Choice Hotels Reports Second Quarter 2009 Adjusted Diluted EPS of $0.44, Domestic Unit Growth of 4.8%
SILVER SPRING, Md., July 29 // PRNewswire-FirstCall // -- Choice Hotels International, Inc., (NYSE: CHH) today reported the following highlights for second quarter 2009:
- Adjusted diluted earnings per share ("EPS") for second quarter 2009 were $0.44, compared to $0.49 for the same period of the prior year. Diluted EPS were $0.42 for second quarter 2009 compared to $0.43 for second quarter 2008. Adjusted diluted EPS for second quarter 2009 and 2008 exclude certain special items, as described below, totaling $0.02 and $0.06, respectively.
- Excluding special items, adjusted earnings before interest, taxes and depreciation ("EBITDA") were $42 million for the three months ended June 30, 2009, compared to $53.1 million for the same period of 2008. Operating income for the three months ended June 30, 2009 was $38.1 million compared to $44.6 million for the same period of 2008.
- Adjusted selling, general and administrative ("SG&A") costs for the second quarter of 2009 totaled $25.2 million which represented a 10% decline from the same period of the prior year. Adjusted SG&A costs exclude special items totaling $1.9 million and $6.4 million for the three months ended June 30, 2009 and 2008, respectively.
- Domestic unit and room growth increased 4.8 percent and 4.5 percent, respectively, from June 30, 2008.
- Domestic system-wide revenue per available room ("RevPAR") declined 15.7% for the second quarter of 2009 compared to the same period of 2008.
- The effective royalty rate increased 6 basis points to 4.26% for the three months ended June 30, 2009 compared to 4.20% for the same period of the prior year.
- Franchising revenues declined 17% from $80.5 million for the three months ended June 30, 2008 compared to $66.9 million for the same period of 2009. Total revenues for the three months ended June 30, 2009 declined 14% compared to the same period of 2008.
- The company executed 118 new domestic hotel franchise contracts for the three months ended June 30, 2009, a decline of 40% compared to the 198 contracts executed in the same period of the prior year.
- The number of domestic hotels under construction, awaiting conversion or approved for development declined 17% from June 30, 2008 to 827 hotels representing 64,384 rooms; the worldwide pipeline declined 15% from June 30, 2008 to 937 hotels representing 73,121 rooms.
"Despite the extremely challenging industry-wide RevPAR environment and significant decline in domestic hotel transactions across the industry, the appeal of our brands, strong marketing and guest distribution platform, as well as our franchise sales expertise once again enabled us to achieve significant domestic unit and room growth." said Stephen P. Joyce, president and chief executive officer. "In this environment, our value-oriented brands position us well to serve travelers looking for ways to stretch their travel budgets. Additionally, on account of our conversion brands, we are particularly well positioned in this environment to increase our market share as the lodging cycle progresses. We also remain focused on returning value to our shareholders, and during the first half of 2009 we returned $57.2 million to shareholders through a combination of share repurchases and dividends."
Special Items
During the three and six months ended June 30, 2009, the company recorded employee termination benefits of approximately $0.4 million and $0.8 million, respectively. In addition, during the three months ended June 30, 2009, the company recorded a $1.5 million charge related to the sublease of a portion of its office space. These special items represent diluted EPS of $0.02 for both the three and six months ended June 30, 2009.
During the three and six months ended June 30, 2008, the company recorded employee termination benefits of approximately $0.3 million and $0.4 million, respectively. Furthermore, the company incurred $6.1 million of benefit costs during the three months ended June 30, 2008 resulting from the acceleration of the company's management succession plan. These special items represented diluted EPS of $0.06 for both the three and six months ended June 30, 2008.
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 they relate to underlying assumptions for RevPAR, new hotel franchise and relicensing sales and interest and investment income and expense.
The company's third quarter 2009 adjusted diluted EPS is expected to be $0.51. The company expects full-year of 2009 adjusted diluted EPS of $1.66. Adjusted EBITDA for the full-year of 2009 are expected to be approximately $169 million. These estimates include the following assumptions:
- The company expects net domestic unit growth of approximately 3.25% in 2009;
- RevPAR is expected to decline approximately 15% for the third quarter of 2009 and decline approximately 13% for the full-year of 2009;
- The effective royalty rate is expected to increase 5 basis points for the full-year of 2009;
- All figures assume the existing share count and an effective tax rate of 36.5% for the third quarter and full-year of 2009;
- Adjusted EBITDA and adjusted diluted EPS for third quarter 2009 exclude $1.3 million ($0.8 million after tax and approximately $0.01 diluted EPS) of operating expenses related to employee termination benefits.
- Adjusted EBITDA and adjusted diluted EPS for full year 2009 exclude $3.6 million ($2.2 million after tax and approximately $0.04 diluted EPS) of operating expenses related to employee termination benefits and a loss on the sublease of office space.
