Choice Hotels International Reports Full Year 2012 Adjusted Diluted EPS of $2.11 Per Share

Full Year New Domestic Hotel Franchise Contracts Rise 42%

SILVER SPRING, Md. - Feb. 11, 2013 // PRNewswire // - Choice Hotels International, Inc., (NYSE:CHH) today reported the following highlights for the fourth quarter and full year 2012:

"2012 was a record breaking year for the company in terms of operating performance. We established new company records for the size of the domestic franchise system, total franchising revenues, franchising margins, operating cash flows, operating income and earnings per share," said Stephen P. Joyce, president and chief executive officer. "We are very pleased with our development results which increased 42 percent over the prior year, highlighted by the conversion of 46 properties, formerly operated as Jameson Inns, to our system and the execution of several Cambria Suites agreements in key markets important for Cambria's long-term success. We remain optimistic that the development and RevPAR environments will continue to improve and result in further growth of our business in 2013."

Full Year Highlights

  • Adjusted diluted earnings per share ("EPS") for full year 2012 were $2.11 compared to $1.92 for full year 2011, a 10% increase.  Adjusted diluted EPS for full year 2012 and 2011 exclude certain special items, as described below, totaling $0.04 and $0.07, respectively.
  • Excluding special items, adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA") increased 10% to $203.7 million for the year endedDecember 31, 2012, compared to the prior year. Operating income increased 12% from $171.9 million for the year ended December 31, 2011 to $193.1 millionfor full year 2012.
  • Franchising revenues increased 6% to $302.2 million for the year ended December 31, 2012 from $285.4 million for the same period of 2011.  Total revenues increased 8% to $691.5 million for the year ended December 31, 2012 compared to the same period of 2011.
  • Adjusted franchising margins increased 280 basis points from 61.5% for the year ended December 31, 2011 to 64.3% for the same period of the current year.
  • Domestic royalty fees for the year ended December 31, 2012 increased $15.4 million to $235.7 million from $220.3 million for the year ended December 31, 2011, an increase of 7%.
  • Domestic unit and room growth increased 1.6 percent and 0.8 percent from December 31, 2011, respectively. 
  • Domestic system-wide revenue per available room ("RevPAR") increased 6.2% for the year ended December 31, 2012 compared to the year ended December 31, 2011 as occupancy and average daily rates increased 200 basis points and 2.5 percent, respectively.   
  • The effective royalty rate increased 1 basis point to 4.33% for the year ended December 31, 2012 compared to 4.32% for the same period of the prior year.
  • The company executed 473 new domestic hotel franchise contracts for the year ended December 31, 2012 compared to 332 new domestic hotel franchise contracts in the same period of the prior year, a 42% increase.
  • The number of worldwide hotels under construction, awaiting conversion or approved for development as of December 31, 2012 was 482 hotels representing 38,969 rooms.
  • The effective income tax rate for the year ended December 31, 2012 was 28.7% compared to 30.1% for the same period of 2011.
  • During the year ended December 31, 2012, the company paid cash dividends totaling approximately $654.1 million, including a special cash dividend of$10.41 per share or approximately $600.7 million and purchased approximately 0.5 million shares of its common stock for a total cost of $19.9 million under the share repurchase program.

Fourth Quarter Highlights

  • Adjusted diluted EPS for fourth quarter 2012 were $0.45 compared to $0.46 for the same period of the prior year. Diluted EPS were $0.42 for the fourth quarter of 2012 compared to $0.42 for the same period of 2011. Adjusted diluted EPS for fourth quarter 2012 and 2011 exclude certain special items, as described below, totaling $0.03 and $0.04, respectively.
  • Excluding special items, adjusted EBITDA increased 11% to $49.3 million for the three months ended December 31, 2012 compared to the same period of the prior year.  Operating income for the three months ended December 31, 2012 increased 17% from the same period of the prior year to $45.2 million.
  • Franchising revenues increased 4% from $73.9 million for the three months ended December 31, 2011 to $77.0 million for the same period of 2012.  Total revenues for the three months ended December 31, 2012 increased 7% compared to the same period of the prior year.
  • Domestic system-wide revenue per available room ("RevPAR") increased 4.2% for the three months ended December 31, 2012 compared to the same period of 2011 as occupancy and average daily rates increased 120 basis points and 2.0 percent, respectively.   
  • The effective royalty rate increased 5 basis points to 4.36% for the three months ended December 31, 2012 compared to 4.31% for the same period of the prior year.
  • The company executed 214 new domestic hotel franchise contracts for the three months ended December 31, 2012 compared to 128 new domestic hotel franchise contracts in the same period of the prior year, a 67% increase.
  • Reached an agreement with affiliates of Colony Capital, LLC, including Colony Financial, Inc., and hospitality management company Aimbridge Hospitality, to convert 46 properties, formerly operated as Jameson Inns, to the company's Quality Inn, Comfort Inn and Econo Lodge brands, representing the company's largest single conversion transaction, excluding brand acquisitions.
  • Expanded Cambria Suites into additional major markets with new franchise agreements executed for hotels in New York CityPhoenix, Arizona and Plano, Texas.
  • Interest expense for the three months ended December 31, 2012 increased $7.1 million over the same period of the prior reflecting the financing transactions entered into during the second and third quarter of 2012 in conjunction with the payment of the $600 million special cash dividend paid on August 23, 2012.

