Choice Hotels(CHH) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the unaudited consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures for Choice Hotels International, Inc ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) This section presents the unaudited consolidated financial statements, including income, comprehensive income, balance sheets, cash flows, and shareholders' equity, along with detailed explanatory notes Consolidated Statements of Income This section provides the unaudited consolidated statements of income for the three and six months ended June 30, 2025 and 2024 Consolidated Statements of Income (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :---------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Total Revenues | $426,443 | $435,156 | $759,303 | $767,105 | | Operating Income | $124,597 | $132,622 | $204,529 | $192,771 | | Income Before Income Taxes | $108,611 | $116,581 | $168,373 | $156,789 | | Net Income | $81,734 | $87,136 | $126,268 | $118,145 | | Basic Earnings Per Share | $1.76 | $1.82 | $2.71 | $2.42 | | Diluted Earnings Per Share | $1.75 | $1.80 | $2.68 | $2.41 | | Cash Dividends Declared Per Share | $0.2875 | $0.2875 | $0.5750 | $0.5750 | Consolidated Statements of Comprehensive Income This section presents the unaudited consolidated statements of comprehensive income for the three and six months ended June 30, 2025 and 2024 Consolidated Statements of Comprehensive Income (in thousands) | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :---------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net Income | $81,734 | $87,136 | $126,268 | $118,145 | | Foreign Currency Translation Adjustment | $2,079 | $(694) | $2,142 | $(240) | | Comprehensive Income | $83,813 | $86,442 | $128,410 | $117,905 | Consolidated Balance Sheets This section provides the unaudited consolidated balance sheets as of June 30, 2025, and December 31, 2024 Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :---------------------------------- | :--------------------------- | :------------------------------- | | Total Current Assets | $400,679 | $339,086 | | Total Assets | $2,664,762 | $2,530,527 | | Total Current Liabilities | $451,929 | $462,721 | | Long-Term Debt | $1,900,116 | $1,768,526 | | Total Liabilities | $2,691,000 | $2,575,798 | | Total Shareholders' Deficit | $(26,238) | $(45,271) | Consolidated Statements of Cash Flows This section presents the unaudited consolidated statements of cash flows for the six months ended June 30, 2025 and 2024 Consolidated Statements of Cash Flows (in thousands) for Six Months Ended June 30 | Metric | 2025 (in thousands) | 2024 (in thousands) | | :---------------------------------- | :------------------ | :------------------ | | Net Cash Provided by Operating Activities | $116,070 | $113,595 | | Net Cash Used in Investing Activities | $(95,148) | $(62,032) | | Net Cash Used in Financing Activities | $(3,239) | $(18,564) | | Net Change in Cash and Cash Equivalents | $17,683 | $32,999 | | Cash and Cash Equivalents, End of Period | $58,610 | $60,409 | Consolidated Statements of Shareholders' Equity (Deficit) This section details the unaudited consolidated statements of shareholders' equity (deficit) for the six months ended June 30, 2025 and 2024 Shareholders' Equity (Deficit) Changes (in thousands) | Metric | Balance as of Dec 31, 2024 (in thousands) | Net Income (in thousands) | Other Comprehensive Income (in thousands) | Share-based Payment Activity (in thousands) | Dividends Declared (in thousands) | Treasury Purchases (in thousands) | Balance as of Jun 30, 2025 (in thousands) | | :---------------------------------- | :---------------------------------------- | :------------------------ | :---------------------------------------- | :------------------------------------------ | :-------------------------------- | :-------------------------------- | :---------------------------------------- | | Total Shareholders' Deficit | $(45,271) | $81,734 | $2,079 | $12,328 | $(13,304) | $(45,141) | $(26,238) | Notes to Consolidated Financial Statements This section provides detailed notes explaining the basis of presentation, significant accounting policies, and specific financial statement line items Note 1. Basis of Presentation and Significant Accounting Policies This note outlines the basis for preparing the unaudited consolidated financial statements, reclassifications, and the impact of new accounting standards - The Company reclassified certain prior year amounts in the consolidated statements of income and cash flows to maintain comparability with the current year presentation, with no effect on total revenues, total operating expenses, operating income, or net income[27][28][30] - ASU 2023-09 (Improvements to Income Tax Disclosures) is effective for annual reporting periods beginning after December 15, 2024, and is not