Choice Hotels Reports Full Year 2008 Adjusted Diluted EPS of $1.78, Domestic Unit Growth of 6.1%
SILVER SPRING, Md., Feb. 10 // PRNewswire-FirstCall // -- Choice Hotels International, Inc. (NYSE: CHH) today reported the following highlights for fourth quarter and full year 2008:
- Adjusted diluted earnings per share ("EPS") for full year 2008 were $1.78, compared to $1.74 for full year 2007. Diluted EPS were $1.60 for full year 2008 compared to $1.70 for 2007.
- Adjusted earnings before interest, taxes and depreciation ("Adjusted EBITDA") were $200.5 million for the year ended December 31, 2008, compared to $198.1 million for the same period of 2007. Operating income for full year 2008 was $174.6 million compared to $185.2 million for the same period of 2007.
- Adjusted EBITDA and adjusted EPS for the year ended December 31, 2008 excludes special items totaling $17.7 million and $0.18 diluted EPS, respectively related to $6.6 million of benefits resulting from the previously announced acceleration of the company's management succession plan, $3.5 million related to employee termination costs and $7.6 million related to an increase in reserves related to impaired notes receivable. Adjusted EBITDA and adjusted EPS for the year ended December 31, 2007 excludes special items totaling $4.3 million and $0.04 diluted EPS, respectively related to employee termination benefits.
- Adjusted EPS for the three months ended December 31, 2008 were $0.41, compared to $0.44 for the same period of 2007. Diluted EPS for the three months ended December 31, 2008 were $0.30 compared to $0.44 for the same period of 2007.
- Adjusted EBITDA were $46.9 million for the quarter ended December 31, 2008, compared to $50.4 million for the same period of 2007. Operating income for the three months ended December 31, 2008 was $34.1 million compared to $48.1 million for the same period of 2007.
- Adjusted EBITDA and adjusted EPS for the three months ended December 31, 2008 excludes special items totaling $10.8 million and $0.11 diluted EPS, respectively related to $0.5 million of benefits resulting from the previously announced acceleration of the company's management succession plan, $2.7 million related to employee termination benefits and $7.6 million related to an increase in reserves related to impaired notes receivable. Adjusted EBITDA for the same period of 2007 excludes $0.1 million of employee termination benefits.
- Domestic unit and room growth increased 6.1 percent and 5.6 percent, respectively, for full year 2008.
- Domestic system-wide revenue per available room (RevPAR) declined 1.8% for full year 2008 and 7.7% for fourth quarter 2008 compared to the same periods of 2007. The declines for full year and fourth quarter 2008 were primarily due to a 260 basis point and 500 basis point decline in occupancy, respectively, which was partially offset by increases in the average daily rate.
- The effective royalty rate increased 6 basis points to 4.20% for the full year 2008 compared to 4.14% for the same period of the prior year.
- Franchising revenues and total revenues increased 2% and 4%, respectively for full year 2008 compared to the same period in 2007. Franchising revenues declined 8% and total revenues declined 9% for fourth quarter 2008 compared to the same period in 2007.
- As a result of the current economic environment and credit market conditions, new domestic hotel franchise contracts for the three months ended December 31, 2008 declined 31% to 207 compared to 301 contracts executed in the same period of the prior year. Overall, new domestic hotel franchise contracts executed for full year 2008 declined 9% to 698 compared to 770 for full year 2007.
- The number of domestic hotels under construction, awaiting conversion or approved for development declined 2% from December 31, 2007 to 987 hotels representing 78,915 rooms; the worldwide pipeline increased 1% from December 31, 2007 to 1,108 hotels representing 89,105 rooms.
"While the last six months of 2008 represented a challenging time for the hotel industry, for the year, Choice Hotels was able to demonstrate strong domestic unit and room growth and increase its effective royalty rate, franchising revenues and total revenues," said Stephen P. Joyce, president and chief executive officer. "While we do not see any immediate economic turnaround or increased liquidity in the credit markets, Choice is uniquely positioned for long-term growth in this climate. With our proven, fee-based business model and financial strength, we have historically been able to perform well in a wide range of industry and economic environments. We remain focused on taking advantage of our tremendous long-term growth prospects while at the same time returning excess cash flows to our investors by way of share repurchases and dividends."
Outlook for 2009
The uncertainty around the current economic environment and credit market conditions and their impact on travel patterns and hotel development activities makes it difficult to predict future results, particularly as it relates to underlying assumptions for RevPAR, new hotel franchise and relicensing sales and interest and investment income and expense.
The company's first quarter 2009 diluted EPS is expected to be $0.24. The company expects full year 2009 diluted EPS of $1.68. EBITDA for full-year 2009 are expected to be approximately $178 million. These estimates include the following assumptions:
- The company expects net domestic unit growth of approximately 3.0% in 2009;
- RevPAR is expected to decline approximately 12% for first quarter 2009 and decline approximately 10% for full-year 2009;
- The effective royalty rate is expected to increase 3 basis points for full-year 2009;
- All figures assume the existing share count and an effective tax rate of 36.5% for first quarter 2009 and 36.5% for full year 2009.
