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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 _____________________________________________ 
FORM 10-Q
 _____________________________________________ 
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED September 30, 2023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NO. 001-13393
 _____________________________________________ 
CHOICE HOTELS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
_____________________________________________ 
Delaware52-1209792
(State or Other Jurisdiction of
Incorporation or Organization)		(I.R.S. Employer
Identification No.)
1 Choice Hotels Circle20850
Rockville,Maryland
(Address of Principal Executive Offices)(Zip Code)

(Registrant’s telephone number, including area code): (301) 592-5000
(Former name, former address and former fiscal year, if changed since last report): N/A
 ________________________________________________________ 
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common Stock, Par Value $0.01 per shareCHHNew York Stock Exchange
_____________________________________________  
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒     No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ☐ No  ☒
The number of shares of common stock outstanding on October 31, 2023 was 49,798,586.

CHOICE HOTELS INTERNATIONAL, INC.
INDEX
 
 PAGE NO.

2
PART I. FINANCIAL INFORMATION
 
ITEM 1.FINANCIAL STATEMENTS

CHOICE HOTELS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
        
Three Months EndedNine Months Ended
 September 30,September 30,
 2023202220232022
REVENUES
Royalty, licensing and management fees$148,512 $144,020 $396,503 $356,208 
Initial franchise fees6,194 7,011 21,240 21,635 
Platform and procurement services fees15,542 14,401 58,186 47,887 
Owned hotels26,239 19,992 74,075 49,220 
Other11,436 31,432 33,211 51,588 
Other revenues from franchised and managed properties217,634 197,410 602,554 513,429 
Total revenues425,557 414,266 1,185,769 1,039,967 
OPERATING EXPENSES
Selling, general and administrative54,913 70,202 182,000 144,414 
Depreciation and amortization9,633 8,726 29,468 20,436 
Owned hotels18,628 13,158 53,924 32,004 
Other expenses from franchised and managed properties207,341 190,541 583,095 458,037 
       Total operating expenses
290,515 282,627 848,487 654,891 
Gain on sale of business and assets, net— 13,379 — 16,688 
Operating income135,042 145,018 337,282 401,764 
OTHER INCOME AND EXPENSES, NET
Interest expense16,168 9,362 46,522 32,084 
Interest income(1,897)(2,348)(5,836)(5,256)
Other loss (gain)1,343 2,303 (2,752)9,578 
Equity in net gain of affiliates(1,801)(1,075)(1,923)(1,279)
Total other income and expenses, net13,813 8,242 36,011 35,127 
Income before income taxes121,229 136,776 301,271 366,637 
Income tax expense29,205 33,696 71,717 89,998 
Net income$92,024 $103,080 $229,554 $276,639 
Basic earnings per share$1.83 $1.87 $4.51 $4.98 
Diluted earnings per share$1.81 $1.85 $4.47 $4.93 
Cash dividends declared per share$0.2875 $0.2375 $0.8625 $0.7125 
The accompanying notes are an integral part of these consolidated financial statements.
3
CHOICE HOTELS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS)
(UNAUDITED)
        
Three Months EndedNine Months Ended
 September 30,September 30,
2023202220232022
Net income$92,024 $103,080 $229,554 $276,639 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment(191)(902)498 (1,139)
Other comprehensive income (loss), net of tax(191)(902)498 (1,139)
Comprehensive income$91,833 $102,178 $230,052 $275,500 
The accompanying notes are an integral part of these consolidated financial statements.