expected to impact financial statements but will require enhanced disclosures[32] - ASU 2024-03 (Disaggregation of Income Statement Expenses) is effective for annual reporting periods beginning after December 15, 2026, and the Company is currently evaluating its potential impact[33] Note 2. Revenue This note details the Company's contract liabilities, revenue recognition, and remaining performance obligations Contract Liabilities Summary (in thousands) | Metric | Amount (in thousands) | | :---------------------------------- | :-------------------- | | Balance as of December 31, 2024 | $216,697 | | Increases due to cash received | $57,859 | | Revenue recognized in the period | $(56,620) | | Balance as of June 30, 2025 | $217,936 | - The aggregate amount of transaction price allocated to unsatisfied performance obligations was $217.9 million as of June 30, 2025, representing fixed transaction price to be recognized as future revenue[37] Loyalty Net Revenues (in millions) | Period | 2025 (in millions) | 2024 (in millions) | | :---------------------------------- | :----------------- | :----------------- | | Three Months Ended June 30 | $37.2 | $36.3 | | Six Months Ended June 30 | $56.7 | $55.8 | Note 3. Receivables and Allowance for Credit Losses This note provides a detailed breakdown of notes receivable, credit quality, and provisions for credit losses Notes Receivable, Net of Allowance for Credit Losses (in thousands) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :---------------------------------- | :--------------------------- | :------------------------------- | | Total Notes Receivable | $116,095 | $115,514 | | Less: Allowance for Credit Losses | $7,204 | $7,331 | | Total Notes Receivable, Net | $108,891 | $108,183 | Notes Receivable Past Due Balances (in thousands) | Category | June 30, 2025 Total Past Due (in thousands) | December 31, 2024 Total Past Due (in thousands) | | :---------------------------------- | :------------------------------------------ | :---------------------------------------------- | | Senior | $42,900 | $15,200 | | Subordinated | $2,264 | $2,264 | | Unsecured | $384 | $784 | | Total Past Due | $45,548 | $18,248 | - The amortized cost basis of notes receivable in non-accrual status significantly increased to $45.2 million as of June 30, 2025, from $17.5 million as of December 31, 2024[45] - During the six months ended June 30, 2025, the Company recognized $9.2 million in provisions for credit losses on accounts receivable in selling, general and administrative expenses, and $6.9 million in reimbursable expenses from franchised and managed properties[49] Note 4. Investments in Affiliates This note details the Company's equity method investments in affiliates, including those in Variable Interest Entities (VIEs) Investments in Affiliates (in thousands) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :---------------------------------- | :--------------------------- | :------------------------------- | | Total Investments in Affiliates | $125,480 | $117,016 | | Investments in Affiliates (VIEs) | $110,500 | $104,200 | Equity in Net Loss (Gain) of Affiliates (in millions) | Period | Three Months Ended June 30, 2025 (in millions) | Three Months Ended June 30, 2024 (in millions) | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | | :---------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Losses (Gains) from VIEs | $(1.0) | $6.8 | $(1.9) | $5.6 | - The Company recognized a $7.2 million gain in Q2 2024 from a distribution by an unconsolidated affiliate that sold its underlying assets[52] Note 5. Debt This note summarizes the Company's long-term debt, including senior unsecured notes and the revolving credit facility Long-Term Debt (in thousands) | Debt Instrument | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :---------------------------------- | :--------------------------- | :------------------------------- | | 2019 Senior Unsecured Notes due 2029 | $397,343 | $397,042 | | 2020 Senior Unsecured Notes due 2031 | $446,605 | $446,300 | | 2024 Senior Unsecured Notes due 2034 | $589,350 | $588,764 | | $1 Billion Senior Unsecured Revolving Credit Facility | $466,818 | $336,420 | | Total Long-Term Debt | $1,900,116 | $1,768,526 | Note 6. Accumulated Other Comprehensive Loss This note outlines changes in accumulated other comprehensive loss, primarily due to foreign currency items Changes in Accumulated Other Comprehensive Loss (in thousands) | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :---------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Balance as of December 31 | $(6,193) | $(5,671) | | Other Comprehensive Income (Loss) before Reclassification | $2,142 | $(240) | | Balance as of June 30 | $(4,051) | $(5,911) | - All changes in accumulated other comprehensive loss for both periods were entirely due to foreign currency items, with no