Exhibit 99.1
For Immediate Release
CHOICE HOTELS REPORTS FULL-YEAR 2007 DILUTED EPS OF $1.70;
DOMESTIC UNIT GROWTH OF 5.6%
New Domestic Hotel Franchise Contracts Up 7% To A Record 770 For Full-Year 2007;
SILVER SPRING, Md. (February 12, 2008) – Choice Hotels International, Inc., (NYSE:CHH) today reported the following highlights for the fourth quarter and full-year 2007:
| • | Diluted earnings per share (“EPS”) for full-year 2007 were $1.70 compared to $1.68 for full-year 2006. Diluted EPS for fourth quarter 2007 were $0.44, a 19% increase compared to $0.37 for the same period in 2006. Full-year 2007 results include termination benefits expense totaling $3.7 million (approximately $0.04 diluted EPS) resulting from previously announced separations of certain executive officers. |
| • | Adjusted diluted EPS for full-year 2007 were $1.70, a 14% increase compared to adjusted diluted EPS of $1.49 for full-year 2006. Adjusted diluted EPS for fourth quarter 2007 were $0.44, a 22% increase compared to adjusted diluted EPS of $0.36 for the same period of 2006. Adjusted diluted earnings per share exclude reductions of income tax expense related to reversal of income tax contingency provisions of approximately $0.01 and $0.19 per share for the fourth quarter and full-year 2006, respectively. |
| • | Operating income increased 11% to $185.2 million for full-year 2007, compared to $166.6 million in the same period of the prior year. Operating income for fourth quarter 2007 increased 21% to $48.1 million compared to $39.9 million for fourth quarter 2006. |
| • | Earnings before interest, taxes and depreciation (“EBITDA”) for full-year 2007 increased 10% to $193.8 million from $176.3 million in 2006. EBITDA for fourth quarter 2007 was $50.3 million, an increase of 19% compared to $42.3 million for fourth quarter 2006. |
| • | Franchising revenues and total revenues increased 12% and 14%, respectively for full-year 2007 compared to the same period in 2006. Franchising revenues increased 14% and total revenues increased 19% for fourth quarter 2007 compared to the same period of 2006. |
| • | Franchising margins for full-year 2007 were 62.5% compared to 63.1% for the same period of 2006. Franchising margins for full-year 2007 reflect the impact of $3.7 million of termination benefits for certain executive officers and the commencement of direct franchising operations in continental Europe. |
| • | Domestic unit growth increased 5.6 percent for full-year 2007. |
| • | Domestic system-wide revenue per available room (RevPAR) increased 4.0% for full-year 2007 and 4.7% for fourth quarter 2007 compared to the same periods in 2006. 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 5.2% for both full-year and fourth quarter 2007. |
| • | New domestic hotel franchise contracts for full-year 2007 increased 7% to a record 770. Fourth quarter new domestic hotel franchise contracts increased 13% to 301 compared to fourth quarter 2006. |
| • | The number of domestic hotels under construction, awaiting conversion or approved for development increased 17% to 1,004 hotels representing 79,342 rooms; the worldwide pipeline increased 18% to 1,093 hotels representing 87,982 rooms. |
“2007 was another very strong year for the company, as we continued to successfully execute our strategy of profitably growing our franchise system and domestic market share of branded hotel rooms,” said Charles A. Ledsinger, Jr., vice chairman and chief executive officer. “We achieved another record year for new domestic hotel franchise contract sales, which highlights our ability to attract owners to our family of ten powerful brands by leveraging our size, scale, and distribution to deliver guests and create opportunities for our franchisees to achieve exceptional returns on their investment.”
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 December 31, 2007 increased approximately $0.5 million and $0.7 million, respectively, compared to fourth quarter 2006. Franchising revenues and selling, general and administrative costs for the full-year 2007 increased approximately $3.3 million and $3.3 million, respectively, compared to the same period in 2006.
Outlook for 2008
The company’s first quarter 2008 diluted EPS is expected to be $0.26. The company expects full year 2008 diluted EPS of $1.87. Earnings before interest, taxes, depreciation and amortization (“EBITDA”) for full-year 2008 is expected to be approximately $207 million. These estimates include the following assumptions.
| • | The company expects net domestic unit growth of approximately 5% in 2008; |
| • | RevPAR is expected to increase approximately 2% for first quarter 2008 and approximately 3% for full-year 2008; |
| • | The effective royalty rate is expected to increase 4 basis points for full-year 2008; |
| • | All figures assume the existing share count and an effective tax rate of 36% for first quarter 2008 and 36.5% for full-year 2008 |
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.
For the year ended December 31, 2007, the company paid $40.1 million of cash dividends to shareholders. The annual dividend rate per common share is $0.68.
