10-Q 1 chh-20220331.htm 10-Q chh-20220331
CHOICE HOTELS INTERNATIONAL INC 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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 March 31, 2022
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
Suite 400
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 April 29, 2022 was 55,769,629.


CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX
 
 PAGE NO.

2

PART I. FINANCIAL INFORMATION
 
ITEM 1.FINANCIAL STATEMENTS

CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
        
Three Months Ended
 March 31,
 20222021
REVENUES
Royalty fees$90,739 $66,047 
Initial franchise and relicensing fees8,402 5,427 
Procurement services11,683 11,191 
Marketing and reservation system126,637 91,521 
Owned hotels12,037 4,354 
Other8,229 4,407 
Total revenues257,727 182,947 
OPERATING EXPENSES
Selling, general and administrative30,324 30,267 
Depreciation and amortization6,231 6,362 
Marketing and reservation system113,650 98,173 
Owned hotels8,154 4,147 
       Total operating expenses
158,359 138,949 
Gain on sale of asset29  
Operating income99,397 43,998 
OTHER INCOME AND EXPENSES, NET
Interest expense11,470 11,777 
Interest income(1,280)(1,281)
Other (gains) losses1,716 (1,205)
Equity in net (gain) loss of affiliates(244)5,997 
Total other income and expenses, net11,662 15,288 
Income before income taxes87,735 28,710 
Income tax expense20,344 6,373 
Net income$67,391 $22,337 
Basic earnings per share$1.21 $0.40 
Diluted earnings per share$1.20 $0.40 
Cash dividends declared per share$0.2375 $ 
The accompanying notes are an integral part of these consolidated financial statements.
3

CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS)
(UNAUDITED)
 
        
Three Months Ended
 March 31,
20222021
Net income$67,391 $22,337 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment(134)52 
Other comprehensive income (loss), net of tax(134)52 
Comprehensive income$67,257 $22,389 
The accompanying notes are an integral part of these consolidated financial statements.
4

CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
March 31, 2022December 31, 2021
ASSETS
Current assets
Cash and cash equivalents$527,209 $511,605 
Accounts receivable (net of allowance for credit losses of $27,713 and $34,149, respectively)
175,051 153,147 
Income taxes receivable4,211 12,511 
Notes receivable (net of allowance for credit losses of $4,316 and $4,318, respectively)
54,746 54,453 
Prepaid expenses and other current assets26,801 29,945 
Total current assets788,018 761,661 
Property and equipment, at cost (net of accumulated depreciation and amortization of $242,375 and $232,492, respectively)
394,950 377,367 
Operating lease right-of-use assets31,869 34,183 
Goodwill159,196 159,196 
Intangible assets (net of accumulated amortization of $201,764 and $195,909, respectively)
311,079 312,389 
Notes receivable (net of allowance for credit losses of $12,500 and $12,461, respectively)
67,649 66,451 
Investments, employee benefit plans, at fair value34,173 33,946 
Investments in affiliates28,126 27,967 
Deferred income taxes71,795 68,643 
Other assets85,173 90,021 
Total assets$1,972,028 $1,931,824 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable$89,826 $81,169 
Accrued expenses and other current liabilities81,265 104,472 
Deferred revenue89,724 81,538 
Current portion of long-term debt216,486 216,351 
Liability for guest loyalty program86,212 86,765 
Total current liabilities563,513 570,295 
Long-term debt844,426 844,123 
Long-term deferred revenue108,165 105,785 
Deferred compensation and retirement plan obligations38,893 38,690 
Income taxes payable20,642 20,642 
Operating lease liabilities32,549 35,492 
Liability for guest loyalty program42,350 41,785 
Other liabilities6,845 9,130 
Total liabilities1,657,383 1,665,942 
Commitments and Contingencies
Common stock, $0.01 par value; 160,000,000 shares authorized; 95,065,638 shares issued at March 31, 2022 and December 31, 2021; 55,770,322 and 55,609,226 shares outstanding at March 31, 2022 and December 31, 2021, respectively
951 951 
Additional paid-in-capital265,385 259,317 
Accumulated other comprehensive loss(4,708)(4,574)
Treasury stock, at cost; 39,295,316 and 39,456,412 shares at March 31, 2022 and December 31, 2021, respectively
(1,276,348)(1,265,032)
Retained earnings1,329,365 1,275,220 
Total shareholders’ equity 314,645 265,882 
Total liabilities and shareholders’ equity$1,972,028 $1,931,824 
The accompanying notes are an integral part of these consolidated financial statements.
5

CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)

Three Months Ended
 March 31,
 20222021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income$67,391 $22,337 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization6,231 6,362 
Depreciation and amortization – marketing and reservation system7,154 5,815 
Gain on sale of asset(29) 
Franchise agreement acquisition cost amortization3,784 3,044 
Stock compensation and other charges7,555 5,026 
Interest and investment loss (income)1,909 (2,059)
Deferred income taxes(3,119)(1,378)
Equity in net loss of affiliates, less distributions received230 5,997 
Franchise agreement acquisition costs, net of reimbursements(12,435)(6,770)
Change in working capital and other(14,747)(38,254)
Net cash provided by operating activities63,924 120 
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in property and equipment(26,809)(9,364)
Investment in intangible assets(1,208)(885)
Proceeds from sale of asset8,494  
Contributions to investments in affiliates(268)(968)
Purchases of investments, employee benefit plans(2,818)(551)
Proceeds from sales of investments, employee benefit plans1,853 1,992 
Issuance of notes receivable(1,245) 
Collections of notes receivable63 63 
Other items, net(529) 
Net cash used in investing activities(22,467)(9,713)
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of treasury stock(14,802)(5,046)
Dividends paid(13,204) 
Proceeds from exercise of stock options2,211 2,845 
Net cash used in financing activities(25,795)(2,201)
Net change in cash and cash equivalents15,662 (11,794)
Effect of foreign exchange rate changes on cash and cash equivalents(58)(24)
Cash and cash equivalents at beginning of period511,605 234,779 
Cash and cash equivalents at end of period$527,209 $222,961 
Supplemental disclosure of cash flow information:
Cash payments during the period for
Income taxes, net of refunds$513 $323 
Interest, net of capitalized interest$14,462 $14,349 
Non-cash investing and financing activities
Dividends declared but not paid$13,250 $ 
Investment in property, equipment and intangibles acquired in accounts payable and accrued liabilities$4,129 $2,785 

The accompanying notes are an integral part of these consolidated financial statements.
6

CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES
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, 202055,535,554 $951 $233,921 $(4,646)$(1,260,478)$1,024,500 $(5,752)
Net income— — — — — 22,337 22,337 
Other comprehensive income (loss), net of tax— — — 52 — — 52 
Share-based payment activity(1)
48,781 — 3,617 — 4,030 (3)7,644 
Dividends declared(1)
— — — — — —  
Treasury purchases(46,499)— — — (5,046)— (5,046)
Balance as of March 31, 202155,537,836 $951 $237,538 $(4,594)$(1,261,494)$1,046,834 $19,235 

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)(1)
     (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 
(1) In April 2020, in light of uncertainty resulting from the COVID-19 pandemic, we suspended future, undeclared dividends. In May 2021, the Company resumed the payment of quarterly dividends, subject to future declarations by our board of directors, and declared a quarterly cash dividend of $0.225 per share of common stock. On December 6, 2021, the Company's board of directors approved a 6% increase in the quarterly cash dividend and declared a quarterly cash dividend of $0.2375 per share of common stock. On February 24, 2022 the Company's board of directors declared a quarterly cash dividend of $0.2375 per share of common stock. During all periods presented, accumulated dividends were paid to certain shareholders upon vesting of certain performance vested restricted stock units ("PVRSU") which are captured in Share-based payment activity.

