Choice Hotels International Reports A 23% Increase In First Quarter 2014 Diluted EPS

First Quarter Franchising EBITDA Increases 15%

ROCKVILLE, Md., April 28, 2014 // PRNewswire // -- Choice Hotels International, Inc. (NYSE: CHH) today reported the following highlights for the first quarter of 2014:

  • Diluted earnings per share ("EPS") for the three months ended March 31, 2014 totaled $0.32, an increase of 23 percent from the same period of 2013.
  • Diluted EPS from continuing operations for the three months ended March 31, 2014 totaled $0.29, an increase of 12 percent from the same period of 2013.
  • Earnings before interest, taxes, depreciation and amortization ("EBITDA") from franchising activities for the three months ended March 31, 2014 totaled $40.1 million, an increase of 15 percent from the same period of 2013.
  • Franchising revenues for the three months ended March 31, 2014 totaled $63.2 million, an increase of 6 percent from the same period of 2013.
  • Franchising margins for the three months ended March 31, 2014 were 60.2 percent, an increase of 510 basis points from the same period of 2013.
  • Domestic royalty fees for the three months ended March 31, 2014 totaled $46.5 million, an increase of 5 percent from the same period of 2013.
  • Domestic unit and room growth increased 2.4 percent and 1.6 percent from March 31, 2013, respectively.
  • Domestic system-wide revenue per available room ("RevPAR") increased 5.6 percent in the first quarter of 2014 as occupancy and average daily rates increased 200 basis points and 1.1 percent, respectively from the same period of 2013.
  • The company executed 59 new domestic hotel franchise contracts for the three months ended March 31, 2014 compared to 83 new domestic hotel franchise contracts for the same period of 2013. Domestic hotel contracts executed during the three months ended March 31, 2013 reflect a multi-faceted strategic marketing alliance with Bluegreen Corporation which resulted in the addition of 21 Bluegreen Vacation Club® Resorts to the company's Ascend Hotel Collection. Excluding this transaction, domestic franchise agreements executed during the first quarter of 2014 totaled 59 compared to 62 new domestic hotel franchise contracts in the same period of 2013.
  • Domestic relicensing and contract renewal transactions for the three months ended March 31, 2014 totaled 83 contracts, an increase of 20 percent from the same period of 2013.
  • The company sold two of its three company-owned Mainstay Suites hotels during the three months ended March 31, 2014 resulting in a $2.6 million gain.

"We are very pleased with the first quarter performance of our franchising business which exceeded our expectations and resulted in a 15 percent increase in franchising EBITDA and an expansion of our franchising margins due to our strong RevPAR growth and disciplined cost management," said Stephen P. Joyce, president and chief executive officer. "We are optimistic that we are well positioned to benefit from strong consumer and developer demand for our brands."

Discontinued Operations

In the first quarter of 2014, the company entered into a plan to sell its three owned hotels operated under the MainStay Suites brand. The company determined that the disposal of these hotels met the definition of a discontinued operation since the operations and cash flows of these components will be eliminated from the on-going operations of the company and the company will not have significant continuing involvement in the operations of the hotels after the disposal transaction.

At March 31, 2014, the company had disposed of two of the three owned hotels and expects the third hotel to be sold during the year ended December 31, 2014. The new owners of the two MainStay Suites hotels have executed new franchise agreements with the company and we expect that following the sale of the third hotel the new owner will also execute a new franchise agreement.

The company's consolidated statement of income for the three months ended March 31, 2014 and the company's consolidated balance sheet as of March 31, 2014 reflect these three company-owned hotels as discontinued operations. In addition, the company's statement of income for the three months ended March 31, 2013 has been reclassified to account for these operations as discontinued. Summarized financial information related to these discontinued operations is presented in Exhibit 9 of this press release.

Outlook

The company's consolidated 2014 outlook reflects continued growth of the company's core hotel franchising business, continued investment in and expanded revenue contribution from the SkyTouch division and the sale of the three company-owned Mainstay Suites hotels described below as well as the following assumptions:

  • All figures assume no repurchases of common stock under the company's share repurchase program; and
  • The effective tax rate for continuing operations is expected to be 30.8% for the second quarter and full-year 2014.

Franchising

  • EBITDA from franchising activities for full-year 2014 are expected to range between $227 million and $232 million;
  • Net domestic unit growth for 2014 is expected to increase between 1% and 2%;
  • RevPAR is expected to increase approximately 5% for the second quarter and 4.5% to 5.5% for full-year 2014; and
  • The effective royalty rate is expected to decline 3 basis points for full-year 2014.