For the three months ended December 31, 2007, the company purchased approximately 0.8 million shares of its common stock at an average price of $36.16 for a total cost of $28.7 million under its share repurchase program. For the year ended December 31, 2007, the company purchased approximately 4.9 million shares of its common stock at an average price of $37.47 for a total cost of $184 million. At December 31, 2007, the company had authorization to purchase up to an additional 3.2 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 38.6 million shares of its common stock for a total cost of $895.9 million through December 31, 2007. Considering the effect of a two-for-one stock split in October 2005, the company has repurchased 71.5 million shares under the share repurchase program at an average price of $12.52 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 Wednesday February 13, 2008 at 9:30 a.m. EST to discuss the company’s fourth quarter and full-year results. The call-in number to listen to the call is 1-800-230-1092. International callers should dial 612-332-0107. 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 11:30 a.m. EST on February 13 and will be available through March 13 by calling 1-800-475-6701, access code 905026. International callers should dial 320-365-3844 and enter access code 905026.
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 December 31, 2007, 1,004 hotels are under development in the United States, representing 79,342 rooms, and an additional 89 hotels, representing 8,640 rooms, are under development in more than 15 countries and territories. The company’s Comfort Inn, Comfort Suites, Quality, Sleep Inn, Clarion, Cambria Suites, MainStay Suites, Suburban Extended Stay Hotel, Econo Lodge and Rodeway Inn brands serve guests worldwide.
Additional corporate information may be found on Choice Hotels Web 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 the 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 an exhibit accompanying this release that reconciles 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.
© 2008 Choice Hotels International, Inc. All rights reserved.
Exhibit 1
Choice Hotels International, Inc.
Consolidated Statements of Income
(Unaudited)
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||||||||||||||||
| Variance | Variance | |||||||||||||||||||||||||||||
| 2007 | 2006 | $ | % | 2007 | 2006 | $ | % | |||||||||||||||||||||||
| (In thousands, except per share amounts) | ||||||||||||||||||||||||||||||
REVENUES: | ||||||||||||||||||||||||||||||
Royalty fees | $ | 60,623 | $ | 54,271 | $ | 6,352 | 12 | % | $ | 236,346 | $ | 211,645 | $ | 24,701 | 12 | % | ||||||||||||||
Initial franchise and relicensing fees | 11,907 | 9,530 | 2,377 | 25 | % | 33,389 | 29,629 | 3,760 | 13 | % | ||||||||||||||||||||
Brand solutions | 3,680 | 3,092 | 588 | 19 | % | 16,283 | 13,945 | 2,338 | 17 | % | ||||||||||||||||||||
Marketing and reservation | 89,963 | 73,098 | 16,865 | 23 | % | 316,827 | 273,267 | 43,560 | 16 | % | ||||||||||||||||||||
Hotel operations | 1,207 | 1,163 | 44 | 4 | % | 4,692 | 4,505 | 187 | 4 | % | ||||||||||||||||||||
Other | 1,595 | 1,345 | 250 | 19 | % | 7,957 | 6,912 | 1,045 | 15 | % | ||||||||||||||||||||
Total revenues | 168,975 | 142,499 | 26,476 | 19 | % | 615,494 | 539,903 | 75,591 | 14 | % | ||||||||||||||||||||
OPERATING EXPENSES: | ||||||||||||||||||||||||||||||
Selling, general and administrative | 27,855 | 26,316 | 1,539 | 6 | % | 101,590 | 87,112 | 14,478 | 17 | % | ||||||||||||||||||||
