ROCKVILLE, Md. - July 26, 2013 // PRNewswire // - Choice Hotels International, Inc., (NYSE:CHH) today reported the following highlights for the second quarter of 2013:
"We are excited about the growth prospects for our core franchising business. We are seeing particularly strong RevPAR performance for our upscale Ascend Collection, Suburban Extended Stay Hotel brand and our Sleep Inn brand which delivered impressive results as more of our franchisees upgrade their hotels to our new Design to Dream proto-type," said Stephen P. Joyce, president and chief executive officer. "On the development side of the business, conversion franchise sales for our flagship Comfort brand and our Ascend Collection continued to outpace last year's results demonstrating that Choice remains a top option for hotel developers."
"We are also excited to report that we debuted SkyTouch Technology's cloud based technology products to the hospitality industry in June at the Hospitality Financial and Technology Professional's HITEC conference and are pleased with the level of interest we received," said Stephen P. Joyce, president and chief executive officer. "We have executed our first customer contracts for this division and are excited that our new customers will experience the benefits that our cloud based technology products will deliver to their hotels."
The company has historically used its free cash flow (cash flow from operations less cash flow from investing activities) to return value to shareholders, primarily through share repurchases and dividends.
During the six months ended June 30, 2013, the company paid $11.3 million of cash dividends to shareholders. The company's current quarterly dividend rate per common share is $0.185, subject to declaration by our board of directors. The company's regular dividend for the first quarter was paid in December 2012.
The company did not repurchase any shares of common stock under the share repurchase program during the three and six months ended June 30, 2013 but has authorization to purchase up to an additional 1.4 million shares under this program. We expect we will make repurchases from time to time under our share repurchase program in the open market and through privately negotiated transactions, subject to market and other conditions. No minimum number of share repurchases has been fixed. Since Choice announced its stock repurchase program on June 25, 1998, the company has repurchased 45.3 million shares of its common stock for a total cost of $1.1 billion through June 30, 2013. Considering the effect of a two-for-one stock split in October 2005, the company has repurchased 78.3 million shares through June 30, 2013 under the share repurchase program at an average price of $13.89 per share.
Our board of directors previously authorized us to enter into a program which permits us to offer financing, investment and guaranty support to qualified franchisees as well as to acquire and resell real estate to incent franchise development for certain brands in strategic markets. Over the next several years, we expect to continue to opportunistically deploy capital pursuant to this program to promote growth of our emerging brands. Our current expectation is that our annual investment in this program will range between $20 million and $40 million per year and we generally expect to recycle these investments over a 5 year period. However, the amount and timing of the investment in this program will be dependent on market and other conditions. Notwithstanding this program, 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.
At June 30, 2013, the company had gross debt of $866.5 million and cash and cash equivalents totaling $143.8 million resulting in net debt of $722.7 million. At December 31, 2012, the company had gross debt of $855.3 million and cash equivalents totaling $134.2 million resulting in net debt of $721.1 million.
At June 30, 2013 and December 31, 2012, the company had outstanding mezzanine financing, real estate investments and sliver equity investments totaling $69 million and $68 million, respectively pursuant to its program to offer financing and investment support to incent franchise development for the Cambria Suites brand in strategic markets. These investments are reported in other current assets and other assets on the company's consolidated balance sheet.
The company's third quarter 2013 diluted EPS is expected to be $0.66. The company expects full-year 2013 diluted EPS to range between $1.84 and $1.87. Earnings before interest, taxes and depreciation ("EBITDA") for full-year 2013 are expected to range between $203.5 million and $206.5 million. These estimates include the following assumptions:
Choice will conduct a conference call on Friday, July 26, 2013 at 10:00 a.m. EDT to discuss the company's second quarter 2013 results. The dial-in number to listen to the call is 1-877-280-4959, and the access code is 31314907. International callers should dial 1-857-244-7316 and enter the access code 31314907. The conference call also will be Webcast simultaneously via the company's Web site, www.choicehotels.com. Interested investors and other parties wishing to access the call via the Webcast 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 call will be recorded and available for replay beginning at 12:00 p.m. EDT on Friday, July 26, 2013 through Friday, August 2, 2013 by calling 1-888-286-8010 and entering access code 26118362. The international dial-in number for the replay is 1-617-801-6888, access code 26118362. In addition, the call will be archived and available on www.choicehotels.com via the Investor Info link.