4
CHOICE HOTELS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
September 30, 2023December 31, 2022
ASSETS
Current assets
Cash and cash equivalents$36,432 $41,566 
Accounts receivable (net of allowance for credit losses of $28,883 and $23,435, respectively)
223,781 216,614 
Income taxes receivable5,743 4,759 
Notes receivable (net of allowance for credit losses of $2,206 and $4,125, respectively)
52,726 52,466 
Prepaid expenses and other current assets34,130 32,517 
Total current assets352,812 347,922 
Property and equipment (net of accumulated depreciation and amortization of $292,786 and $253,323, respectively)
469,771 427,306 
Operating lease right-of-use assets90,474 68,985 
Goodwill220,187 218,653 
Intangible assets (net of accumulated amortization of $220,803 and $201,401, respectively)
781,101 742,190 
Notes receivable (net of allowance for credit losses of $6,183 and $6,047, respectively)
49,831 55,577 
Investments for employee benefit plans, at fair value35,815 31,645 
Investments in affiliates55,081 30,647 
Deferred income taxes92,410 88,182 
Other assets84,755 91,068 
Total assets$2,232,237 $2,102,175 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable$124,113 $118,863 
Accrued expenses and other current liabilities96,523 131,410 
Deferred revenue107,802 92,695 
Current portion of long-term debt4,416 2,976 
Liability for guest loyalty programs86,140 89,954 
Total current liabilities418,994 435,898 
Long-term debt1,391,272 1,200,547 
Long-term deferred revenue135,009 134,149 
Deferred compensation and retirement plan obligations41,200 36,673 
Income taxes payable8,601 15,482 
Operating lease liabilities109,746 70,994 
Liability for guest loyalty programs44,320 47,381 
Other liabilities10,682 6,391 
Total liabilities2,159,824 1,947,515 
Commitments and contingencies (Note 12)
Common stock, $0.01 par value; 160,000,000 shares authorized; 95,065,638 shares issued at September 30, 2023 and December 31, 2022; 50,026,433 and 52,200,903 shares outstanding at September 30, 2023 and December 31, 2022, respectively
951 951 
Additional paid-in-capital321,790 298,053 
Accumulated other comprehensive loss(4,713)(5,211)
Treasury stock, at cost; 45,039,205 and 42,864,735 shares at September 30, 2023 and December 31, 2022, respectively
(1,987,262)(1,694,857)
Retained earnings1,741,647 1,555,724 
Total shareholders’ equity 72,413 154,660 
Total liabilities and shareholders’ equity$2,232,237 $2,102,175 
The accompanying notes are an integral part of these consolidated financial statements.
5
CHOICE HOTELS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
Nine Months Ended
 September 30,
 20232022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income$229,554 $276,639 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization29,468 20,436 
Depreciation and amortization – marketing and reservation system27,544 23,237 
Gain on sale of business and assets, net— (16,688)
Franchise agreement acquisition cost amortization14,616 11,558 
Non-cash share-based compensation and other charges34,670 28,621 
Non-cash interest, investment, and affiliate (income) loss, net(1,709)9,135 
Deferred income taxes(4,315)(22,402)
Equity in net (gain) loss of affiliates, less distributions received(621)2,451 
Franchise agreement acquisition costs, net of reimbursements(72,867)(32,947)
Change in working capital and other(9,150)(34,838)
Net cash provided by operating activities247,190 265,202 
CASH FLOWS FROM INVESTING ACTIVITIES
Investments in property and equipment(81,403)(66,084)
Investments in intangible assets(1,893)(3,247)
Asset acquisitions, net of cash paid— (856)
Proceeds from the sale of assets and business— 140,554 
Proceeds from the termination of intangible assets— 5,698 
Business acquisitions, net of cash acquired— (550,431)
Contributions to investments in affiliates(24,573)(4,264)
Proceeds from the sale of affiliates868 — 
Purchases of investments for employee benefit plans(3,678)(3,719)
Proceeds from sales of investments for employee benefit plans1,263 1,896 
Issuances of notes receivable(4,319)(5,617)
Collections of notes receivable9,923 701 
Other items, net547 1,708 
Net cash used in investing activities(103,265)(483,661)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments to extinguish acquired debt— (55,975)
Proceeds from acquired derivative— 1,943 
Net borrowings pursuant to revolving credit facilities191,500 315,000 
Principal payments on 2012 senior notes— (216,571)
Debt issuance costs(755)(24)
Purchases of treasury stock(304,400)(246,530)
Proceeds from the exercise of stock options6,719 2,361 
Dividends paid(42,073)(39,697)
Net cash used in financing activities(149,009)(239,493)
Net change in cash and cash equivalents(5,084)(457,952)
Effect of foreign exchange rate changes on cash and cash equivalents(50)(1,112)
Cash and cash equivalents, beginning of period41,566 511,605 
Cash and cash equivalents, end of period$36,432 $52,541 
Supplemental disclosure of cash flow information:
Cash payments during the period for
Income taxes, net of refunds$70,614 $81,479 
Interest, net of capitalized interest$44,993 $36,691 
Non-cash investing and financing activities
Dividends declared but not paid$15,239 $12,776 
Investment in property, equipment and intangible assets acquired in accounts payable and accrued liabilities$8,064 $5,352 
Asset acquisition from extinguishment of note receivable$— $20,446 

The accompanying notes are an integral part of these consolidated financial statements.
