Choice Hotels International Reports a 9% Increase in Third Quarter Domestic RevPAR and Royalties

Company Raises Full-Year Outlook
Third Quarter Franchising EBITDA Increases 8%

ROCKVILLE, Md., Oct. 24, 2014 // PRNewswire // -- Choice Hotels International, Inc. (NYSE:CHH) today reported the following highlights for the third quarter of 20141:

  • Franchising revenues for the three months ended September 30, 2014 totaled $99.4 million, an increase of 8 percent from the same period of 2013.
  • Earnings before interest, taxes, depreciation and amortization ("EBITDA") from franchising activities for the three months ended September 30, 2014 totaled $74 million, an increase of 8 percent from the same period of 2013. 
  • Franchising margins for the three months ended September 30, 2014 were 72.3 percent, an increase of 40 basis points from the same period of 2013.
  • Diluted earnings per share ("EPS") from continuing operations for the three months ended September 30, 2014 totaled $0.67 compared to $0.65 for the same period of 2013.
  • Domestic royalty fees for the three months ended September 30, 2014 totaled $79.5 million, an increase of 9 percent from the same period of 2013.
  • Domestic unit and room growth increased 1.6 percent and 0.9 percent from September 30, 2013, respectively. 
  • Domestic system-wide revenue per available room ("RevPAR") increased 8.8 percent in the third quarter of 2014 as occupancy and average daily rates increased 320 basis points and 3.4 percent, respectively from the same period of 2013.
  • New construction domestic hotel executed franchise agreements totaled 31 for the three months ended September 30, 2014, an increase of 55 percent from the same period of the prior year.
  • The company executed 85 relicensing and renewal hotel franchise agreements for the three months ended September 30, 2014, an increase of 18 percent compared to the same period of 2013.
  • The company's domestic pipeline of hotels under construction, awaiting conversion or approved for development increased 14 percent from September 30, 2013.
  • The company purchased 0.4 million shares of common stock under its share repurchase program during the three months ended September 30, 2014 at a total cost of approximately $18.4 million.

"Our efforts and initiatives to improve business delivery, hotel revenue yield and our innovative brand programs are leading to strong results for our franchisees, while simultaneously improving our value proposition which drives franchise development results," said Stephen P. Joyce, president and chief executive officer. "Our strong brands and innovative marketing and reservation programs, supported by a favorable lodging environment, resulted in average daily rate and occupancy gains driving domestic RevPAR growth of approximately 9% over the same period of the prior year. We are optimistic that strong RevPAR performance should continue in the fourth quarter and into 2015, supporting future growth."

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 September 30, 2014, the company had disposed of all three of the owned MainStay Suites hotels and the new owners of each of those hotels had executed new franchise agreements with the company.

The company's consolidated statement of income for the three and nine months ended September 30, 2014 reflect these three company-owned hotels as discontinued operations. In addition, the company's statement of income for the three and nine months ended September 30, 2013 has been recast 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 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 additional repurchases of common stock under the company's share repurchase program; and
  • The effective tax rate for continuing operations is expected to be 30.7% and 30.3% for the fourth quarter and full- year 2014, respectively.

Franchising

  • EBITDA from franchising activities for full-year 2014 are expected to range between $234 million and $237 million;
  • Net domestic unit growth for 2014 is expected to range between 1% and 2%;
  • RevPAR is expected to increase approximately 9% for the fourth quarter and range between 8% and 8.5% for full-year 2014;
  • The effective royalty rate is expected to decline 5 basis points for full-year 2014 as compared to full-year 2013.

SkyTouch

  • Reductions in EBITDA relating to our investment in the SkyTouch division for full-year 2014 are expected to be approximately $18 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 $1 million; and
  • SG&A expenses are forecasted to be approximately $19 million related to investment in business development, sales and marketing and non-capitalizable product development expenditures related to the division's cloud-based hotel operating system's 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 fourth quarter 2014 diluted EPS is expected to be $0.34. The company expects full-year 2014 diluted EPS to range between $1.99 and $2.02. EBITDA for full-year 2014 are expected to range between $216 million and $219 million.

Items Impacting Comparability

We reported on August 5, 2014, that the company changed its accounting for royalty and certain marketing and reservation system fees to restate these fees in order to comply with generally accepted accounting principles in the United States ("GAAP") by reporting these fees in the same period that the underlying gross room revenues are earned by our franchisees rather than one month in arrears (our historical practice).

