Exhibit 99.1
For Immediate Release
CHOICE HOTELS REPORTS THIRD QUARTER 2007 ADJUSTED DILUTED EPS OF
$0.58, DOMESTIC UNIT GROWTH OF 5.7%,
COMPANY INCREASES FULL-YEAR 2007 EPS ESTIMATE TO $1.67
SILVER SPRING, Md. (October 24, 2007) – Choice Hotels International, Inc., (NYSE:CHH) today reported the following highlights for the third quarter 2007:
| • | Adjusted diluted earnings per share (“EPS”) for the third quarter increased 16% to $0.58, compared to adjusted diluted EPS of $0.50 for the third quarter 2006. Adjusted diluted earnings per share for the three months ended September 30, 2007 and 2006 exclude reductions of income tax expense related to reversal of provisions for certain income tax contingencies of approximately $0.01 and $0.19 per share, respectively. Diluted EPS for third quarter 2007 was $0.59 compared to $0.69 in the same period of the prior year. |
| • | Operating income for third quarter 2007 increased 14% to $62.4 million compared to $54.6 million for third quarter 2006. |
| • | Earnings before interest, taxes and depreciation (“EBITDA”) were $64.6 million for third quarter 2007, an increase of 14% compared to $56.9 million for third quarter 2006. |
| • | Domestic units increased 5.7 percent from September 30, 2006. |
| • | Domestic system-wide revenue per available room (RevPAR) increased 5.6% for the third quarter of 2007 compared to the same period of the prior year. Domestic RevPAR for the company’s mid-scale without food and beverage brands (Comfort Inn, Comfort Suites and Sleep Inn), which represent approximately half of the company’s domestic rooms online, increased 6.1% for the third quarter of 2007, with average daily rate increasing 5.4% for those brands. |
| • | Executed 182 new domestic hotel franchise contracts during the third quarter of 2007 compared to 178 for third quarter 2006. New construction contracts comprised 46% of executed agreements, as compared to 31% in the prior year’s third quarter. Overall, year-to-date, new domestic hotel franchise contracts executed increased 4% to 469 compared to 453 in the same period of the prior year. |
| • | The number of domestic hotels under construction, awaiting conversion or approved for development increased 18% to 872 hotels representing 68,853 rooms; the worldwide pipeline also increased 18% to 954 hotels representing 76,823 rooms. |
| • | The company opened its second and third Cambria Suites hotels — in Appleton, Wisconsin and Green Bay, Wisconsin. The fourth Cambria Suites hotel, in Minneapolis, Minnesota, is projected to open in the fourth quarter. |
| • | Franchising revenues and total revenues increased 15% and 17%, respectively for third quarter 2007 compared to the same period of the prior year. Year-to-date franchising revenues and total revenues have increased 11% and 12%, respectively, compared to the same period of 2006. |
| • | Franchising margins for the third quarter of 2007 were 70.2% compared to 70.5% for the same period of 2006. Year to date franchising margins were 62.9% compared to 64.9% for the same period of 2006. Franchising margins for the nine months ended September 30, 2007 reflect the impact of $3.7 million of termination benefits for certain executive officers in the first quarter of 2007. Franchising margins for the third quarter 2007 and year-to-date period ended September 30, 2007 also reflect the commencement of direct franchising operations in continental Europe. |
| • | The company purchased approximately 2.9 million shares of its common stock at an average price of $37.45 for a total cost of $109.2 million under its share repurchase program during the third quarter 2007. Year-to-date through October 24, 2007, the company purchased approximately 4.1 million shares of its common stock at an average price of $37.72 for a total cost of $155.2 million under its share repurchase program. |
| • | The Company increased its 2007 diluted EPS estimate from $1.62 to $1.67. |
“The fundamental strength of our operating model remains strong, as we continue to add more hotels to our distribution system while returning value to our shareholders through share repurchases and dividends,” said Charles A. Ledsinger, Jr., vice chairman and chief executive officer. “By offering hotel owners a well-segmented mix of brands suitable for new construction and conversion development opportunities, we have been able to successfully grow our system size and market share in the lodging segments in which we operate.”
Items Affecting Comparability
Fourth Quarter 2006 Acquisition of Continental Europe Franchising Operations
During the fourth quarter of 2006, the company terminated the master franchising agreement covering continental Europe and acquired the direct franchising operations in this region from the former master franchisor. As a result of the acquisition, franchising revenues and selling, general and administrative costs for the three months ended September 30, 2007 increased approximately $1.0 million and $0.9 million, respectively, compared to third quarter 2006. Franchising revenues and selling, general and administrative costs for the nine months ended September 30, 2007 increased approximately $2.8 million and $2.6 million, respectively, compared to the same period in 2006.
Outlook for 2007
The company’s fourth quarter 2007 diluted EPS is expected to be $0.41. The company expects full year 2007 diluted EPS of $1.67. Earnings before interest, taxes, depreciation and amortization (“EBITDA”) for full-year 2007 are expected to be approximately $189 million. These estimates include the following assumptions.
| • | The company expects net domestic unit growth of approximately 5% in 2007; |
| • | RevPAR is expected to increase approximately 4% for fourth quarter 2007 and approximately 4% for full-year 2007; |
| • | The effective royalty rate is expected to increase 4 basis points for full-year 2007; |
| • | All figures assume the existing share count and an effective tax rate of 36.0% for fourth quarter 2007 and 36.1 % for full year 2007; |
| • | All figures assume approximately $3.7 million ($0.03 diluted EPS) of termination benefits expense resulting from the previously announced separations of certain executive officers. |
Use of Free Cash Flow
The company has consistently used its free cash flow (cash flow from operations less capital expenditures) generated from its operations to return value to shareholders, primarily through share repurchases and dividends.