reclassifications[54] Note 7. Fair Value Measurements This note describes the Company's fair value hierarchy for financial instruments and disclosures for senior unsecured notes Assets at Fair Value on a Recurring Basis (in thousands) | Asset Type | June 30, 2025 Total (in thousands) | June 30, 2025 Level 1 (in thousands) | June 30, 2025 Level 2 (in thousands) | December 31, 2024 Total (in thousands) | December 31, 2024 Level 1 (in thousands) | December 31, 2024 Level 2 (in thousands) | | :---------------------------------- | :--------------------------------- | :--------------------------------- | :--------------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | | Mutual Funds | $45,289 | $45,289 | $— | $43,887 | $43,887 | $— | | Money Market Funds | $7,272 | $— | $7,272 | $5,439 | $— | $5,439 | | Total | $52,561 | $45,289 | $7,272 | $49,326 | $43,887 | $5,439 | Fair Value of Senior Unsecured Notes (in thousands) | Debt Instrument | June 30, 2025 Carrying Amount (in thousands) | June 30, 2025 Fair Value (in thousands) | December 31, 2024 Carrying Amount (in thousands) | December 31, 2024 Fair Value (in thousands) | | :---------------------------------- | :------------------------------------------- | :-------------------------------------- | :----------------------------------------------- | :-------------------------------------------- | | 2019 Senior Notes due 2029 | $397,343 | $380,540 | $397,042 | $371,600 | | 2020 Senior Notes due 2031 | $446,605 | $417,816 | $446,300 | $405,351 | | 2024 Senior Notes due 2034 | $589,350 | $606,804 | $588,764 | $601,836 | Note 8. Income Taxes This note provides the Company's effective income tax rates and the primary factors influencing them Effective Income Tax Rates (%) | Period | June 30, 2025 (%) | June 30, 2024 (%) | | :---------------------------------- | :---------------- | :---------------- | | Three Months Ended | 24.7% | 25.3% | | Six Months Ended | 25.0% | 24.6% | - Effective income tax rates were higher than the U.S. federal income tax rate of 21% primarily due to the impact of state income taxes[62] Note 9. Share-Based Compensation This note details the components of share-based compensation expense and activity of share-based awards Share-Based Compensation Expense (in thousands) | Component | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :---------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Stock Options | $795 | $1,292 | $2,314 | $2,638 | | Restricted Stock | $3,003 | $3,236 | $6,330 | $6,713 | | Performance Vested Restricted Stock Units | $7,155 | $4,749 | $12,724 | $9,020 | | Total | $10,953 | $9,277 | $21,368 | $18,371 | Share-Based Award Activity (Six Months Ended June 30, 2025) | Metric | Stock Options Outstanding (shares) | Restricted Stock Shares (shares) | PVRSUs Shares (shares) | | :---------------------------------- | :------------------------------- | :----------------------------- | :--------------------- | | Outstanding as of January 1, 2025 | 771,641 | 355,405 | 467,521 | | Granted | — | 49,363 | 147,586 | | Exercised/Vested | (57,025) | (57,916) | (116,107) | | Outstanding as of June 30, 2025 | 701,153 | 340,621 | 504,817 | Note 10. Earnings Per Share This note explains the computation of basic and diluted earnings per share using the two-class method Earnings Per Share (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :---------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net Income Available to Common Shareholders | $81,342 | $86,699 | $125,653 | $117,548 | | Weighted Average Shares Outstanding – Basic | 46,141 | 47,741 | 46,316 | 48,522 | | Basic Earnings Per Share | $1.76 | $1.82 | $2.71 | $2.42 | | Weighted Average Shares Outstanding – Diluted | 46,588 | 48,038 | 46,854 | 48,839 | | Diluted Earnings Per Share | $1.75 | $1.80 | $2.68 | $2.41 | Anti-Dilutive Securities Excluded (in thousands) | Security Type | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :---------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Stock Options | 128 | 248 | 128 | 231 | | PVRSUs | — | 49 | — | 49 | Note 11. Reportable Segments This note describes the Company's two reportable segments and provides their financial performance - The Hotel Franchising & Management segment includes hotel franchising operations (22 brands) and management of 13 hotels (including 4 owned)[67] - The Corporate & Other segment includes the operations of the Company's owned hotels[68] Segment Operating Income (in thousands) | Segment | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :---------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Hotel Franchising & Management | $157,866 | $165,243 | $261,251 | $260,091 | | Corporate & Other | $(33,269) | $(32,621) | $(56,722) | $(67,320) | | Consolidated Operating Income | $124,597 | $132,622 | $204,529 | $192,771 | Note 12. Commitments and Contingencies This note outlines the Company's