Use of Free Cash Flow
The company has historically 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 six months ended June 30, 2009 the company paid $22.3 million of cash dividends to shareholders. The current quarterly dividend rate per common share is $0.185, subject to declaration by our board of directors.
For the three months ended June 30, 2009, the company purchased approximately 0.6 million shares of its common stock at an average price of $26.42 for a total cost of $16.8 million under the share repurchase program. For the six months ended June 30, 2009, the company purchased approximately 1.3 million shares of its common stock at an average price of $26.63 for a total cost of $34.9 million. Subsequent to June 30, 2009 and through July 29, 2009, the Company repurchased an additional 0.4 million shares at a total cost of $10.0 million at an average price of $26.24 and has authorization to purchase up to an additional 4.3 million shares under this 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 42.5 million shares of its common stock for a total cost of $995.4 million through July 29, 2009. Considering the effect of a two-for-one stock split in October 2005, the company has repurchased 75.5 million shares under the share repurchase program at an average price of $13.19 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. Notwithstanding these programs, 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.
Impact of the Adoption of New Accounting Pronouncements on Earnings Per Share
In June 2008, the Financial Accounting Standards Board ("FASB") issued FASB Staff Position Emerging Issues Task Force No. 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities" ("FSP EITF 03-6-1"). FSP EITF 03-6-1 clarified that all share-based payment awards that contain rights to non-forfeitable dividends participate in undistributed earnings with common shareholders. Therefore, awards of this nature are considered participating securities and the two-class method of computing basic and diluted earnings per share must be applied rather than the treasury stock method. FSP EITF 03-6-1 is effective for fiscal years beginning after December 15, 2008. In addition, once effective, all prior period earnings per share data presented must be adjusted retrospectively to conform to the provisions of FSP EITF 03-6-1.
The Company's outstanding unvested restricted stock awards contain rights to non-forfeitable dividends and as a result, the Company applied this guidance in the first quarter of 2009. The two-class method of calculating earnings per share is more dilutive to both basic and diluted shares outstanding than the previously utilized treasury stock method. In accordance with FSP EITF 03-6-1, the Company has retrospectively adjusted its basic and diluted shares outstanding for the three and six months ended June 30, 2008 under the two-class method which resulted in a reduction of the Company's basic and diluted earnings per share for the six months ended June 30, 2008 from $0.74 to $0.73 and $0.73 to $0.72 per share, respectively.
Conference Call
Choice will conduct a conference call on Thursday, July 30, 2009 at 10:00 a.m. EDT to discuss the company's second quarter results. The dial-in number to listen to the call is 1-800-599-9816, and the access code is 81224116. International callers should dial 1-617-847-8705 and enter the access code 81224116. 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. EDT on July 30, 2009 through August 30, 2009 by calling 1-888-286-8010 and entering access code 30288765. The international dial-in number for the replay is 617-801-6888, access code 30288765. In addition, the call will be archived and available on choicehotels.com via the Investor Info link.
About Choice Hotels
Choice Hotels International, Inc. franchises more than 5,900 hotels, representing more than 479,000 rooms, in the United States and more than 30 other countries and territories. As of June 30, 2009, more than 800 hotels are under construction, awaiting conversion or approved for development in the United States, representing more than 64,000 rooms, and an additional 110 hotels, representing approximately 8,700 rooms, are 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 serve guests worldwide. In addition, via its Ascend Collection membership program, travelers in the United States 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, 2008, filed with the Securities and Exchange Commission on March 2, 2009. 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, adjusted SG&A, 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 reservation 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 Diluted EPS, Adjusted EBITDA, Adjusted SG&A and Adjusted Franchising Margins: The Company's management also uses adjusted diluted EPS, adjusted EBITDA, adjusted SG&A and adjusted franchising margins which exclude employee termination benefits and a loss on the sublease of a portion of the Company's office space for 2009 and the impact of the acceleration of the Company's management succession plan and employee termination benefits for the periods ended June 30, 2008. 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.