Special Items

On December 27, 2012, the company settled its supplemental executive retirement plan and paid the actuarial equivalent of the lump sum value of the full accrued benefit to each participant. As a result of the settlement, the company recognized a settlement loss in SG&A expense totaling $1.8 million for the three months and year ended December 31, 2012. In addition, during the year ended December 31, 2012, the company recorded employee termination benefits charges in SG&A of approximately $0.5 million and recognized a loss on the extinguishment of debt totaling $0.5 million. These special items represent diluted EPS of $0.03 and $0.04 for the three months and year ended December 31, 2012, respectively.

During the three months and year ended December 31, 2011, the company recorded employee termination benefit charges included in SG&A expenses of approximately $3.6 million and $4.4 million, respectively. In addition, during the year ended December 31, 2011, the company reduced the carrying amount of a parcel of land held for sale resulting in a loss of $1.8 million included in other gains and losses. These special items represent diluted EPS of $0.04 and $0.07 for the three months and year ended December 31, 2011, respectively.

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.

Dividends

For the year ended December 31, 2012, the company paid $654.1 million of cash dividends to shareholders which included a special cash dividend in the amount of $10.41 per share or approximately $600.7 million paid on August 23, 2012. The company's current quarterly dividend rate per common share is $0.185, subject to declaration by our board of directors.

Share Repurchases

During the year ended December 31, 2012, the company repurchased 0.5 million shares for a total cost of $19.9 million and has authorization to purchase up to an additional 1.4 million shares under this program. The company did not repurchase any shares of common stock under the share repurchase program during the three months ended December 31, 2012. We expect to continue making repurchases 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 December 31, 2012. Considering the effect of a two-for-one stock split in October 2005, the company had repurchased 78.3 million shares through December 31, 2012 under the share repurchase program at an average price of $13.89 per share.

Other

Our board of directors previously authorized us to enter into programs which permit 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. During the year ended December 31, 2012, the company advanced, net of repayments, approximately $41 million related to mezzanine financing and sliver equity investments to construct Cambria Suites in such markets as New York City and White Plains, New York, Phoenix, Arizona and Plano, Texas. At December 31, 2012 the company had approximately $68 million outstanding related to this program. Over the next several years, we expect to continue to opportunistically deploy capital pursuant to these programs to promote growth of our emerging brands. We expect these advances to range between $20 million and $40 million per year, however, the amount and timing of the investment in these programs will be 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.

Balance Sheet

At December 31, 2012, the company had gross debt of $855.3 million and cash and cash equivalents totaling $134.2 million resulting in net debt of $721.1 million. At December 31, 2011, the company had gross debt of $252.7 million and cash equivalents totaling $107.1 million resulting in net debt of $145.6 million.

On June 27, 2012, the company issued unsecured senior notes in an aggregate principal amount of $400 million, in an underwritten, registered public offering. These notes will mature in July 2022 and bear a coupon rate of interest of 5.75%. Considering bond issuance costs, the company's effective interest costs related to these senior notes is approximately 5.94%.

On July 25, 2012, the company entered into a senior secured credit facility consisting of a $200 million revolving credit tranche and a $150 million term loan tranche, with a four year term. The company may elect to have borrowings under the senior secured credit facility bear interest at (i) a base rate plus a margin ranging from 100 to 325 basis points based on the company's total leverage ratio or (ii) LIBOR plus a margin ranging from 200 to 425 basis points based on the company's total leverage ratio. As a result of entering into the senior secured credit facility, the company's existing $300 million senior unsecured revolving credit facility was terminated. Under the $300 million senior unsecured revolving credit facility the company could elect to have borrowings bear interest at (i) a base rate plus a margin ranging from 5 to 80 basis points based on the company's credit rating or (ii) LIBOR plus a margin ranging from 105 to 180 basis points based on the company's credit rating.

The proceeds from the issuance of the $400 million senior notes and the company's new senior secured credit facility were utilized to pay the special cash dividend paid on August 23, 2012.

At December 31, 2012 and 2011, the company had outstanding mezzanine financing, real estate investments and sliver equity investments totaling $68 million and $27 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.

Outlook

The company's first quarter 2013 diluted EPS is expected to be $0.26. The company expects full-year 2013 diluted EPS to range between $1.96 and $1.98. EBITDA for full-year 2013 are expected to range between $215 million and $217 million. These estimates include the following assumptions:

  • The company expects net domestic unit growth to increase by approximately 1.5% in 2013;
  • RevPAR is expected to increase approximately 5% for first quarter of 2013 and increase between 4.5% and 5.5% for full-year 2013;
  • The effective royalty rate is expected to increase 3 basis points for full-year 2013;
  • All figures assume the existing share count;
  • An effective tax rate of 28.5% and 30.6% for the first quarter and full-year 2013, respectively.