SkyTouch

  • Reductions in EBITDA from our investment in the SkyTouch division for full-year 2014 are expected to be approximately $20 million;
  • Execution of third-party contracts results in annualized revenue ranging between $4 million and $6 million with realized revenues for the year ended December 31, 2014 totaling approximately $2 million; and
  • SG&A expenses are forecasted to be approximately $22 million related to investment in business development, sales and marketing and continued software development expenditures related to the division's cloud-based hotel operating system technology related products and services.

Discontinued Operations

  • Company EBITDA projections exclude the three company-owned Mainstay Suites hotels which generated EBITDA of approximately $1.1 million in 2013; and
  • Diluted EPS projections for the full-year 2014 include a gain on sale of the three company-owned Mainstay Suites hotels totaling $0.03 per share.

Consolidated Outlook

The company's second quarter 2014 diluted EPS is expected to be $0.48. The company expects full-year 2014 diluted EPS to range between $1.87 and $1.93. EBITDA for full-year 2014 are expected to range between $207 million and $212 million.

Conference Call

Choice will conduct a conference call on Monday, April 28, 2014 at 10:00 a.m. EDT to discuss the company's first quarter 2014 results. The dial-in number to listen to the call is 1-800-591-6942, and the access code is 70683172. International callers should dial 1-617-614-4909 and enter the access code 70683172. 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 page will feature a conference call microphone icon to access the call.

The call will be recorded and available for replay beginning at 2:00 p.m. EDT on Monday, April 28, 2014 through Monday, May 5, 2014 by calling 1-888-286-8010 and entering access code 19637446. The international dial-in number for the replay is 1-617-801-6888, access code 1963746. In addition, the call will be archived for approximately one-year and available on www.choicehotels.com via the Investor Info link.

About Choice Hotels

Choice Hotels International, Inc. franchises more than 6,300 hotels, representing more than 500,000 rooms, in the United States and more than 35 other countries and territories. As of March 31, 2014, 398 hotels, representing more than 30,000 rooms, were under construction, awaiting conversion or approved for development in the United States. Additionally, 95 hotels, representing approximately 8,900 rooms, were under construction, awaiting conversion or approved for development in more than 15 other countries and territories. The company's Comfort Inn, Comfort Suites, Quality, Sleep Inn, Clarion, Cambria Suites, MainStay Suites, Suburban Extended Stay Hotel, Econo Lodge and Rodeway Inn brands, as well as its Ascend Hotel Collection membership program, serve guests worldwide.

SkyTouch Technology is a division of Choice Hotels International, Inc. that develops and markets cloud-based technology products, including inventory management, pricing and connectivity to third party channels, to hoteliers not under franchise agreements with the company.

Additional corporate information can 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 company's filings with the Securities and Exchange Commission including our annual reports on Form 10-K 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 this Press Release

EBITDA, franchising revenues, franchising SG&A, franchising EBITDA and franchising margins are non-GAAP financial measurements. These measures should not be considered as an alternative to any measure of performance or liquidity as promulgated under or authorized by generally accepted accounting principles in the United States ("GAAP"), such as operating income, total revenues and operating margins. The company's calculation of these measurements may be different from the calculations used by other companies and therefore comparability may be limited. The company has included an exhibit accompanying this release that reconciles EBITDA, franchising revenues, franchising SG&A and franchising margins to the most comparable GAAP financial measures. We discuss management's reasons for reporting these non-GAAP measures below.

Earnings Before Interest, Taxes, Depreciation and Amortization: EBITDA reflects income from continuing operations excluding the impact of interest expense, interest income, provision for income taxes, depreciation and amortization, other (gains) and losses and equity in net income of unconsolidated affiliates. We consider EBITDA to be an indicator of operating performance because we use it to measure our ability to service debt, fund capital expenditures, and expand our business. We also use EBITDA, as do analysts, lenders, investors and others, to evaluate companies because it excludes certain items that can vary widely across different industries or among companies within the same industry. For example, interest expense can be dependent on a company's capital structure, debt levels and credit ratings. Accordingly, the impact of interest expense on earnings can vary significantly among companies. The tax positions of companies can also vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the jurisdictions in which they operate. As a result, effective tax rates and provision for income taxes can vary considerably among companies. EBITDA also excludes depreciation and amortization because companies utilize productive assets of different ages and use different methods of both acquiring and depreciating productive assets. These differences can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies.