Use of Free Cash Flow
The company has consistently used its free cash flow (cash flow from operations less capital expenditures) to return value to shareholders, primarily through share repurchases and dividends.
For the year ended December 31, 2008 the company paid $43.1 million of cash dividends to shareholders. The current quarterly divided rate per common share is $0.185, subject to declaration by our board of directors.
During the fourth quarter of 2008, the company's board of directors authorized an increase under the company's existing stock repurchase program to acquire up to an additional five million shares of its outstanding common stock. For the year ended December 31, 2008, the company purchased approximately 2.2 million shares of its common stock at an average price of $24.56 for a total cost of $54.7 million. Subsequent to December 31, 2008 and through February 10, 2009, the Company repurchased 0.5 million shares at a total cost of $13.5 million at an average price of $26.97 per share. The company has authorization to purchase up to an additional 5.5 million shares under the share repurchase program. We expect to continue making repurchases 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 41.3 million shares of its common stock for a total cost of $964.1 million through February 10, 2009. Considering the effect of a two-for-one stock split in October 2005, the company has repurchased 74.3 million shares under the share repurchase program at an average price of $12.98 per share.
Our Board has authorized us to enter into programs which permit us to offer financing, investment and guaranty support to qualified franchisees to incent multi-unit franchise development in top markets. We expect to opportunistically deploy this capital over the next several years. Our annual investment in these programs is dependent on market and other conditions. In addition to these programs, the company expects to continue to return value to its shareholders through a combination of share repurchases and dividends, also subject to market and other conditions.
Conference Call
Choice will conduct a conference call on Wednesday, February 11, 2009 at 10:00 a.m. EST to discuss the company's fourth quarter results. The dial-in number to listen to the call is 1-866-700-6293, and the access code is 24855286. International callers should dial 617-213-8835 and enter the access code 24855286. 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 1:00 p.m. EST on February 11, 2009 through March 11, 2009 by calling 1-888-286-8010 and entering access code 48757869. The international dial-in for the replay is 617-801-6888, access code 48757869. In addition, the call will be archived and available on choicehotels.com via the Investor Info link.
About Choice Hotels
Choice Hotels International franchises more than 5,800 hotels, representing more than 470,000 rooms, in the United States and more than 30 countries and territories. As of December 31, 2008, 987 hotels are under construction, awaiting conversion or approved for development in the United States, representing 78,915 rooms, and an additional 121 hotels, representing 10,190 rooms, are under construction, awaiting conversion or approved for 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. In addition, via its Ascend Collection membership program, travelers in the United States, Canada and the Caribbean have upscale lodging options at historic, boutique and unique hotels.
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 of 1933 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 of the company's revenue, earnings and other financial and operational measures, company debt levels, payment of stock 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, 2007, filed with the Securities and Exchange Commission on February 29, 2008. 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
Adjusted diluted EPS, adjusted EBITDA, franchising revenues and adjusted franchising margins are non-GAAP financial measurements. 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 diluted earnings per share, 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, tax expense, depreciation and amortization. Our management considers EBITDA to be an indicator of operating performance because it can be used to measure our ability to service debt, fund capital expenditures, and expand our business. EBITDA is a commonly used measure of performance in our industry. In addition, it is used by analysts, lenders, investors and others, as well as by us, to facilitate comparisons between the Company and its competitors because it excludes certain items that can vary widely across different industries or among companies within the same industry.
Franchising Revenues and Margins: The Company reports franchising revenues and margins which exclude marketing and reservations revenues and hotel operations. Marketing and reservation activities are excluded from revenues and operating margins since the Company is contractually required by its franchise agreements to use these fees collected for marketing and reservation activities. Cumulative reservation and marketing fees not expended are recorded as a payable on the Company's financial statements and are carried over to the next fiscal year and expended in accordance with the franchise agreements. Cumulative marketing and reservation expenditures in excess of 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 are excluded since they do not reflect the most accurate measure of the Company's core franchising business. These non-GAAP measures are a commonly used measure of performance in our industry and facilitate comparisons between the Company and its competitors.
Adjusted EBITDA, Adjusted Franchising Margins and Adjusted Diluted EPS: The Company's management also uses Adjusted EBITDA, Adjusted Franchising Margins and Adjusted Diluted EPS which exclude the impact of the acceleration of the Company's management succession plan, employee termination benefits, and additional reserves recorded on impaired notes receivable in the year ended December 31, 2008 and the impact of termination benefits incurred in the year ended December 31, 2007. The Company utilizes these non-GAAP measures to enable investors to perform meaningful comparisons of past, present and future operating results and as a means to emphasize the results of on-going operations.
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.