6
CHOICE HOTELS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)

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, 202155,609,226 $951 $259,317 $(4,574)$(1,265,032)$1,275,220 $265,882 
Net income— — — — — 67,391 67,391 
Other comprehensive income (loss), net of tax— — — (134)— — (134)
Share-based payment activity(1)
262,008 — 6,068 — 3,486 4 9,558 
Dividends declared ($0.2375 per share)
— — — — — (13,250)(13,250)
Treasury purchases(100,912)— — — (14,802)— (14,802)
Balance as of March 31, 202255,770,322 $951 $265,385 $(4,708)$(1,276,348)$1,329,365 $314,645 
Net income— — — — — 106,168 106,168 
Other comprehensive income (loss), net of tax— — — (103)— — (103)
Share-based payment activity(1)
12,422 — 8,999 — 596 — 9,595 
Dividends declared ($0.2375 per share)
— — — — — (13,242)(13,242)
Treasury purchases(2,422)— — — (338)— (338)
Balance as of June 30, 202255,780,322 $951 $274,384 $(4,811)$(1,276,090)$1,422,291 $416,725 
Net income— — — — — 103,080 103,080 
Other comprehensive income (loss), net of tax— — — (902)— — (902)
Share-based payment activity(1)
(1,655)— 9,708 — 55 — 9,763 
Dividends declared ($0.2375 per share)
— — — — — (12,767)(12,767)
Treasury purchases(2,005,000)— — — (231,388)— (231,388)
Balance as of September 30, 202253,773,667 $951 $284,092 $(5,713)$(1,507,423)$1,512,604 $284,511 

7
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, 202252,200,903 $951 $298,053 $(5,211)$(1,694,857)$1,555,724 $154,660 
Net income— — — — — 52,820 52,820 
Other comprehensive income (loss), net of tax— — — 394 — — 394 
Share-based payment activity(1)
315,049 — 1,899 — 13,497 — 15,396 
Dividends declared ($0.2875 per share)
— — — — — (14,709)(14,709)
Treasury purchases(2)
(1,341,520)— — — (161,553)— (161,553)
Balance as of March 31, 202351,174,432 $951 $299,952 $(4,817)$(1,842,913)$1,593,835 $47,008 
Net income— — — — — 84,710 84,710 
Other comprehensive income (loss), net of tax— — — 295 — — 295 
Share-based payment activity(1)
10,508 — 11,336 — 579 — 11,915 
Dividends declared ($0.2875 per share)
— — — — — (14,540)(14,540)
Treasury purchases(2)
(619,059)— — — (74,697)— (74,697)
Balance as of June 30, 202350,565,881 $951 $311,288 $(4,522)$(1,917,031)$1,664,005 $54,691 
Net income— — — — — 92,024 92,024 
Other comprehensive income (loss), net of tax— — — (191)— — (191)
Share-based payment activity(1)
22,372 — 10,502 — 403 — 10,905 
Dividends declared ($0.2875 per share)
— — — — — (14,382)(14,382)
Treasury purchases(2)
(561,820)— — — (70,634)— (70,634)
Balance as of September 30, 202350,026,433 $951 $321,790 $(4,713)$(1,987,262)$1,741,647 $72,413 
(1) During certain periods presented, accumulated dividends were paid to certain shareholders upon vesting of their performance vested restricted stock units ("PVRSU") which are presented in Share-based payment activity.
(2) Beginning January 1, 2023, Treasury purchases include an excise tax as imposed by the Inflation Reduction Act of 2022.

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


8
CHOICE HOTELS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.    Basis of Presentation and Significant Accounting Policies
Basis of Presentation
The accompanying unaudited consolidated financial statements of Choice Hotels International, Inc. and subsidiaries (collectively, "Choice" or the "Company") have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America ("GAAP") pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). All significant intercompany accounts and transactions between the Company and its subsidiaries have been eliminated in consolidation.
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments that are necessary to fairly present the Company's financial position and results of operations. Except as otherwise disclosed, all adjustments are of a normal recurring nature.
Certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP have been omitted. Although we believe the disclosures made are adequate to prevent the information presented from being misleading, these financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2022 and the notes thereto included in the Company’s Annual Report on Form 10-K, which was filed with the SEC on March 1, 2023. Interim results are not necessarily indicative of the entire year's results.