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


7

CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES
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 its subsidiaries (together 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, 2021 and notes thereto included in the Company’s Annual Report on Form 10-K, filed with the SEC on February 24, 2022. Interim results are not necessarily indicative of the entire year results.
Summary of Significant Accounting Policies
The Company’s significant accounting policies are detailed in the “Summary of Significant Accounting Policies” section of Note 1 in the Annual Report on Form 10-K for the year ended December 31, 2021.
Recently Issued Accounting Standards
In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses ("ASU 2022-02"). ASU 2022-02 eliminates the recognition and measurement guidance on troubled debt restructuring for creditors that have adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) ("Topic 326"), requires enhanced disclosures about loan modifications for borrowers experiencing financial difficulty, and includes new guidance on current-period gross write-offs presentation. The guidance is effective for annual reporting periods beginning after December 15, 2022 and interim periods within those fiscal years. Early adoption is permitted. The Company is currently assessing the potential impact that ASU 2022-02 will have on the consolidated financial statements and disclosures.
2.    Revenue
Contract Liabilities
Contract liabilities relate to (i) advance consideration received, such as initial franchise and relicensing fees paid when a franchise agreement is executed and system implementation fees paid at time of installation, for services considered to be part of the brand intellectual property performance obligation and (ii) amounts received when Choice Privileges points are issued, but for which revenue is not yet recognized since the related points have not been redeemed.
Deferred revenues from initial and relicensing fees and system implementation fees are typically recognized over a five- to ten-year period, unless the franchise agreement is terminated and the hotel exits the franchise system whereby remaining deferred amounts are recognized to revenue in the period of termination. Loyalty points are typically redeemed within three years of issuance.
Significant changes in the contract liabilities balances during the period December 31, 2021 to March 31, 2022 are as follows:
(in thousands)
Balance as of December 31, 2021$175,425 
Increases to the contract liability balance due to cash received26,756 
Revenue recognized in the period(22,602)
Balance as of March 31, 2022$179,579 
Remaining Performance Obligations
The aggregate amount of transaction price allocated to unsatisfied or partially unsatisfied performance obligations is $179.6 million as of March 31, 2022. This amount represents fixed transaction price that will be recognized as revenue in future periods, which is captured in the consolidated balance sheet as current and non-current deferred revenue.
Based on practical expedient elections permitted by ASU 2014-09, Revenue From Contracts with Customers (Topic 606) and subsequent amendments ("Topic 606"), the Company does not disclose the value of unsatisfied performance obligations for (i) variable consideration subject to the sales or usage-based royalty constraint or comprising a component of a series (including franchise, partnership, qualified vendor, and 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
March 31, 2022March 31, 2021
(in thousands)Over timePoint in timeTotalOver timePoint in timeTotal
Royalty fees$90,739 $ $90,739 $66,047 $ $66,047 
Initial franchise and relicensing fees8,402  8,402 5,427  5,427 
Procurement services11,131 552 11,683 10,739 452 11,191 
Marketing and reservation system112,259 14,378 126,637 79,052 12,469 91,521 
Owned hotels9,940 1,997 11,937 3,517 722 4,239 
Other8,229  8,229 4,407  4,407 
Total Topic 606 revenues$240,700 $16,927 257,627 $169,189 $13,643 182,832 
Non-Topic 606 revenues100 115 
Total revenues$257,727 $182,947 
Marketing and reservation system and Procurement services point in time revenues represent loyalty points redeemed by members for benefits (with both franchisees and third-party partners), net of the cost of redemptions.
As presented in Note 11, the Corporate & Other segment amounts represent $14.3 million and $6.0 million for the three months ended March 31, 2022 and 2021, respectively, and are included in the Over time column of Other revenues and the Owned hotels and Non-Topic 606 revenues rows. The remaining revenues relate to the Hotel Franchising segment.
Royalty fees and Marketing and reservation system revenues are presented net of intersegment revenues of $0.9 million and $0.3 million for the three months ended March 31, 2022 and 2021, 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 properties in strategic markets. The Company's credit quality indicator is the level of security in the note receivable.
8