The financial results and supplemental operating information as of and for the periods ended September 30, 2014 have been prepared in accordance with the new accounting practice.

As a result of this change, the income statement and cash flow statement included herein for the periods ended September 30, 2013 have been preliminarily restated based on currently available information to reflect our new accounting practice for these fees. The company plans to file the restated quarterly financial statements through amended Form 10-Q filings to be filed prior to the filing of our Form 10-Q for the periods ended September 30, 2014. Until the restatement is complete, additional information may become available which could cause the company's current estimates to change.

Due to the seasonality of the company's business, the impact of the new revenue recognition practice will generally be positive for the first two quarters of the year and negative in the final two quarters of the year. However, this change is expected to result in minor, non-material positive revisions to total revenues, operating income and earnings per share for the full years ended December 31, 2013, 2012 and 2011. The company plans to file the revised annual financial statements through an amended Form10-K to be filed prior to our Form 10-Q for the periods ended September 30, 2014. The December 31, 2013 balance sheet included in Exhibit 2 has been preliminarily revised to reflect this change.

More information about this accounting change and restatement can be found in the company's Form 8-K filed on August 5, 2014.

Conference Call

Choice will conduct a conference call on Friday, October 24, 2014 at 10:00 a.m. EDT to discuss the company's third quarter 2014 results. The dial-in number to listen to the call is 1-877-474-9506, and the access code is 86921299. International callers should dial 1-857-244-7559 and enter the access code 86921299. 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 Friday, October 24, 2014 through Friday, October 31, 2014 by calling 1-888-286-8010 and entering access code 90750875. The international dial-in number for the replay is 1-617-801-6888, access code 90750875. 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 September 30, 2014, 422 hotels, representing more than 32,000 rooms, were under construction, awaiting conversion or approved for development in the United States. Additionally, 94 hotels, representing approximately 8,600 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, repurchases of common stock 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 Technologyare proprietary trademarks and service marks of Choice Hotels International.

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

1See the discussion under "Items Impacting Comparability" for information about how the recently announced accounting change and restatement of certain 2013 interim periods impacts the comparative discussion of our results of operations contained herein.

 

Choice Hotels International, Inc.

                         

 

 

Exhibit 1

Consolidated Statements of Income

                               

(Unaudited)

                               
                                 
                                 
                             
   

Three Months Ended September 30,

 

Nine Months Ended September 30,

       

Restated

 

Variance

     

Restated

 

Variance

   

2014

 

2013

 

$

 

%

 

2014

 

2013

 

$

 

%

(In thousands, except per share amounts)

                               
                                 

REVENUES:

                               
                                 

Royalty fees

 

$            86,091

 

$            79,460

 

$     6,631

 

8%

 

$           222,301

 

$           208,206

 

$     14,095

 

7%

Initial franchise and relicensing fees

 

4,299

 

4,650

 

(351)

 

(8%)

 

12,761

 

12,843

 

(82)

 

(1%)

Procurement services

 

5,495

 

4,708

 

787

 

17%

 

18,293

 

16,204

 

2,089

 

13%

Marketing and reservation 

 

115,653

 

124,809

 

(9,156)

 

(7%)

 

309,025

 

311,204

 

(2,179)

 

(1%)

Other

 

3,630

 

3,091

 

539

 

17%

 

10,188

 

7,362

 

2,826

 

38%

      Total revenues

 

215,168

 

216,718

 

(1,550)

 

(1%)

 

572,568

 

555,819

 

16,749

 

3%

                                 

OPERATING EXPENSES:

                               
                                 

Selling, general and administrative

 

30,236

 

26,409

 

3,827

 

14%

 

88,329

 

82,808

 

5,521

 

7%

Depreciation and amortization

 

2,293

 

2,272

 

21

 

1%

 

6,903

 

6,701

 

202

 

3%

Marketing and reservation

 

115,653

 

124,809

 

(9,156)

 

(7%)

 

309,025

 

311,204

 

(2,179)

 

(1%)

Total operating expenses

 

148,182

 

153,490

 

(5,308)

 

(3%)

 

404,257

 

400,713

 

3,544

 

1%

                                 

Operating income

 

66,986

 

63,228

 

3,758

 

6%

 

168,311

 

155,106

 

13,205

 

9%

                                 