Choice Hotels International, Inc. Exhibit 1
Consolidated Statements of Income
(Unaudited)
Three Months Ended December 31,
-------------------------------
Variance
2008 2007 $ %
---- ---- --- ---
(In thousands, except per share amounts)
REVENUES:
Royalty fees $59,284 $60,623 $(1,339) (2%)
Initial
franchise and
relicensing fees 6,729 11,907 (5,178) (43%)
Procurement
services 3,498 3,680 (182) (5%)
Marketing and
reservation 81,904 89,963 (8,059) (9%)
Hotel operations 1,253 1,207 46 4%
Other 1,826 1,595 231 14%
----- ----- --- --
Total
revenues 154,494 168,975 (14,481) (9%)
OPERATING EXPENSES:
Selling,
general and
administrative 35,580 27,855 7,725 28%
Depreciation and
amortization 2,019 2,227 (208) (9%)
Marketing and
reservation 81,904 89,963 (8,059) (9%)
Hotel operations 894 839 55 7%
--- --- -- -
Total
operating
expenses 120,397 120,884 (487) 0%
Operating income 34,097 48,091 (13,994) (29%)
OTHER INCOME AND EXPENSES:
Interest expense 2,245 4,087 (1,842) (45%)
Interest and
other investment
(income) loss 4,431 1,106 3,325 301%
Equity in net
income of
affiliates (476) (393) (83) 21%
---- ---- --- --
Total other
income and
expenses, net 6,200 4,800 1,400 29%
----- ----- ----- --
Income before
income taxes 27,897 43,291 (15,394) (36%)
Income taxes 9,186 15,344 (6,158) (40%)
----- ------ ------ ---
Net income $18,711 $27,947 $(9,236) (33%)
======= ======= ======= ===
Weighted average
shares outstanding-
basic 61,166 62,086
====== ======
Weighted average
shares outstanding-
diluted 61,684 63,109
====== ======
Basic earnings per
share $0.31 $0.45 $(0.14) (31%)
===== ===== ====== ===
Diluted earnings
per share $0.30 $0.44 $(0.14) (32%)
===== ===== ====== ===
Twelve Months Ended December 31,
--------------------------------
Variance
2008 2007 $ %
---- ---- --- ---
(In thousands, except per share amounts)
REVENUES:
Royalty fees $247,435 $236,346 $11,089 5%
Initial
franchise and
relicensing fees 27,931 33,389 (5,458) (16%)
Procurement
services 17,148 16,283 865 5%
Marketing and
reservation 336,477 316,827 19,650 6%
Hotel operations 4,936 4,692 244 5%
Other 7,753 7,957 (204) (3%)
----- ----- ---- --
Total
revenues 641,680 615,494 26,186 4%
OPERATING EXPENSES:
Selling,
general and
administrative 118,989 101,590 17,399 17%
Depreciation and
amortization 8,184 8,637 (453) (5%)
Marketing and
reservation 336,477 316,827 19,650 6%
Hotel operations 3,434 3,241 193 6%
----- ----- --- --
Total
operating
expenses 467,084 430,295 36,789 9%
Operating income 174,596 185,199 (10,603) (6%)
OTHER INCOME AND EXPENSES:
Interest expense 10,932 14,293 (3,361) (24%)
Interest and
other investment
(income) loss 7,760 (1,750) 9,510 (543%)
Equity in net
income of
affiliates (1,414) (1,230) (184) 15%
------ ------ ---- --
Total other
income and
expenses, net 17,278 11,313 5,965 53%
------ ------ ----- --
Income before
income taxes 157,318 173,886 (16,568) (10%)
Income taxes 57,107 62,585 (5,478) (9%)
------ ------ ------ --
Net income $100,211 $111,301 $(11,090) (10%)
======== ======== ======== ===
Weighted average
shares outstanding-
basic 61,853 64,213
====== ======
Weighted average
shares outstanding-
diluted 62,521 65,331
====== ======
Basic earnings per
share $1.62 $1.73 $(0.11) (6%)
===== ===== ====== ==
Diluted earnings
per share $1.60 $1.70 $(0.10) (6%)
===== ===== ====== ==
Choice Hotels International, Inc. Exhibit 2
Consolidated Balance Sheets
(In thousands, except per
share amounts) December 31, December 31,
2008 2007
---- ----
(Unaudited)
ASSETS
Cash and cash equivalents $52,680 $46,377
Accounts receivable, net 43,141 40,855
Deferred income taxes 8,223 2,387
Investments, employee
benefit plans, at fair
value - 1,002
Other current assets 16,172 15,330
------ ------
Total current assets 120,216 105,951
Fixed assets and
intangibles, net 138,867 141,679
Receivable -- marketing fees 13,527 6,782
Investments, employee
benefit plans, at fair
value 25,360 33,488
Other assets 30,249 40,484
------ ------
Total assets $328,219 $328,384
-------- --------
LIABILITIES AND SHAREHOLDERS' DEFICIT
Accounts payable and
accrued expenses $79,897 $96,195
Deferred revenue 47,004 48,660
Deferred compensation &
retirement plan obligations 6,960 1,002
Other current liabilities 1,206 1,659
----- -----
Total current liabilities 135,067 147,516
Long-term debt 284,400 272,378
Deferred compensation &
retirement plan
obligations 33,462 43,132
Other liabilities 12,960 22,419
------ ------
Total liabilities 465,889 485,445
------- -------
Common stock, $0.01 par
value 607 621
Additional paid-in-capital 90,141 86,243
Accumulated other
comprehensive income (loss) (3,472) 346
Treasury stock, at cost (835,186) (798,110)
Retained earnings 610,240 553,839
------- -------
Total shareholders'
