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SEC Comment Letter for CHOICE HOTELS INTERNATIONAL (CHH) — Sep 25, 2007

CHOICE HOTELS INTERNATIONAL INC /DE (CHH) (CIK 0001046311)
Date: Sept. 25, 2007 · CIK: 0001046311 · Accession: 0000000000-07-046743

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File numbers found in text: 001-13393

Date
August 21, 2007
Author
Jennifer Gowetski
Form
UPLOAD
Company
CHOICE HOTELS INTERNATIONAL INC /DE (CHH) (CIK 0001046311)

Letter

August 21, 2007 Mail Stop 4561 By U.S. Mail and facsimile to (301) 592-6157

Charles A. Ledsinger, Jr. Vice Chairman and Chief Executive Officer Choice Hotels International, Inc. 10750 Columbia Pike Silver Spring, Maryland 20901 Re: Choice Hotels International, Inc. Definitive 14A Filed March 30, 2007 File No. 001-13393 Dear Mr. Ledsinger: We have limited our review of your definitive proxy statement to your executive compensation and other related disclosure a nd have the following comments. Our review of your filing is part of the Division’s focused review of executive compensation disclosure. Please understand that the purpose of our re view process is to assist you in your compliance with the applicable disclosure requirements and to enhance the overall disclosure in your filings. We look forward to working with you in these respects. We welcome any questions you may have about our comments or any other aspect of our review. Feel free to call me at the telephone number listed at the e nd of this letter. In some comments we have asked you to provide us with additional information so we may better understand your disclosure. Pl ease do so within the time frame set forth below. You should comply with the remain ing comments in all future filings, as applicable. Please confirm in writing that you will do so and also explain to us how you intend to comply. Please unders tand that after ou r review of all of your responses, we may raise additional comments. If you disagree with any of these commen ts, we will consider your explanation as to why our comment is inapplicable or a revisi on is unnecessary. Please be as detailed as necessary in your explanation.

Charles A. Ledsinger, Jr. Choice Hotels International, Inc. August 21, 2007 Page 2 Compensation Discussion and Analysis, page 14

1. Throughout your Compensati on Discussion and Analysis, and as to each compensation element, please provide an an alysis of how you a rrived at and why you paid each of the particular levels and forms of compensation for 2006. For example, you state on page 16 that the company’s salary pay practice is to target compensation at the competitive median (50 th percentile) of the market; however, actual individual executive officer’s salaries may differ substantially due to indi vidual differences in experience, performance and the relative diffe rences between roles within and outside the organization. You should provide a comp lete analysis of th e specific factors considered by the committee in determining the amounts paid for salary and the other specified elements as well as how that compar ed to the target median values or other benchmarks considered. Role of Management, page 14

2. You state on page 14 that management may prepare and distribute to committee members agenda, meeting documents and co mpany data as well as present specific compensation proposals to the committee. Please expand your disclosure to identify the individual members of management a nd briefly describe the role of each individual.

Benchmarking and Pay Positioning, page 15

3. We note that total compensation is targeted to approximate the median compensation of the competitive market data, on a size-adju sted basis, derived from a consensus of surveys conducted by nationa lly recognized compensation consulting firms and the median compensation of the Comparison Group. Please expand your disclosure to discuss the role of the competitive market data in benchmarking compensation and identify the component companies of the su rvey data, as applicable. In addition, please expand your disclosure to discuss with greater specificity the targets for the individual elements of compensation. If compensation for any named executive officer is not at the target levels, please disclose and discuss why. Refer to Item 402(b)(2)(xiv) of Regulation S-K.

Annual Incentives, page 16

4. We note your description of how EPS aff ects annual bonuses; howev er, there appears to be minimal analysis of the effect individual performance has on compensation awards. We further note that the EPS-adju sted award for executive officers other than the Vice Chairman and CEO is adjusted based on the degree of achievement of individual performance objectives and thes e performance objectives are based in part upon a qualitative evaluation of performance but could also include licensee/customer satisfaction and RevPAR improvement in addition to other relevant measures.