OTHER INCOME AND EXPENSES, NET:

                               

Interest expense

 

10,495

 

10,757

 

(262)

 

(2%)

 

31,376

 

32,334

 

(958)

 

(3%)

Interest income

 

(355)

 

(676)

 

321

 

(47%)

 

(1,205)

 

(1,979)

 

774

 

(39%)

Other (gains) and losses

 

375

 

(703)

 

1,078

 

(153%)

 

(158)

 

(1,266)

 

1,108

 

(88%)

Equity in net (income) loss of affiliates

 

513

 

(421)

 

934

 

(222%)

 

578

 

(340)

 

918

 

(270%)

Total other income and expenses, net

 

11,028

 

8,957

 

2,071

 

23%

 

30,591

 

28,749

 

1,842

 

6%

                                 

Income from continuing operations before income taxes

 

55,958

 

54,271

 

1,687

 

3%

 

137,720

 

126,357

 

11,363

 

9%

Income taxes

 

16,542

 

15,698

 

844

 

5%

 

41,556

 

36,384

 

5,172

 

14%

Income from continuing operations, net of income taxes

 

39,416

 

38,573

 

843

 

2%

 

96,164

 

89,973

 

6,191

 

7%

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

 

(51)

 

143

 

(194)

 

(136%)

 

1,711

 

293

 

1,418

 

484%

Net income

 

$            39,365

 

$            38,716

 

$       649

 

2%

 

$            97,875

 

$            90,266

 

$       7,609

 

8%

                                 
                                 

Basic earnings per share

                               

Continuing operations

 

$                0.67

 

$                0.66

 

$      0.01

 

2%

 

$                1.65

 

$                1.54

 

$        0.11

 

7%

Discontinued operations

 

-

 

-

 

-

 

NM

 

0.03

 

-

 

0.03

 

NM

   

$                0.67

 

$                0.66

 

$      0.01

 

2%

 

$                1.68

 

$                1.54

 

$        0.14

 

9%

                                 
                                 

Diluted earnings per share

                               

Continuing operations

 

$                0.67

 

$                0.65

 

$      0.02

 

3%

 

$                1.63

 

$                1.53

 

$        0.10

 

7%

Discontinued operations

 

-

 

0.01

 

(0.01)

 

(100%)

 

0.03

 

-

 

0.03

 

NM

   

$                0.67

 

$                0.66

 

$      0.01

 

2%

 

$                1.66

 

$                1.53

 

$        0.13

 

8%

 

Choice Hotels International, Inc.

     

Exhibit 2

Consolidated Balance Sheets

       
               
               

(In thousands, except per share amounts)

 September 30, 

   

 December 31, 

         

2014

 

2013

         

(Unaudited)

 

 (Revised) 

               

ASSETS

           
               

Cash and cash equivalents

   

$           244,392

 

$         167,795

Accounts receivable, net

   

109,748

 

82,385

Other current assets

   

51,286

 

56,794

 

Total current assets

   

405,426

 

306,974

               

Fixed assets and intangibles, net

 

131,710

 

143,618

Notes receivable, net of allowances

 

35,045

 

31,872

Advances, marketing and reservation activities

-

 

5,844

Investments, employee benefit plans, at fair value

16,845

 

15,950

Other assets

     

75,161

 

52,164

               
   

Total assets

 

$           664,187

 

$         556,422

               
               
               

LIABILITIES AND SHAREHOLDERS' DEFICIT

     
               

Accounts payable and accrued expenses

$           110,891

 

$            98,288

Deferred revenue

   

65,839

 

61,188

Current portion of long-term debt

 

11,967

 

10,088

Other current liabilities

   

10,760

 

4,774

 

Total current liabilities

 

199,457

 

174,338

               

Long-term debt

   

774,756

 

783,471

Deferred compensation & retirement plan obligations  

23,118

 

22,527

Other liabilities

     

63,871

 

28,957

               
 

Total liabilities

   

1,061,202

 

1,009,293

               

Common stock, $0.01 par value

 

582

 

586

Additional paid-in-capital

   

123,251

 

117,768

Accumulated other comprehensive loss

(5,928)

 

(6,217)

Treasury stock, at cost

   

(933,180)

 

(918,031)

Retained earnings

   

418,260

 

353,023

 

Total shareholders' deficit

 

(397,015)

 

(452,871)

               
 

 

     Total liabilities and shareholders' deficit

$           664,187

 

$         556,422

 

Choice Hotels International, Inc.