Acquisition of Radisson Hotels Americas
On August 11, 2022, the Company completed the acquisition (the "Transaction") of (1) all of the issued and outstanding shares of Radisson Hospitality, Inc. and (2) certain trademarks held by Radisson Hospitality Belgium BV/SRL (collectively referred to as "Radisson Hotels Americas").
The Company determined that it was the accounting acquirer of Radisson Hotels Americas and accounted for the Transaction as a business combination using the acquisition method of accounting. Accordingly, the assets acquired and the liabilities assumed were recorded at their fair values as of the August 11, 2022 acquisition date, with the exception of certain assets and liabilities which were accounted for in accordance with the provisions of ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ("ASU 2021-08"). The Company finalized the purchase price allocation for the Transaction in the third quarter of 2023. Refer to Note 14.
The Company's consolidated statements of income include Radisson Hotels Americas' results of operations in the three and nine months ended September 30, 2023, but our consolidated statements of income only partially include Radisson Hotels Americas' results of operations in the three and nine months ended September 30, 2022 because the Company did not acquire Radisson Hotels Americas until August 11, 2022.
Summary of Significant Accounting Policies
The Company’s significant accounting policies are detailed in the “Summary of Significant Accounting Policies” section of Note 1 in the Annual Report on Form 10-K for the year ended December 31, 2022.
Recently Adopted Accounting Standards
In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses ("ASU 2022-02"). ASU 2022-02 eliminates the recognition and measurement guidance on troubled debt restructuring for creditors that have adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) ("Topic 326"), requires enhanced disclosures about loan modifications for borrowers experiencing financial difficulty, and includes new guidance on current-period gross write-offs presentation. ASU 2022-02 is effective for annual reporting periods beginning after December 15, 2022 and interim periods within those fiscal years. The Company adopted ASU 2022-02 on a prospective basis effective January 1, 2023, and concluded there is no material impact to the consolidated financial statements or disclosures through the third quarter of 2023.
9
2.    Revenue
Contract Liabilities
Contract liabilities relate to (i) advance consideration received related to services considered to be a part of the brand intellectual property performance obligation, such as initial franchise fees that are paid when a franchise agreement is executed and system implementation fees that are paid at the time of installation, and (ii) amounts received when loyalty points are issued but the associated revenue has not yet been recognized since the related loyalty points have not been redeemed.
Deferred revenues from initial fees and system implementation fees are typically recognized over a five- to ten-year period, unless the franchise agreement is terminated and the hotel exits the franchise system whereby remaining deferred amounts are recognized to revenue in the period of termination. Loyalty points are typically redeemed within three years of issuance.
The following table summarizes the significant changes in the contract liabilities balances during the period from December 31, 2022 to September 30, 2023:
(in thousands)
Balance as of December 31, 2022$209,359 
Increases to the contract liability balance due to cash received105,305 
Revenue recognized in the period(99,475)
Balance as of September 30, 2023$215,189 
Remaining Performance Obligations
The aggregate amount of the transaction price that is allocated to unsatisfied, or partially unsatisfied, performance obligations was $215.2 million as of September 30, 2023. This amount represents the fixed transaction price that will be recognized as revenue in future periods, which is presented as current and non-current deferred revenue in the consolidated balance sheets.
Based on the practical expedient elections permitted by ASU 2014-09, Revenue From Contracts with Customers (Topic 606) and subsequent amendments ("Topic 606"), the Company does not disclose the value of unsatisfied performance obligations for (i) variable consideration subject to the sales or usage-based royalty constraint or comprising a component of a series (including franchise, partnership, qualified vendor, and software as a service ("SaaS") agreements), (ii) variable consideration for which we recognize revenue at the amount to which we have the right to invoice for services performed, or (iii) contracts with an expected original duration of one year or less.