Conference Call

Choice will conduct a conference call on Tuesday, February 12, 2013 at 9:00 a.m. EST to discuss the company's fourth quarter 2012 results. The dial-in number to listen to the call is 1-800-591-6930, and the access code is 96459022. International callers should dial 1-617-614-4908 and enter the access code 96459022. 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 11:00 a.m. EST on Tuesday, February 12, 2013 through Tuesday, February 19, 2013 by calling 1-888-286-8010 and entering access code 56450518. The international dial-in number for the replay is 1-617-801-6888, access code 56450518. In addition, the call will be archived and available on www.choicehotels.com via the Investor Info link.

About Choice Hotels

Choice Hotels International, Inc. franchises approximately 6,200 hotels, representing more than 499,000 rooms, in the United States and more than 30 other countries and territories. As of December 31, 2012, 394 hotels, representing more than 31,000 rooms, were under construction, awaiting conversion or approved for development in the United States. Additionally, 88 hotels, representing approximately 7,800 rooms, were under construction, awaiting conversion or approved for development in more than 20 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.

Additional corporate information may be found on the Choice Hotels International, Inc. web site, which may be accessed at www.choicehotels.com.

Forward-Looking Statements

Certain matters discussed in this press release constitute forward-looking statements within the meaning of the 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, 2011, filed with the Securities and Exchange Commission on February 29, 2012 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.

Statement Concerning Non-GAAP Financial Measurements Presented in Exhibit 8

Adjusted diluted EPS, adjusted EBITDA, franchising revenues, adjusted franchising margins and adjusted SG&A expenses 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 EPS, 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 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 fiscal 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 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 the loss on settlement of a pension plan, employee termination benefits, a loss on extinguishment of debt as well as a reduction in the carrying amount of land held for sale. 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.

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 and Ascend Collectionare proprietary trademarks and service marks of Choice Hotels International.

© 2013 Choice Hotels International, Inc. All rights reserved.

 

hoice Hotels International, Inc.

                           

Exhibit 1

Consolidated Statements of Income

                             

(Unaudited)

                             
                               
                               
                           
 

Three Months Ended December 31,

 

Year Ended December 31,

         

Variance

         

Variance

 

2012

 

2011

 

$

 

%

 

2012

 

2011

 

$

 

%

(In thousands, except per share amounts)

                             
                               

REVENUES:

                             
                               

Royalty fees

$              66,020

 

$              62,922

 

$     3,098

 

5%

 

$            260,782

 

$            245,426

 

$     15,356

 

6%

Initial franchise and relicensing fees

5,250

 

4,969

 

281

 

6%

 

14,203

 

14,052

 

151

 

1%

Procurement services

3,972

 

4,074

 

(102)

 

(3%)

 

17,962

 

18,111

 

(149)

 

(1%)

Marketing and reservation 

100,160

 

90,844

 

9,316

 

10%

 

384,784

 

349,036

 

35,748

 

10%

Hotel operations

1,133

 

1,183

 

(50)

 

(4%)

 

4,573

 

4,356

 

217

 

5%

Other

1,771

 

1,898

 

(127)

 

(7%)

 

9,205

 

7,812

 

1,393

 

18%

      Total revenues

178,306

 

165,890

 

12,416

 

7%

 

691,509

 

638,793

 

52,716

 

8%

                               

OPERATING EXPENSES:

                             
                               

Selling, general and administrative

29,779

 

33,463

 

(3,684)

 

(11%)

 

101,852

 

106,404

 

(4,552)

 

(4%)

Depreciation and amortization

2,237

 

2,048

 

189

 

9%

 

8,226

 

8,024

 

202

 

3%

Marketing and reservation

100,160

 

90,844

 

9,316

 

10%

 

384,784

 

349,036

 

35,748

 

10%

Hotel operations

896

 

873

 

23

 

3%

 

3,505

 

3,466

 

39

 

1%

Total operating expenses

133,072

 

127,228

 

5,844

 

5%

 

498,367

 

466,930

 

31,437

 

7%

                               

Operating income

45,234

 

38,662

 

6,572

 

17%

 

193,142

 

171,863

 

21,279

 

12%

                               

OTHER INCOME AND EXPENSES, NET:

                             

Interest expense

10,366

 

3,220

 

7,146

 

222%

 

27,189

 

12,939

 

14,250

 

110%

Interest income

(384)

 

(369)

 

(15)

 

4%

 

(1,540)

 

(1,306)

 

(234)

 

18%

Loss on extinguishment of debt

-

 

-

 

-

 

NM

 

526

 

-

 

526

 

NM

Other (gains) and losses

148

 

(1,236)

 

1,384

 

(112%)

 

(1,989)

 

2,442

 

(4,431)

 

(181%)

Equity in net income of affiliates

(224)

 

(7)

 

(217)

 

3100%

 

(212)

 

(269)

 

57

 

(21%)

Total other income and expenses, net

9,906

 

1,608

 

8,298

 

516%

 

23,974

 

13,806

 

10,168

 

74%

                               

Income before income taxes

35,328

 

37,054

 

(1,726)

 

(5%)

 

169,168

 

158,057

 

11,111

 

7%

Income taxes

10,877

 

12,268

 

(1,391)

 

(11%)

 

48,481

 

47,661

 

820

 

2%

Net income

$              24,451

 

$              24,786

 

$      (335)

 

(1%)

 

$            120,687

 

$            110,396

 

$     10,291

 

9%

                               
                               

Basic earnings per share

$                  0.42

 

$                  0.42

 

$          -

 

0%

 

$                  2.08

 

$                  1.86

 

$        0.22

 

12%

                               

Diluted earnings per share

$                  0.42

 

$                  0.42

 

$          -

 

0%

 

$                  2.07

 

$                  1.85

 

$        0.22

 

12%

                               

 

Choice Hotels International, Inc.