Charles A. Ledsinger, Jr. Choice Hotels International, Inc. August 21, 2007 Page 3 Clearly disclose all individual performa nce objectives for each named executive officer. Please expand your disclosure to provide additional deta il and analysis of how individual performance contributed to actual 2006 compensation for the named executive officers. For example, disc lose and discuss in greater detail the achievement or lack of achievement of a ny performance objectives based in part upon a qualitative evaluation of performance or licensee/customer satisfaction and RevPAR improvement or any other measures . See Item 402(b)(2)(vii) of Regulation S-K. 5. We note the target bonuses for 2007 on page 16. Please clarify whether these target bonuses were the same for 2006. 6. We note that, for the purposes of the a nnual incentive, EPS is adjusted at the discretion of the committee for certain non -recurring items. Please expand your disclosure to describe the extent of th e committee’s discretion in adjusting any incentive award goals, including the EPS goal. In addition, please describe and quantify the non-recurr ing items that resulted in the adjustment to EPS. Long-Term Incentives, page 17

7. With respect to your long-term incentive awar ds, we note the number of PVRSUs that vest range from 0% to 200% of the initial grant and is determined three or four years from the date of grant based upon the actual three or four year cumulative EPS compared to the performance target. Please revise to include the performance targets for 2006 and 2007, including threshold, target and maximum levels, as appropriate. Alternatively, provide on a supplemental basis a detailed explanation of why you believe that disclosure of such targets is not required because it would result in competitive harm such that the targets coul d be excluded under Instruction 4 to Item 402(b). You state on page 18 that EPS target s are set at levels intended to motivate high business performance and that these ta rgets are designed to be challenging to attain. To the extent that that it is appropriate to omit specific goals, provide additional discussion and analysis regarding how difficult it will be for the executives or how likely it will be for the registrant to achieve the target goals. Please see Instruction 4 to Item 402(b) of Regulation S-K. 8. You state on page 18 that, in 2006, you grante d Mr. White restricted stock pursuant to the company’s long-term incentive plan. Pl ease expand your disc losure to quantify the amount of restricted stoc k granted, describe any conditi ons to vesting and discuss why Mr. White was granted restricted stock.

Perquisites and Related Personal Benefits, page 19

9. We note your reference to the Flexible Perquisite Program. Please expand your disclosure to describe this program, qua ntify the amount available for each named

Charles A. Ledsinger, Jr. Choice Hotels International, Inc. August 21, 2007 Page 4 executive officer under this program and de scribe all covered expenses under the program.

Potential Payments upon Termination or Change in Control, page 28

10. We note the various severance and post-ter mination arrangements you have with the named executive officers and various scenarios described. In the Compensation Discussion and Analysis, please discuss how these arrangements fit into your overall compensation objectives and affect th e decisions you made regarding other compensation elements and the rationale for decisions made in connection with these arrangements. Also, provide analysis e xplaining why you structured the terms and payout levels of these arrangements as you have. Refer to Items 402(j) and 402(b)(1)(iv) of Regulation S-K. 11. We note your disclosure on page 14 that Mr. Squeri and Mr. Wielgus are named executive officers for fiscal year 2006 and that their employment will terminate in 2007. Please expand your disclosure to discuss the terms of any agreements, including any specific paymen ts to be paid, with Mr. Squeri and Mr. Wielgus in connection with their term ination in 2007. Certain Relationships and Re lated Transactions, page 38

12. We note that the company’s Amended and Restated Basic Policies of the Board of Directors require board appr oval of any material transa ctions between the company and its directors, officers, stockholders, em ployees or agents and affiliates. Please expand your disclosure to provide additiona l information describing your policies and procedures, including any st andards to be applied pursuant to the Amended and Restated Basic Policies. Refer to Item 404(b)(1) of Regulation S-K. Please respond to our comments by September 21, 2007, or tell us by that time when you will provide us with a response.

We urge all persons who are responsible for the accuracy and adequacy of the disclosure in the filing to be certain that the filing includes all in formation required under the Securities Exchange Act of 1934 and th at they have provided all information investors require for an informed invest ment decision. Since the company and its management are in possession of all facts re lating to a company’s disclosure, they are responsible for the accuracy and adequacy of the disclosures they have made. When you respond to our comments, please provide, in writing, a statement from the company acknowledging that:

• the company is responsible for the adequacy and accuracy of the disclosure in the filing;

Charles A. Ledsinger, Jr. Choice Hotels International, Inc. August 21, 2007 Page 5

• staff comments or changes to disclo sure in response to comments do not foreclose the Commission from taking a ny action with respect to the filing; and • the company may not assert staff comme nts as a defense in any proceeding initiated by the Commission or any pers on under the federal s ecurities laws of the United States.

In addition, please be advise d that the Division of Enfo rcement has access to all information you provide to the staff of the Di vision of Corporation Finance in connection with our review of your filing or in response to comments.

Please contact me at (202) 551-3401 with any questions.