Disaggregation of Revenue
Three Months EndedThree Months Ended
September 30, 2023September 30, 2022
(in thousands)Over timePoint in timeTotalOver timePoint in timeTotal
Royalty, licensing and management fees$145,830 $2,682 $148,512 $143,987 $33 $144,020 
Initial franchise fees6,194 — 6,194 7,011 — 7,011 
Platform and procurement services fees14,874 668 15,542 13,628 773 14,401 
Owned hotels19,497 6,742 26,239 14,877 5,115 19,992 
Other11,436 — 11,436 31,432 — 31,432 
Other revenues from franchised and managed properties200,399 17,235 217,634 178,349 19,061 197,410 
Total revenues$398,230 $27,327 $425,557 $389,284 $24,982 $414,266 
Nine Months EndedNine Months Ended
September 30, 2023September 30, 2022
(in thousands)Over timePoint in timeTotalOver timePoint in timeTotal
Royalty, licensing and management fees$389,332 $7,171 $396,503 $356,175 $33 $356,208 
Initial franchise fees21,240 — 21,240 21,635 — 21,635 
Platform and procurement services fees56,112 2,074 58,186 45,503 2,384 47,887 
Owned hotels55,544 18,531 74,075 39,720 9,500 49,220 
Other33,211 — 33,211 51,588 — 51,588 
Other revenues from franchised and managed properties546,332 56,222 602,554 438,734 74,695 513,429 
Total revenues$1,101,771 $83,998 $1,185,769 $953,355 $86,612 $1,039,967 
The owned hotels revenues that are recognized at a point in time represent the goods and services that are purchased independently of the hotel stay, such as food and beverage, incidentals, and parking fees. The remaining revenues that are recognized at a point in time represent the loyalty points that are redeemed by members for benefits (with both franchisees and third-party partners), net of the cost of redemptions.
During the three and nine months ended September 30, 2022, Other revenues included contract termination fee revenue of $22.7 million from the exit of 110 WoodSpring units in September 2022. The contract termination fee revenue consisted of $67.4 million in consideration, less the $44.7 million in intangible assets that were initially recognized on the date of the WoodSpring acquisition.
As presented in Note 11, the Corporate & Other segment revenue amounts are $33.8 million and $29.7 million for the three months ended September 30, 2023 and 2022, respectively, and $86.5 million and $63.4 million for the nine months ended September 30, 2023 and 2022, respectively, and are primarily included in Other revenue and Owned hotels revenue in the consolidated statements of income. The remaining revenues relate to the Hotel Franchising & Management reportable segment.
Royalty, licensing and management fees and Other revenues from franchised and managed properties are presented net of intersegment revenues of $4.0 million and $1.6 million for the three months ended September 30, 2023 and 2022, respectively, and $7.3 million and $3.7 million for the nine months ended September 30, 2023 and 2022, respectively.
3.    Receivables and Allowance for Credit Losses
Notes Receivable
The Company has provided financing in the form of notes receivable loans to franchisees to support the development of hotel properties in strategic markets. The Company's credit quality indicator is the level of security in the note receivable.
10
The following table summarizes the composition of the notes receivable balances by credit quality indicator and the allowance for credit losses:
(in thousands)September 30, 2023December 31, 2022
Senior$86,374 $95,466 
Subordinated19,592 17,075 
Unsecured4,980 5,674 
Total notes receivable$110,946 $118,215 
Less: allowance for credit losses8,389 10,172 
Total notes receivable, net of allowance for credit losses$102,557 $108,043 
Current portion, net of allowance for credit losses$52,726 $52,466 
Long-term portion, net of allowance for credit losses$49,831 $55,577 
The following table summarizes the amortized cost basis of the notes receivable by the year of origination and credit quality indicator:
(in thousands)20232022202120202019PriorTotal
Senior$— $— $— $— $29,083 $57,291 $86,374 
Subordinated3,493 — 1,994 — — 14,105 19,592 
Unsecured— 215 1,292 903 208 2,362 4,980 
Total notes receivable$3,493 $215 $3,286 $903 $29,291 $73,758 $110,946 
The following table summarizes the activity related to the Company’s notes receivable allowance for credit losses:
(in thousands)September 30, 2023December 31, 2022
Beginning balance$10,172 $16,779 
Provision for credit losses154 (938)
Recoveries(1,937)(5,669)
Ending balance$8,389 $10,172 
As of both September 30, 2023 and December 31, 2022, one note receivable loan with a senior credit quality indicator met the definition of collateral-dependent and is collateralized by membership interests in the borrowing entities and the associated land parcel. The Company used a market approach using quoted market prices to value the underlying collateral. The Company reviewed the borrower's financial statements, economic trends, industry projections for the market, and comparable sales capitalization rates, which represent significant inputs to the cash flow projections. These nonrecurring fair value measurements are classified as Level 3 in the fair value measurement hierarchy because they are unobservable inputs which are significant to the overall fair value. Based on the Company's analysis, the fair value of the collateral secures substantially all of the carrying value of the loan. The allowances for credit losses attributable to collateral-dependent loans are $0.9 million as of both September 30, 2023 and December 31, 2022, respectively.