deficit (137,670) (157,061)
-------- --------
Total liabilities and
shareholders' deficit $328,219 $328,384
-------- --------
Choice Hotels International, Inc. Exhibit 3
Consolidated Statements of Cash Flows
(Unaudited)
Twelve Months
(In thousands) Ended December 31,
------------------
2008 2007
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $100,211 $111,301
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 8,184 8,637
Provision for bad debts 9,433 905
Non-cash stock compensation and other charges 10,914 11,124
Non-cash interest and other loss 9,300 29
Dividends received from equity
method investments 1,180 1,245
Equity in net income of affiliates (1,414) (1,230)
Changes in assets and liabilities, net
of acquisitions:
Receivables (4,358) 1,056
Receivable - marketing and
reservation fees, net (7,578) 11,997
Accounts payable (13,138) 13,053
Accrued expenses (3,206) (5,480)
Income taxes payable/receivable (1,870) (5,422)
Deferred income taxes 3,073 (7,649)
Deferred revenue (1,549) 1,493
Other assets (1,046) (2,554)
Other liabilities (3,737) 7,161
------ -----
NET CASH PROVIDED BY OPERATING ACTIVITIES 104,399 145,666
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in property and equipment (12,611) (11,963)
Acquisitions, net of cash acquired - (343)
Purchases of investments, employee
benefit plans (7,802) (8,686)
Proceeds from sales of investments,
employee benefit plans 7,819 6,049
Issuance of notes receivable (7,410) (7,395)
Collections of notes receivable 434 1,806
Other items, net (695) (752)
---- ----
NET CASH USED IN INVESTING ACTIVITIES (20,265) (21,284)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of long-term debt (100,000) (422)
Net borrowings pursuant to revolving
credit facility 112,000 100,199
Excess tax benefits from stock-based
compensation 10,135 6,209
Purchase of treasury stock (63,732) (185,935)
Dividends paid (43,142) (40,139)
Proceeds from exercise of stock options 9,026 5,749
----- -----
NET CASH USED IN FINANCING ACTIVITIES (75,713) (114,339)
------- --------
Net change in cash and cash equivalents 8,421 10,043
Effect of foreign exchange rate changes on cash
and cash equivalents (2,118) 493
Cash and cash equivalents at
beginning of period 46,377 35,841
------ ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $52,680 $46,377
======= =======
CHOICE HOTELS INTERNATIONAL, INC. EXHIBIT 4
SUPPLEMENTAL OPERATING INFORMATION
DOMESTIC HOTEL SYSTEM
(UNAUDITED)
For the Twelve Months Ended
December 31, 2008*
------------------------------------
Average Daily
Rate Occupancy RevPAR
---- --------- ------
Comfort Inn $79.84 60.1% $48.01
Comfort Suites 89.49 61.3% 54.82
Sleep 71.91 58.5% 42.10
----- ---- -----
Midscale without Food & Beverage 80.90 60.2% 48.66
----- ---- -----
Quality 71.42 52.0% 37.15
Clarion 84.48 50.0% 42.21
----- ---- -----
Midscale with Food & Beverage 74.18 51.6% 38.26
----- ---- -----
Econo Lodge 55.58 46.9% 26.05
Rodeway 55.04 47.5% 26.16
----- ---- -----
Economy 55.44 47.0% 26.08
----- ---- -----
MainStay 73.72 64.2% 47.34
Suburban 42.93 62.4% 26.80
----- ---- -----
Extended Stay 51.14 62.9% 32.17
----- ---- -----
Total $74.11 55.3% $40.98
====== ==== ======
For the Twelve Months Ended
December 31, 2007*
------------------------------------
Average Daily
Rate Occupancy RevPAR
---- --------- ------
Comfort Inn $77.14 63.1% $48.70
Comfort Suites 87.23 65.5% 57.11
Sleep 69.67 62.5% 43.52
----- ---- -----
Midscale without Food & Beverage 78.23 63.5% 49.70
----- ---- -----
Quality 70.30 54.2% 38.09
Clarion 80.86 51.7% 41.79
----- ---- -----
Midscale with Food & Beverage 72.74 53.6% 38.97
----- ---- -----
Econo Lodge 54.40 48.0% 26.10
Rodeway 53.24 47.6% 25.32
----- ---- -----
Economy 54.14 47.9% 25.93
----- ---- -----
MainStay 70.04 68.5% 47.98
Suburban 40.13 67.3% 27.01
----- ---- -----
Extended Stay 47.10 67.6% 31.83
----- ---- -----
Total $72.07 57.9% $41.75
====== ==== ======
Change
------
Average Daily
Rate Occupancy RevPAR
---- --------- ------
Comfort Inn 3.5% (300) bps (1.4%)
Comfort Suites 2.6% (420) bps (4.0%)
Sleep 3.2% (400) bps (3.3%)
--- --------- ----
Midscale without Food & Beverage 3.4% (330) bps (2.1%)
--- --------- ----
Quality 1.6% (220) bps (2.5%)
Clarion 4.5% (170) bps 1.0%
--- --------- ---
Midscale with Food & Beverage 2.0% (200) bps (1.8%)
--- --------- ----
Econo Lodge 2.2% (110) bps (0.2%)
Rodeway 3.4% (10) bps 3.3%
--- -------- ---
Economy 2.4% (90) bps 0.6%
--- -------- ---
MainStay 5.3% (430) bps (1.3%)
Suburban 7.0% (490) bps (0.8%)
--- --------- ----
Extended Stay 8.6% (470) bps 1.1%
--- --------- ---
Total 2.8% (260) bps (1.8%)
=== ========= ====
* Operating statistics represent hotel operations from December through
November.
