,728,794	$	1,587,333



	Nine Months Ended
	September 30,
	2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	121,334		$	107,550
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	9,215			8,707
Loss (gain) on disposal of assets	32			(377		)
Provision for bad debts, net	1,796			1,093
Non-cash stock compensation and other charges	20,369			11,037
Non-cash interest and other (income) loss	(451		)	807
Deferred income taxes	44,777			(4,329		)
Equity in net losses from unconsolidated joint ventures, less distributions received	4,278			1,654
Changes in assets and liabilities, net of acquisition:
Receivables	(47,520		)	(42,426		)
Advances to/from marketing and reservation system activities, net	43,697			(25,783		)
Forgivable notes receivable, net	(21,443		)	(15,109		)
Accounts payable	19,679			(3,532		)
Accrued expenses and other current liabilities	(11,540		)	(14,261		)
Income taxes payable/receivable	(20,114		)	21,368
Deferred revenue	3,650			49,976
Other assets	(1,162		)	(9,958		)
Other liabilities	(1,578		)	1,992
Net cash provided by operating activities	165,019			88,409
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in property and equipment	(17,514		)	(17,584		)
Investment in intangible assets	(2,376		)	(482		)
Proceeds from sales of assets	—			8,360
Business acquisition, net of cash acquired	—			(1,341		)
Contributions to equity method investments	(44,876		)	(24,179		)
Distributions from equity method investments	4,307			3,700
Purchases of investments, employee benefit plans	(2,140		)	(1,430		)
Proceeds from sales of investments, employee benefit plans	2,150			1,395
Issuance of mezzanine and other notes receivable	(18,565		)	(20,281		)
Collections of mezzanine and other notes receivable	630			11,040
Acquisitions of real estate	—			(25,263		)
Other items, net	109			60
Net cash used by investing activities	(78,275		)	(66,005		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings pursuant to revolving credit facilities	(39,974		)	52,814
Principal payments on long-term debt	(484		)	(836		)
Purchases of treasury stock	(8,887		)	(33,958		)
Dividends paid	(36,483		)	(34,690		)
Debt issuance costs	—			(284		)
Proceeds from transfer of interest in notes receivable	24,237			—
Proceeds from exercise of stock options	9,799			6,802
Net cash used by financing activities	(51,792		)	(10,152		)
Net change in cash and cash equivalents	34,952			12,252
Effect of foreign exchange rate changes on cash and cash equivalents	1,433			260
Cash and cash equivalents at beginning of period	202,463			193,441
Cash and cash equivalents at end of period	$	238,848		$	205,953
Supplemental disclosure of cash flow information:
Cash payments during the period for:
Income taxes, net of refunds	$	31,254		$	32,085
Interest, net of capitalized interest	$	41,119		$	40,935
Non-cash investing and financing activities:
Dividends declared but not paid	$	12,167		$	11,499
Investment in property and equipment acquired in accounts payable	$	758		$	554
Non-cash sale of investment of unconsolidated joint venture	$	—		$	2,350


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
REVENUES
Royalty fees	$	106,242	$	50,152	$	172,289	$	120,491
Initial franchise and relicensing fees	7,328		6,676		12,755		13,960
Procurement services	12,092		10,697		23,283		24,494
Marketing and reservation system	135,988		79,677		227,509		190,062
Owned hotels	8,993		2,108		13,347		11,530
Other	7,701		2,423		12,108		9,371
Total revenues	278,344		151,733		461,291		369,908
OPERATING EXPENSES
Selling, general and administrative	34,470		43,935		64,737		72,318
Depreciation and amortization	6,232		6,398		12,594		12,927
Marketing and reservation system	113,285		89,309		211,458		219,756
Owned hotels	5,333		2,976		9,480		9,010
Total operating expenses	159,320		142,618		298,269		314,011

Loss on impairment of assets	0		(1,226)		0		(1,226)


Operating income	119,024		7,889		163,022		54,671
OTHER INCOME AND EXPENSES, NET
Interest expense	11,691		13,082		23,468		24,462
Interest income	(1,234)		(2,245)		(2,515)		(4,533)
Loss on extinguishment of debt	0		0		0		607
Other (gains) losses	(2,108)		(3,556)		(3,313)		1,173
Equity in net (gain) loss of affiliates	(1,179)		3,486		4,818		5,441
Total other income and expenses, net	7,170		10,767		22,458		27,150
Income (loss) before income taxes	111,854		(2,878)		140,564		27,521
Income tax expense (benefit)	25,972		(437)		32,345		(25,501)
Net income (loss)	$	85,882	$	(2,441)	$	108,219	$	53,022