Recoveries during the nine months ended September 30, 2023 were primarily associated with cash collections pursuant to a settlement agreement with a borrower. Recoveries during the year ended December 31, 2022 were primarily associated with a loan that was previously classified as collateral-dependent and was settled in exchange for an operating hotel on April 14, 2022.
The Company considers loans past due and in default when payments are not made when due in accordance with the then-current loan provisions or the terms extended to the borrowers, including loans with concessions or interest deferral. The Company suspends the accrual of interest when payments on loans are more than 30 days past due or upon a loan being classified as collateral-dependent. The Company applies the payments received for loans on a non-accrual status first to interest and then to principal. The Company does not resume an interest accrual until all delinquent payments are received based on the then-current loan provisions. The amortized cost basis of the notes receivable in a non-accrual status was $16.5 million and $18.7 million as of September 30, 2023 and December 31, 2022, respectively.
The Company has notes receivable loans totaling approximately $4.4 million and $4.8 million as of September 30, 2023 and December 31, 2022, respectively, with stated interest rates that are lower than market interest rates, representing a total unamortized discount of less than $0.1 million as of both September 30, 2023 and December 31, 2022. These discounts are reflected as a reduction of the outstanding notes receivable loan amounts and are amortized over the life of the related loan.
11
The following table summarizes the past due balances by credit quality indicator of the notes receivable:
(in thousands)1- 30 days
Past Due		31-89 days
Past Due		> 90 days
Past Due		Total
Past Due		CurrentTotal
 Notes Receivable
As of September 30, 2023
Senior$— $— $44,283 $44,283 $42,091 $86,374 
Subordinated— — 271 271 19,321 19,592 
Unsecured— — 400 400 4,580 4,980 
$— $— $44,954 $44,954 $65,992 $110,946 
As of December 31, 2022
Senior$— $15,200 $— $15,200 $80,266 $95,466 
Subordinated— — 2,209 2,209 14,866 17,075 
Unsecured20 40 40 99 5,575 5,674 
$20 $15,240 $2,249 $17,508 $100,707 $118,215 
Variable Interest through Notes Issued
The Company has issued notes receivable loans to certain entities that have created variable interests in the associated borrowers totaling $98.4 million and $103.2 million as of September 30, 2023 and December 31, 2022, respectively. The Company has determined that it is not the primary beneficiary of these variable interest entities ("VIEs").
Accounts Receivable
Accounts receivable consists primarily of franchise and related fees due from the hotel franchisees and are recorded at the invoiced amount.
During the nine months ended September 30, 2023, the Company recognized provisions for credit losses on accounts receivable of $4.2 million in selling, general and administrative ("SG&A") expenses and $4.0 million in other expenses from franchised and managed properties. During the nine months ended September 30, 2022, the Company recognized a reversal of provisions for credit losses on accounts receivable of $0.4 million in SG&A expenses and provisions for credit losses on accounts receivable of $0.5 million in other expenses from franchised and managed properties. During the nine months ended September 30, 2023 and 2022, the Company recorded write-offs, net of recoveries, through the accounts receivable allowance for credit losses of $2.8 million and $12.9 million, respectively.
4.    Investments in Affiliates
The Company has equity method investments in affiliates primarily related to the Company's program to offer equity support to qualified franchisees to develop and operate Everhome Suites and Cambria Hotels in strategic markets.
As of September 30, 2023 and December 31, 2022, the Company had total investments in affiliates in the consolidated balance sheets of $55.1 million and $30.6 million, respectively, which included investments in affiliates that represent VIEs of $45.3 million and $24.4 million, respectively. The Company has determined that it is not the primary beneficiary of any of these VIEs, however the Company does exercise significant influence through its equity ownership and as a result, the investments in these affiliates are accounted for under the equity method. During the three months ended September 30, 2023 and 2022, the Company recognized losses totaling $0.9 million and $1.1 million, respectively, from these investments that represent VIEs. During the nine months ended September 30, 2023 and 2022, the Company recognized losses totaling $3.2 million and $2.7 million, respectively, from these investments that represent VIEs. The Company's maximum exposure to losses related to its investments in the VIEs is limited to the total of its respective equity investment as well as certain limited payment guaranties, which are described in Note 12 of these consolidated financial statements.
