![]() ® Deutsche Bank 2013 Leveraged Finance Conference Exhibit 99.1 |
![]() 2 Investor Presentation ® Disclaimer Certain matters discussed throughout all of this presentation constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Generally, our use of words such as “expect,” “estimate,” “believe,” “anticipate,” "should,“ “will,” “forecast,” “plan,” project,” “assume” or similar words of futurity identify such forward-looking statements. These forward-looking statements are based on management's current beliefs, assumption and expectations regarding future events, which in turn are based on information currently available to management. Such statements may relate to projections of the company’s revenue, earnings and other financial and operational measures, company debt levels, ability to repay outstanding indebtedness, payment of dividends, and future operations, among other matters. We caution you not to place undue reliance on any such forward-looking statements. 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; the level of acceptance of alternative growth strategies we may implement; the outcome of litigation; and our ability to effectively manage 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, 2012, filed with the Securities and Exchange Commission on February 28, 2013. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law. |
![]() 3 Investor Presentation ® Company overview |
![]() 4 Investor Presentation ® Choice Hotels overview Growing US hotel market share – 9.7% share of branded US hotels (+50 basis points over trailing 5 years)* – 2 nd largest U.S. hotelier* Well-known, diversified brands Global pipeline of 448 hotels Stable, profitable, long-term growth throughout economic cycles Cumulative free cash flows of ~$1.5 billion since 1997 – $2.1 billion returned to shareholders through share repurchases and quarterly and special cash dividends Capital “light” model generates strong after-tax returns on invested capital Strong, growing, global hotel franchising business Highly attractive business model with strong financial returns Chain scale mix - rooms (Domestic Q2 2013) Geographic property distribution - rooms (Q2 2013) Source: Choice Internal Data as of June 30, 2013 * Based on number of hotels as June 30, 2013 (Smith Travel Research) |
![]() 5 Investor Presentation ® Diversified global footprint* Source: Choice internal data *As of June 30, 2013. The Company includes its Caribbean properties within domestic operating statistics. |
![]() 6 Investor Presentation Investor Presentation ® Portfolio overview Brand Number of properties Number of rooms Occupancy (%) Average daily room rate (ADR) RevPAR Upscale 90 7,521 64.6% $118.22 $76.36 18 2,094 NA NA NA Upper Midscale 1,311 102,882 59.9% 82.49 49.37 587 45,339 62.4% 86.35 53.87 191 27,184 50.5% 74.99 37.86 Midscale 379 27,478 57.7% 73.38 42.31 1,192 99,761 52.3% 69.73 36.43 Extended Stay 43 3,332 68.4% 70.92 48.52 63 7,241 70.5% 42.42 29.91 Economy 817 49,608 48.6% 56.29 27.34 427 24,782 51.1% 53.72 27.46 Total / Average 5,118 397,222 56.0% $74.23 $41.56 International 1,169 104,701 Total 6,287 501,923 Note: Number of properties and rooms are as of June 30, 2013; Operating statistics are for the trailing twelve months ended June 30, 2013. Source: Company’s public filings, management data |
![]() 7 Investor Presentation Investor Presentation ® Franchise portfolio growth Worldwide hotels* Domestic pipeline* Worldwide unit growth has increased at a CAGR of 2.0% over the last 5 years Executed a total of 490 new domestic hotel franchise contracts during the trailing twelve months ended June 30, 2013, a 30% increase over the prior year Current domestic pipeline consists of 365 hotels representing 29,245 rooms 220 hotels under construction or awaiting development 145 hotels awaiting conversion * As of June 30, 2013 Source: Company’s public filings |