2009 Choice Hotels International, Inc. All rights reserved.
Choice Hotels International, Inc. Exhibit 1
Consolidated Statements of Income
(Unaudited)
Three Months Ended June 30,
---------------------------
Variance
2009 2008 $ %
---- ---- - -
(In thousands, except per share amounts)
REVENUES:
Royalty fees $54,929 $63,776 $(8,847) (14%)
Initial franchise and relicensing
fees 3,993 8,146 (4,153) (51%)
Procurement services 6,772 6,472 300 5%
Marketing and reservation 75,296 85,336 (10,040) (12%)
Hotel operations 1,179 1,288 (109) (8%)
Other 1,174 2,102 (928) (44%)
----- ----- ---- ----
Total revenues 143,343 167,120 (23,777) (14%)
OPERATING EXPENSES:
Selling, general and administrative 27,076 34,275 (7,199) (21%)
Depreciation and amortization 2,032 2,070 (38) (2%)
Marketing and reservation 75,296 85,336 (10,040) (12%)
Hotel operations 829 861 (32) (4%)
--- --- --- ---
Total operating expenses 105,233 122,542 (17,309) (14%)
Operating income 38,110 44,578 (6,468) (15%)
OTHER INCOME AND EXPENSES:
Interest expense 1,265 2,693 (1,428) (53%)
Interest and other investment
(income) loss (3,173) (141) (3,032) 2150%
Equity in net income of affiliates (225) (201) (24) 12%
---- ---- --- ---
Total other income and expenses,
net (2,133) 2,351 (4,484) (191%)
------ ----- ------ -----
Income before income taxes 40,243 42,227 (1,984) (5%)
Income taxes 14,740 15,219 (479) (3%)
------ ------ ---- ---
Net income $25,503 $27,008 $(1,505) (6%)
======= ======= ======= ===
Weighted average shares outstanding-
basic* 60,467 62,739
====== ======
Weighted average shares outstanding-
diluted* 60,598 63,365
====== ======
Basic earnings per share* $0.42 $0.43 $(0.01) (2%)
===== ===== ====== ===
Diluted earnings per share* $0.42 $0.43 $(0.01) (2%)
===== ===== ====== ===
Six Months Ended June 30,
-------------------------
Variance
2009 2008 $ %
---- ---- - -
(In thousands, except per share amounts)
REVENUES:
Royalty fees $98,370 $111,556 $(13,186) (12%)
Initial franchise and relicensing
fees 6,642 14,190 (7,548) (53%)
Procurement services 10,162 9,814 348 4%
Marketing and reservation 137,338 153,762 (16,424) (11%)
Hotel operations 2,297 2,330 (33) (1%)
Other 2,692 4,323 (1,631) (38%)
----- ----- ------ ----
Total revenues 257,501 295,975 (38,474) (13%)
OPERATING EXPENSES:
Selling, general and administrative 48,537 57,830 (9,293) (16%)
Depreciation and amortization 4,147 4,127 20 0%
Marketing and reservation 137,338 153,762 (16,424) (11%)
Hotel operations 1,614 1,626 (12) (1%)
----- ----- --- ---
Total operating expenses 191,636 217,345 (25,709) (12%)
Operating income 65,865 78,630 (12,765) (16%)
OTHER INCOME AND EXPENSES:
Interest expense 2,805 6,530 (3,725) (57%)
Interest and other investment
(income) loss (2,341) 927 (3,268) (353%)
Equity in net income of affiliates (443) (502) 59 (12%)
---- ---- -- ----
Total other income and expenses,
net 21 6,955 (6,934) (100%)
-- ----- ------ -----
Income before income taxes 65,844 71,675 (5,831) (8%)
Income taxes 24,033 26,090 (2,057) (8%)
------ ------ ------ ---
Net income $41,811 $45,585 $(3,774) (8%)
======= ======= ======= ===
Weighted average shares outstanding-
basic* 60,499 62,489
====== ======
Weighted average shares outstanding-
diluted* 60,708 63,200
====== ======
Basic earnings per share* $0.69 $0.73 $(0.04) (5%)
===== ===== ====== ===
Diluted earnings per share* $0.69 $0.72 $(0.03) (4%)
===== ===== ====== ===
* The Company's weighted average shares outstanding for the three and six
months ended June 30, 2008 have been retrospectively adjusted due to the
application of EITF Issue 03-6-1 "Determining Whether Instruments
Granted in Share Based Payment Transactions are Participating
Securities" which became effective for the Company in 2009. The
application of this guidance has resulted in the revision of basic and
diluted earnings per share for the six months ended June 30, 2008 from
$0.74 to $0.73 and $0.73 to $0.72 per share, respectively.