Franchising Revenues, Operating Income, EBITDA, SG&A and Margins: The company reports franchising revenues, operating income, EBITDA, SG&A and margins which exclude marketing and reservation revenues and SkyTouch Technology operations. Marketing and reservation activities are excluded since the company is required by its franchise agreements to use the fees collected for marketing and reservation activities; as such, no income or loss to the company is generated. Cumulative marketing and reservation system fees not expended are recorded as a liability in the company's financial statements and are carried over to the next year and expended in accordance with the franchise agreements. Cumulative marketing and reservation expenditures in excess of fees collected for marketing and reservation activities are deferred and recorded as an asset in the company's financial statements and recovered in future periods. SkyTouch Technology is a division of the company that develops and markets cloud-based technology products, including inventory management, pricing and connectivity to third party channels, to hoteliers not under franchise agreements with the company. The operations for SkyTouch Technology are excluded since they do not reflect the company's core franchising business but are an adjacent, complimentary line of business. These non-GAAP measures are a commonly used measure of performance in our industry and facilitate comparisons between the company and its competitors.

Choice Hotels, Choice Hotels International, Comfort Inn, Comfort Suites, Quality, Sleep Inn, Clarion, Cambria Suites, MainStay Suites, Suburban Extended Stay Hotel, Econo Lodge, Rodeway Inn, Ascend Hotel Collection and SkyTouch Technology are proprietary trademarks and service marks of Choice Hotels International.

© 2014 Choice Hotels International, Inc. All rights reserved. 

Choice Hotels International, Inc.

Exhibit 1

Consolidated Statements of Income

 

(Unaudited)

               
               
           
 

Three Months Ended March 31,

               

Variance

 

2014

 

2013

 

$

    

%

(In thousands, except per share amounts)

             
               

REVENUES:

             
               

Royalty fees

$ 51,681

 

$ 49,736

 

$ 1,945

 

4%

Initial franchise and relicensing fees

3,740

 

3,777

 

(37)

 

(1%)

Procurement services

4,778

 

3,950

 

828

 

21%

Marketing and reservation 

84,012

 

76,440

 

7,572

 

10%

Other

3,072

 

2,013

 

1,059

 

53%

      Total revenues

147,283

 

135,916

 

11,367

 

8%

               

OPERATING EXPENSES:

             
               

Selling, general and administrative

26,463

 

26,916

 

(453)

 

(2%)

Depreciation and amortization

2,122

 

2,041

 

81

 

4%

Marketing and reservation

84,012

 

76,440

 

7,572

 

10%

Total operating expenses

112,597

 

105,397

 

7,200

 

7%

               

Operating income

34,686

 

30,519

 

4,167

 

14%

               

OTHER INCOME AND EXPENSES, NET:

             

Interest expense

10,171

 

10,770

 

(599)

 

(6%)

Interest income

(503)

 

(644)

 

141

 

(22%)

Other (gains) and losses

(59)

 

(710)

 

651

 

(92%)

Equity in net loss of affiliates

35

 

141

 

(106)

 

(75%)

Total other income and expenses, net

9,644

 

9,557

 

87

 

1%

               

Income from continuing operations before income taxes

25,042

 

20,962

 

4,080

 

19%

Income taxes

7,711

 

5,406

 

2,305

 

43%

Income from continuing operations  

17,331

 

15,556

 

1,775

 

11%

Income (loss) from discontinued operations, net of income taxes

1,641

 

(33)

 

1,674

 

(5073%)

Net income

$ 18,972

 

$ 15,523

 

$ 3,449

 

22%

               
               

Basic earnings per share

             

Continuing operations

$    0.30

 

$    0.27

 

$  0.03

 

11%

Discontinued operations

0.03

 

-

 

0.03

 

NM

 

$    0.33

 

$    0.27

 

$  0.06

 

22%

               
               

Diluted earnings per share

             

Continuing operations

$    0.29

 

$    0.26

 

$  0.03

 

12%

Discontinued operations

0.03

 

-

 

0.03

 

NM

 

$    0.32

 

$    0.26

 

$  0.06

 

23%

 

Choice Hotels International, Inc.