![]() 8 Investor Presentation Investor Presentation ® Strategy for Choice’s brands, growth and shareholders Improve and Grow Brands – Increase portfolio profitability of the Comfort brand family – Refresh Sleep Inn to improve long-term brand growth potential – Invest in and expand emerging brands/segments – Cambria, Ascend, International Capture Greater Share of Reservations Via Central Channels – Grow Choice Privileges loyalty program – target 2.0 million new members in 2013 – Continue to enhance ChoiceHotels.com to increase traffic and conversion Allocate Free Cash Flows To “Best And Highest” Use – Continue effective long-term capital allocation practices by optimizing balance sheet leverage, share repurchase and dividend policy – Leverage financial capacity/strength to support expansion of emerging brands – Evaluate opportunities to enter new segments that leverage core competencies (i.e. Sky Touch) – Invest in IT infrastructure to shore up value proposition for international properties |
![]() 9 Investor Presentation ® Investment highlights |
![]() 10 Investor Presentation Investor Presentation ® Investment highlights ® |
![]() 11 Investor Presentation Investor Presentation ® Established hotel franchising platform with global scale One of the largest hoteliers… … with a significant number of rooms in the portfolio Source: Various public companies’ filings as of June 30, 2013, except for Hilton which is as of December 31, 2012. |
![]() 12 Investor Presentation ® Resilient fee-for-service business model with stable cash flows ($ in millions) Source: Smith Travel Research, Management data, December 2012 |
![]() 13 Investor Presentation ® Strong, growing loyalty program Choice Privileges revenue as percent of domestic gross room revenues* Source: Management Data, December 31, 2012, Company’s public filings * 2001-2008 Data Excludes Econo Lodge and Rodeway Inn brands Comprehensive loyalty rewards program 16.5 million members worldwide – contribute over ¼ of domestic gross room revenues 2.4 million new members added in 2012 Delivers incremental business to all Choice brand hotels Important selling point for franchise sales Loyalty program |
![]() 14 Investor Presentation Investor Presentation ® Effective marketing and central reservation system Consists of the telephone reservation system, proprietary internet site, mobile phone applications, global distribution systems and other internet reservation sites Central Reservation System (“CRS”) provides a data link to the Company’s franchised properties and to airline reservation systems Offers rooms for sale on the Company’s own internet site, as well as other travel companies Expertise and innovation in on-line, targeted interactive marketing to influence guest hotel stay decisions Powerful advertising campaigns Focus on driving guests to Choice central channels Facilitate “one-stop” shopping Reservation agents can match each caller with a Choice-branded hotel Approximately $400 million in annual marketing and reservation spending Description Size, scale and distribution Domestic franchise system gross room revenue source Domestic Choice CRS net room revenue Source: Company’s public filings as of December 31, 2012, Management data |
![]() 15 Investor Presentation Investor Presentation ® Strong pipeline expected to continue to grow as the global economy improves Historical international pipeline Source: Company’s public filings, Management data as of December 31, 2012 Historical domestic pipeline |
![]() 16 Investor Presentation Investor Presentation ® Asset light franchising model with strong returns on investment Capital light model generates strong after-tax returns on invested capital Virtually 100% of the properties are franchised* * The Company owns a limited number of hotels that it holds for strategic purposes. Source: Company’s public filings, Management data as of December 31, 2012 |
![]() 17 Investor Presentation ® Strong and growing brand awareness Source: Percentage of survey respondents. Millward Brown, December 2012. * Econo Lodge, Rodeway Inn and Suburban Extended Stay measured among economy hotel users. |
![]() 18 Investor Presentation ® Financial overview |