The annual dividend rate per common share was increased 13 percent by the Board of Directors in September and is now $0.68. For the three and nine months ended September 30, 2007, the company paid $9.8 million and $29.5 million, respectively, of cash dividends to shareholders.
During the quarter, the company’s Board of Directors authorized an increase under the company’s existing stock repurchase program to acquire up to an additional three million shares of its outstanding common stock. For the three months ended September 30, 2007, the company purchased approximately 2.9 million shares of its common stock at an average price of $37.45 for a total cost of $109.2 million under its share repurchase program. For the nine months ended September 30, 2007, the company purchased approximately 4.1 million shares of its common stock at an average price of $37.72 for a total cost of $155.2 million. At September 30, 2007, the company had authorization to purchase up to an additional 4.0 million shares under the share repurchase program. Repurchases will continue to be made in the open market and through privately negotiated transactions subject to market and other conditions. No minimum number of shares has been fixed. Since Choice announced its stock repurchase program on June 25, 1998, the company has repurchased 37.8 million shares of its common stock for a total cost of $867.1 million through September 30, 2007. Considering the effect of a two-for-one stock split in October 2005, the company has repurchased 70.8 million shares under the share repurchase program at an average price of $12.26 per share.
The company expects to continue to return value to its shareholders through a combination of share repurchases and dividends, subject to market and other conditions.
Conference Call
Choice will conduct a conference call on Thursday October 25, 2007 at 9:30 a.m. EDT to discuss the company’s third quarter results. The call-in number to listen to the call is 1-866-269-9613. International callers should dial 612-234-9960. The conference call also will be Web cast simultaneously via the company’s Web site, www.choicehotels.com. Interested investors and other parties wishing to access the call on the Web should go to the Web site and click on the Investor Info link. The Investor Information page will feature a conference call microphone icon to access the call.
The audio of the call will be archived and available on www.choicehotels.com beginning at 1:00 p.m. EDT on October 25 and will be available through November 25 by calling 1-800-475-6701, access code 888352. International callers should dial 320-365-3844 and enter access code 888352.
About Choice Hotels
Choice Hotels International franchises more than 5,500 hotels, representing more than 450,000 rooms, in the United States and 37 countries and territories. As of September 30, 2007, 872 hotels are under development in the United States, representing 68,853 rooms, and an additional 82 hotels, representing 7,970 rooms, are under development in more than 20 countries and territories. The company’s Cambria Suites, Comfort Inn, Comfort Suites, Quality, Clarion, Sleep Inn, Econo Lodge, Rodeway Inn, MainStay Suites and Suburban Extended Stay Hotel brands serve guests worldwide.
Additional corporate information may be found on Choice Hotels’ Internet site, which may be accessed at www.choicehotels.com.
Forward-Looking Statements
Certain matters discussed in this press release constitute forward-looking statements within the meaning of the federal securities law. Generally, our use of words such as “expect,” “estimate,” “believe,” “anticipate,” “will,” “forecast,” “plan,” project,” “assume” or similar words of futurity identify statements that are forward-looking and that we intend to be included within the Safe Harbor protections provided by Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements are based on management’s current beliefs, assumptions and expectations regarding future events, which in turn are based on information currently available to management. Such statements may relate to projections for the company’s revenue, earnings and other financial and operational measures, company debt levels, payment of stock dividends, and future operations. We caution you not to place undue reliance on any forward-looking statements, which are made as of the date of this press release. Forward-looking statements do not guarantee future performance and involve known and unknown risks, uncertainties and other factors.
Several factors could cause actual results, performance or achievements of the company to differ materially from those expressed in or contemplated by the forward-looking statements. Such risks include, but are not limited to, changes to general, domestic and foreign economic conditions; operating risks common in the lodging and franchising industries; changes to the desirability of our brands as viewed by hotel operators and customers; changes to the terms or termination of our contracts with franchisees; our ability to keep pace with improvements in technology utilized for reservations systems and other operating systems; fluctuations in the supply and demand for hotels rooms; and our ability to manage effectively our indebtedness. These and other risk factors are discussed in detail in Risk Factors section of the company’s Form 10-K for the year ended December 31, 2006, filed with the Securities and Exchange Commission on March 1, 2007. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
Statement Concerning Non-GAAP Financial Measurements
Franchising revenues, franchising margins, adjusted diluted EPS and EBITDA are non-GAAP financial measurements. These financial measurements are presented as supplemental disclosures because they are used by management in reviewing and analyzing the company’s performance. This information should not be considered as an alternative to any measure of performance as promulgated under accounting principles generally accepted in the United States (GAAP), such as total revenues, operating margins, diluted EPS and operating income. The company’s calculation of these measurements may be different from the calculation used by other companies and therefore comparability may be limited. The company has included exhibits accompanying this release that reconcile these measures to the comparable GAAP measurement.