The Company recognized no impairment charges related to its equity method investments during the nine months ended September 30, 2023 and 2022.
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5.    Debt
Debt consists of the following:
September 30, 2023December 31, 2022
(in thousands)
$450 million senior unsecured notes due 2031 ("2020 Senior Notes") with an effective interest rate of 3.86%, less a discount and deferred issuance costs of $4.5 million and $4.9 million at September 30, 2023 and December 31, 2022, respectively
$445,537 $445,080 
$400 million senior unsecured notes due 2029 ("2019 Senior Notes") with an effective interest rate of 3.88%, less a discount and deferred issuance costs of $3.7 million and $4.2 million at September 30, 2023 and December 31, 2022, respectively
396,290 395,838 
$850 million senior unsecured revolving credit facility with an effective interest rate of 6.40% less deferred issuance costs of $2.1 million and $1.8 million at September 30, 2023 and December 31, 2022, respectively (1)
549,445 358,189 
Economic development loans with an effective interest rate of 3.00% at September 30, 2023 and December 31, 2022, respectively
4,416 4,416 
Total debt
$1,395,688 $1,203,523 
Less current portion
4,416 2,976 
Long-term debt$1,391,272 $1,200,547 
(1) On February 14, 2023, the Company entered into a Third Amendment to the Amended and Restated Senior Unsecured Credit Agreement (the "Amendment"). The Amendment provides, among other things, for (i) an increase in the aggregate amount of commitments under the Company's existing $600 million unsecured credit facility (the "Revolver") by $250 million (the “Increased Commitments”) to an aggregate amount of $850 million and (ii) the replacement of the interest reference rate for U.S. dollar-denominated borrowings under the Revolver from the London Interbank Offered Rate ("LIBOR") to an adjusted Secured Overnight Financing Rate ("SOFR"). The pricing and other terms applicable to the Increased Commitments are the same as those applicable to the existing revolving loan commitments that were in effect prior to the Amendment. Except as amended by the Amendment, the remaining terms of the unsecured credit facility remain in full force and effect.
Refer to Note 12 and the Liquidity and Capital Resources section of "Management's Discussion and Analysis of Financial Condition and Results of Operations" for more information.
6.    Accumulated Other Comprehensive Loss
The changes in accumulated other comprehensive loss, net of tax, for the nine months ended September 30, 2023 and 2022 were as follows:
(in thousands)
Balance as of December 31, 2022$(5,211)
Other comprehensive income (loss) before reclassification498 
Balance as of September 30, 2023$(4,713)
(in thousands)
Balance as of December 31, 2021$(4,574)
Other comprehensive income (loss) before reclassification(1,139)
Balance as of September 30, 2022$(5,713)
The other comprehensive income (loss) before reclassification for both the nine months ended September 30, 2023 and 2022 relate to foreign currency items, and there were no amounts reclassified from accumulated other comprehensive loss during either period.
7.    Fair Value Measurements
The Company estimates the fair value of its financial instruments utilizing a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The following summarizes the three levels of inputs, as well as the assets that the Company values using those levels of inputs on a recurring basis.
Level 1: Quoted prices in active markets for identical assets and liabilities. The Company’s Level 1 assets consist of marketable securities (primarily mutual funds) held in the Company's Deferred Compensation Plan.
Level 2: Observable inputs, other than quoted prices in active markets for identical assets and liabilities, such as quoted prices for similar assets and liabilities, quoted prices in markets that are not active, or other inputs that are observable. The Company’s Level 2 assets consist of money market funds held in the Company's Deferred Compensation Plan.
Level 3: Unobservable inputs, supported by little or no market data available, where the reporting entity is required to develop its own assumptions to determine the fair value of the instrument. The Company does not currently have any assets recorded at fair value on a recurring basis whose fair value was determined using Level 3 inputs and there were no transfers of Level 3 assets during the nine months ended September 30, 2023 and year ended December 31, 2022.
As of September 30, 2023 and December 31, 2022, the Company recognized the following assets at fair value on a recurring basis in the consolidated balance sheets:
 Fair Value Measurements at Reporting Date Using
(in thousands)TotalLevel 1Level 2Level 3
As of September 30, 2023
Mutual funds (1)
$33,216 $33,216 $— $— 
Money market funds (1)
4,568 — 4,568 — 
Total$37,784 $33,216 $4,568 $— 
As of December 31, 2022
Mutual funds (1)
$29,143 $29,143 $— $— 
Money market funds (1)
3,242 — 3,242 — 
Total$32,385 $29,143 $3,242 $— 
(1) The current assets at fair value noted above are presented in Prepaid expenses and other assets, and the long-term assets at fair value noted above are presented in Investments for employee benefit plans, at fair value, in the consolidated balance sheets.