![]() 19 Investor Presentation Investor Presentation ® Choice’s franchise business model provides stable, growing cash flows, driven primarily through unit expansion, RevPAR growth and effective royalty rate growth Recent performance LTM Revenue LTM Adjusted EBITDA Choice has experienced consistent revenue growth over the past eight quarters Revenues have increased by 14% since Q2 2011 EBITDA margins have increased by 138 bps since Q2 2011 Domestic and international unit growth and improvement in operating performance continues to drive profitability ($ in millions) Source: Company’s public filings |
![]() 20 Investor Presentation Investor Presentation ® Historical operating metrics RevPAR & occupancy Total worldwide rooms Source: Company’s public filings |
![]() 21 Investor Presentation Investor Presentation ® Historical financial overview Revenue* Adjusted EBITDA *Excludes marketing and reservation revenues Source: Company’s public filings ($ in millions) |
![]() 22 Investor Presentation Investor Presentation ® Historical capital expenditure overview ($ in millions) *Capital expenditures reflect tenant improvements related to the of its corporate offices in Rockville, MD during 2013. Source: Company’s public filings Company leasing extra space for a new technology center in Phoenix, AZ during 2010 and the relocation |
![]() 23 Investor Presentation Investor Presentation ® Credit Metrics ($ in millions) Captialization As of Mult LTM 6/30/2013 Adjusted EBITDA Total cash and equivalents $143.8 New revolver $72.2 0.4x Term Loan $142.5 0.7x Total secured debt $214.7 1.1x Senior Notes Due 2020 $250.0 1.2x Senior Notes Due 2022 $400.0 2.0x Other debt $2.2 0.0x Total debt $866.9 4.3x LTM Adjusted EBITDA $202.5 Interest expense $42.1 Capital expenditures $30.2 Credit metrics Total debt / Adjusted EBITDA 4.3x Net debt / Adjusted EBITDA 3.6x Adjusted EBITDA / int. exp. 4.8x (Adjusted EBITDA - capex) / int. exp 4.1x Source: Company’s public filings |
![]() 24 Investor Presentation ® Questions and answers |
![]() 25 Investor Presentation ® DISCLAIMER Adjusted earnings before interest, taxes depreciation and amortization (EBITDA), return on average invested capital (ROIC), franchising revenues and free cash flows are non-GAAP financial measurements. These financial measurements are presented as supplemental disclosures because they are used by management in reviewing and analyzing the company’s performance. This information should not be considered as an alternative to any measure of performance as promulgated under accounting principles generally accepted in the United States (GAAP), such as operating income, total revenues or net cash provided by operating activities. The calculation of these non-GAAP measures may be different from the calculation by other companies and therefore comparability may be limited. The company has included the following appendix which reconcile these measures to the comparable GAAP measurement. |
![]() 26 Investor Presentation ® FRANCHISING REVENUES Source: Choice Internal Data, December 2012 ($ amounts in thousands) Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2012 2011 2010 2009 2008 2007 2006 2005 Total Revenues 691,509 $ 638,793 $ 596,076 $ 564,178 $ 641,680 $ 615,494 $ 539,903 $ 472,098 $ Adjustments: Marketing and Reservation (384,784) (349,036) (329,246) (305,379) (336,477) (316,827) (273,267) (237,822) Product Sales - - - - - - - - Hotel Operations (4,573) (4,356) (4,031) (4,140) (4,936) (4,692) (4,505) (4,293) Franchising Revenues 302,152 $ 285,401 $ 262,799 $ 254,659 $ 300,267 $ 293,975 $ 262,131 $ 229,983 $ |
![]() ![]() 27 Investor Presentation ® FRANCHISING REVENUES (Continued) Source: Choice Internal Data, December 2012 ($ amounts in thousands) Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2004 2003 2002 2001 2000 1999 1998 Total Revenues 428,208 $ 385,866 $ 365,562 $ 341,428 $ 352,841 $ 324,203 $ 165,474 $ Adjustments: Marketing and Reservation (220,732) (195,219) (190,145) (168,170) (185,367) (162,603) - Product Sales - - - - - (3,871) (20,748) Hotel Operations (3,729) (3,565) (3,331) (3,215) (1,249) - (1,098) Franchising Revenues 203,747 $ 187,082 $ 172,086 $ 170,043 $ 166,225 $ 157,729 $ 143,628 $ |