Choice Hotels International, Inc. Exhibit 2
Consolidated Balance Sheets
(In thousands, except per share amounts) June 30, December 31,
2009 2008
---- ----
(Unaudited)
ASSETS
Cash and cash equivalents $61,810 $52,680
Accounts receivable, net 44,430 43,141
Deferred income taxes 8,223 8,223
Other current assets 12,526 16,172
------ ------
Total current assets 126,989 120,216
Fixed assets and intangibles, net 136,035 138,867
Receivable -- marketing and
reservation fees 35,687 13,527
Investments, employee benefit plans,
at fair value 28,855 25,360
Other assets 30,355 30,249
------ ------
Total assets $357,921 $328,219
-------- --------
LIABILITIES AND SHAREHOLDERS' DEFICIT
Accounts payable and accrued expenses $74,680 $79,897
Deferred revenue 53,135 47,004
Deferred compensation & retirement
plan obligations 2,961 6,960
Other current liabilities 19,180 1,206
------ -----
Total current liabilities 149,956 135,067
Long-term debt 304,100 284,400
Deferred compensation & retirement
plan obligations 34,852 33,462
Other liabilities 10,367 12,960
------ ------
Total liabilities 499,275 465,889
------- -------
Common stock, $0.01 par value 601 607
Additional paid-in-capital 84,308 90,141
Accumulated other comprehensive loss (2,073) (3,472)
Treasury stock, at cost (854,033) (835,186)
Retained earnings 629,843 610,240
------- -------
Total shareholders' deficit (141,354) (137,670)
-------- --------
Total liabilities and
shareholders' deficit $357,921 $328,219
-------- --------
Choice Hotels International, Inc. Exhibit 3
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
(In thousands) June 30,
----------------
2009 2008
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $41,811 $45,585
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,147 4,127
Provision for bad debts 743 271
Non-cash stock compensation and other charges 6,601 7,739
Non-cash interest and other (income) loss (2,107) 1,716
Dividends received from equity method investments 488 438
Equity in net income of affiliates (443) (502)
Changes in assets and liabilities:
Receivables (1,774) (4,759)
Receivable - marketing and reservation fees, net (19,513) (14,209)
Accounts payable 1,523 (8,928)
Accrued expenses (7,167) (9,741)
Income taxes payable/receivable 20,093 5,296
Deferred income taxes - 2,553
Deferred revenue 6,083 4,097
Other assets 1,574 328
Other liabilities (3,685) 3,741
------ -----
NET CASH PROVIDED BY OPERATING ACTIVITIES 48,374 37,752
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in property and equipment (4,989) (5,460)
Purchases of investments, employee benefit plans (2,464) (6,068)
Proceeds from sales of investments, employee
benefit plans 1,171 5,678
Issuance of notes receivable (1,329) (1,684)
Collections of notes receivable 125 257
Other items, net (246) (423)
---- ----
NET CASH USED IN INVESTING ACTIVITIES (7,732) (7,700)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of long-term debt - (100,000)
Net borrowings pursuant to revolving credit
facility 19,700 91,900
Excess tax benefits from stock-based compensation 2,033 4,303
Purchase of treasury stock (36,350) (1,506)
Dividends paid (22,321) (21,013)
Proceeds from exercise of stock options 4,603 5,914
----- -----
NET CASH USED IN FINANCING ACTIVITIES (32,335) (20,402)
------- -------
Net change in cash and cash equivalents 8,307 9,650
Effect of foreign exchange rate changes on cash
and cash equivalents 823 518
Cash and cash equivalents at beginning of period 52,680 46,377
------ ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $61,810 $56,545
======= =======
CHOICE HOTELS INTERNATIONAL, INC. Exhibit 4
SUPPLEMENTAL OPERATING INFORMATION
DOMESTIC HOTEL SYSTEM
(UNAUDITED)
For the Six Months Ended For the Six Months Ended
June 30, 2009* June 30, 2008*
------------------------- -------------------------
Average Average
Daily Daily
Rate Occupancy RevPAR Rate Occupancy RevPAR