For the Three Months Ended
December 31, 2008*
-----------------------------------
Average Daily
Rate Occupancy RevPAR
---- --------- ------
Comfort Inn $78.95 57.8% $45.59
Comfort Suites 88.09 57.6% 50.73
Sleep 71.48 55.1% 39.37
----- ---- -----
Midscale without Food & Beverage 80.00 57.3% 45.85
----- ---- -----
Quality 69.34 49.2% 34.08
Clarion 82.53 46.7% 38.51
----- ---- -----
Midscale with Food & Beverage 71.97 48.6% 35.00
----- ---- -----
Econo Lodge 55.36 45.5% 25.19
Rodeway 53.68 44.4% 23.81
----- ---- -----
Economy 54.90 45.2% 24.80
----- ---- -----
MainStay 74.71 61.4% 45.88
Suburban 44.08 57.1% 25.17
----- ---- -----
Extended Stay 52.65 58.2% 30.67
----- ---- -----
Total $72.97 52.6% $38.38
====== ==== ======
For the Three Months Ended
December 31, 2007*
-----------------------------------
Average Daily
Rate Occupancy RevPAR
---- --------- ------
Comfort Inn $77.45 63.9% $49.47
Comfort Suites 86.32 64.1% 55.29
Sleep 70.10 61.4% 43.03
----- ---- -----
Midscale without Food & Beverage 78.31 63.5% 49.76
----- ---- -----
Quality 69.86 53.4% 37.28
Clarion 82.27 52.3% 43.04
----- ---- -----
Midscale with Food & Beverage 72.68 53.1% 38.61
----- ---- -----
Econo Lodge 54.33 47.7% 25.89
Rodeway 52.17 46.7% 24.37
----- ---- -----
Economy 53.82 47.4% 25.52
----- ---- -----
MainStay 70.40 70.7% 49.77
Suburban 40.65 64.6% 26.24
----- ---- -----
Extended Stay 48.50 66.1% 32.04
----- ---- -----
Total $72.16 57.6% $41.58
====== ==== ======
Change
------
Average Daily
Rate Occupancy RevPAR
---- --------- ------
Comfort Inn 1.9% (610) bps (7.8%)
Comfort Suites 2.1% (650) bps (8.2%)
Sleep 2.0% (630) bps (8.5%)
--- --------- ----
Midscale without Food & Beverage 2.2% (620) bps (7.9%)
--- --------- ----
Quality (0.7%) (420) bps (8.6%)
Clarion 0.3% (560) bps (10.5%)
--- --------- -----
Midscale with Food & Beverage (1.0%) (450) bps (9.3%)
---- --------- ----
Econo Lodge 1.9% (220) bps (2.7%)
Rodeway 2.9% (230) bps (2.3%)
--- --------- ----
Economy 2.0% (220) bps (2.8%)
--- --------- ----
MainStay 6.1% (930) bps (7.8%)
Suburban 8.4% (750) bps (4.1%)
--- --------- ----
Extended Stay 8.6% (790) bps (4.3%)
--- --------- ----
Total 1.1% (500) bps (7.7%)
=== ========= ====
* Operating statistics represent hotel operations from September through
November.