   

Exhibit 3

Consolidated Statements of Cash Flows

     

(Unaudited)

     
       
       
   

(In thousands)

Nine Months Ended September 30,

       
 

2014

 

2013

CASH FLOWS FROM OPERATING ACTIVITIES:

   

(Restated)

       

Net income

$                    97,875

 

$              90,266

       

Adjustments to reconcile net income to net cash provided 

     

 by operating activities:

     

  Depreciation and amortization  

6,903

 

7,094

  Gain on sale of assets

(2,809)

 

-

  Provision for bad debts, net

1,676

 

2,264

  Non-cash stock compensation and other charges

8,093

 

8,635

  Non-cash interest and other (income) loss

1,836

 

1,057

  Deferred income taxes

(19,216)

 

(351)

  Dividends received from equity method investments

1,101

 

1,109

  Equity in net (income) loss of affiliates

578

 

(340)

       

Changes in assets and liabilities:

     

  Receivables

(30,497)

 

(26,635)

  Advances to/from marketing and reservation activities, net

60,187

 

29,712

  Forgivable notes receivable, net

(8,776)

 

(5,722)

  Accounts payable

21,845

 

1,280

  Accrued expenses

(11,082)

 

(22,757)

  Income taxes payable/receivable

7,981

 

24,107

  Deferred revenue

4,751

 

(9,686)

  Other assets

(1,125)

 

(2,395)

  Other liabilities

(943)

 

8,851

       

 NET CASH PROVIDED BY OPERATING ACTIVITIES 

138,378

 

106,489

       

CASH FLOWS FROM INVESTING ACTIVITIES:

     
       

Investment in property and equipment

(11,886)

 

(27,922)

Proceeds from sales of assets

15,612

 

-

Equity method investments

(14,362)

 

(3,761)

Purchases of investments, employee benefit plans

(1,520)

 

(1,845)

Proceeds from sales of investments, employee benefit plans

966

 

4,052

Issuance of mezzanine and other notes receivable

(3,340)

 

-

Collections of mezzanine and other notes receivable

9,832

 

224

Other items, net

(592)

 

(578)

       

 NET CASH USED IN INVESTING ACTIVITIES 

(5,290)

 

(29,830)

       

CASH FLOWS FROM FINANCING ACTIVITIES:

     
       

Net repayments pursuant to revolving credit facility

-

 

(27,500)

Principal payments on long-term debt

(7,110)

 

(6,158)

Proceeds from the issuance of long-term debt

226

 

3,360

Purchase of treasury stock

(23,757)

 

(3,684)

Dividends paid

(32,767)

 

(22,026)

Excess tax benefits from stock-based compensation

2,297

 

1,216

Proceeds from exercise of stock options

4,984

 

6,677

       

 NET CASH USED IN FINANCING ACTIVITIES

(56,127)

 

(48,115)

       

Net change in cash and cash equivalents

76,961

 

28,544

Effect of foreign exchange rate changes on cash and cash equivalents

(364)

 

(1,583)

Cash and cash equivalents at beginning of period

167,795

 

134,177

       

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$                  244,392

 

$            161,138

 

Exhibit 4

CHOICE HOTELS INTERNATIONAL, INC.

SUPPLEMENTAL OPERATING INFORMATION 

DOMESTIC HOTEL SYSTEM

(UNAUDITED)

                                       
                                       
                                       
                                       
   

For the Nine Months Ended September 30, 2014

 

For the Nine Months Ended September 30, 2013

 

Change

                                       
   

Average Daily

         

Average Daily

         

Average Daily

         
   

Rate

 

Occupancy

 

RevPAR

 

Rate

 

Occupancy

 

RevPAR

 

Rate

 

Occupancy

 

RevPAR

                                       

Comfort Inn

 

$             86.92

 

64.9%

 

$          56.43

 

$             84.14

 

61.9%

 

$         52.08

 

3.3%

 

300

bps

 

8.4%

Comfort Suites

 

91.06

 

67.8%

 

61.78

 

87.91

 

64.6%

 

56.81

 

3.6%

 

320

bps

 

8.7%

Sleep

 

77.75

 

63.7%

 

49.52

 

75.04

 

60.3%

 

45.24

 

3.6%

 

340

bps

 

9.5%

Quality

 