-------- --------- ------ -------- --------- ------
Comfort Inn $75.01 50.5% $37.90 $76.67 56.4% $43.22
Comfort Suites 85.14 51.2% 43.56 88.35 59.3% 52.41
Sleep 68.94 49.6% 34.20 70.33 56.4% 39.66
----- ---- ----- ----- ---- -----
Midscale
without Food &
Beverage 76.57 50.5% 38.70 78.41 57.0% 44.71
----- ---- ----- ----- ---- -----
Quality 66.15 43.3% 28.64 68.85 48.7% 33.56
Clarion 75.98 40.5% 30.76 82.06 47.0% 38.58
----- ---- ----- ----- ---- -----
Midscale with
Food &
Beverage 68.10 42.7% 29.08 71.73 48.4% 34.69
----- ---- ----- ----- ---- -----
Econo Lodge 52.68 40.3% 21.24 52.63 43.1% 22.66
Rodeway 50.41 40.0% 20.16 51.40 44.6% 22.93
----- ---- ----- ----- ---- -----
Economy 52.03 40.2% 20.93 52.31 43.4% 22.72
----- ---- ----- ----- ---- -----
MainStay 70.90 55.3% 39.19 71.77 62.7% 44.99
Suburban 42.76 53.9% 23.05 42.19 63.5% 26.81
----- ---- ----- ----- ---- -----
Extended Stay 50.68 54.3% 27.51 49.77 63.3% 31.52
----- ---- ----- ----- ---- -----
Total $69.57 46.5% $32.37 $71.63 52.2% $37.36
====== ==== ====== ====== ==== ======
* Operating statistics represent hotel operations from December through
May
For the Three Months Ended For the Three Months Ended
June 30, 2009* June 30, 2008*
--------------------------- ---------------------------
Average Average
Daily Daily
Rate Occupancy RevPAR Rate Occupancy RevPAR
-------- --------- ------ -------- --------- ------
Comfort Inn $75.86 55.0% $41.72 $79.05 62.1% $49.11
Comfort Suites 85.67 55.0% 47.12 90.19 64.4% 58.12
Sleep 70.10 54.1% 37.94 72.44 62.5% 45.26
----- ---- ----- ----- ---- -----
Midscale
without Food &
Beverage 77.38 54.9% 42.46 80.61 62.7% 50.53
----- ---- ----- ----- ---- -----
Quality 67.27 47.3% 31.83 70.79 54.0% 38.22
Clarion 77.52 43.8% 33.96 83.88 52.7% 44.16
----- ---- ----- ----- ---- -----
Midscale with
Food &
Beverage 69.29 46.6% 32.28 73.64 53.7% 39.54
----- ---- ----- ----- ---- -----
Econo Lodge 53.54 43.5% 23.30 53.96 47.5% 25.63
Rodeway 51.07 42.8% 21.87 52.83 47.9% 25.30
----- ---- ----- ----- ---- -----
Economy 52.83 43.3% 22.89 53.67 47.6% 25.55
----- ---- ----- ----- ---- -----
MainStay 70.76 59.7% 42.25 74.00 66.9% 49.50
Suburban 42.89 55.7% 23.90 43.15 67.6% 29.16
----- ---- ----- ----- ---- -----
Extended Stay 51.05 56.8% 29.02 51.15 67.4% 34.47
----- ---- ----- ----- ---- -----
Total $70.53 50.4% $35.58 $73.57 57.4% $42.22
====== ==== ====== ====== ==== ======
* Operating statistics represent hotel operations from March through May
For the Quarter Ended For the Six Months Ended
--------------------- ------------------------
6/30/2009 6/30/2008 6/30/2009 6/30/2008
System-wide
effective
royalty rate 4.26% 4.20% 4.26% 4.20%
Change
------
Average
Daily
Rate Occupancy RevPAR
---- --------- ------
Comfort Inn (2.2%) (590) bps (12.3%)
Comfort Suites (3.6%) (810) bps (16.9%)
Sleep (2.0%) (680) bps (13.8%)
---- ---- --- -----
Midscale
without Food &
Beverage (2.3%) (650) bps (13.4%)
---- ---- --- -----
Quality (3.9%) (540) bps (14.7%)
Clarion (7.4%) (650) bps (20.3%)
---- ---- --- -----
Midscale with
Food &
Beverage (5.1%) (570) bps (16.2%)
---- ---- --- -----
Econo Lodge 0.1% (280) bps (6.3%)
Rodeway (1.9%) (460) bps (12.1%)
---- ---- --- -----
Economy (0.5%) (320) bps (7.9%)
---- ---- --- ----
MainStay (1.2%) (740) bps (12.9%)
Suburban 1.4% (960) bps (14.0%)
--- ---- --- -----
Extended Stay 1.8% (900) bps (12.7%)
--- ---- --- -----
Total (2.9%) (570) bps (13.4%)
==== ==== === =====
* Operating statistics represent hotel operations from
December through May
Change
------
Average
Daily
Rate Occupancy RevPAR
---- --------- ------
Comfort Inn (4.0%) (710) bps (15.0%)
Comfort Suites (5.0%) (940) bps (18.9%)
Sleep (3.2%) (840) bps (16.2%)
---- ---- --- -----
Midscale
without Food &
Beverage (4.0%) (780) bps (16.0%)
---- ---- --- -----
Quality (5.0%) (670) bps (16.7%)
Clarion (7.6%) (890) bps (23.1%)
---- ---- --- -----
Midscale with