Depreciation and amortization | 2,227 | 2,370 | (143 | ) | (6 | )% | 8,637 | 9,705 | (1,068 | ) | (11 | )% | ||||||||||||||||||
Marketing and reservation | 89,963 | 73,098 | 16,865 | 23 | % | 316,827 | 273,267 | 43,560 | 16 | % | ||||||||||||||||||||
Hotel operations | 839 | 829 | 10 | 1 | % | 3,241 | 3,194 | 47 | 1 | % | ||||||||||||||||||||
Total operating expenses | 120,884 | 102,613 | 18,271 | 18 | % | 430,295 | 373,278 | 57,017 | 15 | % | ||||||||||||||||||||
Operating income | 48,091 | 39,886 | 8,205 | 21 | % | 185,199 | 166,625 | 18,574 | 11 | % | ||||||||||||||||||||
OTHER INCOME AND EXPENSES: | ||||||||||||||||||||||||||||||
Interest expense | 4,087 | 2,807 | 1,280 | 46 | % | 14,293 | 14,098 | 195 | 1 | % | ||||||||||||||||||||
Interest and other investment (income) loss | 1,106 | (942 | ) | 2,048 | (217 | )% | (1,750 | ) | (2,041 | ) | 291 | (14 | )% | |||||||||||||||||
Equity in net income of affiliates | (393 | ) | (315 | ) | (78 | ) | 25 | % | (1,230 | ) | (1,052 | ) | (178 | ) | 17 | % | ||||||||||||||
Loss on extinguishment of debt | — | — | — | NM | — | 342 | (342 | ) | (100 | )% | ||||||||||||||||||||
Total other income and expenses, net | 4,800 | 1,550 | 3,250 | 210 | % | 11,313 | 11,347 | (34 | ) | (0 | )% | |||||||||||||||||||
Income before income taxes | 43,291 | 38,336 | 4,955 | 13 | % | 173,886 | 155,278 | 18,608 | 12 | % | ||||||||||||||||||||
Income taxes | 15,344 | 13,707 | 1,637 | 12 | % | 62,585 | 42,491 | 20,094 | 47 | % | ||||||||||||||||||||
Net income | $ | 27,947 | $ | 24,629 | $ | 3,318 | 13 | % | $ | 111,301 | $ | 112,787 | $ | (1,486 | ) | (1 | )% | |||||||||||||
Weighted average shares outstanding-basic | 62,086 | 65,728 | 64,213 | 65,387 | ||||||||||||||||||||||||||
Weighted average shares outstanding-diluted | 63,109 | 67,171 | 65,331 | 67,050 | ||||||||||||||||||||||||||
Basic earnings per share | $ | 0.45 | $ | 0.37 | $ | 0.08 | 22 | % | $ | 1.73 | $ | 1.72 | $ | 0.01 | 1 | % | ||||||||||||||
Diluted earnings per share | $ | 0.44 | $ | 0.37 | $ | 0.07 | 19 | % | $ | 1.70 | $ | 1.68 | $ | 0.02 | 1 | % | ||||||||||||||
Exhibit 2
Choice Hotels International, Inc.
Consolidated Balance Sheets
| (In thousands, except per share amounts) | December 31, 2007 | December 31, 2006 | ||||||
| (Unaudited) | ||||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 46,377 | $ | 35,841 | ||||
Accounts receivable, net | 40,855 | 41,694 | ||||||
Deferred income taxes | 2,387 | 1,790 | ||||||
Investments, employee benefit plans, at fair value | 1,002 | — | ||||||
Other current assets | 15,330 | 7,757 | ||||||
Total current assets | 105,951 | 87,082 | ||||||
Fixed assets and intangibles, net | 141,679 | 144,124 | ||||||
Receivable — marketing fees | 6,782 | 6,662 | ||||||
Investments, employee benefit plans, at fair value | 33,488 | 31,529 | ||||||
Other assets | 40,484 | 33,912 | ||||||
Total assets | $ | 328,384 | $ | 303,309 | ||||
LIABILITIES AND SHAREHOLDERS' DEFICIT | ||||||||
Current portion of long-term debt | $ | — | $ | 146 | ||||
Other current liabilities | 147,516 | 139,645 | ||||||
Total current liabilities | 147,516 | 139,791 | ||||||
Long-term debt | 272,378 | 172,390 | ||||||
Deferred compensation & retirement plan obligations | 43,132 | 40,101 | ||||||
Other liabilities | 22,419 | 13,407 | ||||||
Total liabilities | 485,445 | 365,689 | ||||||
Common stock, $0.01 par value | 621 | 664 | ||||||
Additional paid-in-capital | 86,243 | 81,689 | ||||||
Accumulated other comprehensive income (loss) | 346 | (772 | ) | |||||
Treasury stock, at cost | (798,110 | ) | (627,311 | ) | ||||