72.87

 

57.7%

 

42.05

 

71.21

 

54.8%

 

39.04

 

2.3%

 

290

bps

 

7.7%

Clarion

 

78.05

 

55.9%

 

43.59

 

76.21

 

52.6%

 

40.12

 

2.4%

 

330

bps

 

8.6%

Econo Lodge

 

58.64

 

52.9%

 

31.01

 

57.32

 

50.4%

 

28.89

 

2.3%

 

250

bps

 

7.3%

Rodeway

 

57.46

 

56.5%

 

32.48

 

55.28

 

53.3%

 

29.45

 

3.9%

 

320

bps

 

10.3%

MainStay

 

75.52

 

72.9%

 

55.03

 

73.25

 

69.4%

 

50.87

 

3.1%

 

350

bps

 

8.2%

Suburban

 

45.29

 

73.3%

 

33.19

 

42.91

 

71.5%

 

30.70

 

5.5%

 

180

bps

 

8.1%

Ascend Hotel Collection

 

120.64

 

59.8%

 

72.10

 

122.67

 

65.6%

 

80.52

 

(1.7%)

 

(580)

bps

 

(10.5%)

                                       

Total 

 

$             77.80

 

60.9%

 

$          47.36

 

$             75.67

 

58.1%

 

$         43.98

 

2.8%

 

280

bps

 

7.7%

                                       
                                       
                                       
                                       
   

For the Three Months Ended September 30, 2014

 

For the Three Months Ended September 30, 2013

 

Change

                                       
   

Average Daily

         

Average Daily

         

Average Daily

         
   

Rate

 

Occupancy

 

RevPAR

 

Rate

 

Occupancy

 

RevPAR

 

Rate

 

Occupancy

 

RevPAR

                                       

Comfort Inn

 

$             92.33

 

72.0%

 

$          66.44

 

$             88.73

 

68.4%

 

$         60.73

 

4.1%

 

360

bps

 

9.4%

Comfort Suites

 

94.13

 

72.1%

 

67.86

 

90.22

 

68.1%

 

61.48

 

4.3%

 

400

bps

 

10.4%

Sleep

 

80.95

 

68.4%

 

55.35

 

77.72

 

63.9%

 

49.66

 

4.2%

 

450

bps

 

11.5%

Quality

 

77.05

 

63.3%

 

48.78

 

75.14

 

59.9%

 

45.02

 

2.5%

 

340

bps

 

8.4%

Clarion

 

83.40

 

61.8%

 

51.49

 

80.42

 

57.6%

 

46.35

 

3.7%

 

420

bps

 

11.1%

Econo Lodge

 

63.31

 

59.0%

 

37.33

 

61.18

 

56.0%

 

34.27

 

3.5%

 

300

bps

 

8.9%

Rodeway

 

62.71

 

62.8%

 

39.35

 

60.41

 

58.7%

 

35.48

 

3.8%

 

410

bps

 

10.9%

MainStay

 

78.58

 

77.3%

 

60.70

 

75.99

 

73.0%

 

55.51

 

3.4%

 

430

bps

 

9.3%

Suburban

 

46.78

 

74.6%

 

34.88

 

43.45

 

72.1%

 

31.32

 

7.7%

 

250

bps

 

11.4%

Ascend Hotel Collection

 

127.43

 

61.0%

 

77.68

 

124.86

 

69.7%

 

87.07

 

2.1%

 

(870)

bps

 

(10.8%)

                                       

Total 

 

$             82.12

 

66.5%

 

$          54.64

 

$             79.39

 

63.3%

 

$         50.22

 

3.4%

 

320

bps

 

8.8%

                                       
                                       
                                       
                                       
                                       
                                       
   

For the Quarter Ended

     

For the Nine Months Ended

                 
   

9/30/2014

 

9/30/2013

     

9/30/2014

 

9/30/2013

                 
                                       

System-wide effective royalty rate

 

4.24%

 

4.28%

     

4.28%

 

4.33%

                 

 

Exhibit 5

CHOICE HOTELS INTERNATIONAL, INC.

SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA

(UNAUDITED)

                                 
                                 
                                 
   

September 30, 2014

 

September 30, 2013

 

Variance

                                 
   

Hotels

 

Rooms

 

Hotels

  

Rooms

  

Hotels

  

Rooms

 

%

 

%

                                 

Comfort Inn

 

1,266

 

98,119

 

1,312

 

102,586

 

(46)

 

(4,467)

 

(3.5%)

 

(4.4%)

Comfort Suites

 

593

 

45,873

 

590

 

45,519

 

3

 

354

 

0.5%

 

0.8%

Sleep

 

374

 

27,065

 

378

 

27,351

 

(4)

 

(286)

 

(1.1%)

 

(1.0%)

Quality

 

1,262

 

103,358

 

1,193

 

98,788

 

69

 

4,570

 

5.8%

 

4.6%

Clarion

 

183

 

26,182

 

188

 

26,885

 

(5)

 

(703)

 

(2.7%)

 

(2.6%)

Econo Lodge

 

846

 

52,304

 

821

 

50,230

 

25

 

2,074

 

3.0%

 

4.1%

Rodeway

 

460

 

25,235

 

434

 

24,660

 

26

 

575

 

6.0%

 

2.3%

MainStay

 

42

 

3,304

 

43

 

3,331

 

(1)

 

(27)

 

(2.3%)

 

(0.8%)

Suburban

 

64

 

7,164

 

63

 

7,213

 

1

 

(49)

 

1.6%

 

(0.7%)

Ascend Hotel Collection

107

 

9,271

 

94

 

8,006

 

13

 

1,265

 

13.8%

 

15.8%

Cambria Suites

 

21

 

2,534

 

18

 

2,094

 

3

 

440

 

16.7%

 

21.0%

                                 

Domestic Franchises

 

5,218

 

400,409

 

5,134

 

396,663

 

84

 

3,746

 

1.6%

 

0.9%

                                 

International Franchises

 

1,168

 

106,905

 

1,169

 

106,000

 

(1)

 

905

 

(0.1%)

 

0.9%

                                 

Total Franchises

 

6,386

 

507,314

 

6,303

 

502,663

 

83

 

4,651

 

1.3%

 

0.9%

 

                               

 

 

Exhibit 6

CHOICE HOTELS INTERNATIONAL, INC.

SUPPLEMENTAL INFORMATION BY BRAND

DEVELOPMENT RESULTS -- DOMESTIC NEW HOTEL CONTRACTS

(UNAUDITED)

                                     
                                     
                                     
                                     
   

For the Nine Months Ended 
September 30, 2014

 

For the Nine Months Ended 
September 30, 2013

 

% Change

                                     
   

New

         

New

         

New

       
   

Construction

  

Conversion

 

Total

 

Construction

  

Conversion

  

Total

  

Construction

  

Conversion

  

Total

                                     

Comfort Inn

 

16

 

11

 

27

 

12

 

35

 

47

 

33%

 

(69%)

 

(43%)

Comfort Suites

 

11

 

-

 

11

 

7

 

6

 

13

 

57%

 

(100%)

 

(15%)

Sleep

 

21

 

1

 

22

 

9

 

1

 

10

 

133%

 

0%

 

120%

Quality

 

3

 

82

 

85

 

1

 

76

 

77

 

200%

 

8%

 

10%

Clarion

 

1

 

15

 

16

 

1

 

12

 

13

 

0%

 

25%

 

23%

Econo Lodge

 

1

 

46

 

47

 

-

 

61

 

61

 

NM

 

(25%)

 

(23%)

Rodeway

 

3

 

48

 

51

 

1

 

39

 

40

 

200%

 

23%

 

28%

MainStay

 

10

 

1

 

11

 

5

 

-

 

5

 

100%

 

NM

 

120%

Suburban

 

2

 

3

 

5

 

1

 

1

 

2

 

100%

 

200%

 

150%

Ascend Hotel Collection

6

 

11

 

17

 

5

 

40

 

45

 

20%

 

(73%)

 

(62%)

Cambria Suites

 

5

 

-

 

5

 

2

 

-

 

2

 

150%

 

NM

 

150%

                                     

Total Domestic System

 

79

 

218

 

297

 

44

 

271

 

315

 

80%

 

(20%)

 

(6%)

                                     
                                     
                                     
                                     
                                     
   

For the Three Months Ended 
September 30, 2014

 

For the Three Months Ended 
September 30, 2013

 

% Change

                                     
   

New

         

New

         

New

       
   

Construction

 

Conversion

 

Total

 

Construction

 

Conversion

 

Total

 

Construction

 

Conversion

 

Total

                                     