Food &
Beverage (5.9%) (710) bps (18.4%)
---- ---- --- -----
Econo Lodge (0.8%) (400) bps (9.1%)
Rodeway (3.3%) (510) bps (13.6%)
---- ---- --- -----
Economy (1.6%) (430) bps (10.4%)
---- ---- --- -----
MainStay (4.4%) (720) bps (14.6%)
Suburban (0.6%) (1,190) bps (18.0%)
---- ------ --- -----
Extended Stay (0.2%) (1,060) bps (15.8%)
---- ------ --- -----
Total (4.1%) (700) bps (15.7%)
==== ==== === =====
* Operating statistics represent hotel operations from
March through May
CHOICE HOTELS INTERNATIONAL, INC. Exhibit 5
SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA
(UNAUDITED)
June 30, 2009 June 30, 2008
------------- -------------
Hotels Rooms Hotels Rooms
------ ----- ------ -----
Comfort Inn 1,461 114,531 1,449 113,230
Comfort Suites 576 45,056 504 39,155
Sleep 376 27,576 353 26,179
--- ------ --- ------
Midscale without Food &
Beverage 2,413 187,163 2,306 178,564
----- ------- ----- -------
Quality 941 86,675 868 82,120
Clarion 163 23,444 170 23,099
--- ------ --- ------
Midscale with Food &
Beverage 1,104 110,119 1,038 105,219
----- ------- ----- -------
Econo Lodge 796 49,596 834 51,947
Rodeway 362 20,840 319 18,761
--- ------ --- ------
Economy 1,158 70,436 1,153 70,708
----- ------ ----- ------
MainStay 37 2,866 32 2,448
Suburban 64 7,657 57 6,930
-- ----- -- -----
Extended Stay 101 10,523 89 9,378
--- ------ -- -----
Ascend Collection 22 1,444 - -
Cambria Suites 14 1,540 7 766
-- ----- --- ---
Domestic Franchises 4,812 381,225 4,593 364,635
International Franchises 1,102 98,603 1,115 99,030
----- ------ ----- ------
Total Franchises 5,914 479,828 5,708 463,665
===== ======= ===== =======
Variance
--------
Hotels Rooms % %
------ ----- - -
Comfort Inn 12 1,301 0.8% 1.1%
Comfort Suites 72 5,901 14.3% 15.1%
Sleep 23 1,397 6.5% 5.3%
-- ----- --- ---
Midscale without Food &
Beverage 107 8,599 4.6% 4.8%
--- ----- --- ---
Quality 73 4,555 8.4% 5.5%
Clarion (7) 345 (4.1%) 1.5%
-- --- ---- ---
Midscale with Food &
Beverage 66 4,900 6.4% 4.7%
-- ----- --- ---
Econo Lodge (38) (2,351) (4.6%) (4.5%)
Rodeway 43 2,079 13.5% 11.1%
-- ----- ---- ----
Economy 5 (272) 0.4% (0.4%)
--- ---- --- ----
MainStay 5 418 15.6% 17.1%
Suburban 7 727 12.3% 10.5%
--- --- ---- ----
Extended Stay 12 1,145 13.5% 12.2%
-- ----- ---- ----
Ascend Collection 22 1,444 NM NM
Cambria Suites 7 774 100.0% 101.0%
--- --- ----- -----
Domestic Franchises 219 16,590 4.8% 4.5%
International Franchises (13) (427) (1.2%) (0.4%)
--- ---- ---- ----
Total Franchises 206 16,163 3.6% 3.5%
=== ====== === ===
CHOICE HOTELS INTERNATIONAL, INC. Exhibit 6
SUPPLEMENTAL INFORMATION BY BRAND
DEVELOPMENT RESULTS -- DOMESTIC NEW HOTEL CONTRACTS
(UNAUDITED)
For the Six Months Ended For the Six Months Ended
June 30, 2009 June 30, 2008
----------------------------- ------------------------
New New
Construction Conversion Total Construction Conversion Total
------------ ---------- ----- ------------ ---------- -----
Comfort Inn 2 15 17 22 27 49
Comfort Suites 5 1 6 42 3 45
Sleep 7 2 9 32 2 34
--- --- --- -- --- --
Midscale
without Food &
Beverage 14 18 32 96 32 128
-- -- -- -- -- ---
Quality 2 64 66 2 75 77
Clarion - 14 14 5 21 26
--- -- -- --- -- --
Midscale with
Food &
Beverage 2 78 80 7 96 103
--- -- -- --- -- ---
Econo Lodge - 29 29 1 39 40
Rodeway 1 28 29 2 48 50
--- -- -- --- -- --
Economy 1 57 58 3 87 90
--- -- -- --- -- --
MainStay 1 1 2 1 - 1
Suburban 2 - 2 4 - 4
--- --- --- --- --- ---
Extended Stay 3 1 4 5 - 5
--- --- --- --- --- ---
Ascend
Collection - 2 2 - - -
Cambria Suites 2 - 2 5 - 5
--- --- --- --- --- ---
Total Domestic
System 22 156 178 116 215 331
== === === === === ===
For the Three Months Ended For the Three Months Ended
June 30, 2009 June 30, 2008
----------------------------- --------------------------
New New
Construction Conversion Total Construction Conversion Total
------------ ---------- ----- ------------ ---------- -----