        

Exhibit 2

Consolidated Balance Sheets

     
           
           

(In thousands, except per share amounts)

 March 31, 

 

 December 31, 

     

2014

 

2013

     

(Unaudited)

   
           

ASSETS

       
           

Cash and cash equivalents

$    174,878

 

$           167,795

Accounts receivable, net

59,241

 

53,521

Other current assets

43,595

 

37,330

 

Total current assets

277,714

 

258,646

           

Fixed assets and intangibles, net

131,681

 

141,858

Notes receivable, net of allowances

34,223

 

31,872

Advances, marketing and reservations activities

18,856

 

19,127

Investments, employee benefit plans, at fair value

16,852

 

15,950

Other assets

 

75,574

 

72,446

           
   

Total assets

$    554,900

 

$           539,899

           
           
           

LIABILITIES AND SHAREHOLDERS' DEFICIT

     
           

Accounts payable and accrued expenses

$       82,037

 

$              98,288

Deferred revenue

69,155

 

61,188

Current portion of long-term debt

11,026

 

10,088

Other current liabilities

6,039

 

4,774

 

Total current liabilities

168,257

 

174,338

           

Long-term debt

795,497

 

783,471

Deferred compensation & retirement plan obligations  

22,387

 

22,527

Other liabilities

 

23,392

 

23,808

           
 

Total liabilities

1,009,533

 

1,004,144

           

Common stock, $0.01 par value

584

 

586

Additional paid-in-capital

118,020

 

117,768

Accumulated other comprehensive loss

(5,469)

 

(6,217)

Treasury stock, at cost

(917,226)

 

(918,031)

Retained earnings

349,458

 

341,649

 

Total shareholders' deficit

(454,633)

 

(464,245)

           
   

Total liabilities and shareholders' deficit

$    554,900

 

$           539,899

 

Choice Hotels International, Inc.

   

Exhibit 3

Consolidated Statements of Cash Flows

     

(Unaudited)

     
       
       
   

(In thousands)

Three Months Ended March 31,

       
 

2014

 

2013

CASH FLOWS FROM OPERATING ACTIVITIES:

     
       

Net income

$   18,972

 

$   15,523

       

Adjustments to reconcile net income to net cash provided 

     

 by operating activities:

     

  Depreciation and amortization  

2,122

 

2,175

  Gain on sale of assets

(2,572)

 

-

  Provision for bad debts, net

1,182

 

844

  Non-cash stock compensation and other charges

2,887

 

2,549

  Non-cash interest and other (income) loss

416

 

76

  Deferred income taxes

(3)

 

446

  Dividends received from equity method investments

181

 

146

  Equity in net loss of affiliates

35

 

141

       

Changes in assets and liabilities:

     

  Receivables

(7,491)

 

(3,531)

  Advances to/from marketing and reservation activities, net

5,309

 

(4,101)

  Forgivable notes receivable, net

(3,623)

 

(1,729)

  Accounts payable

2,080

 

10,471

  Accrued expenses

(19,861)

 

(31,145)

  Income taxes payable/receivable

3,160

 

4,367

  Deferred revenue

7,932

 

5,160

  Other assets

(3,103)

 

(3,869)

  Other liabilities

(2,359)

 

2,622

       

 NET CASH PROVIDED BY OPERATING ACTIVITIES

5,264

 

145

       

CASH FLOWS FROM INVESTING ACTIVITIES:

     
       

Investment in property and equipment

(3,015)

 

(13,645)

Proceeds from sales of assets

8,703

 

-

Equity method investments

(3,379)

 

(1,000)

Issuance of mezzanine and other notes receivable

(587)

 

-

Collections of mezzanine and other notes receivable

68

 

19

Purchases of investments, employee benefit plans

(890)

 

(1,242)

Proceeds from sales of investments, employee benefit plans

281

 

3,882

Other items, net

(154)

 

(101)

       

 NET CASH PROVIDED (USED) IN INVESTING ACTIVITIES

1,027

 

(12,087)

       

CASH FLOWS FROM FINANCING ACTIVITIES:

     
       

Net borrowings pursuant to revolving credit facility

15,000

 

18,000

Principal payments on long-term debt

(2,052)

 

(2,046)

Dividends paid

(10,784)

 

(503)

Purchase of treasury stock

(4,530)

 

(3,634)

Excess tax benefits from stock-based compensation

1,024

 

952

Proceeds from exercise of stock options

1,547

 

5,367

       

 NET CASH PROVIDED BY FINANCING ACTIVITIES

205

 

18,136

       

Net change in cash and cash equivalents

6,496

 

6,194

Effect of foreign exchange rate changes on cash and cash equivalents

587

 

(146)

Cash and cash equivalents at beginning of period

167,795

 

134,177

       

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$ 174,878

 

$ 140,225

 

 

Exhibit 4

CHOICE HOTELS INTERNATIONAL, INC.