   

Exhibit 2

Consolidated Balance Sheets

     
           
           

(In thousands, except per share amounts)

 December 31, 

 

 December 31, 

     

2012

 

2011

     

(Unaudited)

   
           

ASSETS

       
           

Cash and cash equivalents

$           134,177

 

$         107,057

Accounts receivable, net

52,270

 

53,012

Investments, employee benefit plans, at fair value

3,486

 

12,094

Other current assets

43,537

 

22,633

 

Total current assets

233,470

 

194,796

           

Fixed assets and intangibles, net

130,937

 

135,252

Receivable -- marketing and reservation fees

42,179

 

54,014

Investments, employee benefit plans, at fair value

12,755

 

11,678

Other assets

 

91,431

 

51,949

           
   

Total assets

$           510,772

 

$         447,689

           
           
           

LIABILITIES AND SHAREHOLDERS' DEFICIT

     
           

Accounts payable and accrued expenses

$              94,266

 

$            92,240

Deferred revenue

71,154

 

68,825

Deferred compensation & retirement plan obligations

2,522

 

18,935

Current portion of long-term debt

8,195

 

673

Other current liabilities

-

 

3,892

 

Total current liabilities

176,137

 

184,565

           

Long-term debt

847,150

 

252,032

Deferred compensation & retirement plan obligations  

20,399

 

20,593

Other liabilities

 

15,990

 

16,060

           
 

Total liabilities

1,059,676

 

473,250

           

Common stock, $0.01 par value

582

 

583

Additional paid-in-capital

110,246

 

102,665

Accumulated other comprehensive loss

(4,216)

 

(6,801)

Treasury stock, at cost

(927,776)

 

(916,955)

Retained earnings

272,260

 

794,947

 

Total shareholders' deficit

(548,904)

 

(25,561)

           
   

Total liabilities and shareholders' deficit

$           510,772

 

$         447,689

           

 

Choice Hotels International, Inc.

   

Exhibit 3

Consolidated Statements of Cash Flows

     

(Unaudited)

     
       
       
   

(In thousands)

Year Ended December 31,

       
 

2012

 

2011

CASH FLOWS FROM OPERATING ACTIVITIES:

     
       

Net income

$                  120,687

 

$            110,396

       

Adjustments to reconcile net income to net cash provided 

     

 by operating activities:

     

  Depreciation and amortization  

8,226

 

8,024

  Provision for bad debts, net

2,896

 

2,160

  Non-cash stock compensation and other charges

12,375

 

14,511

  Non-cash interest and other loss

292

 

2,208

  Loss on extinguishment of debt

526

 

-

  Dividends received from equity method investments

1,310

 

1,139

  Equity in net income of affiliates

(212)

 

(269)

       

Changes in assets and liabilities:

     

  Receivables

(5,239)

 

(7,785)

  Receivable - marketing and reservation fees, net

30,313

 

623

  Accounts payable

11

 

(1,851)

  Accrued expenses

12,376

 

6,346

  Income taxes payable/receivable

(3,193)

 

(4,562)

  Deferred income taxes

(540)

 

5,514

  Deferred revenue

2,188

 

1,523

  Other assets

(3,476)

 

(3,162)

  Other liabilities

(17,520)

 

29

       

 NET CASH PROVIDED BY OPERATING ACTIVITIES

161,020

 

134,844

       

CASH FLOWS FROM INVESTING ACTIVITIES:

     
       

Investment in property and equipment

(15,443)

 

(10,924)

Equity method investments

(20,285)

 

(5,000)

Issuance of notes receivable

(34,925)

 

(12,766)

Collections of notes receivable

3,561

 

4,754

Purchases of investments, employee benefit plans

(1,697)

 

(1,602)

Proceeds from sales of investments, employee benefit plans

11,223

 

644

Proceeds from sale of assets

-

 

1,654

Other items, net

(433)

 

(564)

       

 NET CASH USED IN INVESTING ACTIVITIES

(57,999)

 

(23,804)

       

CASH FLOWS FROM FINANCING ACTIVITIES:

     
       

Proceeds from the issuance of long-term debt

543,500

 

75

Net borrowings (repayments) pursuant to revolving credit facilities

57,000

 

(200)

Principal payments on long-term debt

(4,422)

 

(297)

Debt issuance costs

(4,759)

 

(2,356)

Dividends paid

(654,092)

 

(43,747)

Purchase of treasury stock

(22,586)

 

(53,617)

Excess tax benefits from stock-based compensation

1,559

 

1,227

Proceeds from exercise of stock options

7,090

 

3,845

       

 NET CASH USED IN FINANCING ACTIVITIES

(76,710)

 

(95,070)

       

Net change in cash and cash equivalents

26,311

 

15,970

Effect of foreign exchange rate changes on cash and cash equivalents

809

 

(172)

Cash and cash equivalents at beginning of period

107,057

 

91,259

       

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$                  134,177

 

$            107,057

       

 

CHOICE HOTELS INTERNATIONAL, INC.