Contacts
David White, Chief Financial Officer
(301) 592-5117
David Peikin, Senior Director, Corporate Communications
(301) 592-6361
Cambria Suites, Comfort Inn, Comfort Suites, Quality, Clarion, Sleep Inn, MainStay Suites, Suburban Extended Stay Hotel, Econo Lodge, and Rodeway Inn are proprietary trademarks and service marks of Choice Hotels International, Inc.
©2007 Choice Hotels International, Inc. All rights reserved.
Exhibit 1
Choice Hotels International, Inc.
Consolidated Statements of Income
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||
2007 | 2006 | Variance | 2007 | 2006 | Variance | |||||||||||||||||||||||||
| $ | % | $ | % | |||||||||||||||||||||||||||
(In thousands, except per share amounts) | ||||||||||||||||||||||||||||||
REVENUES: | ||||||||||||||||||||||||||||||
Royalty fees | $ | 73,219 | $ | 64,364 | $ | 8,855 | 14 | % | $ | 175,723 | $ | 157,374 | $ | 18,349 | 12 | % | ||||||||||||||
Initial franchise and relicensing fees | 8,902 | 7,733 | 1,169 | 15 | % | 21,482 | 20,099 | 1,383 | 7 | % | ||||||||||||||||||||
Brand solutions | 3,622 | 3,171 | 451 | 14 | % | 12,603 | 10,853 | 1,750 | 16 | % | ||||||||||||||||||||
Marketing and reservation | 86,795 | 73,001 | 13,794 | 19 | % | 230,646 | 203,719 | 26,927 | 13 | % | ||||||||||||||||||||
Hotel operations | 1,196 | 1,182 | 14 | 1 | % | 3,485 | 3,342 | 143 | 4 | % | ||||||||||||||||||||
Other | 2,675 | 1,545 | 1,130 | 73 | % | 6,362 | 5,567 | 795 | 14 | % | ||||||||||||||||||||
Total revenues | 176,409 | 150,996 | 25,413 | 17 | % | 450,301 | 400,954 | 49,347 | 12 | % | ||||||||||||||||||||
OPERATING EXPENSES: | ||||||||||||||||||||||||||||||
Selling, general and administrative | 24,230 | 20,279 | 3,951 | 19 | % | 73,735 | 60,796 | 12,939 | 21 | % | ||||||||||||||||||||
Depreciation and amortization | 2,158 | 2,344 | (186 | ) | (8 | )% | 6,410 | 7,335 | (925 | ) | (13 | )% | ||||||||||||||||||
Marketing and reservation | 86,795 | 73,001 | 13,794 | 19 | % | 230,646 | 203,719 | 26,927 | 13 | % | ||||||||||||||||||||
Hotel operations | 867 | 820 | 47 | 6 | % | 2,402 | 2,365 | 37 | 2 | % | ||||||||||||||||||||
Total operating expenses | 114,050 | 96,444 | 17,606 | 18 | % | 313,193 | 274,215 | 38,978 | 14 | % | ||||||||||||||||||||
| Operating income | 62,359 | 54,552 | 7,807 | 14 | % | 137,108 | 126,739 | 10,369 | 8 | % | ||||||||||||||||||||
| OTHER INCOME AND EXPENSES: | ||||||||||||||||||||||||||||||
Interest expense | 3,992 | 3,207 | 785 | 24 | % | 10,206 | 11,291 | (1,085 | ) | (10 | )% | |||||||||||||||||||
Interest and other investment income | (534 | ) | (569 | ) | 35 | (6 | )% | (2,856 | ) | (1,099 | ) | (1,757 | ) | 160 | % | |||||||||||||||
Equity in net income of affiliates | (462 | ) | (349 | ) | (113 | ) | 32 | % | (837 | ) | (737 | ) | (100 | ) | 14 | % | ||||||||||||||
Loss on extinguishment of debt | — | — | — | NM | — | 342 | (342 | ) | (100 | )% | ||||||||||||||||||||
Total other income and expenses, net | 2,996 | 2,289 | 707 | 31 | % | 6,513 | 9,797 | (3,284 | ) | (34 | )% | |||||||||||||||||||
| Income before income taxes | 59,363 | 52,263 | 7,100 | 14 | % | 130,595 | 116,942 | 13,653 | 12 | % | ||||||||||||||||||||
| Income taxes | 20,969 | 5,906 | 15,063 | 255 | % | 47,241 | 28,784 | 18,457 | 64 | % | ||||||||||||||||||||
| Net income | $ | 38,394 | $ | 46,357 | $ | (7,963 | ) | (17 | )% | $ | 83,354 | $ | 88,158 | $ | (4,804 | ) | (5 | )% | ||||||||||||
| Weighted average shares outstanding-basic | 63,556 | 65,668 | 64,929 | 65,272 | ||||||||||||||||||||||||||
| Weighted average shares outstanding-diluted | 64,602 | 67,152 | 66,077 | 67,009 | ||||||||||||||||||||||||||
| Basic earnings per share | $ | 0.60 | $ | 0.71 | $ | (0.11 | ) | (15 | )% | $ | 1.28 | $ | 1.35 | $ | (0.07 | ) | (5 | )% | ||||||||||||
| Diluted earnings per share | $ | 0.59 | $ | 0.69 | $ | (0.10 | ) | (14 | )% | $ | 1.26 | $ | 1.32 | $ | (0.06 | ) | (5 | )% | ||||||||||||
Exhibit 2
Choice Hotels International, Inc.