SUPPLEMENTAL OPERATING INFORMATION 

DOMESTIC HOTEL SYSTEM

(UNAUDITED)

                                     
                                     
                                     
                                     
 

For the Three Months Ended March 31, 2014*

 

For the Three Months Ended March 31, 2013*

 

Change

                                     
 

Average Daily

         

Average Daily

         

Average Daily

         
 

Rate

 

Occupancy

    

RevPAR

    

Rate

 

Occupancy

    

RevPAR

 

Rate

 

Occupancy

 

RevPAR

                                     

Comfort Inn

$          77.34

 

49.5%

 

$       38.25

 

$          76.30

 

47.5%

 

$        36.24

 

1.4%

 

200

bps

 

5.5%

Comfort Suites

83.59

 

54.5%

 

45.52

 

81.82

 

52.6%

 

43.04

 

2.2%

 

190

bps

 

5.8%

Sleep

70.05

 

49.8%

 

34.90

 

69.07

 

47.6%

 

32.85

 

1.4%

 

220

bps

 

6.2%

Quality

65.33

 

44.2%

 

28.90

 

64.20

 

42.2%

 

27.08

 

1.8%

 

200

bps

 

6.7%

Clarion

68.61

 

43.9%

 

30.14

 

68.84

 

41.1%

 

28.32

 

(0.3%)

 

280

bps

 

6.4%

Econo Lodge

51.49

 

40.2%

 

20.70

 

51.67

 

38.6%

 

19.95

 

(0.3%)

 

160

bps

 

3.8%

Rodeway

49.67

 

45.5%

 

22.58

 

47.96

 

42.2%

 

20.25

 

3.6%

 

330

bps

 

11.5%

MainStay

69.31

 

59.7%

 

41.35

 

68.55

 

57.0%

 

39.05

 

1.1%

 

270

bps

 

5.9%

Suburban

41.56

 

64.6%

 

26.85

 

40.90

 

63.4%

 

25.94

 

1.6%

 

120

bps

 

3.5%

Ascend Hotel Collection

104.61

 

56.3%

 

58.88

 

113.87

 

56.1%

 

63.84

 

(8.1%)

 

20

bps

 

(7.8%)

                                     

Total 

$          69.63

 

47.5%

 

$       33.09

 

$          68.87

 

45.5%

 

$        31.34

 

1.1%

 

200

bps

 

5.6%

                                     
                                     
                                     
                                     
 

For the Quarter Ended

                         
 

3/31/2014

 

3/31/2013

                             
                                     

System-wide effective royalty rate

4.35%

 

4.39%

                             
                                     
                                     
                                     
                                     

* Operating statistics represent hotel operations from December through February

           

 

                                 
 

Exhibit 5

CHOICE HOTELS INTERNATIONAL, INC.

SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA

(UNAUDITED)

                                 
                                 
                                 
   

March 31, 2014

 

March 31, 2013

 

Variance

                                 
   

Hotels

   

Rooms

   

Hotels

   

Rooms

   

Hotels

   

Rooms

   

%

   

%

                                 

Comfort Inn

 

1,297

 

101,099

 

1,332

 

104,159

 

(35)

 

(3,060)

 

(2.6%)

 

(2.9%)

Comfort Suites

 

590

 

45,609

 

597

 

46,079

 

(7)

 

(470)

 

(1.2%)

 

(1.0%)

Sleep

 

381

 

27,517

 

382

 

27,685

 

(1)

 

(168)

 

(0.3%)

 

(0.6%)

Quality

 

1,236

 

102,327

 

1,172

 

99,090

 

64

 

3,237

 

5.5%

 

3.3%

Clarion

 

191

 

27,393

 

190

 

27,268

 

1

 

125

 

0.5%

 

0.5%

Econo Lodge

 

840

 

51,544

 

811

 

49,244

 

29

 

2,300

 

3.6%

 

4.7%

Rodeway

 

449

 

25,077

 

421

 

24,269

 

28

 

808

 

6.7%

 

3.3%

MainStay

 

43

 

3,329

 

41

 

3,165

 

2

 

164

 

4.9%

 

5.2%

Suburban

 