Sincerely, Jennifer Gowetski Attorney-Advisor

Show Raw Text
August 21, 2007
 Mail Stop 4561
By U.S. Mail and facsimile to (301) 592-6157

Charles A. Ledsinger, Jr. Vice Chairman and Chief Executive Officer Choice Hotels International, Inc. 10750 Columbia Pike Silver Spring, Maryland  20901
Re:  Choice Hotels International, Inc.  Definitive 14A   Filed March 30, 2007
File No. 001-13393
 Dear Mr. Ledsinger:
We have limited our review of your definitive proxy statement to your executive
compensation and other related disclosure a nd have the following comments.  Our review
of your filing is part of the Division’s focused review of executive compensation disclosure.
Please understand that the purpose of our re view process is to assist you in your
compliance with the applicable disclosure requirements and to enhance the overall disclosure in your filings.  We look forward to working with you in these respects.  We
welcome any questions you may have about our comments or any other aspect of our review.  Feel free to call me at the telephone number listed at the e nd of this letter.
  In some comments we have asked you to provide us with additional information so we may better understand your disclosure.  Pl ease do so within the time frame set forth
below.  You should comply with the remain ing comments in all future filings, as
applicable.  Please confirm in writing that you will do so and also explain to us how you
intend to comply.  Please unders tand that after ou r review of all of your responses, we
may raise additional comments.     If you disagree with any of these commen ts, we will consider your explanation as
to why our comment is inapplicable or a revisi on is unnecessary.  Please be as detailed as
necessary in your explanation.

Charles A. Ledsinger, Jr.
Choice Hotels International, Inc.
August 21, 2007 Page 2  Compensation Discussion and Analysis, page 14

 1. Throughout your Compensati on Discussion and Analysis, and as to each
compensation element, please provide an an alysis of how you a rrived at and why you
paid each of the particular levels and forms of compensation for 2006.  For example, you state on page 16 that the company’s salary  pay practice is to target compensation
at the competitive median (50
th percentile) of the market; however, actual individual
executive officer’s salaries may differ substantially due to indi vidual differences in
experience, performance and the relative diffe rences between roles within and outside
the organization.  You should provide a comp lete analysis of th e specific factors
considered by the committee in determining the amounts paid for salary and the other
specified elements as well as how that compar ed to the target median values or other
benchmarks considered.
 Role of Management, page 14

2. You state on page 14 that management may prepare and distribute to committee
members agenda, meeting documents and co mpany data as well as present specific
compensation proposals to the committee.  Please expand your disclosure to identify
the individual members of management a nd briefly describe the role of each
individual.

Benchmarking and Pay Positioning, page 15

3. We note that total compensation is targeted  to approximate the median compensation
of the competitive market data, on a size-adju sted basis, derived from a consensus of
surveys conducted by nationa lly recognized compensation consulting firms and the
median compensation of the Comparison Group.  Please expand your disclosure to
discuss the role of the competitive market data in benchmarking compensation and identify the component companies of the su rvey data, as applicable.  In addition,
please expand your disclosure to discuss with  greater specificity the targets for the
individual elements of compensation.  If compensation for any named executive officer is not at the target levels, please disclose and discuss why.  Refer to Item
402(b)(2)(xiv) of Regulation S-K.

Annual Incentives, page 16

4. We note your description of how EPS aff ects annual bonuses; howev er, there appears
to be minimal analysis of the effect individual performance has on compensation
awards.  We further note that the EPS-adju sted award for executive officers other
than the Vice Chairman and CEO is adjusted based on the degree of achievement of
individual performance objectives and thes e performance objectives are based in part
upon a qualitative evaluation of performance but could also include licensee/customer
satisfaction and RevPAR improvement in addition to other relevant measures.

Charles A. Ledsinger, Jr.
Choice Hotels International, Inc.
August 21, 2007 Page 3
Clearly disclose all individual performa nce objectives for each named executive
officer.  Please expand your disclosure to provide additional deta il and analysis of
how individual performance contributed to actual 2006 compensation for the named executive officers.  For example, disc lose and discuss in greater detail the
achievement or lack of achievement of a ny performance objectives based in part upon
a qualitative evaluation of  performance or licensee/customer satisfaction and
RevPAR improvement or any other measures .  See Item 402(b)(2)(vii) of Regulation
S-K.
5. We note the target bonuses for 2007 on page 16.  Please clarify whether these target
bonuses were the same for 2006.
 6. We note that, for the purposes of the a nnual incentive, EPS is  adjusted at the
discretion of the committee for certain non -recurring items.  Please expand your
disclosure to describe the extent of th e committee’s discretion in adjusting any
incentive award goals, including the EPS goal.  In addition, please describe and quantify the non-recurr ing items that resulted in the adjustment to EPS.
 Long-Term Incentives, page 17