Comfort Inn

 

6

 

3

 

9

 

7

 

17

 

24

 

(14%)

 

(82%)

 

(63%)

Comfort Suites

 

4

 

-

 

4

 

2

 

4

 

6

 

100%

 

(100%)

 

(33%)

Sleep

 

7

 

-

 

7

 

4

 

1

 

5

 

75%

 

(100%)

 

40%

Quality

 

-

 

34

 

34

 

-

 

32

 

32

 

NM

 

6%

 

6%

Clarion

 

1

 

4

 

5

 

1

 

5

 

6

 

0%

 

(20%)

 

(17%)

Econo Lodge

 

1

 

19

 

20

 

-

 

31

 

31

 

NM

 

(39%)

 

(35%)

Rodeway

 

2

 

17

 

19

 

1

 

15

 

16

 

100%

 

13%

 

19%

MainStay

 

5

 

-

 

5

 

1

 

-

 

1

 

400%

 

NM

 

400%

Suburban

 

1

 

-

 

1

 

1

 

-

 

1

 

0%

 

NM

 

0%

Ascend Hotel Collection

-

 

5

 

5

 

2

 

4

 

6

 

(100%)

 

25%

 

(17%)

Cambria Suites

 

4

 

-

 

4

 

1

 

-

 

1

 

300%

 

NM

 

300%

                                     

Total Domestic System

 

31

 

82

 

113

 

20

 

109

 

129

 

55%

 

(25%)

 

(12%)

 

                                           

Exhibit 7

CHOICE HOTELS INTERNATIONAL, INC.

DOMESTIC 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

   

September 30, 2014

 

September 30, 2013

                       
   

Units

 

Units

 

Conversion

 

New Construction

 

Total

   

Conversion

 

New Construction

 

Total

 

Conversion

 

New Construction

 

Total

 

Units

 

%

 

Units

 

%

 

Units

 

%

                                                 

Comfort Inn

 

33

 

51

 

84

 

36

 

50

 

86

 

(3)

 

(8%)

 

1

 

2%

 

(2)

 

(2%)

Comfort Suites

 

-

 

47

 

47

 

4

 

47

 

51

 

(4)

 

(100%)

 

-

 

0%

 

(4)

 

(8%)

Sleep Inn

 

2

 

62

 

64

 

1

 

45

 

46

 

1

 

100%

 

17

 

38%

 

18

 

39%

Quality

 

34

 

6

 

40

 

33

 

3

 

36

 

1

 

3%

 

3

 

100%

 

4

 

11%

Clarion

 

9

 

3

 

12

 

7

 

2

 

9

 

2

 

29%

 

1

 

50%

 

3

 

33%

Econo Lodge

 

36

 

3

 

39

 

33

 

-

 

33

 

3

 

9%

 

3

 

NM

 

6

 

18%

Rodeway

 

31

 

4

 

35

 

24

 

1

 

25

 

7

 

29%

 

3

 

300%

 

10

 

40%

MainStay

 

2

 

39

 

41

 

-

 

26

 

26

 

2

 

NM

 

13

 

50%

 

15

 

58%

Suburban

 

6

 

11

 

17

 

3

 

12

 

15

 

3

 

100%

 

(1)

 

(8%)

 

2

 

13%

Ascend Hotel Collection

8

 

15

 

23

 

13

 

10

 

23

 

(5)

 

(38%)

 

5

 

50%

 

-

 

0%

Cambria Suites

 

-

 

20

 

20

 

-

 

21

 

21

 

-

 

NM

 

(1)

 

(5%)

 

(1)

 

(5%)

                                                 
   

161

 

261

 

422

 

154

 

217

 

371

 

7

 

5%

 

44

 

20%

 

51

 

14%

 

 

Exhibit 8

 

CHOICE HOTELS INTERNATIONAL, INC.