Basic earnings (losses) per share	$	1.54	$	(0.04)	$	1.95	$	0.96
Diluted earnings (losses) per share	$	1.53	$	(0.04)	$	1.93	$	0.95

Cash dividends declared per share	$	0.225	$	0	$	0.225	$	0.225


	Common Stock - Shares Outstanding	Common Stock - Par Value		Additional Paid-in- Capital		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Retained Earnings		Total
Balance as of December 31, 2019	55,702,628	$	951	$	231,160	$	(4,550)	$	(1,219,905)	$	968,833	$	(23,511)
Cumulative-effect adjustment (1)	—	—		—		—		—		(6,831)		(6,831)
Net income	—	—		—		—		—		55,463		55,463
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)	—	—		—		—		—		0		0
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)


1.	~~Company Information and Significant Accounting Policies~~


(in thousands)
Balance as of December 31, 2020	$	156,227
Increases to the contract liability balance due to cash received	44,940
Revenue recognized in the period	(39,461)
Balance as of June 30, 2021	$	161,706



	September 30, 2017		December 31, 2016
	(in thousands)
Prepaid expenses	$	20,600	$	22,210
Other current assets	4,027		4,675
Land held for sale	9,711		—
Total	$	34,338	$	26,885



	Forgivable Notes Receivable			Mezzanine & Other Notes Receivable
	(in thousands)
Beginning balance	$	5,013		$	2,417
Provisions	1,936			—
Recoveries	(172		)	—
Write-offs	(11		)	—
Other⁽¹⁾	(459		)	—
Ending balance	$	6,307		$	2,417


(in thousands)	1- 30 days Past Due		31-89 days Past Due		> 90 days Past Due		Total Past Due		Current		Total Notes Receivable
As of June 30, 2021
Senior	$	17,918	$	0	$	15,200	$	33,118	$	90,297	$	123,415
Subordinated	6,629		0		2,209		8,838		25,130		33,968
Unsecured	0		0		0		0		1,465		1,465
	$	24,547	$	0	$	17,409	$	41,956	$	116,892	$	158,848
As of December 31, 2020
Senior	$	0	$	0	$	15,200	$	15,200	$	89,516	$	104,716
Subordinated	0		0		2,209		2,209		31,025		33,234
Unsecured	0		0		0		0		1,367		1,367
	$	0	$	0	$	17,409	$	17,409	$	121,908	$	139,317



	30-89 days Past Due		> 90 days Past Due		Total Past Due		Current		Total Notes Receivable
	(in thousands)
As of September 30, 2017
Forgivable Notes	$	24	$	1,591	$	1,615	$	65,083	$	66,698
	$	24	$	1,591	$	1,615	$	65,083	$	66,698

As of December 31, 2016
Forgivable Notes	$	116	$	1,349	$	1,465	$	50,010	$	51,475
	$	116	$	1,349	$	1,465	$	50,010	$	51,475



	Loss on Cash Flow Hedge			Foreign Currency Items			Total
	(in thousands)
Beginning balance, December 31, 2016	$	(3,160	)	$	(5,362	)	$	(8,522	)
Other comprehensive income before reclassification	—			2,842			2,842
Amounts reclassified from accumulated other comprehensive loss	646			—			646
Net current period other comprehensive income	646			2,842			3,488
Ending balance, September 30, 2017	$	(2,514	)	$	(2,520	)	$	(5,034	)



Component	Amount Reclassified from Accumulated Other Comprehensive Loss				Affected Line Item in the Consolidated Statement of Income
	Three Months Ended September 30, 2017		Nine Months Ended September 30, 2017
	(in thousands)
Loss on cash flow hedge
Interest rate contract	$	215	$	646	Interest expense
	—		—		Tax (expense) benefit
	$	215	$	646	Net of tax


~~ITEM 1.~~	~~FINANCIAL STATEMENTS~~


3.	~~Notes Receivable and Allowance for Losses~~


6.	4. Investments in Unconsolidated Entities


7.	~~Deferred Revenue~~


~~10.~~(in thousands)			~~Non-Qualified Retirement, Savings and Investment Plans~~


~~11.~~Balance as of December 31, 2020	~~Fair Value Measurements~~	$	(4,646)
Other comprehensive income (loss) before reclassification		123
Net current period other comprehensive income (loss)		123
Balance as of June 30, 2021		$	(4,523)


	Fair Value Measurements at Reporting Date Using
(in thousands)	Total		Level 1		Level 2		Level 3
As of June 30, 2021