Exhibit 4

SUPPLEMENTAL OPERATING INFORMATION 

 

DOMESTIC HOTEL SYSTEM

 

(UNAUDITED)

 
                                         
                                         
                                         
                                         
 

For the Year Ended December 31, 2012*

 

For the Year Ended December 31, 2011*

 

Change

   
                                         
 

Average Daily

         

Average Daily

         

Average Daily

             
 

Rate

 

Occupancy

 

RevPAR

 

Rate

 

Occupancy

 

RevPAR

 

Rate

 

Occupancy

 

RevPAR

   
                                         

Comfort Inn

$             81.55

 

59.4%

 

$          48.42

 

$             79.41

 

57.5%

 

$           45.62

 

2.7%

 

190

bps

 

6.1%

   

Comfort Suites

85.47

 

61.7%

 

52.74

 

83.72

 

58.6%

 

49.09

 

2.1%

 

310

bps

 

7.4%

   

Sleep

72.40

 

56.3%

 

40.77

 

69.96

 

53.6%

 

37.49

 

3.5%

 

270

bps

 

8.7%

   

Quality

69.46

 

51.6%

 

35.85

 

67.75

 

50.0%

 

33.86

 

2.5%

 

160

bps

 

5.9%

   

Clarion

74.94

 

49.4%

 

37.03

 

73.89

 

46.9%

 

34.64

 

1.4%

 

250

bps

 

6.9%

   

Econo Lodge

55.78

 

48.5%

 

27.05

 

54.71

 

47.5%

 

25.96

 

2.0%

 

100

bps

 

4.2%

   

Rodeway

53.36

 

50.8%

 

27.13

 

51.87

 

48.7%

 

25.27

 

2.9%

 

210

bps

 

7.4%

   

MainStay

69.34

 

70.4%

 

48.81

 

66.16

 

67.7%

 

44.80

 

4.8%

 

270

bps

 

9.0%

   

Suburban

41.61

 

69.7%

 

29.01

 

40.26

 

67.5%

 

27.15

 

3.4%

 

220

bps

 

6.9%

   

Ascend Collection

113.33

 

64.4%

 

72.94

 

113.59

 

60.3%

 

68.44

 

(0.2%)

 

410

bps

 

6.6%

   
                                         

Total 

$             73.60

 

55.5%

 

$          40.84

 

$             71.83

 

53.5%

 

$           38.44

 

2.5%

 

200

bps

 

6.2%

   
                                         

* Operating statistics represent hotel operations from December through November

                             
                                         
                                         
 

For the Three Months Ended December 31, 2012*

 

For the Three Months Ended December 31, 2011*

 

Change

   
                                         
 

Average Daily

         

Average Daily

         

Average Daily

             
 

Rate

 

Occupancy

 

RevPAR

 

Rate

 

Occupancy

 

RevPAR

 

Rate

 

Occupancy

 

RevPAR

   
                                         

Comfort Inn

$             81.67

 

60.0%

 

$          48.98

 

$             79.92

 

58.8%

 

$           46.98

 

2.2%

 

120

bps

 

4.3%

   

Comfort Suites

85.01

 

61.4%

 

52.21

 

83.13

 

59.2%

 

49.23

 

2.3%

 

220

bps

 

6.1%

   

Sleep

72.70

 

56.5%

 

41.05

 

70.06

 

54.0%

 

37.80

 

3.8%

 

250

bps

 

8.6%

   

Quality

68.34

 

51.2%

 

35.02

 

67.17

 

50.2%

 

33.74

 

1.7%

 

100

bps

 

3.8%

   

Clarion

74.81

 

49.6%

 

37.12

 

74.27

 

47.6%

 

35.32

 

0.7%

 

200

bps

 

5.1%

   

Econo Lodge

55.84

 

48.0%

 

26.80

 

54.62

 

48.3%

 

26.37

 

2.2%

 

(30)

bps

 

1.6%

   

Rodeway

52.64

 

49.5%

 

26.07

 

51.12

 

49.1%

 

25.11

 

3.0%

 

40

bps

 

3.8%

   

MainStay

69.54

 

70.3%

 

48.85

 

66.12

 

69.7%

 

46.06

 

5.2%

 

60

bps

 

6.1%

   

Suburban

42.78

 

69.2%

 

29.61

 

40.31

 

66.6%

 

26.84

 

6.1%

 

260

bps

 

10.3%

   

Ascend Collection

116.26

 

67.0%

 

77.86

 

122.22

 

61.0%

 

74.56

 

(4.9%)

 

600

bps

 

4.4%

   
                                         

Total 

$             73.44

 

55.4%

 

$          40.68

 

$             71.98

 

54.2%

 

$           39.03

 

2.0%

 

120

bps

 

4.2%

   
                                         
                                         

* Operating statistics represent hotel operations from September through November

                             
                                         
                                         
                                         
 

For the Quarter Ended

     

For the Year Ended

                     
 

12/31/2012

 

12/31/2011

     

12/31/2012

 

12/31/2011

                     
                                         

System-wide effective royalty rate

4.36%

 

4.31%

     

4.33%

 

4.32%

                     
                                         

 

                                 

CHOICE HOTELS INTERNATIONAL, INC.