Consolidated Balance Sheets
(In thousands) | September 30, 2007 | December 31, 2006 | ||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
Cash and cash equivalents | $ | 47,354 | $ | 35,841 | ||||
Accounts receivable, net | 54,110 | 41,694 | ||||||
Deferred income taxes | 3,062 | 1,790 | ||||||
Investments, employee benefit plans, at fair value | 3,384 | — | ||||||
Other current assets | 12,046 | 7,757 | ||||||
Total current assets | 119,956 | 87,082 | ||||||
| Fixed assets and intangibles, net | 142,865 | 144,124 | ||||||
Receivable—marketing fees | 87 | 6,662 | ||||||
Investments, employee benefit plans, at fair value | 34,425 | 31,529 | ||||||
Other assets | 40,488 | 33,912 | ||||||
Total assets | $ | 337,821 | $ | 303,309 | ||||
| LIABILITIES AND SHAREHOLDERS' DEFICIT | ||||||||
Current portion of long-term debt | $ | 8,400 | $ | 146 | ||||
Other current liabilities | 142,686 | 139,645 | ||||||
Total current liabilities | 151,086 | 139,791 | ||||||
Long-term debt | 269,962 | 172,390 | ||||||
Deferred compensation & retirement plan obligations | 42,290 | 40,101 | ||||||
Other liabilities | 23,482 | 13,407 | ||||||
Total liabilities | 486,820 | 365,689 | ||||||
Common stock, $0.01 par value | 628 | 664 | ||||||
Additional paid-in-capital | 83,373 | 81,689 | ||||||
Accumulated other comprehensive income (loss) | 830 | (772 | ) | |||||
Treasury stock, at cost | (770,212 | ) | (627,311 | ) | ||||
Retained earnings | 536,382 | 483,350 | ||||||
Total shareholders' deficit | (148,999 | ) | (62,380 | ) | ||||
Total liabilities and shareholders' deficit | $ | 337,821 | $ | 303,309 | ||||
Exhibit 3
Choice Hotels International, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
| Nine Months Ended September 30, | ||||||||
| (In thousands) | 2007 | 2006 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income | $ | 83,354 | $ | 88,158 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 6,410 | 7,335 | ||||||
Provision for bad debts | 133 | 35 | ||||||
Non-cash stock compensation and other charges | 9,164 | 8,250 | ||||||
Non-cash interest and other income | (1,599 | ) | (385 | ) | ||||
Loss on extinguishment of debt | — | 342 | ||||||
Dividends received from equity method investees | 495 | 657 | ||||||
Equity in net income of affiliates | (837 | ) | (737 | ) | ||||
Changes in assets and liabilities: | ||||||||
Receivables | (12,155 | ) | (8,149 | ) | ||||
Receivable - marketing and reservation fees, net | 17,248 | 18,585 | ||||||
Accounts payable | (551 | ) | (2,227 | ) | ||||
Accrued expenses and other | (9,403 | ) | (17,237 | ) | ||||
Income taxes payable | 8,614 | 19,776 | ||||||
Deferred income taxes | (9,035 | ) | (12,319 | ) | ||||
Deferred revenue | (80 | ) | 7,142 | |||||
Other assets | (435 | ) | 476 | |||||
Other liabilities | 9,081 | 5,888 | ||||||
NET CASH PROVIDED BY OPERATING ACTIVITIES | 100,404 | 115,590 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Investment in property and equipment | (8,734 | ) | (5,281 | ) | ||||
Acquisitions, net of cash acquired | (343 | ) | — | |||||
Purchases of investments, employee benefit plans | (7,128 | ) | (7,976 | ) | ||||
Proceeds from sales of investments, employee benefit plans | 2,703 | 2,885 | ||||||
Issuance of notes receivable | (5,066 | ) | (1,780 | ) | ||||
Collections of notes receivable | 675 | 772 | ||||||
Other items, net | (468 | ) | (859 | ) | ||||
NET CASH USED IN INVESTING ACTIVITIES | (18,361 | ) | (12,239 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Principal payments of long-term debt | (422 | ) | (109 | ) | ||||
Net borrowings (repayments) pursuant to revolving credit facility | 106,200 | (86,500 | ) | |||||
Debt issuance costs | — | (477 | ) | |||||
Excess tax benefits from stock-based compensation | 4,870 | 12,550 | ||||||
Purchase of treasury stock | (156,749 | ) | (1,326 | ) | ||||
Dividends paid | (29,522 | ) | (25,494 | ) | ||||
Proceeds from exercise of stock options | 5,093 | 8,162 | ||||||
NET CASH USED IN FINANCING ACTIVITIES | (70,530 | ) | (93,194 | ) | ||||
Net change in cash and cash equivalents | 11,513 | 10,157 | ||||||
Cash and cash equivalents at beginning of period | 35,841 | 16,921 | ||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 47,354 | $ | 27,078 | ||||
EXHIBIT 4
CHOICE HOTELS INTERNATIONAL, INC.