Retained earnings | 553,839 | 483,350 | ||||||
Total shareholders’ deficit | (157,061 | ) | (62,380 | ) | ||||
Total liabilities and shareholders’ deficit | $ | 328,384 | $ | 303,309 | ||||
Exhibit 3
Choice Hotels International, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
| (In thousands) | Twelve Months Ended December 31, | |||||||
| 2007 | 2006 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income | $ | 111,301 | $ | 112,787 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 8,637 | 9,705 | ||||||
Provision for bad debts | 905 | (163 | ) | |||||
Non-cash stock compensation and other charges | 11,392 | 10,644 | ||||||
Non-cash interest and other (income) loss | 29 | (1,576 | ) | |||||
Loss on extinguishment of debt | — | 342 | ||||||
Dividends received from equity method investees | 1,245 | 1,095 | ||||||
Equity in net income of affiliates | (1,230 | ) | (1,052 | ) | ||||
Changes in assets and liabilities, net of acquisitions: | ||||||||
Receivables | 671 | (3,007 | ) | |||||
Receivable—marketing and reservation fees, net | 11,997 | 19,049 | ||||||
Accounts payable | 13,466 | 6,888 | ||||||
Accrued expenses and other | (5,364 | ) | (7,631 | ) | ||||
Income taxes payable/receivable | (5,395 | ) | 2,857 | |||||
Deferred income taxes | (7,651 | ) | (17,214 | ) | ||||
Deferred revenue | 1,493 | 15,036 | ||||||
Other assets | (2,559 | ) | (1,724 | ) | ||||
Other liabilities | 7,198 | 7,892 | ||||||
NET CASH PROVIDED BY OPERATING ACTIVITIES | 146,135 | 153,928 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Investment in property and equipment | (11,963 | ) | (7,707 | ) | ||||
Acquisitions, net of cash acquired | (343 | ) | (826 | ) | ||||
Purchases of investments, employee benefit plans | (8,686 | ) | (10,515 | ) | ||||
Proceeds from sales of investments, employee benefit plans | 6,049 | 3,728 | ||||||
Issuance of notes receivable | (7,395 | ) | (2,433 | ) | ||||
Collections of notes receivable | 1,806 | 868 | ||||||
Other items, net | (728 | ) | (446 | ) | ||||
NET CASH USED IN INVESTING ACTIVITIES | (21,260 | ) | (17,331 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Principal payments of long-term debt | (422 | ) | (146 | ) | ||||
Net borrowings (repayments) pursuant to revolving credit facility | 100,199 | (101,500 | ) | |||||
Debt issuance costs | — | (477 | ) | |||||
Excess tax benefits from stock-based compensation | 6,209 | 12,699 | ||||||
Purchase of treasury stock | (185,935 | ) | (1,365 | ) | ||||
Dividends paid | (40,139 | ) | (35,386 | ) | ||||
Proceeds from exercise of stock options | 5,749 | 8,498 | ||||||
NET CASH USED IN FINANCING ACTIVITIES | (114,339 | ) | (117,677 | ) | ||||
Net change in cash and cash equivalents | 10,536 | 18,920 | ||||||
Cash and cash equivalents at beginning of period | 35,841 | 16,921 | ||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 46,377 | $ | 35,841 | ||||
EXHIBIT 4
CHOICE HOTELS INTERNATIONAL, INC.
SUPPLEMENTAL OPERATING INFORMATION
DOMESTIC HOTEL SYSTEM
(UNAUDITED)
| For the Twelve Months Ended December 31, 2007 | For the Twelve Months Ended December 31, 2006 | Change | |||||||||||||||||||||||||
| Average Daily Rate | Occupancy | RevPAR | Average Daily Rate | Occupancy | RevPAR | Average Daily Rate | Occupancy | RevPAR | |||||||||||||||||||
Comfort Inn | $ | 77.14 | 63.1 | % | $ | 48.70 | $ | 73.08 | 63.0 | % | $ | 46.06 | 5.6 | % | 10 | bps | 5.7 | % | |||||||||
Comfort Suites | 87.23 | 65.5 | % | 57.11 | 82.93 | 67.0 | % | 55.59 | 5.2 | % | (150 | )bps | 2.7 | % | |||||||||||||