63

 

7,152

 

63

 

7,241

 

-

 

(89)

 

0.0%

 

(1.2%)

Ascend Hotel Collection

 

103

 

9,251

 

63

 

5,481

 

40

 

3,770

 

63.5%

 

68.8%

Cambria Suites

 

18

 

2,119

 

19

 

2,221

 

(1)

 

(102)

 

(5.3%)

 

(4.6%)

                                 

Domestic Franchises

 

5,211

 

402,417

 

5,091

 

395,902

 

120

 

6,515

 

2.4%

 

1.6%

                                 

International Franchises

 

1,153

 

104,735

 

1,173

 

104,474

 

(20)

 

261

 

(1.7%)

 

0.2%

                                 

Total Franchises

 

6,364

 

507,152

 

6,264

 

500,376

 

100

 

6,776

 

1.6%

 

1.4%

 

                                 

Exhibit 6

 

CHOICE HOTELS INTERNATIONAL, INC.

SUPPLEMENTAL INFORMATION BY BRAND

DEVELOPMENT RESULTS -- DOMESTIC NEW HOTEL CONTRACTS

(UNAUDITED)

                                     
                                     
                                     
                                     
 

For the Three Months Ended March 31, 2014

 

For the Three Months Ended March 31, 2013

 

% Change

 
                                     
 

New

         

New

         

New

         
 

Construction

 

Conversion

 

Total

 

Construction

 

Conversion

 

Total

 

Construction

 

Conversion

 

Total

 
                                     

Comfort Inn

3

 

3

 

6

 

3

 

5

 

8

 

0%

 

(40%)

 

(25%)

 

Comfort Suites

1

 

-

 

1

 

2

 

2

 

4

 

(50%)

 

(100%)

 

(75%)

 

Sleep

4

 

-

 

4

 

1

 

-

 

1

 

300%

 

NM

 

300%

 

Quality

1

 

10

 

11

 

-

 

19

 

19

 

NM

 

(47%)

 

(42%)

 

Clarion

-

 

2

 

2

 

-

 

3

 

3

 

NM

 

(33%)

 

(33%)

 

Econo Lodge

-

 

6

 

6

 

-

 

8

 

8

 

NM

 

(25%)

 

(25%)

 

Rodeway

1

 

15

 

16

 

-

 

9

 

9

 

NM

 

67%

 

78%

 

MainStay

4

 

-

 

4

 

1

 

-

 

1

 

300%

 

NM

 

300%

 

Suburban

1

 

1

 

2

 

-

 

1

 

1

 

NM

 

0%

 

100%

 

Ascend Hotel Collection

3

 

3

 

6

 

2

 

26

 

28

 

50%

 

(88%)

 

(79%)

 

Cambria Suites

1

 

-

 

1

 

1

 

-

 

1

 

0%

 

NM

 

0%

 
                                     

Total Domestic System

19

 

40

 

59

 

10

 

73

 

83

 

90%

 

(45%)

 

(29%)

 

 

                                         

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

 

March 31, 2014

 

March 31, 2013

                       
 

Units

 

Units

 

Conversion

 

New Construction

 

Total

 

Conversion

 

New Construction

 

Total

 

Conversion

 

New Construction

   

Total

 

Units

   

%

 

Units

   

%

   

Units

   

%

                                               

Comfort Inn

39

 

51

 

90

 

30

 

49

 

79

 

9

 

30%

 

2

 

4%

 

11

 

14%

Comfort Suites

2

 

46

 

48

 

2

 

67

 

69

 

-

 

0%

 

(21)

 

(31%)

 

(21)

 

(30%)

Sleep Inn

1

 

48

 

49

 

1

 

44

 

45

 

-

 

0%

 

4

 

9%

 

4

 

9%

Quality

38

 

4

 

42

 

35

 

2

 

37

 

3

 

9%

 

2

 

100%

 

5

 

14%

Clarion

6

 

2

 

8

 

9

 

-

 

9

 

(3)

 

(33%)

 

2

 

NM

 

(1)

 

(11%)

Econo Lodge

20

 

2

 

22

 

23

 

-

 

23

 

(3)

 

(13%)

 

2

 

NM

 

(1)

 

(4%)

Rodeway

33

 

2

 

35

 

30

 

-

 

30

 

3

 

10%

 

2

 

NM

 

5

 

17%

MainStay

2

 

35

 

37

 

-

 

25

 

25

 

2

 