Exhibit 5

SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA

 

(UNAUDITED)

 
                                 
                                 
                                 
 

December 31, 2012

 

December 31, 2011

 

Variance

 
                                 
 

Hotels

 

Rooms

 

Hotels

 

Rooms

 

Hotels

 

Rooms

 

%

 

%

 
                                 

Comfort Inn

1,349

 

105,471

 

1,399

 

109,330

 

(50)

 

(3,859)

 

(3.6%)

 

(3.5%)

 

Comfort Suites

597

 

46,045

 

616

 

47,738

 

(19)

 

(1,693)

 

(3.1%)

 

(3.5%)

 

Sleep

387

 

28,087

 

394

 

28,568

 

(7)

 

(481)

 

(1.8%)

 

(1.7%)

 

Quality

1,152

 

98,078

 

1,047

 

91,502

 

105

 

6,576

 

10.0%

 

7.2%

 

Clarion

191

 

27,441

 

189

 

27,527

 

2

 

(86)

 

1.1%

 

(0.3%)

 

Econo Lodge

817

 

49,951

 

797

 

49,483

 

20

 

468

 

2.5%

 

0.9%

 

Rodeway

410

 

23,370

 

388

 

21,627

 

22

 

1,743

 

5.7%

 

8.1%

 

MainStay

41

 

3,165

 

40

 

3,093

 

1

 

72

 

2.5%

 

2.3%

 

Suburban

63

 

7,291

 

60

 

7,126

 

3

 

165

 

5.0%

 

2.3%

 

Ascend Collection

57

 

4,982

 

52

 

4,617

 

5

 

365

 

9.6%

 

7.9%

 

Cambria Suites

19

 

2,221

 

19

 

2,215

 

-

 

6

 

0.0%

 

0.3%

 
                                 

Domestic Franchises

5,083

 

396,102

 

5,001

 

392,826

 

82

 

3,276

 

1.6%

 

0.8%

 
                                 

International Franchises

1,160

 

103,151

 

1,177

 

104,379

 

(17)

 

(1,228)

 

(1.4%)

 

(1.2%)

 
                                 

Total Franchises

6,243

 

499,253

 

6,178

 

497,205

 

65

 

2,048

 

1.1%

 

0.4%

 
                                 

 

                                 

Exhibit 6

 

CHOICE HOTELS INTERNATIONAL, INC.

SUPPLEMENTAL INFORMATION BY BRAND

DEVELOPMENT RESULTS -- DOMESTIC NEW HOTEL CONTRACTS

(UNAUDITED)

                                     
                                     
                                     
                                     
 

For the Year Ended December 31, 2012

 

For the Year Ended December 31, 2011

 

% Change

 
                                     
 

New

         

New

         

New

         
 

Construction

 

Conversion

 

Total

 

Construction

 

Conversion

 

Total

 

Construction

 

Conversion

 

Total

 
                                     

Comfort Inn

23

 

36

 

59

 

12

 

46

 

58

 

92%

 

(22%)

 

2%

 

Comfort Suites

12

 

5

 

17

 

12

 

4

 

16

 

0%

 

25%

 

6%

 

Sleep

25

 

2

 

27

 

9

 

2

 

11

 

178%

 

0%

 

145%

 

Quality

-

 

170

 

170

 

-

 

80

 

80

 

NM

 

113%

 

113%

 

Clarion

-

 

22

 

22

 

-

 

19

 

19

 

NM

 

16%

 

16%

 

Econo Lodge

-

 

59

 

59

 

1

 

56

 

57

 

(100%)

 

5%

 

4%

 

Rodeway

-

 

71

 

71

 

-

 

49

 

49

 

NM

 

45%

 

45%

 

MainStay

12

 

1

 

13

 

6

 

3

 

9

 

100%

 

(67%)

 

44%

 

Suburban

3

 

4

 

7

 

5

 

4

 

9

 

(40%)

 

0%

 

(22%)

 

Ascend Collection

4

 

17

 

21

 

2

 

14

 

16

 

100%

 

21%

 

31%

 

Cambria Suites

7

 

-

 

7

 

8

 

-

 

8

 

(13%)

 

NM

 

(13%)

 
                                     

Total Domestic System

86

 

387

 

473

 

55

 

277

 

332

 

56%

 

40%

 

42%

 
                                     
                                     
                                     
                                     
                                     
 