SUPPLEMENTAL OPERATING INFORMATION
DOMESTIC HOTEL SYSTEM
(UNAUDITED)
| For the Nine Months Ended September 30, 2007 | For the Nine Months Ended September 30, 2006 | Change | ||||||||||||||||||||||||
Average Daily Rate | Occupancy | RevPAR | Average Daily Rate | Occupancy | RevPAR | Average Daily Rate | Occupancy | RevPAR | ||||||||||||||||||
Comfort Inn | $ | 77.04 | 62.9 | % | $ | 48.45 | $ | 73.06 | 62.9 | % | $ | 45.92 | 5.4 | % | — bps | 5.5 | % | |||||||||
Comfort Suites | 87.54 | 66.0 | % | 57.74 | 83.12 | 67.4 | % | 55.99 | 5.3 | % | (140) bps | 3.1 | % | |||||||||||||
Sleep | 69.53 | 62.8 | % | 43.69 | 66.58 | 62.3 | % | 41.48 | 4.4 | % | 50 bps | 5.3 | % | |||||||||||||
Midscale without Food & Beverage | 78.20 | 63.5 | % | 49.67 | 74.22 | 63.7 | % | 47.25 | 5.4 | % | (20) bps | 5.1 | % | |||||||||||||
Quality | 70.45 | 54.5 | % | 38.37 | 67.27 | 55.6 | % | 37.40 | 4.7 | % | (110) bps | 2.6 | % | |||||||||||||
Clarion | 80.39 | 51.5 | % | 41.38 | 79.18 | 51.2 | % | 40.56 | 1.5 | % | 30 bps | 2.0 | % | |||||||||||||
Midscale with Food & Beverage | 72.76 | 53.7 | % | 39.10 | 70.10 | 54.5 | % | 38.20 | 3.8 | % | (80) bps | 2.4 | % | |||||||||||||
Econo Lodge | 54.43 | 48.1 | % | 26.17 | 53.21 | 47.7 | % | 25.38 | 2.3 | % | 40 bps | 3.1 | % | |||||||||||||
Rodeway | 53.63 | 47.9 | % | 25.68 | 52.32 | 46.7 | % | 24.44 | 2.5 | % | 120 bps | 5.1 | % | |||||||||||||
Economy | 54.25 | 48.0 | % | 26.06 | 53.05 | 47.5 | % | 25.20 | 2.3 | % | 50 bps | 3.4 | % | |||||||||||||
MainStay | 69.91 | 67.8 | % | 47.38 | 67.39 | 68.2 | % | 45.97 | 3.7 | % | (40) bps | 3.1 | % | |||||||||||||
Suburban | 39.98 | 68.1 | % | 27.23 | 38.34 | 73.9 | % | 28.32 | 4.3 | % | (580) bps | (3.8 | )% | |||||||||||||
Extended Stay | 46.69 | 68.0 | % | 31.76 | 43.61 | 72.8 | % | 31.73 | 7.1 | % | (480) bps | 0.1 | % | |||||||||||||
Total | $ | 72.04 | 58.0 | % | $ | 41.80 | $ | 68.81 | 58.5 | % | $ | 40.28 | 4.7 | % | (50) bps | 3.8 | % | |||||||||
| For the Three Months Ended September 30, 2007 | For the Three Months Ended September 30, 2006 | Change | ||||||||||||||||||||||||
Average Daily Rate | Occupancy | RevPAR | Average Daily Rate | Occupancy | RevPAR | Average Daily Rate | Occupancy | RevPAR | ||||||||||||||||||
Comfort Inn | $ | 82.60 | 73.2 | % | $ | 60.51 | $ | 78.25 | 72.6 | % | $ | 56.79 | 5.6 | % | 60 bps | 6.6 | % | |||||||||
Comfort Suites | 90.64 | 72.7 | % | 65.88 | 86.19 | 73.3 | % | 63.22 | 5.2 | % | (60) bps | 4.2 | % | |||||||||||||
Sleep | 73.09 | 70.8 | % | 51.72 | 69.80 | 69.6 | % | 48.61 | 4.7 | % | 120 bps | 6.4 | % | |||||||||||||
Midscale without Food & Beverage | 82.93 | 72.8 | % | 60.35 | 78.67 | 72.3 | % | 56.88 | 5.4 | % | 50 bps | 6.1 | % | |||||||||||||
Quality | 76.08 | 63.7 | % | 48.47 | 71.73 | 64.7 | % | 46.42 | 6.1 | % | (100) bps | 4.4 | % | |||||||||||||
Clarion | 85.09 | 60.0 | % | 51.05 | 82.51 | 57.1 | % | 47.14 | 3.1 | % | 290 bps | 8.3 | % | |||||||||||||
Midscale with Food & Beverage | 78.10 | 62.8 | % | 49.08 | 74.19 | 62.8 | % | 46.60 | 5.3 | % | — bps | 5.3 | % | |||||||||||||
Econo Lodge | 59.07 | 56.3 | % | 33.24 | 57.22 | 56.1 | % | 32.11 | 3.2 | % | 20 bps | 3.5 | % | |||||||||||||
Rodeway | 58.55 | 57.3 | % | 33.52 | 57.14 | 54.9 | % | 31.38 | 2.5 | % | 240 bps | 6.8 | % | |||||||||||||
Economy | 58.95 | 56.5 | % | 33.31 | 57.20 | 55.9 | % | 31.96 | 3.1 | % | 60 bps | 4.2 | % | |||||||||||||
MainStay | 73.34 | 75.3 | % | 55.26 | 68.86 | 77.1 | % | 53.12 | 6.5 | % | (180) bps | 4.0 | % | |||||||||||||
Suburban | 40.89 | 70.3 | % | 28.76 | 38.95 | 75.4 | % | 29.36 | 5.0 | % | (510) bps | (2.0 | )% | |||||||||||||
Extended Stay | 49.27 | 71.6 | % | 35.26 | 44.89 | 75.7 | % | 34.00 | 9.8 | % | (410) bps | 3.7 | % | |||||||||||||
Total | $ | 76.90 | 66.9 | % | $ | 51.43 | $ | 72.96 | 66.8 | % | $ | 48.72 | 5.4 | % | 10 bps | 5.6 | % | |||||||||
| For the Quarter Ended | For the Nine Months Ended | |||||||||||
| 9/30/2007 | 9/30/2006 | 9/30/2007 | 9/30/2006 | |||||||||
System-wide effective royalty rate | 4.12 | % | 4.07 | % | 4.13 | % | 4.08 | % | ||||
EXHIBIT 5
CHOICE HOTELS INTERNATIONAL, INC.
SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA
(UNAUDITED)
| September 30, 2007 | September 30, 2006 | Variance | ||||||||||||||||||
| Hotels | Rooms | Hotels | Rooms | Hotels | Rooms | % | % | |||||||||||||
Comfort Inn | 1,429 | 111,505 | 1,411 | 110,525 | 18 | 980 | 1.3 | % | 0.9 | % | ||||||||||
Comfort Suites | 470 | 36,688 | 427 | 33,573 | 43 | 3,115 | 10.1 | % | 9.3 | % | ||||||||||
Sleep | 345 | 25,617 | 327 | 24,609 | 18 | 1,008 | 5.5 | % | 4.1 | % | ||||||||||
Midscale without Food & Beverage | 2,244 | 173,810 | 2,165 | 168,707 | 79 | 5,103 | 3.6 | % | 3.0 | % | ||||||||||
Quality | 804 | 77,515 | 709 | 69,699 | 95 | 7,816 | 13.4 | % | 11.2 | % | ||||||||||
Clarion | 166 | 23,685 | 160 | 23,733 | 6 | (48 | ) | 3.8 | % | (0.2 | )% | |||||||||
Midscale with Food & Beverage | 970 | 101,200 | 869 | 93,432 | 101 | 7,768 | 11.6 | % | 8.3 | % | ||||||||||
Econo Lodge | 824 | 50,273 | 815 | 50,013 | 9 | 260 | 1.1 | % | 0.5 | % | ||||||||||
Rodeway | 275 | 16,342 | 217 | 13,245 | 58 | 3,097 | 26.7 | % | 23.4 | % | ||||||||||
Economy | 1,099 | 66,615 | 1,032 | 63,258 | 67 | 3,357 | 6.5 | % | 5.3 | % | ||||||||||
MainStay | 29 | 2,166 | 27 | 2,046 | 2 | 120 | 7.4 | % | 5.9 | % | ||||||||||
Suburban | 52 | 6,691 | 64 | 8,441 | (12 | ) | (1,750 | ) | (18.8 | )% | (20.7 | )% | ||||||||
Extended Stay | 81 | 8,857 | 91 | 10,487 | (10 | ) | (1,630 | ) | (11.0 | )% | (15.5 | )% | ||||||||
Cambria Suites | 2 | 219 | — | — | 2 | 219 | NM | NM | ||||||||||||
Domestic Franchises | 4,396 | 350,701 | 4,157 | 335,884 | 239 | 14,817 | 5.7 | % | 4.4 | % | ||||||||||
International Franchises | 1,137 | 99,579 | 1,171 | 98,811 | (34 | ) | 768 | (2.9 | )% | 0.8 | % | |||||||||
Total Franchises | 5,533 | 450,280 | 5,328 | 434,695 | 205 | 15,585 | 3.8 | % | 3.6 | % | ||||||||||
EXHIBIT 6
CHOICE HOTELS INTERNATIONAL, INC.