Comfort Inn 2 8 10 11 18 29
Comfort Suites 4 - 4 27 - 27
Sleep 5 2 7 21 - 21
--- --- --- -- --- --
Midscale
without Food &
Beverage 11 10 21 59 18 77
-- -- -- -- -- --
Quality 1 41 42 2 47 49
Clarion - 8 8 4 11 15
--- --- --- --- -- --
Midscale with
Food &
Beverage 1 49 50 6 58 64
--- -- -- --- -- --
Econo Lodge - 20 20 - 20 20
Rodeway - 21 21 1 30 31
--- -- -- --- -- --
Economy - 41 41 1 50 51
--- -- -- --- -- --
MainStay 1 - 1 - - -
Suburban 2 - 2 2 - 2
--- --- --- --- --- ---
Extended Stay 3 - 3 2 - 2
--- --- --- --- --- ---
Ascend
Collection - 2 2 - - -
Cambria Suites 1 - 1 4 - 4
--- --- --- --- --- ---
Total Domestic
System 16 102 118 72 126 198
== === === == === ===
% Change
--------
New
Construction Conversion Total
------------ ---------- -----
Comfort Inn (91%) (44%) (65%)
Comfort Suites (88%) (67%) (87%)
Sleep (78%) 0% (74%)
--- - ---
Midscale
without Food &
Beverage (85%) (44%) (75%)
--- --- ---
Quality 0% (15%) (14%)
Clarion (100%) (33%) (46%)
---- --- ---
Midscale with
Food &
Beverage (71%) (19%) (22%)
--- --- ---
Econo Lodge (100%) (26%) (28%)
Rodeway (50%) (42%) (42%)
--- --- ---
Economy (67%) (34%) (36%)
--- --- ---
MainStay 0% NM 100%
Suburban (50%) NM (50%)
--- -- ---
Extended Stay (40%) NM (20%)
--- -- ---
Ascend
Collection NM NM NM
Cambria Suites (60%) NM (60%)
--- -- ---
Total Domestic
System (81%) (27%) (46%)
=== === ===
% Change
--------
New
Construction Conversion Total
------------ ---------- -----
Comfort Inn (82%) (56%) (66%)
Comfort Suites (85%) NM (85%)
Sleep (76%) NM (67%)
--- -- ---
Midscale
without Food &
Beverage (81%) (44%) (73%)
--- --- ---
Quality (50%) (13%) (14%)
Clarion (100%) (27%) (47%)
---- --- ---
Midscale with
Food &
Beverage (83%) (16%) (22%)
--- --- ---
Econo Lodge NM 0% 0%
Rodeway (100%) (30%) (32%)
---- --- ---
Economy (100%) (18%) (20%)
---- --- ---
MainStay NM NM NM
Suburban 0% NM 0%
--- -- ---
Extended Stay 50% NM 50%
-- -- --
Ascend
Collection NM NM NM
Cambria Suites (75%) NM (75%)
--- -- ---
Total Domestic
System (78%) (19%) (40%)
=== === ===
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.
June 30, 2009 June 30, 2008
Units Units
----- -----
New New
Conversion Construction Total Conversion Construction Total
---------- ------------ ----- ---------- ------------ -----
Comfort Inn 37 110 147 50 128 178
Comfort Suites 1 227 228 3 280 283
Sleep Inn 3 139 142 2 149 151
--- --- --- --- --- ---
Midscale
without
Food &
Beverage 41 476 517 55 557 612
-- --- --- -- --- ---
Quality 57 15 72 81 16 97
Clarion 25 5 30 36 9 45
-- --- -- -- --- --
Midscale
with
Food &
Beverage 82 20 102 117 25 142
-- -- --- --- -- ---
Econo Lodge 36 4 40 43 3 46
Rodeway 48 2 50 54 3 57
-- --- -- -- --- --
Economy 84 6 90 97 6 103
-- --- -- -- --- ---
MainStay - 35 35 2 35 37
Suburban - 32 32 1 36 37
--- -- -- --- -- --
Extended
Stay - 67 67 3 71 74
--- -- -- --- -- --
Ascend
Collection 2 1 3 - - -
Cambria Suites - 48 48 - 61 61
--- -- -- --- -- --
209 618 827 272 720 992
=== === === === === ===
Variance
--------
Conversion New Construction Total
---------- ---------------- -----
Units % Units % Units %
----- - ----- - ----- -
Comfort Inn (13) (26%) (18) (14%) (31) (17%)
Comfort Suites (2) (67%) (53) (19%) (55) (19%)
Sleep Inn 1 50% (10) (7%) (9) (6%)
--- -- --- -- -- --
Midscale
without
Food &
Beverage (14) (25%) (81) (15%) (95) (16%)
--- --- --- --- --- ---
Quality (24) (30%) (1) (6%) (25) (26%)
Clarion (11) (31%) (4) (44%) (15) (33%)
--- --- -- --- --- ---
Midscale
with
Food &
Beverage (35) (30%) (5) (20%) (40) (28%)
--- --- -- --- --- ---
Econo Lodge (7) (16%) 1 33% (6) (13%)
Rodeway (6) (11%) (1) (33%) (7) (12%)
-- --- -- --- -- ---
Economy (13) (13%) - 0% (13) (13%)
--- --- --- --- --- ---
MainStay (2) (100%) - 0% (2) (5%)
Suburban (1) (100%) (4) (11%) (5) (14%)
-- ---- -- --- -- ---
Extended
Stay (3) (100%) (4) (6%) (7) (9%)
-- ---- -- -- -- --
Ascend
Collection 2 NM 1 NM 3 NM