![]() 28 Investor Presentation ® RETURN ON INVESTED CAPITAL (a) Operating income and tax rate for the year ended December 31, 2001 have been adjusted to exclude the effect of a $22.7 million impairment charge related to the write-off of the company’s investment in Friendly Hotels. Source: Choice Internal Data, December 2012 Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, ($ in thousands) 2012 2011 2010 2009 2008 2007 2006 Operating Income (a) $193.1 $171.9 $160.8 $148.1 $174.6 $185.2 $166.6 Tax Rate(a) 28.7% 30.1% 32.1% 34.8% 36.3% 36.0% 27.4% After-Tax Operating Income 137.7 120.2 109.2 96.6 111.2 118.5 121.0 + Depreciation & Amortization 8.2 8.0 8.3 8.3 8.2 8.6 9.7 - Maintenance CAPEX 8.2 8.0 8.3 8.3 8.2 8.6 9.7 Net Op. Profit After-tax (NOPAT) $137.7 $120.2 $109.2 $96.6 $111.2 $118.5 $121.0 Total Assets $510.8 $447.7 $411.7 $340.0 $328.2 $328.4 $303.3 - Current Liabilities 176.1 184.6 165.3 131.8 135.1 147.5 139.8 Invested Capital $334.7 $263.1 $246.4 $208.2 $193.1 $180.9 $163.5 Return on Average Invested Capital 46.1% 47.2% 48.0% 48.1% 59.5% 68.8% 78.5% |
![]() ![]() 29 Investor Presentation ® RETURN ON INVESTED CAPITAL (Continued) (a) Operating income and tax rate for the year ended December 31, 2001 have been adjusted to exclude the effect of a $22.7 million impairment charge related to the write-off of the company’s investment in Friendly Hotels. Source: Choice Internal Data, December 2012 Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, ($ in thousands) 2005 2004 2003 2002 2001 2000 1999 1998 Operating Income (a) $143.8 $125.0 $113.9 $104.7 $96.3 $92.4 $94.2 $85.2 Tax Rate(a) 33.0% 35.1% 36.1% 36.5% 35.0% 39.0% 39.5% 41.7% After-Tax Operating Income 96.3 81.1 72.8 66.5 62.6 56.4 57.0 49.7 + Depreciation & Amortization 9.1 9.9 11.2 11.3 12.5 11.6 7.7 6.7 - Maintenance CAPEX 9.1 9.9 11.2 11.3 12.5 11.6 7.7 6.7 Net Op. Profit After-tax (NOPAT) $96.3 $81.1 $72.8 $66.5 $62.6 $56.4 $57.0 $49.7 Total Assets $265.3 $263.4 $267.3 $316.8 $321.2 $484.1 $464.7 $398.2 - Current Liabilities 120.3 102.1 102.2 84.3 71.2 93.8 88.7 64.7 Invested Capital $145.0 $161.3 $165.1 $232.5 $250.0 $390.3 $375.9 $333.6 Return on Average Invested Capital 62.9% 49.7% 36.7% 27.6% 19.5% 14.7% 16.1% 15.2% |
![]() 30 Investor Presentation ® FREE CASH FLOWS Source: Choice Internal Data, June 30, 2013 Year to Date Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended June 30, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, ($ in thousands) 2013 2012 2011 2010 2009 2008 2007 2006 2005 Net Cash Provided by Operating Activities 28,957 $ 150,122 $ 131,369 $ 143,815 $ 112,216 $ 104,399 $ 145,666 $ 153,680 $ 133,588 $ Net Cash Provided (Used) by Investing Activities (20,605) (47,101) (20,329) (31,035) (3,349) (20,265) (21,284) (17,244) (24,531) Free Cash Flows 8,352 $ 103,021 $ 111,040 $ 112,780 $ 108,867 $ 84,134 $ 124,382 $ 136,436 $ 109,057 $ |
![]() ![]() 31 Investor Presentation ® FREE CASH FLOWS (Continued) Source: Choice Internal Data, June 30, 2013 Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, ($ in thousands) 2004 2003 2002 2001 2000 1999 1998 Net Cash Provided by Operating Activities 108,908 $ 115,304 $ 99,018 $ 101,712 $ 53,879 $ 65,040 $ 38,952 $ Net Cash Provided (Used) by Investing Activities (14,544) 27,784 (14,683) 87,738 (16,617) (36,031) (9,056) Free Cash Flows 94,364 $ 143,088 $ 84,335 $ 189,450 $ 37,262 $ 29,009 $ 29,896 $ |
![]() 32 Investor Presentation ® Source: Choice Internal Data, June 30, 2013 ADJUSTED EBITDA LTM Year Ended Year Ended Year Ended Year Ended Year Ended ($ in thousands) June 30, December 31, December 31, December 31, December 31, December 31, 2013 2012 2011 2010 2009 2008 Operating Income 191,275 $ 193,142 $ 171,863 $ 160,762 $ 148,073 $ 174,596 $ Adjustments Acceleration of Management Succession Plan - - - - - 6,605 Loss on Sublease of Office Space - - - - 1,503 - Executive Termination Benefits 491 491 4,444 1,730 4,604 3,537 Curtailment and Settlement of SERP 1,818 1,818 - - 1,209 - Loan Reserves Related to Impaired Notes Receivable - - - - - 7,555 Product Sales - - - - - - Impairment of Friendly investment - - - - - - Depreciation and Amortization 8,927 8,226 8,024 8,342 8,336 8,184 Adjusted EBITDA 202,511 $ 203,677 $ 184,331 $ 170,834 $ 163,725 $ 200,477 $ |