various commitments and contingencies, including limited payment guaranties and financing commitments - As of June 30, 2025, the maximum unrecorded exposure for limited payment guaranties related to VIEs was $47.4 million, plus unpaid expenses and accrued interest[74] - The Company has a guarantee for a long-term management arrangement (acquired with Radisson Hotels Americas) to fund shortfalls in owner's priority, with a maximum unrecorded exposure of $20.0 million as of June 30, 2025[76] - The Company had remaining commitments of up to $4.3 million to provide financing to franchisees for brand development efforts as of June 30, 2025[76] Note 13. Subsequent Events This note discloses significant events occurring after the reporting period, including acquisitions and joint ventures - On July 2, 2025, the Company acquired the remaining 50% of Choice Hotels Canada for approximately $112.0 million, funded by available cash and borrowings, expanding its brand offerings in Canada[77] - On July 10, 2025, the Company entered into a joint venture to develop Everhome Suites, contributing $71.6 million in cash for an equity ownership interest[78] - In connection with the Everhome Suites joint venture, the Company provided a limited payment guarantee for a loan facility, with a maximum unrecorded exposure of $11.5 million as of the loan facility date[79] - The Company sold four wholly-owned Everhome Suites hotels under construction to the Joint Venture for an aggregate sale price of $52.0 million[79] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on the Company's financial condition, operational results, liquidity, and capital resources, along with critical accounting estimates and forward-looking statements Overview This section provides an overview of the Company's business as a hotel franchisor and its strategic priorities for growth and shareholder value - Choice Hotels International is primarily a hotel franchisor with 7,481 hotels and 644,400 rooms open globally as of June 30, 2025[81] - The Company's strategic priorities include profitable growth (improving hotel performance, increasing system size, enhancing royalty rates, expanding vendor platforms, and disciplined cost structure) and maximizing financial returns for shareholders (acquisitions, share repurchases, and dividends)[88][89] - The Company strategically develops and owns hotels, particularly Cambria Hotels and Everhome Suites, to increase brand presence and drive growth, with an intent to dispose of them to franchisees in the future[90] - Reimbursable expenses from franchised and managed properties exceeded revenue for reimbursable costs by $9.0 million for the three months and $29.4 million for the six months ended June 30, 2025[96] Operations Review This section reviews the Company's operating results for the three and six months ended June 30, 2025 and 2024 Comparison of the Operating Results for the Three Months Ended June 30, 2025 and 2024 This section compares the Company's operating results for the three months ended June 30, 2025, and 2024, highlighting key financial changes - Income before income taxes decreased by $8.0 million to $108.6 million for the three months ended June 30, 2025, compared to $116.6 million in the prior year[102] - Operating income decreased by $8.0 million, mainly due to a $5.9 million increase in net reimbursable deficit and a $2.7 million decrease in franchise and management fees[103] Domestic System-Wide RevPAR Performance (Three Months Ended June 30) | Metric | 2025 ($) | 2024 ($) | Change | | :---------------------------------- | :------- | :------- | :----- | | Average Daily Rate | $97.65 | $99.40 | (1.8)% | | Occupancy | 59.6% | 60.3% | (70) bps | | RevPAR | $58.22 | $59.95 | (2.9)% | | Effective Royalty Rate | 5.12% | 5.04% | 8 bps | - Equity in net loss (gain) of affiliates decreased $8.0 million, primarily due to a $7.2 million gain recognized in Q2 2024 from an unconsolidated affiliate's asset sale[108] Comparison of the Operating Results for the Six Months Ended June 30, 2025 and 2024 This section compares the Company's operating results for the six months ended June 30, 2025, and 2024, focusing on key financial drivers - Income before income taxes increased by $11.6 million to $168.4 million for the six months ended June 30, 2025, compared to $156.8 million in the prior year[111] - Operating income increased by $11.8 million, primarily due to a $5.2 million increase in partnership services and fees and a $16.3 million decrease in business combination, diligence and transition costs (due to the termination of the Wyndham acquisition pursuit)[112][120] Domestic System-Wide RevPAR Performance (Six Months Ended June 30) | Metric | 2025 ($) | 2024 ($) | Change | | :---------------------------------- | :------- | :------- | :----- | | Average Daily Rate | $94.48 | $94.79 | (0.3)% | | Occupancy | 55.3% | 55.5% | (20) bps | | RevPAR | $52.25 | $52.61 | (0.7)% | | Effective Royalty Rate | 5.11% | 5.04% | 7 bps | - Other (gain) loss increased $8.8 million, primarily due to an $8.4 million unrealized loss on equity securities recognized in the prior year[121] Liquidity and Capital Resources This section discusses the Company's liquidity sources, capital allocation strategies, and cash flow activities - As of June 30, 2025, primary liquidity sources included $587.5 million in cash and cash equivalents and available borrowing capacity under the senior unsecured revolving credit facility[125] - The Company had approximately $667.5 million in financial support for Cambria Hotels and Everhome Suites brands reflected on the balance sheet as of June 30, 2025, with outstanding investments not expected to exceed $1.2 billion[126] - The projected 2025 annual dividend rate is $1.15 per share, totaling approximately $53.5 million in aggregate dividend payments[128] Cash Flows from Operating Activities This section analyzes net cash provided by operating activities and its primary drivers for the six months ended June 30, 2025 Net Cash Provided by Operating Activities (in millions) | Period | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | | :---------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net Cash Provided by Operating Activities | $116.1 | $113.6 | - Operating cash flows increased by $2.5 million, primarily due to a decrease in business combination, diligence and transition costs and lower franchise agreement acquisition cost payments[129] Net Franchise Agreement Acquisition Costs (in millions) | Period | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | | :---------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net Franchise Agreement Acquisition Costs | $41.5 | $52.0 | Cash Flows from Investing Activities This section details net cash used in investing activities, including investments in hotel properties and affiliates Net Cash Used in Investing Activities (in millions) | Period | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | | :---------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net Cash Used in Investing Activities | $(95.1) | $(62.0) | Key Investing Activities (in millions) | Activity | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | | :---------------------------------- | :------------------------------------------- | :------------------------------------------- | | Investments in Owned Hotel Properties | $65.7 | $50.9 | | Investments in Other Property and Equipment | $18.3 | $22.7 | | Contributions to Investments in Affiliates | $9.4 | $19.5 | | Issuances of Notes Receivable | $3.4 | $1.5 | | Collections of Notes Receivable | $2.8 | $1.7 | Cash Flows from Financing Activities This section outlines cash flows from financing activities, primarily related to debt, treasury stock, and dividends Net Cash Used in Financing Activities (in millions) | Period | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | | :---------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net Cash Used in Financing Activities | $(3.2) | $(18.6) | Debt This section provides details on the Company's debt instruments, including revolving credit facilities and senior unsecured notes - The Senior Unsecured Revolving Credit Facility was increased to $1 billion and extended to June 28, 2029, with an effective interest rate of 5.72% as of June 30, 2025[137][140][143] - The Company issued $600 million in 2024 Senior Unsecured Notes due 2034 with a 5.85% coupon and 6.11% effective rate, using proceeds to repay the 2023 Term Loan[147][150] - As of June 30, 2025, the Company maintained a total leverage ratio of 2.91x and was in compliance with all financial covenants under its credit agreements[143] Dividends This section reports on cash dividends paid and the projected annual dividend rate - Cash dividends paid during the six months ended June 30, 2025, totaled $26.9 million[154] - The projected 2025 annual dividend rate is $1.15 per share, amounting to approximately $53.5 million in aggregate payments[154] Share Repurchases & Redemptions This section details common stock repurchases under the program and redemptions from employees - The Company repurchased 0.7 million shares of common stock for $100.4 million under its share repurchase program during the six months ended June 30, 2025[156] - As of June 30, 2025, 3.0 million shares remained under the current share repurchase authorization[156] - The Company redeemed 0.1 million shares of common stock from employees for $9.6 million to satisfy option exercise prices and tax-withholding requirements, outside the share repurchase program[157] Critical Accounting Estimates This section confirms no material changes to critical accounting estimates previously disclosed - There were no material changes to the critical accounting