The composition of notes receivable balances by credit quality indicator and the allowance for credit losses is as follows:
(in thousands)March 31, 2022December 31, 2021
Senior$109,628 $108,370 
Subordinated27,977 27,801 
Unsecured1,606 1,512 
Total notes receivable139,211 137,683 
Total allowance for notes receivable credit losses16,816 16,779 
Total notes receivable, net of allowance$122,395 $120,904 
Current portion, net of allowance$54,746 $54,453 
Long-term portion, net of allowance$67,649 $66,451 
Amortized cost basis by year of origination and credit quality indicator are as follows:
(in thousands)202220212020PriorTotal
Senior$ $3,453 $ $106,175 $109,628 
Subordinated   27,977 27,977 
Unsecured   1,606 1,606 
Total notes receivable$ $3,453 $ $135,758 $139,211 
The following table summarizes the activity related to the Company’s notes receivable allowance for credit losses:
(in thousands)March 31, 2022December 31, 2021
Beginning balance$16,779 $19,484 
Provision for credit losses39 709 
Write-offs(2)(3,414)
Ending balance$16,816 $16,779 
As of both March 31, 2022 and December 31, 2021, two loans with senior and/or subordinated tranches met the definition of collateral-dependent and are collateralized by membership interests in the borrowing entities and either the associated land parcels or an operating hotel. The Company used a discounted cash flow ("DCF") technique to project cash flows or a market approach via quoted market prices to value the underlying collateral. The Company reviewed the borrower's financial statements, economic trends, industry projections for the market, and comparable sales capitalization rates, which represent significant inputs to the cash flow projections. These nonrecurring fair value measurements are classified as level three of the fair value measurement hierarchy, as there are unobservable inputs which are significant to the overall fair value. Based on these analyses, the fair value of collateral secures the carrying value of each loan to a significant extent. Allowances for credit losses attributable to collateral-dependent loans are $6.3 million as of both March 31, 2022 and December 31, 2021, respectively.
The write-offs for the year ended December 31, 2021 are associated with a loan previously classified as collateral-dependent that was settled in exchange for an operating hotel on October 1, 2021.
In April 2022, the Company reached a settlement with a borrower holding a loan classified as collateral-dependent, collateralized by an operating hotel. The key terms of the settlement resulted in a deed in lieu of foreclosure on the operating hotel in exchange for releasing obligations pursuant to the senior and mezzanine loans and the associated franchise agreement. The property was exchanged in full settlement of the senior and mezzanine loans and will be recorded at fair value as of the acquisition date of April 14, 2022. The Company will account for the acquisition of the hotel as an asset acquisition in the second quarter of 2022.
As a result of the COVID-19 pandemic, the Company extended interest deferral terms on certain notes receivable. The Company considers loans past due and in default when payments are not made when due in accordance with then current loan provisions or terms extended to borrowers, including loans with concessions or interest deferral. 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 payments received for loans on non-accrual status first to interest and then to principal. The Company does not resume interest accrual until all delinquent payments are received based on then current loan provisions. The amortized cost basis of notes receivable on non-accrual status was $44.1 million at both March 31, 2022 and December 31, 2021, respectively.
9