Cambria Suites - NM (13) (21%) (13) (21%)
--- -- --- --- --- ---
(63) (23%) (102) (14%) (165) (17%)
=== === ==== === ==== ===
CHOICE HOTELS INTERNATIONAL, INC. Exhibit 8
SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION
(UNAUDITED)
CALCULATION OF FRANCHISING REVENUES AND ADJUSTED FRANCHISING MARGINS
(dollar amounts Three Months Ended Six Months Ended
in thousands) June 30, June 30,
------------------- -----------------
2009 2008 2009 2008
---- ---- ---- ----
Franchising Revenues:
Total Revenues $143,343 $167,120 $257,501 $295,975
Adjustments:
Marketing and reservation
revenues (75,296) (85,336) (137,338) (153,762)
Hotel operations (1,179) (1,288) (2,297) (2,330)
------ ------ ------ ------
Franchising Revenues $66,868 $80,496 $117,866 $139,883
------- ------- -------- --------
Franchising Margins:
Operating Margin:
Total Revenues $143,343 $167,120 $257,501 $295,975
Operating Income $38,110 $44,578 $65,865 $78,630
------- ------- ------- -------
Operating Margin 26.6% 26.7% 25.6% 26.6%
---- ---- ---- ----
Adjusted Franchising Margin:
Franchising Revenues $66,868 $80,496 $117,866 $139,883
Operating Income $38,110 $44,578 $65,865 $78,630
Acceleration of management
succession plan benefits - 6,069 - 6,069
Employee termination benefits 399 338 774 381
Loss on sublease of office space 1,503 - 1,503 -
Hotel operations (350) (427) (683) (704)
---- ---- ---- ----
$39,662 $50,558 $67,459 $84,376
------- ------- ------- -------
---- ---- ---- ----
Adjusted Franchising Margins 59.3% 62.8% 57.2% 60.3%
---- ---- ---- ----
CALCULATION OF ADJUSTED SELLING, GENERAL AND ADMINISTRATIVE COSTS
(dollar amounts Three Months Ended Six Months Ended
in thousands) June 30, June 30,
------------------- -----------------
2009 2008 2009 2008
---- ---- ---- ----
Selling, general and
administrative costs $27,076 $34,275 $48,537 $57,830
Acceleration of management
succession plan benefits - (6,069) - (6,069)
Employee termination benefits (399) (338) (774) (381)
Loss on sublease of office space (1,503) - (1,503) -
------ --- ------ ---
Adjusted Selling, General and
Administrative Costs $25,174 $27,868 $46,260 $51,380
======= ======= ======= =======
CALCULATION OF ADJUSTED NET INCOME AND ADJUSTED DILUTED EARNINGS PER SHARE
(EPS)
(In thousands, Three Months Ended Six Months Ended
except per share amounts) June 30, June 30,
------------------- -----------------
2009 2008 2009 2008
---- ---- ---- ----
Net Income $25,503 $27,008 $41,811 $45,585
Adjustments:
Acceleration of management
succession plan benefits - 3,799 - 3,799
Employee termination benefits 250 212 485 239
Loss on sublease of office space 941 - 941 -
--- --- --- ---
Adjusted Net Income $26,694 $31,019 $43,237 $49,623
------- ------- ------- -------
Weighted average shares
outstanding-diluted 60,598 63,365 60,708 63,200
Diluted Earnings Per Share $0.42 $0.43 $0.69 $0.72
Adjustments:
Acceleration of management
succession plan - 0.06 - 0.06
Employee termination benefits - - - -
Loss on sublease of office space 0.02 - 0.02 -
---- --- ---- ---
Adjusted Diluted Earnings Per
Share (EPS) $0.44 $0.49 $0.71 $0.78
----- ----- ----- -----
Adjusted EBITDA Reconciliation
(in millions)
Six Six
Months Months
Ended Ended Full-
June 30, June 30, Year
Q2 2009 Q2 2008 2009 2008 2009
Actuals Actuals Actuals Actuals Outlook
-------- -------- --------- --------- --------
Operating Income
(per GAAP) $38.1 $44.6 $65.9 $78.6 $156.9
Acceleration of
management
succession plan - 6.1 - 6.1 -
Employee termination
benefits 0.4 0.3 0.8 0.4 2.1
Loss on sublease of
office space 1.5 - 1.5 - 1.5
Depreciation and
amortization 2.0 2.1 4.1 4.1 8.5
--- --- --- --- ---
Adjusted Earnings
before interest,
taxes, depreciation
& amortization (non-
GAAP) $42.0 $53.1 $72.3 $89.2 $169.0
===== ===== ===== ===== ======
SOURCE Choice Hotels International, Inc.
###
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