Sleep | 69.67 | 62.5 | % | 43.52 | 66.44 | 62.4 | % | 41.43 | 4.9 | % | 10 | bps | 5.0 | % | |||||||||||||
Midscale without Food & Beverage | 78.23 | 63.5 | % | 49.70 | 74.18 | 63.7 | % | 47.26 | 5.5 | % | (20 | )bps | 5.2 | % | |||||||||||||
Quality | �� | 70.30 | 54.2 | % | 38.09 | 66.89 | 55.3 | % | 37.01 | 5.1 | % | (110 | )bps | 2.9 | % | ||||||||||||
Clarion | 80.86 | 51.7 | % | 41.79 | 78.98 | 51.2 | % | 40.41 | 2.4 | % | 50 | bps | 3.4 | % | |||||||||||||
Midscale with Food & Beverage | 72.74 | 53.6 | % | 38.97 | 69.76 | 54.3 | % | 37.87 | 4.3 | % | (70 | )bps | 2.9 | % | |||||||||||||
Econo Lodge | 54.40 | 48.0 | % | 26.10 | 53.09 | 47.7 | % | 25.31 | 2.5 | % | 30 | bps | 3.1 | % | |||||||||||||
Rodeway | 53.24 | 47.6 | % | 25.32 | 51.66 | 45.8 | % | 23.66 | 3.1 | % | 180 | bps | 7.0 | % | |||||||||||||
Economy | 54.14 | 47.9 | % | 25.93 | 52.83 | 47.3 | % | 24.99 | 2.5 | % | 60 | bps | 3.8 | % | |||||||||||||
MainStay | 70.04 | 68.5 | % | 47.98 | 67.26 | 69.4 | % | 46.66 | 4.1 | % | (90 | )bps | 2.8 | % | |||||||||||||
Suburban | 40.13 | 67.3 | % | 27.01 | 38.30 | 72.4 | % | 27.73 | 4.8 | % | (510 | )bps | (2.6 | )% | |||||||||||||
Extended Stay | 47.10 | 67.6 | % | 31.83 | 43.81 | 71.8 | % | 31.46 | 7.5 | % | (420 | )bps | 1.2 | % | |||||||||||||
Total | $ | 72.07 | 57.9 | % | $ | 41.75 | $ | 68.71 | 58.4 | % | $ | 40.13 | 4.9 | % | (50 | )bps | 4.0 | % | |||||||||
| For the Three Months Ended December 31, 2007 | For the Three Months Ended December 31, 2006 | Change | |||||||||||||||||||||||||
| Average Daily Rate | Occupancy | RevPAR | Average Daily Rate | Occupancy | RevPAR | Average Daily Rate | Occupancy | RevPAR | |||||||||||||||||||
Comfort Inn | $ | 77.45 | 63.9 | % | $ | 49.47 | $ | 73.14 | 63.5 | % | $ | 46.46 | 5.9 | % | 40 | bps | 6.5 | % | |||||||||
Comfort Suites | 86.32 | 64.1 | % | 55.29 | 82.35 | 66.1 | % | 54.42 | 4.8 | % | (200 | )bps | 1.6 | % | |||||||||||||
Sleep | 70.10 | 61.4 | % | 43.03 | 66.04 | 62.5 | % | 41.29 | 6.1 | % | (110 | )bps | 4.2 | % | |||||||||||||
Midscale without Food & Beverage | 78.31 | 63.5 | % | 49.76 | 74.04 | 63.9 | % | 47.30 | 5.8 | % | (40 | )bps | 5.2 | % | |||||||||||||
Quality | 69.86 | 53.4 | % | 37.28 | 65.79 | 54.6 | % | 35.89 | 6.2 | % | (120 | )bps | 3.9 | % | |||||||||||||
Clarion | 82.27 | 52.3 | % | 43.04 | 78.38 | 51.0 | % | 39.98 | 5.0 | % | 130 | bps | 7.7 | % | |||||||||||||
Midscale with Food & Beverage | 72.68 | 53.1 | % | 38.61 | 68.79 | 53.7 | % | 36.91 | 5.7 | % | (60 | )bps | 4.6 | % | |||||||||||||
Econo Lodge | 54.33 | 47.7 | % | 25.89 | 52.74 | 47.6 | % | 25.10 | 3.0 | % | 10 | bps | 3.1 | % | |||||||||||||
Rodeway | 52.17 | 46.7 | % | 24.37 | 49.79 | 43.4 | % | 21.61 | 4.8 | % | 330 | bps | 12.8 | % | |||||||||||||
Economy | 53.82 | 47.4 | % | 25.52 | 52.18 | 46.7 | % | 24.38 | 3.1 | % | 70 | bps | 4.7 | % | |||||||||||||
MainStay | 70.40 | 70.7 | % | 49.77 | 66.91 | 72.8 | % | 48.74 | 5.2 | % | (210 | )bps | 2.1 | % | |||||||||||||
Suburban | 40.65 | 64.6 | % | 26.24 | 38.16 | 67.7 | % | 25.82 | 6.5 | % | (310 | )bps | 1.6 | % | |||||||||||||
Extended Stay | 48.50 | 66.1 | % | 32.04 | 44.47 | 68.7 | % | 30.57 | 9.1 | % | (260 | )bps | 4.8 | % | |||||||||||||
Total | $ | 72.16 | 57.6 | % | $ | 41.58 | $ | 68.40 | 58.0 | % | $ | 39.70 | 5.5 | % | (40 | )bps | 4.7 | % | |||||||||
| For the Quarter Ended | For the Twelve Months Ended | |||||||||||
| 12/31/2007 | 12/31/2006 | 12/31/2007 | 12/31/2006 | |||||||||
System-wide effective royalty rate | 4.15 | % | 4.12 | % | 4.14 | % | 4.09 | % | ||||
EXHIBIT 5
CHOICE HOTELS INTERNATIONAL, INC.
SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA
(UNAUDITED)
| December 31, 2007 | December 31, 2006 | Variance | ||||||||||||||||||
| Hotels | Rooms | Hotels | Rooms | Hotels | Rooms | % | % | |||||||||||||
Comfort Inn | 1,434 | 112,042 | 1,415 | 110,877 | 19 | 1,165 | 1.3 | % | 1.1 | % | ||||||||||
Comfort Suites | 481 | 37,358 | 433 | 33,976 | 48 | 3,382 | 11.1 | % | 10.0 | % | ||||||||||
Sleep | 346 | 25,728 | 327 | 24,575 | 19 | 1,153 | 5.8 | % | 4.7 | % | ||||||||||
Midscale without Food & Beverage | 2,261 | 175,128 | 2,175 | 169,428 | 86 | 5,700 | 4.0 | % | 3.4 | % | ||||||||||
Quality | 828 | 79,276 | 736 | 72,054 | 92 | 7,222 | 12.5 | % | 10.0 | % | ||||||||||
Clarion | 167 | 23,319 | 162 | 23,945 | 5 | (626 | ) | 3.1 | % | (2.6 | )% | |||||||||
Midscale with Food & Beverage | 995 | 102,595 | 898 | 95,999 | 97 | 6,596 | 10.8 | % | 6.9 | % | ||||||||||
Econo Lodge | 825 | 50,403 | 816 | 49,679 | 9 | 724 | 1.1 | % | 1.5 | % | ||||||||||
Rodeway | 276 | 16,523 | 233 | 14,168 | 43 | 2,355 | 18.5 | % | 16.6 | % | ||||||||||
Economy | 1,101 | 66,926 | 1,049 | 63,847 | 52 | 3,079 | 5.0 | % | 4.8 | % | ||||||||||
MainStay | 30 | 2,258 | 29 | 2,183 | 1 | 75 | 3.4 | % | 3.4 | % | ||||||||||
Suburban | 54 | 6,773 | 60 | 7,984 | (6 | ) | (1,211 | ) | (10.0 | )% | (15.2 | )% | ||||||||
Extended Stay | 84 | 9,031 | 89 | 10,167 | (5 | ) | �� | (1,136 | ) | (5.6 | )% | (11.2 | )% | |||||||
Cambria Suites | 4 | 459 | — | — | 4 | 459 | NM | NM | ||||||||||||
Domestic Franchises | 4,445 | 354,139 | 4,211 | 339,441 | 234 | 14,698 | 5.6 | % | 4.3 | % | ||||||||||
International Franchises | 1,125 | 97,888 | 1,165 | 97,944 | (40 | ) | (56 | ) | (3.4 | )% | (0.1 | )% | ||||||||
Total Franchises | 5,570 | 452,027 | 5,376 | 437,385 | 194 | 14,642 | 3.6 | % | 3.3 | % | ||||||||||
EXHIBIT 6
CHOICE HOTELS INTERNATIONAL, INC.
SUPPLEMENTAL INFORMATION BY BRAND
DEVELOPMENT RESULTS — DOMESTIC NEW HOTEL CONTRACTS
(UNAUDITED)
| For the Twelve Months Ended December 31, 2007 | For the Twelve Months Ended December 31, 2006 | % Change | |||||||||||||||||||
| New Construction | Conversion | Total | New Construction | Conversion | Total | New Construction | Conversion | Total | |||||||||||||
Comfort Inn | 48 | 62 | 110 | 67 | 65 | 132 | (28 | )% | (5 | )% | (17 | )% | |||||||||
Comfort Suites | 114 | 4 | 118 | 98 | 3 | 101 | 16 | % | 33 | % | 17 | % | |||||||||
Sleep | 71 | 1 | 72 | 58 | 1 | 59 | 22 | % | 0 | % | 22 | % | |||||||||
Midscale without Food & Beverage | 233 | 67 | 300 | 223 | 69 | 292 | 4 | % | (3 | )% | 3 | % | |||||||||
Quality | 11 | 153 | 164 | 6 | 143 | 149 | 83 | % | 7 | % | 10 | % | |||||||||
Clarion | 6 | 42 | 48 | 2 | 26 | 28 | 200 | % | 62 | % | 71 | % | |||||||||
Midscale with Food & Beverage | 17 | 195 | 212 | 8 | 169 | 177 | 113 | % | 15 | % | 20 | % | |||||||||
Econo Lodge | 3 | 77 | 80 | 1 | 80 | 81 | 200 | % | (4 | )% | (1 | )% | |||||||||
Rodeway | 2 | 99 | 101 | 3 | 105 | 108 | (33 | )% | (6 | )% | (6 | )% | |||||||||
Economy | 5 | 176 | 181 | 4 | 185 | 189 | 25 | % | (5 | )% | (4 | )% | |||||||||
MainStay | 22 | 2 | 24 | 9 | 1 | 10 | 144 | % | 100 | % | 140 | % | |||||||||
Suburban | 21 | 3 | 24 | 14 | 8 | 22 | 50 | % | (63 | )% | 9 | % | |||||||||
Extended Stay | 43 | 5 | 48 | 23 | 9 | 32 | 87 | % | (44 | )% | 50 | % | |||||||||
Cambria Suites | 29 | — | 29 | 30 | — | 30 | (3 | )% | NM | (3 | )% | ||||||||||
Total Domestic System | 327 | 443 | 770 | 288 | 432 | 720 | 14 | % | 3 | % | 7 | % | |||||||||