The Company has identified loans totaling approximately $7.5 million as of both March 31, 2022 and December 31, 2021, respectively, with stated interest rates that are less than market rate, representing a total unamortized discount of $0.3 million as of both March 31, 2022 and December 31, 2021, respectively. These discounts are reflected as a reduction of the outstanding loan amounts and are amortized over the life of the related loan.
The past due balances by credit quality indicator of notes receivable are as follows:
(in thousands)1- 30 days
Past Due
31-89 days
Past Due
> 90 days
Past Due
Total
Past Due
CurrentTotal
 Notes Receivable
As of March 31, 2022
Senior$ $15,200 $ $15,200 $94,428 $109,628 
Subordinated  2,209 2,209 25,768 27,977 
Unsecured    1,606 1,606 
$ $15,200 $2,209 $17,409 $121,802 $139,211 
As of December 31, 2021
Senior$ $ $ $ $108,370 $108,370 
Subordinated  2,209 2,209 25,592 27,801 
Unsecured    1,512 1,512 
$ $ $2,209 $2,209 $135,474 $137,683 
The Company evaluated its off-balance-sheet credit exposure for loan commitments and determined the likelihood of having to perform is remote as of March 31, 2022. Refer to Note 12.
Variable Interest through Notes Issued
The Company has issued notes receivables to certain entities that have created variable interests in these borrowers totaling $121.6 million and $120.2 million as of March 31, 2022 and December 31, 2021, respectively. The Company has determined that it is not the primary beneficiary of these variable interest entities ("VIEs"). These loans have stated fixed and/or variable interest amounts.
Accounts Receivable
Accounts receivable consist primarily of franchise and related fees due from hotel franchisees and are recorded at the invoiced amount.
During the three months ended March 31, 2021, the Company recorded provisions for credit losses on accounts receivable of $2.6 million in SG&A expenses and $3.9 million in marketing and reservation system expenses. During three months ended March 31, 2022, the Company recorded reversals of provisions for credit losses on accounts receivable of $0.5 million in SG&A expenses and provisions of $0.3 million in marketing and reservation system expenses. During the three months ended March 31, 2021 and 2022, the Company recorded write-offs, net of recoveries, through the accounts receivable allowance for credit losses of $0.3 million and $6.3 million, respectively.
4.    Investments in Affiliates
The Company maintains equity method investments in affiliates related to the Company's program to offer equity support to qualified franchisees to develop and operate Cambria Hotels in strategic markets. The Company has investments in affiliates that represent VIEs totaling $24.7 million and $25.2 million on the consolidated balance sheets at March 31, 2022 and December 31, 2021, respectively. The Company has determined that it is not the primary beneficiary of any of these VIEs, however it does exercise significant influence through its equity ownership and as a result the investment in these affiliates is accounted for under the equity method. For the three months ended March 31, 2022 and 2021, the Company recognized losses totaling $0.8 million and $6.4 million, respectively, from these investments that represent VIEs. The Company's maximum exposure to losses related to its investments in VIEs is limited to its equity investments as well as certain limited payment guaranties described in Note 12 of these financial statements.
The Company recognized no impairment charges related to equity method investments during the three months ended March 31, 2022. During the first quarter of 2021, the Company recognized an other-than-temporary impairment of $4.8 million related to an equity method investment. The Company assessed the estimated fair value of the investment from comparable market transactions of the investment, which was a key judgment in the fair value determination. This nonrecurring fair value measurement was classified as level three of the fair value measurement hierarchy, as the Company utilized unobservable inputs which are significant to the overall fair value. Based on this analysis, the Company determined that the fair market value declined below the carrying value and the decline is other-than-temporary. As a result, the Company recorded an other-than-
temporary impairment from the carrying value to the estimated fair value for the investment. The other-than-temporary impairment is classified as equity in net loss of affiliates in the consolidated statements of income and captured in the Hotel Franchising reportable segment in Note 11.
5.    Debt
Debt consists of the following:
March 31, 2022December 31, 2021
(in thousands)
$450 million senior unsecured notes due 2031 ("2020 Senior Notes") with an effective interest rate of 3.86%, less a discount and deferred issuance costs of $5.4 million and $5.5 million at March 31, 2022 and December 31, 2021, respectively
$444,622 $444,470 
$400 million senior unsecured notes due 2029 ("2019 Senior Notes") with an effective interest rate of 3.88%, less a discount and deferred issuance costs of $4.6 million and $4.8 million at March 31, 2022 and December 31, 2021, respectively
395,388 395,237 
$400 million senior unsecured notes due 2022 ("2012 Senior Notes") with an effective interest rate of 6.00%, less deferred issuance costs of $0.1 million and $0.2 million at March 31, 2022 and December 31, 2021, respectively (2)
216,486 216,351 
$600 million senior unsecured revolving credit facility (1)
  
Economic development loans with an effective interest rate of 3.00% at March 31, 2022 and December 31, 2021, respectively
4,416 4,416 
Total debt $1,060,912 $1,060,474 
Less current portion (2)
216,486 216,351 
Long-term debt$844,426 $844,123 
(1) During the third quarter of 2020, the Company utilized excess cash on hand to pay down its senior unsecured revolving credit facility balance in full and the facility remains undrawn as of March 31, 2022 and December 31, 2021. As there are no outstanding borrowings at March 31, 2022 or December 31, 2021, deferred issuance costs for the senior unsecured revolving credit facility of $2.1 million and $2.3 million, respectively, are presented in non-current Other assets in the consolidated balance sheets.
(2) The Company's 2012 Senior Notes mature on July 1, 2022 with a principal maturity, net of unamortized deferred issuance costs, of $216.5 million.
Refer to Note 12 and the Liquidity and Capital Resources header of "Management's Discussion and Analysis of Financial Condition and Results of Operations" for more information.