Other financial instruments disclosure
The Company believes that the fair values of its current assets and current liabilities approximate their reported carrying amounts due to the short-term nature of these items. In addition, the interest rate on the senior unsecured revolving credit facility adjusts frequently based on current market interest rates; accordingly, the Company believes the carrying amount approximates fair value.
The fair values of the Company's senior unsecured notes are classified as Level 2 because the significant inputs are observable in an active market. Refer to Note 5 for further information on debt. As of September 30, 2023 and December 31, 2022, the carrying amounts and the fair values were as follows:
September 30, 2023December 31, 2022
(in thousands)Carrying AmountFair ValueCarrying AmountFair Value
2020 Senior Notes$445,537 $374,882 $445,080 $384,647 
2019 Senior Notes396,290 345,196 395,838 349,368 
The fair value estimates are made at a specific point in time, are subjective in nature, and involve uncertainties and matters of significant judgment. The settlement of such fair value amounts may not be possible or a prudent management decision.
8. Income Taxes
The effective income tax rates were 24.1% and 24.6% for the three months ended September 30, 2023 and 2022, respectively. The effective income tax rates were 23.8% and 24.5% for the nine months ended September 30, 2023 and 2022, respectively.
The effective income tax rates for the three and nine months ended September 30, 2023 and 2022 were higher than the U.S. federal income tax rate of 21% primarily due to the impact of state income taxes.
9.    Share-Based Compensation and Capital Stock
The components of the Company’s share-based compensation expense for the three and nine months ended September 30, 2023 and 2022 were as follows:
Three Months Ended September 30,
Nine Months Ended September 30,
(in thousands)20232022
2023
2022
Stock options$1,422 $1,216 $4,562 $3,445 
Restricted stock awards3,305 3,763 10,362 10,364 
Performance vested restricted stock units5,261 4,887 17,041 13,051 
Total share-based compensation expense$9,988 $9,866 $31,965 $26,860 
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A summary of the share-based award activity during the nine months ended September 30, 2023 is presented below:
 Stock OptionsRestricted StockPerformance Vested
Restricted Stock Units
 OptionsWeighted
Average
Exercise
Price		Weighted
Average
Remaining
Contractual
Term		SharesWeighted
Average
Grant Date
Fair Value		SharesWeighted
Average
Grant Date
Fair Value
Outstanding at January 1, 20231,010,647 $94.97 399,099 $128.47 437,180 $140.05 
Granted88,733 123.62 64,216 123.95 109,786 127.82 
Performance-Based Leveraging (1)
— — — — 64,717 138.51 
Exercised/Vested(126,556)57.04 (85,551)94.82 (119,751)145.41 
Expired— — — — — — 
Forfeited(8,660)126.49 (10,370)116.26 (12,365)134.36 
Outstanding at September 30, 2023964,164 $102.30 5.9367,394 $135.87 479,567 $136.11 
Stock options exercisable at September 30, 2023581,426 $90.42 4.4
(1) Any revisions to the outstanding PVRSUs during the nine months ended September 30, 2023 is based on the Company's performance relative to the targeted performance conditions in the respective PVRSUs.
The fair value of the restricted stock awards and the PVRSUs with performance conditions that were granted during the nine months ended September 30, 2023 was equal to the market price of the Company’s common stock on the date of grant. The fair value of the PVRSUs with market conditions based on the Company’s total shareholder return relative to a predetermined peer group was estimated using a Monte Carlo simulation method as of the grant date. The requisite service periods for the restricted stock and PVRSUs was between 9 months and 48 months. PVRSU awards have vesting ranges between 0% and 230% of the initial units granted.

The stock options granted by the Company had an exercise price equal to the market price of the Company's common stock on the date of grant. The fair value of the options granted during the nine months ended September 30, 2023 was estimated on the grant date using the Black-Scholes option-pricing model with the following weighted average assumptions:
Risk-free interest rate4.10 %
Expected volatility30.90 %
Expected life of the stock option6.0 years
Dividend yield0.9 %
Requisite service period4 years