NM

 

10

 

40%

 

12

 

48%

Suburban

6

 

17

 

23

 

3

 

12

 

15

 

3

 

100%

 

5

 

42%

 

8

 

53%

Ascend Hotel Collection

11

 

12

 

23

 

30

 

9

 

39

 

(19)

 

(63%)

 

3

 

33%

 

(16)

 

(41%)

Cambria Suites

-

 

21

 

21

 

-

 

24

 

24

 

-

 

NM

 

(3)

 

(13%)

 

(3)

 

(13%)

                                               

Total Domestic Pipeline

158

 

240

 

398

 

163

 

232

 

395

 

(5)

 

(3%)

 

8

 

3%

 

3

 

1%

 

 

CHOICE HOTELS INTERNATIONAL, INC.

 Exhibit 8

 

SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION

 
 

(UNAUDITED)

 
           

CALCULATION OF FRANCHISING REVENUES AND FRANCHISING MARGINS

   
           

(dollar amounts in thousands)

Three Months Ended March 31, 

 
           
   

2014

    

2013

 
 

Franchising Revenues:

       
           
 

Total Revenues

$          147,283

 

$          135,916

 
 

Adjustments:

       
 

     Marketing and reservation revenues

(84,012)

 

(76,440)

 
 

     Other

(53)

 

-

 
 

Franchising Revenues

$            63,218

 

$            59,476

 
           
 

Franchising Margins:

       
           
 

Operating Margin:

       
           
 

Total Revenues

$          147,283

 

$          135,916

 
 

Operating Income

$            34,686

 

$            30,519

 
 

     Operating Margin

23.6%

 

22.5%

 
           
 

Franchising Margin:

       
           
 

Franchising Revenues

$            63,218

 

$            59,476

 
           
 

Operating Income

$            34,686

 

$            30,519

 
 

SkyTouch Division operating loss

3,350

 

2,255

 
   

$            38,036

 

$            32,774

 
           
 

     Franchising Margins

60.2%

 

55.1%

 
           
           
           

CALCULATION OF FRANCHISING SELLING, GENERAL AND ADMINISTRATION EXPENSES

 
           

(dollar amounts in thousands)

Three Months Ended March 31, 

 
           
   

2014

 

2013

 
           
 

Total Selling, General and Administrative Expenses

$            26,463

 

$            26,916

 
 

SkyTouch Division

(3,336)

 

(2,241)

 
 

Franchising Selling, General and Administration Expenses

$            23,127

 

$            24,675

 
           
           
           

CALCULATION OF EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION ("EBITDA")

   
           

(dollar amounts in thousands)

       
   

Q1 2014 Actuals

 

Q1 2013 Actuals

 
           

Income from continuing operations

$            17,331

 

$            15,556

 
 

Income taxes

7,711

 

5,406

 
 

Interest expense

10,171

 

10,770

 
 

Interest income

(503)

 

(644)

 
 

Other (gains) and losses

(59)

 

(710)

 
 

Equity in net loss of affiliates

35

 

141

 
 

Depreciation and amortization

2,122

 

2,041

 

EBITDA

$            36,808

 

$            32,560

 
           

Franchising 

$            40,091

 

$            34,801

 

SkyTouch

(3,283)

 

(2,241)

 
   

$            36,808

 

$            32,560

 

 

 

CHOICE HOTELS INTERNATIONAL, INC.

Exhibit 9

 

DISCONTINUED OPERATIONS

 
 

(UNAUDITED)

 
           
           
           
   

Three Months Ended March 31, 

 
           

(In thousands)

2014

 

2013

 
           

REVENUES:

       

Hotel operations

$    690

 

$  956

 

      Total revenues

690

 

956

 
           

OPERATING EXPENSES:

       

Hotel operations

662

 

875

 

Depreciation and amortization

-

 

134

 

Total operating expenses

662

 

1,009

 
           

Operating income (loss)

28

 

(53)

 
           

Gain on disposal of discontinued operations

2,581

 

-

 
           

Income (loss) from discontinued operations before income taxes

2,609

 

(53)

 

Income tax (benefit)

968

 

(20)

 

Income (loss) from discontinued operations

$  1,641

 

$   (33)

 

SOURCE Choice Hotels International, Inc.

Contacts:

David White
Senior Vice President
Chief Financial Officer & Treasurer
(301) 592-5117

Scott Carman
Director
Public Relations
(301) 592-6361

###

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