 

SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION

 

(UNAUDITED)

                   

CALCULATION OF FRANCHISING REVENUES AND FRANCHISING MARGINS

   
                   

(dollar amounts in thousands)

Three Months Ended September 30, 

 

Nine Months Ended September 30, 

                   
     

2014

    

2013

    

2014

    

2013

 

Franchising Revenues:

             
                   
 

Total Revenues

 

$              215,168

 

$               216,718

 

$               572,568

 

$              555,819

 

Adjustments:

               
 

     Marketing and reservation revenues

(115,653)

 

(124,809)

 

(309,025)

 

(311,204)

 

     Other

 

(92)

 

(13)

 

(213)

 

(13)

 

Franchising Revenues

$                99,423

 

$                 91,896

 

$               263,330

 

$              244,602

                   
 

Franchising Margins:

             
                   
 

Operating Margin:

               
                   
 

Total Revenues

 

$              215,168

 

$               216,718

 

$               572,568

 

$              555,819

 

Operating Income

 

$                66,986

 

$                 63,228

 

$               168,311

 

$              155,106

 

     Operating Margin

31.1%

 

29.2%

 

29.4%

 

27.9%

                   
 

Franchising Margin:

             
                   
 

Franchising Revenues

$                99,423

 

$                 91,896

 

$               263,330

 

$              244,602

                   
 

Operating Income

 

$                66,986

 

$                 63,228

 

$               168,311

 

$              155,106

 

SkyTouch Division operating loss

 

4,928

 

2,841

 

12,794

 

7,307

     

$                71,914

 

$                 66,069

 

$               181,105

 

$              162,413

                   
 

     Franchising Margins

72.3%

 

71.9%

 

68.8%

 

66.4%

                   
                   
                   

CALCULATION OF FRANCHISING SELLING, GENERAL AND ADMINISTRATION EXPENSES

 
                   

(dollar amounts in thousands)

Three Months Ended September 30, 

 

Nine Months Ended September 30, 

                   
     

2014

 

2013

 

2014

 

2013

                   
 

Total Selling, General and Administrative Expenses

 

$                30,236

 

$                 26,409

 

$                 88,329

 

$                82,808

 

SkyTouch Division

 

(4,786)

 

(2,740)

 

(12,322)

 

(7,110)

 

Franchising Selling, General and Administration Expenses

 

$                25,450

 

$                 23,669

 

$                 76,007

 

$                75,698

                   
                   
                   

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

                   

(dollar amounts in thousands)

             
     

Three Months Ended September 30, 

 

Nine Months Ended September 30, 

                   
     

2014

 

2013

 

2014

 

2013

                   

Income from continuing operations, net of income taxes

 

$                39,416

 

$                 38,573

 

$                 96,164

 

$                89,973

 

Income taxes

 

16,542

 

15,698

 

41,556

 

36,384

 

Interest expense

 

10,495

 

10,757

 

31,376

 

32,334

 

Interest income

 

(355)

 

(676)

 

(1,205)

 

(1,979)

 

Other (gains) and losses

 

375

 

(703)

 

(158)

 

(1,266)

 

Equity in net (income) loss of affiliates

 

513

 

(421)

 

578

 

(340)

 

Depreciation and amortization

 

2,293

 

2,272

 

6,903

 

6,701

EBITDA

 

$                69,279

 

$                 65,500

 

$               175,214

 

$              161,807

                   

Franchising 

 

$                73,973

 

$                 68,227

 

$               187,323

 

$              168,904

SkyTouch

 

(4,694)

 

(2,727)

 

(12,109)

 

(7,097)

     

$                69,279

 

$                 65,500

 

$               175,214

 

$              161,807

 

 

CHOICE HOTELS INTERNATIONAL, INC.

 

Exhibit 9

 

DISCONTINUED OPERATIONS

   
 

(UNAUDITED)

   
                   
                   
                   
     

Three Months Ended September 30,

 

Nine Months Ended September 30, 

                   

(In thousands)

 

2014

 

2013

 

2014

 

2013

                         

REVENUES:

                  

Hotel operations

$                       -

 

$                   1,310

 

$                    801

 

$              3,600

      Total revenues

-

 

1,310

 

801

 

3,600

                   

OPERATING EXPENSES:

             

Hotel operations

52

 

956

 

884

 

2,742

Depreciation and amortization

-

 

127

 

-

 

393

Total operating expenses

52

 

1,083

 

884

 

3,135

                   

Operating income (loss)

(52)

 

227

 

(83)

 

465

                   

Gain (loss) on disposal of discontinued operations

(30)

 

-

 

2,803

 

-

                   

Income (loss) from discontinued operations before income taxes

(82)

 

227

 

2,720

 

465

Income tax (benefit)

(31)

 

84

 

1,009

 

172

Income (loss) from discontinued operations

$                    (51)

 

$                      143

 

$                 1,711

 

$                 293

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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