 7. With respect to your long-term incentive awar ds, we note the number of PVRSUs that
vest range from 0% to 200% of the initial grant and is determined three or four years
from the date of grant based upon the actual three or four year cumulative EPS
compared to the performance target.  Please revise to include the performance targets
for 2006 and 2007, including threshold, target and maximum levels, as appropriate.
Alternatively, provide on a supplemental basis a detailed explanation of why you
believe that disclosure of such targets is not required because it would result in
competitive harm such that the targets coul d be excluded under Instruction 4 to Item
402(b).  You state on page 18 that EPS target s are set at levels intended to motivate
high business performance and that these ta rgets are designed to be challenging to
attain.  To the extent that that it is appropriate to omit specific goals, provide
additional discussion and analysis regarding how difficult it will be for the executives or how likely it will be for the registrant to achieve the target goals.  Please see
Instruction 4 to Item 402(b) of Regulation S-K.
 8. You state on page 18 that, in 2006, you grante d Mr. White restricted stock pursuant to
the company’s long-term incentive plan.  Pl ease expand your disc losure to quantify
the amount of restricted stoc k granted, describe any conditi ons to vesting and discuss
why Mr. White was granted restricted stock.

Perquisites and Related Personal Benefits, page 19

9. We note your reference to the Flexible Perquisite Program.  Please expand your
disclosure to describe this program, qua ntify the amount available for each named

Charles A. Ledsinger, Jr.
Choice Hotels International, Inc.
August 21, 2007 Page 4
executive officer under this program and de scribe all covered expenses under the
program.

Potential Payments upon Termination or Change in Control, page 28

10. We note the various severance and post-ter mination arrangements you have with the
named executive officers and various scenarios described.  In the Compensation Discussion and Analysis, please discuss how these arrangements fit into your overall
compensation objectives and affect th e decisions you made regarding other
compensation elements and the rationale for decisions made in connection with these
arrangements.  Also, provide analysis e xplaining why you structured the terms and
payout levels of these arrangements as you have.  Refer to Items 402(j) and 402(b)(1)(iv) of Regulation S-K.
 11. We note your disclosure on page 14 that Mr. Squeri and Mr. Wielgus are named
executive officers for fiscal year 2006 and that their employment will terminate in
2007.  Please expand your disclosure to discuss the terms of any agreements,
including any specific paymen ts to be paid, with Mr. Squeri and Mr. Wielgus in
connection with their term ination in 2007.
 Certain Relationships and Re lated Transactions, page 38

 12. We note that the company’s Amended and Restated Basic Policies of the Board of
Directors require board appr oval of any material transa ctions between the company
and its directors, officers, stockholders, em ployees or agents and affiliates.  Please
expand your disclosure to provide additiona l information describing your policies and
procedures, including any st andards to be applied pursuant to the Amended and
Restated Basic Policies.  Refer to Item 404(b)(1) of Regulation S-K.
  Please respond to our comments by September 21, 2007, or tell us by that time when you will provide us with a response.

We urge all persons who are responsible for the accuracy and adequacy of the
disclosure in the filing to be certain that the filing includes all in formation required under
the Securities Exchange Act of 1934 and th at they have provided all information
investors require for an informed invest ment decision.  Since the company and its
management are in possession of all facts re lating to a company’s disclosure, they are
responsible for the accuracy and adequacy  of the disclosures they have made.
  When you respond to our comments, please provide, in writing, a statement from the company acknowledging that:

• the company is responsible for the adequacy and accuracy of the disclosure in
the filing;

Charles A. Ledsinger, Jr.
Choice Hotels International, Inc. August 21, 2007 Page 5

• staff comments or changes to disclo sure in response to comments do not
foreclose the Commission from taking a ny action with respect to the filing;
and
 • the company may not assert staff comme nts as a defense in any proceeding
initiated by the Commission or any pers on under the federal s ecurities laws of
the United States.

In addition, please be advise d that the Division of Enfo rcement has access to all
information you provide to the staff of the Di vision of Corporation Finance in connection
with our review of your filing or in response to comments.

Please contact me at (202) 551-3401 with any questions.

Sincerely,    Jennifer Gowetski Attorney-Advisor