Choice Hotels International, Inc. franchises more than 6,200 hotels, representing more than 500,000 rooms, in the United States and more than 30 other countries and territories. As of June 30, 2013, 365 hotels, representing more than 29,000 rooms, were under construction, awaiting conversion or approved for development in the United States. Additionally, 83 hotels, representing approximately 7,200 rooms, were under construction, awaiting conversion or approved for development in more than 15 other 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, as well as its Ascend Hotel Collection membership program, serve guests worldwide.
SkyTouch Technology is an initiative of Choice Hotels International, Inc. that develops and markets cloud-based technology products to help industry-wide hoteliers improve their efficiency and profitability.
Additional corporate information can be found on the Choice Hotels International, Inc. web site, which may be accessed at www.choicehotels.com.
Certain matters discussed in this press release 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," "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, assumptions 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; 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, 2012, filed with the Securities and Exchange Commission on February 28, 2013 and our quarterly reports filed on Form 10-Q. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
EBITDA, franchising revenues and franchising margins are non-GAAP financial measurements. This information should not be considered as an alternative to any measure of performance as promulgated under generally accepted accounting principles in the United States ("GAAP"), such as operating income, total revenues and operating margins. The company's calculation of these measurements may be different from the calculations 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. We discuss management's reasons for reporting these non-GAAP measures below.
Earnings Before Interest, Taxes, Depreciation and Amortization: EBITDA reflects earnings excluding the impact of interest expense, interest income, provision for income taxes, depreciation and amortization, other (gains) and losses and equity in net income (loss) of unconsolidated affiliates. We consider EBITDA to be an indicator of operating performance because we use it to measure our ability to service debt, fund capital expenditures, and expand our business. We also use EBITDA, as do analysts, lenders, investors and others, to evaluate companies because it excludes certain items that can vary widely across different industries or among companies within the same industry. For example, interest expense can be dependent on a company's capital structure, debt levels and credit ratings. Accordingly, the impact of interest expense on earnings can vary significantly among companies. The tax positions of companies can also vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the jurisdictions in which they operate. As a result, effective tax rates and provision for income taxes can vary considerably among companies. EBITDA also excludes depreciation and amortization because companies utilize productive assets of different ages and use different methods of both acquiring and depreciating productive assets. These differences can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies.
Franchising Revenues and Margins: The company reports franchising revenues and margins which exclude marketing and reservation revenues, SkyTouch Technology and hotel operations. Marketing and reservation activities are excluded from revenues and operating margins since the company is required by its franchise agreements to use these fees collected for marketing and reservation activities. Cumulative reservation and marketing system fees not expended are recorded as a liability on the company's financial statements and are carried over to the next year and expended in accordance with the franchise agreements. Cumulative marketing and reservation expenditures in excess of system fees collected for marketing and reservation activities are recorded as a receivable on the company's financial statements. In addition, the company has the contractual authority to require that the franchisees in the system at any given point repay the company for any deficits related to marketing and reservation activities. Hotel operations reflect the company's ownership of three MainStay Suites hotels. SkyTouch Technology is a division of the company that develops and markets cloud-based technology products to help industry-wide hoteliers improve their efficiency and profitability. Hotel and SkyTouch Technology operations are excluded from franchising revenue and margins since they do not reflect the most accurate measure of the company's core franchising business but are adjacent, complimentary lines of business. These non-GAAP measures are a commonly used measure of performance in our industry and facilitate comparisons between the company and its competitors.
Choice Hotels, Choice Hotels International, Comfort Inn, Comfort Suites, Quality, Sleep Inn, Clarion, Cambria Suites, MainStay Suites, Suburban Extended Stay Hotel, Econo Lodge, Rodeway Inn, Ascend Hotel Collection and SkyTouch Technology are proprietary trademarks and service marks of Choice Hotels International.
© 2013 Choice Hotels International, Inc. All rights reserved.
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Choice Hotels International is one of the largest and most successful lodging franchisors in the world.