For the Three Months Ended December 31, 2012

 

For the Three Months Ended December 31, 2011

 

% Change

 
                                     
 

New

         

New

         

New

         
 

Construction

 

Conversion

 

Total

 

Construction

 

Conversion

 

Total

 

Construction

 

Conversion

 

Total

 
                                     

Comfort Inn

13

 

19

 

32

 

6

 

18

 

24

 

117%

 

6%

 

33%

 

Comfort Suites

1

 

1

 

2

 

5

 

-

 

5

 

(80%)

 

NM

 

(60%)

 

Sleep

8

 

1

 

9

 

3

 

1

 

4

 

167%

 

0%

 

125%

 

Quality

-

 

82

 

82

 

-

 

31

 

31

 

NM

 

165%

 

165%

 

Clarion

-

 

8

 

8

 

-

 

7

 

7

 

NM

 

14%

 

14%

 

Econo Lodge

-

 

26

 

26

 

1

 

20

 

21

 

(100%)

 

30%

 

24%

 

Rodeway

-

 

25

 

25

 

-

 

17

 

17

 

NM

 

47%

 

47%

 

MainStay

10

 

-

 

10

 

5

 

-

 

5

 

100%

 

NM

 

100%

 

Suburban

2

 

3

 

5

 

3

 

2

 

5

 

(33%)

 

50%

 

0%

 

Ascend Collection

3

 

9

 

12

 

-

 

5

 

5

 

NM

 

80%

 

140%

 

Cambria Suites

3

 

-

 

3

 

4

 

-

 

4

 

(25%)

 

NM

 

(25%)

 
                                     

Total Domestic System

40

 

174

 

214

 

27

 

101

 

128

 

48%

 

72%

 

67%

 
                                     

 

                                         

Exhibit 7

   

CHOICE HOTELS INTERNATIONAL, INC.

DOMESTIC HOTEL PIPELINE OF HOTELS UNDER CONSTRUCTION, AWAITING CONVERSION OR APPROVED FOR DEVELOPMENT

(UNAUDITED)

                                               

A hotel in the domestic pipeline does not always result in an open and operating hotel due to various factors.

                           
                                               
                                   
                         

Variance

 

December 31, 2012

 

December 31, 2011

                       
 

Units

 

Units

 

Conversion

 

New Construction

 

Total

 

Conversion

 

New Construction

 

Total

 

Conversion

 

New Construction

 

Total

 

Units

 

%

 

Units

 

%

 

Units

 

%

                                               

Comfort Inn

33

 

49

 

82

 

29

 

46

 

75

 

4

 

14%

 

3

 

7%

 

7

 

9%

Comfort Suites

1

 

72

 

73

 

1

 

90

 

91

 

-

 

0%

 

(18)

 

(20%)

 

(18)

 

(20%)

Sleep Inn

1

 

43

 

44

 

1

 

49

 

50

 

-

 

0%

 

(6)

 

(12%)

 

(6)

 

(12%)

Quality

36

 

3

 

39

 

29

 

5

 

34

 

7

 

24%

 

(2)

 

(40%)

 

5

 

15%

Clarion

12

 

1

 

13

 

14

 

1

 

15

 

(2)

 

(14%)

 

-

 

0%

 

(2)

 

(13%)

Econo Lodge

24

 

-

 

24

 

25

 

2

 

27

 

(1)

 

(4%)

 

(2)

 

(100%)

 

(3)

 

(11%)

Rodeway

35

 

-

 

35

 

22

 

1

 

23

 

13

 

59%

 

(1)

 

(100%)

 

12

 

52%

MainStay

-

 

25

 

25

 

2

 

28

 

30

 

(2)

 

(100%)

 

(3)

 

(11%)

 

(5)

 

(17%)

Suburban

1

 

15

 

16

 

2

 

20

 

22

 

(1)

 

(50%)

 

(5)

 

(25%)

 

(6)

 

(27%)

Ascend Collection

11

 

7

 

18

 

6

 

4

 

10

 

5

 

83%

 

3

 

75%

 

8

 

80%

Cambria Suites

-

 

25

 

25

 

-

 

31

 

31

 

-

 

NM

 

(6)

 

(19%)

 

(6)

 

(19%)

                                               

Total Domestic Pipeline

154

 

240

 

394

 

131

 

277

 

408

 

23

 

18%

 

(37)

 

(13%)

 

(14)

 

(3%)

                                               

 


 

CHOICE HOTELS INTERNATIONAL, INC.