Mutual funds (1)	$	31,251	$	31,251	$	0	$	0
Money market funds (1)	2,543		0		2,543		0
Total	$	33,794	$	31,251	$	2,543	$	0
As of December 31, 2020
Mutual funds (1)	$	28,520	$	28,520	$	0	$	0
Money market funds (1)	2,836		0		2,836		0
Total	$	31,356	$	28,520	$	2,836	$	0



	Fair Value Measurements at Reporting Date Using
	Total		Level 1		Level 2		Level 3
Assets	(in thousands)
As of September 30, 2017
Money market funds, included in cash and cash equivalents	$	50,305	$	—	$	50,305	$	—
Mutual funds⁽¹⁾	19,731		19,731		—		—
Money market funds⁽¹⁾	1,649		—		1,649		—
	$	71,685	$	19,731	$	51,954	$	—
As of December 31, 2016
Money market funds, included in cash and cash equivalents	$	50,085	$	—	$	50,085	$	—
Mutual funds⁽¹⁾	17,468		17,468		—		—
Money market funds⁽¹⁾	1,676		—		1,676		—
	$	69,229	$	17,468	$	51,761	$	—


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


	Three Months Ended June 30,				Six Months Ended June 30,

(in thousands)	2021		2020		2021		2020
Stock options	$	932	$	490	$	1,548	$	981
Restricted stock awards	2,323		2,099		4,842		4,043
Performance vested restricted stock units	3,144		(324)		4,810		(5,511)
Total share-based compensation expense (benefit)	$	6,399	$	2,265	$	11,200	$	(487)
Income tax benefit (expense)	$	1,556	$	(539)	$	2,723	$	116


	Stock Options				Restricted Stock			Performance Vested Restricted Stock Units
	Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Shares	Weighted Average Grant Date Fair Value		Shares	Weighted Average Grant Date Fair Value
Outstanding at January 1, 2021	819,610	$	70.48		304,439	$	84.48	321,752	$	109.25
Granted	280,811	104.87			52,112	106.89		96,447	108.52

Performance-Based Leveraging (1)	—	—			—	—		75,911	107.51
Exercised/Vested	(153,266)	59.47			(98,938)	81.54		(3,986)	81.55
Expired	0	0			—	—		(72,955)	81.55
Forfeited	0	0			(9,051)	87.09		(1,357)	101.85
Outstanding at June 30, 2021	947,155	$	82.46	5.9 years	248,562	$	90.25	415,812	$	113.91
Options exercisable at June 30, 2021	451,256	$	66.30	3.2 years



	2017 Grants			2016 Grants
Risk-free interest rate	1.76		%	1.22		%
Expected volatility	21.65		%	23.76		%
Expected life of stock option	4.6 years			4.6 years
Dividend yield	1.42		%	1.59		%
Requisite service period	4 years			4 years
Contractual life	7 years			7 years
Weighted average fair value of options granted (per option)	$	10.80		$	9.30


	2021 Grants
Risk-free interest rate	0.94		%
Expected volatility	29.23		%
Expected life of stock option	5.9 years
Dividend yield (1)	0.82		%
Requisite service period	4 years
Contractual life	10 years
Weighted average fair value of options granted (per option)	$	28.00



	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
REVENUES:
Royalty fees	$	98,079		$	44,819		$	11,304		$	(49,950	)	$	104,252
Initial franchise and relicensing fees	6,275			—			128			—			6,403
Procurement services	7,944			84			149			(74		)	8,103
Marketing and reservation system	141,057			123,841			4,481			(101,616		)	167,763
Other	6,237			45			2,653			(368		)	8,567
Total revenues	259,592			168,789			18,715			(152,008		)	295,088
OPERATING EXPENSES:
Selling, general and administrative	50,969			40,875			4,629			(50,109		)	46,364
Depreciation and amortization	370			1,937			788			—			3,095
Marketing and reservation system	149,993			114,865			4,804			(101,899		)	167,763
Total operating expenses	201,332			157,677			10,221			(152,008		)	217,222
Loss on sale of assets, net	—			—			(32		)	—			(32		)
Operating income	58,260			11,112			8,462			—			77,834
OTHER INCOME AND EXPENSES, NET:
Interest expense	11,220			—			179			—			11,399
Other items, net	(442		)	596			(2,233		)	—			(2,079		)
Equity in earnings of consolidated subsidiaries	(19,105		)	(751		)	—			19,856			—
Total other income and expenses, net	(8,327		)	(155		)	(2,054		)	19,856			9,320
Income before income taxes	66,587			11,267			10,516			(19,856		)	68,514
Income taxes	18,992			1,137			790			—			20,919
Net income	$	47,595		$	10,130		$	9,726		$	(19,856	)	$	47,595