6.    Accumulated Other Comprehensive Loss
The changes in accumulated other comprehensive loss, net of tax, for the three months ended March 31, 2022 and 2021 are as follows:
(in thousands)
Balance as of December 31, 2021$(4,574)
Other comprehensive income (loss) before reclassification(134)
Net current period other comprehensive income (loss)(134)
Balance as of March 31, 2022$(4,708)
(in thousands)
Balance as of December 31, 2020$(4,646)
Other comprehensive income (loss) before reclassification52 
Net current period other comprehensive income (loss)52 
Balance as of March 31, 2021$(4,594)
The other comprehensive income (loss) before reclassification for both the three months ended March 31, 2022 and 2021 relate to foreign currency items.
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 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 whose fair value was determined using Level 3 inputs and there were no transfers of Level 3 assets during the three months ended March 31, 2022.
As of March 31, 2022 and December 31, 2021, the Company had the following assets recorded in the consolidated balance sheets measured at fair value on a recurring basis:
 Fair Value Measurements at Reporting Date Using
(in thousands)TotalLevel 1Level 2Level 3
As of March 31, 2022
Mutual funds (1)
$32,478 $32,478 $ $ 
Money market funds (1)
2,840  2,840  
Total$35,318 $32,478 $2,840 $ 
As of December 31, 2021
Mutual funds (1)
$33,555 $33,555 $ $ 
Money market funds (1)
2,520  2,520  
Total$36,075 $33,555 $2,520 $ 
(1) Included in Investments, employee benefit plans, at fair value and Prepaid expenses and other current assets on the consolidated balance sheets.
Other financial instruments disclosure
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 rates of the Company's senior unsecured revolving credit facility adjust frequently based on current market rates; accordingly, we believe its carrying amount, when amounts are drawn, approximates fair value.
The fair values of the Company's senior unsecured notes are classified as Level 2, as the significant inputs are observable in an active market. Refer to Note 5 for further information on debt. At March 31, 2022 and December 31, 2021, the carrying amounts and fair values are as follows:
March 31, 2022December 31, 2021
(in thousands)Carrying AmountFair ValueCarrying AmountFair Value
2020 Senior Notes$444,622 $437,724 $444,470 $477,675 
2019 Senior Notes395,388 398,056 395,237 425,984 
2012 Senior Notes216,486 218,143 216,351 221,702 
Fair value estimates are made at a specific point in time, are subjective in nature and involve uncertainties and matters of significant judgment. Settlement of such fair value amounts may not be possible or a prudent management decision.

8. Income Taxes
The effective income tax rates were 23.2% and 22.2% for the three months ended March 31, 2022 and 2021, respectively.
The effective income tax rate for the three months ended March 31, 2022 was higher than the U.S. federal income tax rate of 21.0% primarily due to the impact of state income taxes, partially offset by excess tax benefits from share-based compensation.
The effective income tax rate for the three months ended March 31, 2021 was higher than the U.S. federal income tax rate of 21.0% due to the impact of state income taxes and foreign operations, partially offset by excess tax benefits from share-based compensation.
10

9.    Share-Based Compensation and Capital Stock
The components of the Company’s pretax share-based compensation activity and associated income tax expense are as follows for the three months ended March 31, 2022 and 2021:
Three Months Ended March 31,
(in thousands)20222021
Stock options$1,052 $616 
Restricted stock awards3,043 2,519 
Performance vested restricted stock units3,354 1,666 
Total share-based compensation expense$7,449 $4,801 
Income tax expense$1,805 $1,157 
A summary of share-based award activity as of and changes during the three months ended March 31, 2022 are 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, 2022910,944 $83.14 236,599 $92.60 412,642 $114.70 
Granted155,774 146.68 241,833 146.68 111,585 181.91 
Performance-Based Leveraging (1)
    12,280 81.55 
Exercised/Vested(41,054)53.86 (76,229)87.90   
Expired    (78,370)81.15 
Forfeited  (1,407)94.19 (194)114.36 
Outstanding at March 31, 20221,025,664 $93.96 6.2 years400,796 $126.12 457,943 $135.65 
Options exercisable at March 31, 2022549,980