For the Quarter Ended For the Twelve Months Ended
--------------------- ---------------------------
12/31/2008 12/31/2007 12/31/2008 12/31/2007
System-wide
effective
royalty rate 4.23% 4.15% 4.20% 4.14%
CHOICE HOTELS INTERNATIONAL, INC. EXHIBIT 5
SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA
(UNAUDITED)
December 31, December 31,
2008 2007
------------ ------------
Hotels Rooms Hotels Rooms
------ ----- ------ -----
Comfort Inn 1,462 114,573 1,434 112,042
Comfort Suites 541 42,152 481 37,358
Sleep 365 26,867 346 25,728
--- ------ --- ------
Midscale without Food & Beverage 2,368 183,592 2,261 175,128
----- ------- ----- -------
Quality 908 85,055 828 79,276
Clarion 150 21,497 167 23,319
--- ------ --- ------
Midscale with Food & Beverage 1,058 106,552 995 102,595
----- ------- --- -------
Econo Lodge 816 50,812 825 50,403
Rodeway 346 20,302 276 16,523
--- ------ --- ------
Economy 1,162 71,114 1,101 66,926
----- ------ ----- ------
MainStay 35 2,694 30 2,258
Suburban 60 7,256 54 6,773
-- ----- -- -----
Extended Stay 95 9,950 84 9,031
-- ----- -- -----
Ascend Collection 21 1,353 - -
Cambria Suites 12 1,323 4 459
-- ----- -- ---
Domestic Franchises 4,716 373,884 4,445 354,139
International Franchises 1,111 98,642 1,125 97,888
----- ------ ----- ------
Total Franchises 5,827 472,526 5,570 452,027
===== ======= ===== =======
Variance
--------
Hotels Rooms % %
------ ----- --- ---
Comfort Inn 28 2,531 2.0% 2.3%
Comfort Suites 60 4,794 12.5% 12.8%
Sleep 19 1,139 5.5% 4.4%
-- ----- --- ---
Midscale without Food & Beverage 107 8,464 4.7% 4.8%
--- ----- --- ---
Quality 80 5,779 9.7% 7.3%
Clarion (17) (1,822) (10.2%) (7.8%)
--- ------ ----- ----
Midscale with Food & Beverage 63 3,957 6.3% 3.9%
-- ----- --- ---
Econo Lodge (9) 409 (1.1%) 0.8%
Rodeway 70 3,779 25.4% 22.9%
-- ----- ---- ----
Economy 61 4,188 5.5% 6.3%
-- ----- --- ---
MainStay 5 436 16.7% 19.3%
Suburban 6 483 11.1% 7.1%
-- --- ---- ---
Extended Stay 11 919 13.1% 10.2%
-- --- ---- ----
Ascend Collection 21 1,353 NM NM
Cambria Suites 8 864 200.0% 188.2%
-- --- ----- -----
Domestic Franchises 271 19,745 6.1% 5.6%
International Franchises (14) 754 (1.2%) 0.8%
--- --- ---- ---
Total Franchises 257 20,499 4.6% 4.5%
=== ====== === ===
CHOICE HOTELS INTERNATIONAL, INC. EXHIBIT 6
SUPPLEMENTAL INFORMATION BY BRAND
DEVELOPMENT RESULTS -- DOMESTIC NEW HOTEL CONTRACTS
(UNAUDITED)
For the Twelve Months Ended
December 31, 2008
---------------------------
New
Construction Conversion Total
------------ ---------- -----
Comfort Inn 48 58 106
Comfort Suites 85 3 88
Sleep 72 4 76
-- -- --
Midscale without Food & Beverage 205 65 270
--- -- ---
Quality 5 147 152
Clarion 7 42 49
-- -- --
Midscale with Food & Beverage 12 189 201
-- --- ---
Econo Lodge 4 83 87
Rodeway 3 99 102
-- -- ---
Economy 7 182 189
-- --- ---
MainStay 12 - 12
Suburban 8 - 8
-- -- --
Extended Stay 20 - 20
-- -- --
Ascend Collection 1 1 2
Cambria Suites 16 - 16
-- -- --
Total Domestic System 261 437 698
=== === ===
For the Twelve Months Ended
December 31, 2007
---------------------------
New
Construction Conversion Total
------------ ---------- -----
Comfort Inn 48 62 110
Comfort Suites 114 4 118
Sleep 71 1 72
-- -- --
Midscale without Food & Beverage 233 67 300
--- -- ---
Quality 11 153 164
Clarion 6 42 48
-- -- --
Midscale with Food & Beverage 17 195 212
-- --- ---
Econo Lodge 3 77 80
Rodeway 2 99 101
-- -- ---
Economy 5 176 181
-- --- ---
MainStay 22 2 24
Suburban 21 3 24
-- -- --
Extended Stay 43 5 48
-- -- --
Ascend Collection - - -
Cambria Suites 29 - 29
-- -- --
Total Domestic System 327 443 770
=== === ===
% Change
--------
New
Construction Conversion Total
------------ ---------- -----
Comfort Inn 0% (6%) (4%)
Comfort Suites (25%) (25%) (25%)
Sleep 1% 300% 6%
-- --- --
Midscale without Food & Beverage (12%) (3%) (10%)