SUPPLEMENTAL INFORMATION BY BRAND
DEVELOPMENT RESULTS—DOMESTIC NEW HOTEL CONTRACTS
(UNAUDITED)
| For the Nine Months Ended September 30, 2007 | For the Nine Months Ended September 30, 2006 | % Change | |||||||||||||||||||
New Construction | Conversion | Total | New Construction | Conversion | Total | New Construction | Conversion | Total | |||||||||||||
Comfort Inn | 26 | 32 | 58 | 38 | 43 | 81 | (32 | )% | (26 | )% | (28 | )% | |||||||||
Comfort Suites | 78 | 4 | 82 | 55 | 3 | 58 | 42 | % | 33 | % | 41 | % | |||||||||
Sleep | 33 | 1 | 34 | 27 | 1 | 28 | 22 | % | 0 | % | 21 | % | |||||||||
Midscale without | 137 | 37 | 174 | 120 | 47 | 167 | 14 | % | (21 | )% | 4 | % | |||||||||
Quality | 7 | 96 | 103 | 5 | 100 | 105 | 40 | % | (4 | )% | (2 | )% | |||||||||
Clarion | 5 | 28 | 33 | 1 | 22 | 23 | 400 | % | 27 | % | 43 | % | |||||||||
Midscale with | 12 | 124 | 136 | 6 | 122 | 128 | 100 | % | 2 | % | 6 | % | |||||||||
Econo Lodge | 3 | 50 | 53 | — | 43 | 43 | NM | 16 | % | 23 | % | ||||||||||
Rodeway | 2 | 62 | 64 | 2 | 73 | 75 | 0 | % | (15 | )% | (15 | )% | |||||||||
Economy | 5 | 112 | 117 | 2 | 116 | 118 | 150 | % | (3 | )% | (1 | )% | |||||||||
MainStay | 10 | 1 | 11 | 5 | 1 | 6 | 100 | % | 0 | % | 83 | % | |||||||||
Suburban | 10 | 3 | 13 | 9 | 5 | 14 | 11 | % | (40 | )% | (7 | )% | |||||||||
Extended Stay | 20 | 4 | 24 | 14 | 6 | 20 | 43 | % | (33 | )% | 20 | % | |||||||||
Cambria Suites | 18 | — | 18 | 20 | — | 20 | (10 | %) | NM | (10 | )% | ||||||||||
Total Domestic System | 192 | 277 | 469 | 162 | 291 | 453 | 19 | % | (5 | )% | 4 | % | |||||||||
| For the Three Months Ended September 30, 2007 | For the Three Months Ended September 30, 2006 | % Change | |||||||||||||||||||
New Construction | Conversion | Total | New Construction | Conversion | Total | New Construction | Conversion | Total | |||||||||||||
Comfort Inn | 10 | 12 | 22 | 14 | 25 | 39 | (29 | )% | (52 | )% | (44 | )% | |||||||||
Comfort Suites | 38 | 1 | 39 | 14 | 1 | 15 | 171 | % | 0 | % | 160 | % | |||||||||
Sleep | 17 | — | 17 | 17 | 1 | 18 | 0 | % | (100 | )% | (6 | )% | |||||||||
Midscale without | 65 | 13 | 78 | 45 | 27 | 72 | 44 | % | (52 | )% | 8 | % | |||||||||
Quality | 2 | 33 | 35 | — | 43 | 43 | NM | (23 | )% | (19 | )% | ||||||||||
Clarion | 1 | 7 | 8 | — | 4 | 4 | NM | 75 | % | 100 | % | ||||||||||
Midscale with | 3 | 40 | 43 | — | 47 | 47 | NM | (15 | )% | (9 | )% | ||||||||||
Econo Lodge | 1 | 22 | 23 | — | 20 | 20 | NM | 10 | % | 15 | % | ||||||||||
Rodeway | 2 | 23 | 25 | 1 | 25 | 26 | 100 | % | (8 | )% | (4 | )% | |||||||||
Economy | 3 | 45 | 48 | 1 | 45 | 46 | 200 | % | 0 | % | 4 | % | |||||||||
MainStay | 6 | — | 6 | 2 | — | 2 | 200 | % | NM | 200 | % | ||||||||||
Suburban | 3 | 1 | 4 | 3 | 3 | 6 | 0 | % | (67 | )% | (33 | )% | |||||||||
Extended Stay | 9 | 1 | 10 | 5 | 3 | 8 | 80 | % | (67 | )% | 25 | % | |||||||||
Cambria Suites | 3 | — | 3 | 5 | — | 5 | (40 | )% | NM | (40 | )% | ||||||||||
Total Domestic System | 83 | 99 | 182 | 56 | 122 | 178 | 48 | % | (19 | )% | 2 | % | |||||||||
Exhibit 7
CHOICE HOTELS INTERNATIONAL, INC.
DOMESTIC HOTEL PIPELINE OF HOTELS UNDER CONSTRUCTION, AWAITING CONVERSION OR APPROVED FOR DEVELOPMENT
(UNAUDITED)
A hotel in the domestic pipeline does not always result in an open and operating hotel due to various factors.
| Variance | ||||||||||||||||||||||||||||||
September 30, 2007 Units | September 30, 2006 Units | Conversion | New Construction | Total | ||||||||||||||||||||||||||
| Conversion | New Construction | Total | Conversion | New Construction | Total | Units | % | Units | % | Units | % | |||||||||||||||||||
Comfort Inn | 41 | 121 | 162 | 50 | 108 | 158 | (9 | ) | (18 | )% | 13 | 12 | % | 4 | 3 | % | ||||||||||||||
Comfort Suites | 1 | 258 | 259 | 5 | 197 | 202 | (4 | ) | (80 | )% | 61 | 31 | % | 57 | 28 | % | ||||||||||||||
Sleep Inn | — | 113 | 113 | — | 95 | 95 | — | NM | 18 | 19 | % | 18 | 19 | % | ||||||||||||||||
Midscale without Food & Beverage | 42 | 492 | 534 | 55 | 400 | 455 | (13 | ) | (24 | )% | 92 | 23 | % | 79 | 17 | % | ||||||||||||||
Quality | 61 | 12 | 73 | 67 | 11 | 78 | (6 | ) | (9 | )% | 1 | 9 | % | (5 | ) | (6 | )% | |||||||||||||
Clarion | 23 | 7 | 30 | 14 | 4 | 18 | 9 | 64 | % | 3 | 75 | % | 12 | 67 | % | |||||||||||||||
Midscale with Food & Beverage | 84 | 19 | 103 | 81 | 15 | 96 | 3 | 4 | % | 4 | 27 | % | 7 | 7 | % | |||||||||||||||
Econo Lodge | 45 | 4 | 49 | 32 | 5 | 37 | 13 | 41 | % | (1 | ) | (20 | )% | 12 | 32 | % | ||||||||||||||
Rodeway | 52 | 3 | 55 | 56 | 2 | 58 | (4 | ) | (7 | )% | 1 | 50 | % | (3 | ) | (5 | )% | |||||||||||||
Economy | 97 | 7 | 104 | 88 | 7 | 95 | 9 | 10 | % | — | 0 | % | 9 | 9 | % | |||||||||||||||
MainStay | 1 | 36 | 37 | 1 | 33 | 34 | — | 0 | % | 3 | 9 | % | 3 | 9 | % | |||||||||||||||
Suburban | 6 | 31 | 37 | 4 | 19 | 23 | 2 | 50 | % | 12 | 63 | % | 14 | 61 | % | |||||||||||||||
Extended Stay | 7 | 67 | 74 | 5 | 52 | 57 | 2 | 40 | % | 15 | 29 | % | 17 | 30 | % | |||||||||||||||
Cambria Suites | — | 57 | 57 | — | 33 | 33 | — | NM | 24 | 73 | % | 24 | 73 | % | ||||||||||||||||
| 230 | 642 | 872 | 229 | 507 | 736 | 1 | 0 | % | 135 | 27 | % | 136 | 18 | % | ||||||||||||||||
EXHIBIT 8
CHOICE HOTELS INTERNATIONAL, INC.
SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION
(UNAUDITED)
CALCULATION OF FRANCHISING REVENUES AND FRANCHISING MARGINS
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| (dollar amounts in thousands) | 2007 | 2006 | 2007 | 2006 | ||||||||||||
Franchising Revenues: | ||||||||||||||||
Total Revenues | $ | 176,409 | $ | 150,996 | $ | 450,301 | $ | 400,954 | ||||||||
Adjustments: | ||||||||||||||||
Marketing and reservation revenues | (86,795 | ) | (73,001 | ) | (230,646 | ) | (203,719 | ) | ||||||||
Hotel Operations | (1,196 | ) | (1,182 | ) | (3,485 | ) | (3,342 | ) | ||||||||
Franchising Revenues | $ | 88,418 | $ | 76,813 | $ | 216,170 | $ | 193,893 | ||||||||
Franchising Margins: | ||||||||||||||||
Operating Margin: | ||||||||||||||||
Total Revenues | $ | 176,409 | $ | 150,996 | $ | 450,301 | $ | 400,954 | ||||||||
Operating Income | $ | 62,359 | $ | 54,552 | $ | 137,108 | $ | 126,739 | ||||||||
Operating Margin | 35.3 | % | 36.1 | % | 30.4 | % | 31.6 | % | ||||||||
Franchising Margin: | ||||||||||||||||
Franchising Revenues | $ | 88,418 | $ | 76,813 | $ | 216,170 | $ | 193,893 | ||||||||
Operating Income | $ | 62,359 | $ | 54,552 | $ | 137,108 | $ | 126,739 | ||||||||
Less: Hotel Operations | 329 | 362 | 1,083 | 977 | ||||||||||||
| $ | 62,030 | $ | 54,190 | $ | 136,025 | $ | 125,762 | |||||||||
Franchising Margins | 70.2 | % | 70.5 | % | 62.9 | % | 64.9 | % | ||||||||
| CALCULATION OF ADJUSTED NET INCOME AND ADJUSTED DILUTED EARNINGS PER SHARE (EPS) | ||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| (In thousands, except per share amounts) | 2007 | 2006 | 2007 | 2006 | ||||||||||||
Net Income | $ | 38,394 | $ | 46,357 | $ | 83,354 | $ | 88,158 | ||||||||
Adjustments: | ||||||||||||||||
Loss on Debt Extinguishment Costs | — | — | — | 217 | ||||||||||||
Reversal of Provisions for Income Tax Contingencies/Unrecognized Tax Benefits | (679 | ) | (12,785 | ) | (301 | ) | (12,581 | ) | ||||||||
Adjusted Net Income | $ | 37,715 | $ | 33,572 | $ | 83,053 | $ | 75,794 | ||||||||
Weighted average shares outstanding-diluted | 64,602 | 67,152 | 66,077 | 67,009 | ||||||||||||
Diluted Earnings Per Share | $ | 0.59 | $ | 0.69 | $ | 1.26 | $ | 1.32 | ||||||||
Adjustments: | ||||||||||||||||
Loss on Debt Extinguishment Costs | — | — | — | |||||||||||||
Reversal of Provisions for Income Tax Contingencies/Unrecognized Tax Benefits | (0.01 | ) | (0.19 | ) | (0.00 | ) | (0.19 | ) | ||||||||
Adjusted Diluted Earnings Per Share (EPS) | $ | 0.58 | $ | 0.50 | $ | 1.26 | $ | 1.13 | ||||||||
| EBITDA Reconciliation | ||||||||||||||||
| (in millions) | Q3 2007 Actuals | Q3 2006 Actuals | Full-Year 2007 Outlook | |||||||||||||
Operating Income (per GAAP) | $ | 62.4 | $ | 54.6 | $ | 180.4 | ||||||||||
Depreciation and amortization | 2.2 | 2.3 | 8.6 | |||||||||||||
Earnings before interest, taxes, depreciation & amortization (non-GAAP)* | $ | 64.6 | $ | 56.9 | $ | 189.0 | ||||||||||
| * | Nine months ended September 30, 2007 franchising margins, operating income and EBITDA include approximately $3.7 million of severance costs related to the previously announced termination of certain executive officers. |