| For the Three Months Ended December 31, 2007 | For the Three Months Ended December 31, 2006 | % Change | |||||||||||||||||||
| New Construction | Conversion | Total | New Construction | Conversion | Total | New Construction | Conversion | Total | |||||||||||||
Comfort Inn | 22 | 30 | 52 | 29 | 22 | 51 | (24 | )% | 36 | % | 2 | % | |||||||||
Comfort Suites | 36 | — | 36 | 43 | — | 43 | (16 | )% | NM | (16 | )% | ||||||||||
Sleep | 38 | — | 38 | 31 | — | 31 | 23 | % | NM | 23 | % | ||||||||||
Midscale without Food & Beverage | 96 | 30 | 126 | 103 | 22 | 125 | (7 | )% | 36 | % | 1 | % | |||||||||
Quality | 4 | 57 | 61 | 1 | 43 | 44 | 300 | % | 33 | % | 39 | % | |||||||||
Clarion | 1 | 14 | 15 | 1 | 4 | 5 | 0 | % | 250 | % | 200 | % | |||||||||
Midscale with Food & Beverage | 5 | 71 | 76 | 2 | 47 | 49 | 150 | % | 51 | % | 55 | % | |||||||||
Econo Lodge | — | 27 | 27 | 1 | 37 | 38 | (100 | )% | (27 | )% | (29 | )% | |||||||||
Rodeway | — | 37 | 37 | 1 | 32 | 33 | (100 | )% | 16 | % | 12 | % | |||||||||
Economy | — | 64 | 64 | 2 | 69 | 71 | (100 | )% | (7 | )% | (10 | )% | |||||||||
MainStay | 12 | 1 | 13 | 4 | — | 4 | 200 | % | NM | 225 | % | ||||||||||
Suburban | 11 | — | 11 | 5 | 3 | 8 | 120 | % | (100 | )% | 38 | % | |||||||||
Extended Stay | 23 | 1 | 24 | 9 | 3 | 12 | 156 | % | (67 | )% | 100 | % | |||||||||
Cambria Suites | 11 | — | 11 | 10 | — | 10 | 10 | % | NM | 10 | % | ||||||||||
Total Domestic System | 135 | 166 | 301 | 126 | 141 | 267 | 7 | % | 18 | % | 13 | % | |||||||||
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 | |||||||||||||||||||||||||||||
| December 31, 2007 Units | December 31, 2006 Units | Conversion | New Construction | Total | |||||||||||||||||||||||||
| Conversion | New Construction | Total | Conversion | New Construction | Total | Units | % | Units | % | Units | % | ||||||||||||||||||
Comfort Inn | 54 | 135 | 189 | 56 | 124 | 180 | (2 | ) | (4 | )% | 11 | 9 | % | 9 | 5 | % | |||||||||||||
Comfort Suites | 1 | 278 | 279 | 3 | 233 | 236 | (2 | ) | (67 | )% | 45 | 19 | % | 43 | 18 | % | |||||||||||||
Sleep Inn | — | 138 | 138 | — | 123 | 123 | — | NM | 15 | 12 | % | 15 | 12 | % | |||||||||||||||
Midscale without Food & Beverage | 55 | 551 | 606 | 59 | 480 | 539 | (4 | ) | (7 | )% | 71 | 15 | % | 67 | 12 | % | |||||||||||||
Quality | 71 | 15 | 86 | 76 | 10 | 86 | (5 | ) | (7 | )% | 5 | 50 | % | — | 0 | % | |||||||||||||
Clarion | 30 | 7 | 37 | 11 | 4 | 15 | 19 | 173 | % | 3 | 75 | % | 22 | 147 | % | ||||||||||||||
Midscale with Food & Beverage | 101 | 22 | 123 | 87 | 14 | 101 | 14 | 16 | % | 8 | 57 | % | 22 | 22 | % | ||||||||||||||
Econo Lodge | 46 | 3 | 49 | 41 | 5 | 46 | 5 | 12 | % | (2 | ) | (40 | )% | 3 | 7 | % | |||||||||||||
Rodeway | 68 | 3 | 71 | 66 | 3 | 69 | 2 | 3 | % | — | 0 | % | 2 | 3 | % | ||||||||||||||
Economy | 114 | 6 | 120 | 107 | 8 | 115 | 7 | 7 | % | (2 | ) | (25 | )% | 5 | 4 | % | |||||||||||||
MainStay | 2 | 46 | 48 | — | 33 | 33 | 2 | NM | 13 | 39 | % | 15 | 45 | % | |||||||||||||||
Suburban | 4 | 40 | 44 | 5 | 24 | 29 | (1 | ) | (20 | )% | 16 | 67 | % | 15 | 52 | % | |||||||||||||
Extended Stay | 6 | 86 | 92 | 5 | 57 | 62 | 1 | 20 | % | 29 | 51 | % | 30 | 48 | % | ||||||||||||||
Cambria Suites | — | 63 | 63 | — | 43 | 43 | — | NM | 20 | 47 | % | 20 | 47 | % | |||||||||||||||
| 276 | 728 | 1,004 | 258 | 602 | 860 | 18 | 7 | % | 126 | 21 | % | 144 | 17 | % | |||||||||||||||
EXHIBIT 8
CHOICE HOTELS INTERNATIONAL, INC.
SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION
(UNAUDITED)
CALCULATION OF FRANCHISING REVENUES AND FRANCHISING MARGINS
| (dollar amounts in thousands) | Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
| 2007 | 2006 | 2007* | 2006 | |||||||||||||
Franchising Revenues: | ||||||||||||||||
Total Revenues | $ | 168,975 | $ | 142,499 | $ | 615,494 | $ | 539,903 | ||||||||
Adjustments: | ||||||||||||||||
Marketing and reservation revenues | (89,963 | ) | (73,098 | ) | (316,827 | ) | (273,267 | ) | ||||||||
Hotel Operations | (1,207 | ) | (1,163 | ) | (4,692 | ) | (4,505 | ) | ||||||||
Franchising Revenues | $ | 77,805 | $ | 68,238 | $ | 293,975 | $ | 262,131 | ||||||||
Franchising Margins: | ||||||||||||||||
Operating Margin: | ||||||||||||||||
Total Revenues | $ | 168,975 | $ | 142,499 | $ | 615,494 | $ | 539,903 | ||||||||
Operating Income | $ | 48,091 | $ | 39,886 | $ | 185,199 | $ | 166,625 | ||||||||
Operating Margin | 28.5 | % | 28.0 | % | 30.1 | % | 30.9 | % | ||||||||
Franchising Margin: | ||||||||||||||||
Franchising Revenues | $ | 77,805 | $ | 68,238 | $ | 293,975 | $ | 262,131 | ||||||||
Operating Income | $ | 48,091 | $ | 39,886 | $ | 185,199 | $ | 166,625 | ||||||||
Less: Hotel Operations | 368 | 334 | 1,451 | 1,311 | ||||||||||||
| $ | 47,723 | $ | 39,552 | $ | 183,748 | $ | 165,314 | |||||||||
Franchising Margins | 61.3 | % | 58.0 | % | 62.5 | % | 63.1 | % | ||||||||
CALCULATION OF ADJUSTED NET INCOME AND ADJUSTED DILUTED EARNINGS PER SHARE (EPS)
| (In thousands, except per share amounts) | Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
| 2007 | 2006 | 2007* | 2006 | |||||||||||||
Net Income | $ | 27,947 | $ | 24,629 | $ | 111,301 | $ | 112,787 | ||||||||
Adjustments: | ||||||||||||||||
Reversal of Provisions for Income Tax Contingencies/Unrecognized Tax Benefits | (48 | ) | (210 | ) | (349 | ) | (12,791 | ) | ||||||||
Adjusted Net Income | $ | 27,899 | $ | 24,419 | $ | 110,952 | $ | 99,996 | ||||||||
Weighted average shares outstanding-diluted | 63,109 | 67,171 | 65,331 | 67,050 | ||||||||||||
Diluted Earnings Per Share | $ | 0.44 | $ | 0.37 | $ | 1.70 | $ | 1.68 | ||||||||
Adjustments: | ||||||||||||||||
Reversal of Provisions for Income Tax Contingencies/Unrecognized Tax Benefits | — | (0.01 | ) | — | (0.19 | ) | ||||||||||
Adjusted Diluted Earnings Per Share (EPS) | $ | 0.44 | $ | 0.36 | $ | 1.70 | $ | 1.49 | ||||||||
EBITDA Reconciliation
| (in millions) | Q4 2007 Actuals | Q4 2006 Actuals | Year Ended December 31, 2007 Actuals* | Year Ended December 31, 2006 Actuals | Full-Year 2008 Outlook | ||||||||||
Operating Income | $ | 48.1 | $ | 39.9 | $ | 185.2 | $ | 166.6 | $ | 196.9 | |||||
Depreciation and amortization | 2.2 | 2.4 | 8.6 | 9.7 | 10.1 | ||||||||||
Earnings before interest, taxes, depreciation & amortization | $ | 50.3 | $ | 42.3 | $ | 193.8 | $ | 176.3 | $ | 207.0 | |||||
| * | Year ended December 31, 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. |