--- -- ---
Quality (55%) (4%) (7%)
Clarion 17% 0% 2%
-- -- --
Midscale with Food & Beverage (29%) (3%) (5%)
--- -- --
Econo Lodge 33% 8% 9%
Rodeway 50% 0% 1%
-- -- --
Economy 40% 3% 4%
-- -- --
MainStay (45%) (100%) (50%)
Suburban (62%) (100%) (67%)
--- ---- ---
Extended Stay (53%) (100%) (58%)
--- ---- ---
Ascend Collection NM NM NM
Cambria Suites (45%) NM (45%)
--- -- ---
Total Domestic System (20%) (1%) (9%)
=== == ==
For the Three Months Ended
December 31, 2008
--------------------------
New
Construction Conversion Total
------------ ---------- -----
Comfort Inn 15 17 32
Comfort Suites 20 - 20
Sleep 25 1 26
-- -- --
Midscale without Food & Beverage 60 18 78
-- -- --
Quality 1 39 40
Clarion 1 14 15
-- -- --
Midscale with Food & Beverage 2 53 55
-- -- --
Econo Lodge 1 28 29
Rodeway 1 34 35
-- -- --
Economy 2 62 64
-- -- --
MainStay 5 - 5
Suburban - - -
-- -- --
Extended Stay 5 - 5
-- -- --
Ascend Collection 1 - 1
Cambria Suites 4 - 4
-- -- --
Total Domestic System 74 133 207
== === ===
For the Three Months Ended
December 31, 2007
--------------------------
New
Construction Conversion Total
------------ ---------- -----
Comfort Inn 22 30 52
Comfort Suites 36 - 36
Sleep 38 - 38
-- -- --
Midscale without Food & Beverage 96 30 126
-- -- ---
Quality 4 57 61
Clarion 1 14 15
-- -- --
Midscale with Food & Beverage 5 71 76
-- -- --
Econo Lodge - 27 27
Rodeway - 37 37
-- -- --
Economy - 64 64
-- -- --
MainStay 12 1 13
Suburban 11 - 11
-- -- --
Extended Stay 23 1 24
-- -- --
Ascend Collection - - -
Cambria Suites 11 - 11
-- -- --
Total Domestic System 135 166 301
=== === ===
% Change
--------
New
Construction Conversion Total
------------ ---------- -----
Comfort Inn (32%) (43%) (38%)
Comfort Suites (44%) NM (44%)
Sleep (34%) NM (32%)
--- -- ---
Midscale without Food & Beverage (38%) (40%) (38%)
--- --- ---
Quality (75%) (32%) (34%)
Clarion 0% 0% 0%
-- -- --
Midscale with Food & Beverage (60%) (25%) (28%)
--- --- ---
Econo Lodge NM 4% 7%
Rodeway NM (8%) (5%)
-- -- --
Economy NM (3%) 0%
-- -- --
MainStay (58%) (100%) (62%)
Suburban (100%) NM (100%)
---- -- ----
Extended Stay (78%) (100%) (79%)
--- ---- ---
Ascend Collection NM NM NM
Cambria Suites (64%) NM (64%)
--- -- ---
Total Domestic System (45%) (20%) (31%)
=== === ===
CHOICE HOTELS INTERNATIONAL, INC. Exhibit 7
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.
December 31, 2008
Units
-----
New
Conversion Construction Total
---------- ------------- -----
Comfort Inn 51 125 176
Comfort Suites 3 279 282
Sleep Inn 2 157 159
-- --- ---
Midscale without Food &
Beverage 56 561 617
-- --- ---
Quality 69 14 83
Clarion 36 9 45
-- -- --
Midscale with Food & Beverage 105 23 128
--- -- ---
Econo Lodge 45 5 50
Rodeway 58 2 60
-- -- --
Economy 103 7 110
--- -- ---
MainStay - 38 38
Suburban - 34 34
-- -- --
Extended Stay - 72 72
-- -- --
Ascend Collection - 1 1
Cambria Suites - 59 59
-- -- --
Total 264 723 987
=== === ===
December 31, 2007
Units
-----
New
Conversion Construction Total
---------- ------------- -----
Comfort Inn 54 135 189
Comfort Suites 1 278 279
Sleep Inn - 138 138
-- --- ---
Midscale without Food &
Beverage 55 551 606
-- --- ---
Quality 71 15 86
Clarion 30 7 37
-- -- --
Midscale with Food & Beverage 101 22 123
--- -- ---
Econo Lodge 46 3 49
Rodeway 68 3 71
-- -- --
Economy 114 6 120
--- -- ---
MainStay 2 46 48
Suburban 4 40 44
-- -- --
Extended Stay 6 86 92
-- -- --
Ascend Collection - - -
Cambria Suites - 63 63
-- -- --
Total 276 728 1,004
=== === =====
Variance
--------
Conversion New Construction Total
---------- ---------------- -----
Units % Units % Units %
----- --- ----- --- ----- ---
Comfort Inn (3) (6%) (10) (7%) (13) (7%)
Comfort Suites 2 200% 1 0% 3 1%
Sleep Inn 2 NM 19 14% 21 15%
-- -- -- -- -- --
Midscale without Food &
Beverage 1 2% 10 2% 11 2%
-- -- -- -- -- --