estimates previously disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2024, during the six months ended June 30, 2025[158] New Accounting Standards This section refers to Note 1 for information regarding the evaluation of new accounting standards - Refer to Note 1 for information related to the evaluation of new accounting standards (ASU 2023-09 and ASU 2024-03)[159] FORWARD-LOOKING STATEMENTS This section highlights the presence of forward-looking statements and associated risks and uncertainties - The report contains forward-looking statements regarding future events, financial and operational measures, and liquidity, which are subject to known and unknown risks and uncertainties[160] - Key risk factors include changes in economic conditions, consumer demand, regulatory environment, foreign currency fluctuations, asset impairments, operating risks, technology advancements, and the ability to manage indebtedness[161] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section discusses the Company's exposure to market risks from interest rate and foreign currency fluctuations - The Company is exposed to market risk from changes in interest rates and foreign currency fluctuations[162] - As of June 30, 2025, the Company had $470.0 million of variable interest rate debt outstanding at an effective interest rate of 5.72% A 10% hypothetical change in this rate would impact annual interest expense by $2.7 million[163] - The Company does not currently have any material derivative financial instruments[164] ITEM 4. CONTROLS AND PROCEDURES This section confirms the effectiveness of disclosure controls and procedures and the absence of material changes in internal control over financial reporting - The Company's disclosure controls and procedures were evaluated and deemed effective as of June 30, 2025[167] - No material changes occurred in the Company's internal control over financial reporting during the period ended June 30, 2025[168] PART II. OTHER INFORMATION This section provides disclosures on legal proceedings, risk factors, equity security transactions, and other miscellaneous information ITEM 1. LEGAL PROCEEDINGS This section states that the Company is not involved in any material litigation outside the ordinary course of business - The Company is not a party to any material litigation other than in the ordinary course of business[170] - Management does not expect current legal proceedings to have a material adverse effect on financial position, results of operations, or cash flows[170] ITEM 1A. RISK FACTORS This section confirms no material changes to previously disclosed risk factors - No material changes to risk factors were disclosed in this quarterly report compared to the Annual Report on Form 10-K for the fiscal year ended December 31, 2024[171] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS This section details the Company's purchases and redemptions of common stock during the period Issuer Purchases of Equity Securities (Six Months Ended June 30, 2025) | Period | Total Shares Purchased or Redeemed (shares) | Average Price Paid per Share ($/share) | Total Shares Purchased as Part of Publicly Announced Plans or Programs (shares) | Maximum Shares Remaining Under Plans or Programs (shares) | | :---------------------------------- | :------------------------------------------ | :------------------------------------- | :-------------------------------------------------------------- | :-------------------------------------------------------- | | January 1, 2025 through June 30, 2025 | 811,418 | $135.49 | 742,607 | 3,034,520 | - During the six months ended June 30, 2025, 68,811 shares were redeemed from employees to satisfy option prices and minimum tax-withholding requirements, which were not part of the share repurchase program[173] ITEM 3. DEFAULTS UPON SENIOR SECURITIES This section reports no defaults upon senior securities during the period - There were no defaults upon senior securities[174] ITEM 4. MINE SAFETY DISCLOSURES This section states that the Company has no mine safety disclosures to report - There are no mine safety disclosures[175] ITEM 5. OTHER INFORMATION This section confirms no directors or officers adopted or terminated Rule 10b5-1 trading arrangements - No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarterly period[176] ITEM 6. EXHIBITS This section lists all exhibits filed with the Form 10-Q - Exhibits include the Restated Certificate of Incorporation, Amendments, Second Amended and Restated Bylaws, 2025 Long-Term Incentive Plan, CEO/CFO Certifications, and Inline XBRL documents[177] SIGNATURES This section contains the signatures of the Company's principal executive and financial officers - The report was signed by Patrick S. Pacious, President & Chief Executive Officer, and Scott E. Oaksmith, Chief Financial Officer, on August 6, 2025[180][181]