Exhibit 8

   
 

SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION

       
 

(UNAUDITED)

       
                         

CALCULATION OF FRANCHISING REVENUES AND ADJUSTED FRANCHISING MARGINS

               
                         

(dollar amounts in thousands)

Three Months Ended December 31, 

 

Year Ended December 31, 

       
                         
   

2012

 

2011

 

2012

 

2011

       
 

Franchising Revenues:

                     
                         
 

Total Revenues

$              178,306

 

$               165,890

 

$                      691,509

 

$                   638,793

       
 

Adjustments:

                     
 

     Marketing and reservation revenues

(100,160)

 

(90,844)

 

(384,784)

 

(349,036)

       
 

     Hotel operations

(1,133)

 

(1,183)

 

(4,573)

 

(4,356)

       
 

Franchising Revenues

$                77,013

 

$                 73,863

 

$                      302,152

 

$                   285,401

       
                         
 

Franchising Margins:

                     
                         
 

Operating Margin:

                     
                         
 

Total Revenues

$              178,306

 

$               165,890

 

$                      691,509

 

$                   638,793

       
 

Operating Income

$                45,234

 

$                 38,662

 

$                      193,142

 

$                   171,863

       
 

     Operating Margin

25.4%

 

23.3%

 

27.9%

 

26.9%

       
                         
 

Adjusted Franchising Margin:

                     
                         
 

Franchising Revenues

$                77,013

 

$                 73,863

 

$                      302,152

 

$                   285,401

       
                         
 

Operating Income

$                45,234

 

$                 38,662

 

$                      193,142

 

$                   171,863

       
 

Employee termination benefits

-

 

3,619

 

491

 

4,444

       
 

Loss on settlement of pension plan

1,818

 

-

 

1,818

 

-

       
 

Hotel operations

(237)

 

(310)

 

(1,068)

 

(890)

       
   

$                46,815

 

$                 41,971

 

$                      194,383

 

$                   175,417

       
                         
 

     Adjusted Franchising Margins

60.8%

 

56.8%

 

64.3%

 

61.5%

       
                         
                         
                         

CALCULATION OF ADJUSTED SELLING, GENERAL AND ADMINISTRATIVE COSTS

               
                         

(dollar amounts in thousands)

Three Months Ended December 31, 

 

Year Ended December 31, 

       
                         
   

2012

 

2011

 

2012

 

2011

       
                         

Selling, general and administrative expense

$                29,779

 

$                 33,463

 

$                      101,852

 

$                   106,404

       
 

Employee termination benefits

-

 

(3,619)

 

(491)

 

(4,444)

       
 

Loss on settlement of pension plan

(1,818)

 

-

 

(1,818)

 

-

       

Adjusted Selling, General and Administrative Expense

$                27,961

 

$                 29,844

 

$                       99,543

 

$                   101,960

       
                         
                         
                         

CALCULATION OF ADJUSTED NET INCOME AND ADJUSTED DILUTED EARNINGS PER SHARE (EPS)

               
                         

(In thousands, except per share amounts)

Three Months Ended December 31, 

 

Year Ended December 31, 

       
                         
   

2012

 

2011

 

2012

 

2011

       
                         

Net Income

$                24,451

 

$                 24,786

 

$                      120,687

 

$                   110,396

       

Adjustments:

                     
 

Employee termination benefits

-

 

2,291

 

312

 

2,813

       
 

Less on settlement of pension plan

1,774

 

-

 

1,774

 

-

       
 

Loss on extinguishment of debt

-

 

-

 

334

 

-

       
 

Loss on land held for sale

-

 

-

 

-

 

1,119

       

Adjusted Net Income

$                26,225

 

$                 27,077

 

$                      123,107

 

$                   114,328

       
                         

Weighted average shares outstanding-diluted

58,377

 

58,608

 

58,265

 

59,525

       
                         

Diluted Earnings Per Share

$                   0.42

 

$                     0.42

 

$                           2.07

 

$                        1.85

       

Adjustments:

                     
 

Employee termination benefits

-

 

0.04

 

-

 

0.05

       
 

Loss on settlement of pension plan

0.03

 

-

 

0.03

 

-

       
 

Loss on extinguishment of debt

-

 

-

 

0.01

 

-

       
 

Loss on land held for sale

-

 

-

 

-

 

0.02

       

Adjusted Diluted Earnings Per Share (EPS)

$                   0.45

 

$                     0.46

 

$                           2.11

 

$                        1.92

       
                         
                         
                         

Adjusted EBITDA Reconciliation

                     
                         

(in thousands)

                     
   

Q4 2012 Actuals

 

Q4 2011 Actuals

 

Year Ended December

31, 2012 Actuals

 

Year Ended December

31, 2011 Actuals

 

Full-Year 2013 Outlook

Range

                         
 

Operating Income (per GAAP)

$                45,234

 

$                 38,662

 

$                      193,142

 

$                   171,863

 

$    205,100

-

$   207,100

 

Employee termination benefits

-

 

3,619

 

491

 

4,444

 

-

 

-

 

Loss on settlement of pension plan

1,818

 

-

 

1,818

 

-

 

-

 

-

 

Depreciation and amortization

2,237

 

2,048

 

8,226

 

8,024

 

9,900

-

9,900

 

Adjusted Earnings before interest, taxes, depreciation & amortization (non-GAAP)

$                49,289

 

$                 44,329

 

$                      203,677

 

$                   184,331

 

$    215,000

 

$   217,000

                       

 

SOURCE Choice Hotels International, Inc.

Contacts:

David White
Senior Vice President
Chief Financial Officer & Treasurer
+1-301-592-5117

Robin Pence
Vice President
Public Relations
+1-301-592-5186

###

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