Quality (2) (3%) (1) (7%) (3) (3%)
Clarion 6 20% 2 29% 8 22%
-- -- -- -- -- --
Midscale with Food &
Beverage 4 4% 1 5% 5 4%
-- -- -- -- -- --
Econo Lodge (1) (2%) 2 67% 1 2%
Rodeway (10) (15%) (1) (33%) (11) (15%)
--- --- -- --- --- ---
Economy (11) (10%) 1 17% (10) (8%)
--- --- -- -- --- --
MainStay (2) (100%) (8) (17%) (10) (21%)
Suburban (4) (100%) (6) (15%) (10) (23%)
-- ---- -- --- --- ---
Extended Stay (6) (100%) (14) (16%) (20) (22%)
-- ---- --- --- --- ---
Ascend Collection - NM 1 NM 1 NM
Cambria Suites - NM (4) (6%) (4) (6%)
-- -- -- -- -- --
Total (12) (4%) (5) (1%) (17) (2%)
=== == == == === ==
CHOICE HOTELS INTERNATIONAL, INC. EXHIBIT 8
SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION
(UNAUDITED)
CALCULATION OF FRANCHISING REVENUES AND ADJUSTED FRANCHISING MARGINS
Three Months Twelve Months
Ended Ended
(dollar amounts in thousands) December 31, December 31,
-------------- --------------
2008 2007 2008 2007
---- ---- ---- ----
Franchising Revenues:
Total Revenues $154,494 $168,975 $641,680 $615,494
Adjustments:
Marketing and
reservation revenues (81,904) (89,963) (336,477) (316,827)
Hotel operations (1,253) (1,207) (4,936) (4,692)
------ ------ ------ ------
Franchising Revenues $71,337 $77,805 $300,267 $293,975
------- ------- -------- --------
Franchising Margins:
Operating Margin:
Total Revenues $154,494 $168,975 $641,680 $615,494
Operating Income $34,097 $48,091 $174,596 $185,199
------- ------- -------- --------
Operating Margin 22.1% 28.5% 27.2% 30.1%
---- ---- ---- ----
Adjusted Franchising Margin:
Franchising Revenues $71,337 $77,805 $300,267 $293,975
Operating Income $34,097 $48,091 $174,596 $185,199
Acceleration of management
succession plan benefits 500 - 6,605 -
Employee termination benefits 2,731 141 3,537 4,250
Loan reserves related to
impaired notes receivable 7,555 - 7,555 -
Hotel operations (359) (368) (1,502) (1,451)
---- ---- ------ ------
$44,524 $47,864 $190,791 $187,998
------- ------- -------- --------
---- ---- ---- ----
Adjusted Franchising Margins 62.4% 61.5% 63.5% 64.0%
---- ---- ---- ----
CALCULATION OF ADJUSTED NET INCOME AND ADJUSTED DILUTED EARNINGS
PER SHARE (EPS)
Three Months Twelve Months
(In thousands, except Ended Ended
per share amounts) December 31, December 31,
-------------- --------------
2008 2007 2008 2007
---- ---- ---- ----
Net Income $18,711 $27,947 $100,211 $111,301
Adjustments:
Acceleration of management
succession plan benefits 313 - 4,135 -
Employee termination benefits 1,709 89 2,214 2,660
Loan reserves related to
impaired notes receivable 4,729 - 4,729 -
----- -- ----- --
Adjusted Net Income $25,462 $28,036 $111,289 $113,961
------- ------- -------- --------
Weighted average shares
outstanding-diluted 61,684 63,109 62,521 65,331
Diluted Earnings Per Share $0.30 $0.44 $1.60 $1.70
Adjustments:
Acceleration of management
succession plan - - 0.07 -
Employee termination benefits 0.03 - 0.03 0.04
Loan reserves related to
impaired notes receivable 0.08 - 0.08 -
---- -- ---- --
Adjusted Diluted Earnings
Per Share (EPS) $0.41 $0.44 $1.78 $1.74
----- ----- ----- -----
Adjusted EBITDA Reconciliation
(in millions)
Year Ended Year Ended
Q4 Q4 December 31, December 31, Full-Year
2008 2007 2008 2007 2009
Actuals Actuals Actuals Actuals Outlook
------- ------- ------------ ------------ ---------
Operating Income
(per GAAP) $34.1 $48.1 $174.6 $185.2 $169.2
Acceleration
of management
succession plan 0.5 - 6.6 - $-
Employee termination
benefits 2.7 0.1 3.5 4.3 $-
Loan reserves
related to
impaired notes
receivable 7.6 - 7.6 - $-
Depreciation
and amortization 2.0 2.2 8.2 8.6 8.8
--- --- --- --- ---
Adjusted Earnings
before interest,
taxes, depreciation
and amortization
(non-GAAP) $46.9 $50.4 $200.5 $198.1 $178.0
===== ===== ====== ====== ======
###
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