	Three Months Ended June 30, 2021								Three Months Ended June 30, 2020
(in thousands)	Hotel Franchising		Corporate & Other		Intersegment Eliminations		Consolidated		Hotel Franchising		Corporate & Other		Intersegment Eliminations		Consolidated
Revenues	$	268,092	$	10,932	$	(680)	$	278,344	$	147,318	$	4,512	$	(97)	$	151,733
Operating income (loss)	$	132,600	$	(13,576)	$	0	$	119,024	$	33,325	$	(25,436)	$	0	$	7,889
Income (loss) before income taxes	$	134,025	$	(22,171)	$	0	$	111,854	$	29,811	$	(32,689)	$	0	$	(2,878)

	Six Months Ended June 30, 2021								Six Months Ended June 30, 2020
(in thousands)	Hotel Franchising		Corporate & Other		Intersegment Eliminations		Consolidated		Hotel Franchising		Corporate & Other		Intersegment Eliminations		Consolidated
Revenues	$	445,310	$	16,972	$	(991)	$	461,291	$	355,365	$	15,417	$	(874)	$	369,908
Operating income (loss)	$	190,753	$	(27,731)	$	0	$	163,022	$	84,311	$	(29,640)	$	0	$	54,671
Income (loss) before income taxes	$	185,936	$	(45,372)	$	0	$	140,564	$	78,390	$	(50,869)	$	0	$	27,521



	Three Months Ended September 30, 2017										Three Months Ended September 30, 2016
(In thousands)	Hotel Franchising		SkyTouch Technology			Corporate & Other			Consolidated		Hotel Franchising		SkyTouch Technology			Corporate & Other			Consolidated

Revenues	$	292,229	$	803		$	2,056		$	295,088	$	265,152	$	526		$	1,899		$	267,577
Operating income (loss)	$	101,271	$	(580	)	$	(22,857	)	$	77,834	$	95,760	$	(3,594	)	$	(13,548	)	$	78,618
Income (loss) before income taxes	$	100,996	$	(580	)	$	(31,902	)	$	68,514	$	97,482	$	(3,594	)	$	(23,688	)	$	70,200



	Nine Months Ended September 30, 2017										Nine Months Ended September 30, 2016
(In thousands)	Hotel Franchising		SkyTouch Technology			Corporate & Other			Consolidated		Hotel Franchising		SkyTouch Technology			Corporate & Other			Consolidated

Revenues	$	761,814	$	2,135		$	5,836		$	769,785	$	709,924	$	1,395		$	5,127		$	716,446
Operating income (loss)	$	259,045	$	(3,159	)	$	(48,039	)	$	207,847	$	237,926	$	(12,669	)	$	(38,824	)	$	186,433
Income (loss) before income taxes	$	255,831	$	(3,159	)	$	(75,394	)	$	177,278	$	238,212	$	(12,669	)	$	(69,355	)	$	156,188


~~ITEM 2.~~	~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~



	Three Months Ended September 30,						Nine Months Ended September 30,
	(In thousands)
	2017			2016			2017			2016

Total Revenues	$	295,088		$	267,577		$	769,785		$	716,446
Adjustments:
Marketing and reservation system revenues	(167,763		)	(152,018		)	(435,273		)	(412,193		)
Non-hotel franchising activities	(2,859		)	(2,424		)	(7,971		)	(6,521		)
Hotel Franchising Revenues	$	124,466		$	113,135		$	326,541		$	297,732



	September 30, 2017		September 30, 2016		Variance
	Hotels	Rooms	Hotels	Rooms	Hotels		Rooms		%		%
Comfort Inn	1,083	84,427	1,126	87,346	(43	)	(2,919	)	(3.8	)%	(3.3	)%
Comfort Suites	566	43,857	565	43,610	1		247		0.2	%	0.6	%
Sleep	382	27,365	378	27,035	4		330		1.1	%	1.2	%
Quality	1,509	117,948	1,407	111,564	102		6,384		7.2	%	5.7	%
Clarion	160	21,267	164	22,456	(4	)	(1,189	)	(2.4	)%	(5.3	)%
Econo Lodge	839	51,322	853	52,773	(14	)	(1,451	)	(1.6	)%	(2.7	)%
Rodeway	595	34,331	526	30,058	69		4,273		13.1	%	14.2	%
MainStay	57	4,135	54	4,020	3		115		5.6	%	2.9	%
Suburban	59	6,578	58	6,471	1		107		1.7	%	1.7	%
Cambria hotel & suites	31	4,160	25	3,113	6		1,047		24.0	%	33.6	%
Ascend Hotel Collection	140	11,062	119	9,761	21		1,301		17.6	%	13.3	%
Total Domestic Franchises	5,421	406,452	5,275	398,207	146		8,245		2.8	%	2.1	%