Choice Hotels International, Inc.,
-- Diluted earnings per share ("EPS") for third quarter 2008 were $0.57, compared to $0.59 for the same period of the prior year.
-- Adjusted diluted EPS for the nine months ended September 30, 2008 were $1.36, a 5% increase compared to $1.30 in the same period of the prior year. Diluted EPS were $1.30 for the nine months ended September 30, 2008 compared to $1.26 for the same period of 2007. Adjusted diluted EPS for the nine months ended September 30, 2008 excludes a $3.8 million after-tax charge (approximately $0.06 diluted EPS) resulting from the previously announced acceleration of the Company's management succession plan. Adjusted diluted EPS for the nine months ended September 30, 2007 excludes a $2.3 million after-tax charge (approximately $0.04 diluted EPS) resulting from termination benefits for certain executive officers.
-- Earnings before interest, taxes and depreciation ("EBITDA") were $63.9 million for third quarter 2008, compared to $64.5 million for third quarter 2007. Operating income for third quarter 2008 was $61.9 million compared to $62.4 million for third quarter 2007.
-- Adjusted earnings before interest, taxes and depreciation ("Adjusted EBITDA") increased 4% to $152.8 million for the nine months ended September 30, 2008, compared to $147.2 million for the same period of 2007. Operating income for the nine months ended September 30, 2008 was $140.5 million compared to $137.1 million for the same period of 2007. Adjusted EBITDA for the nine months ended September 30, 2008 excludes a $6.1 million charge resulting from the acceleration of the Company's management succession plan. Adjusted EBITDA for the nine months ended September 30, 2007 excludes a $3.7 million charge resulting from termination benefits for certain executive officers.
-- Domestic unit and room growth increased 6.0 percent and 5.4 percent, respectively, since September 30, 2007.
-- Domestic system-wide revenue per available room (RevPAR) declined 1.6% for third quarter 2008 compared to the same period of the prior year. The decrease was due to a 280 basis point decline in occupancy, which was partially offset by a 2.7% increase in average daily rate.
-- The effective royalty rate increased 7 basis points to 4.19% for the three months ended September 30, 2008 compared to 4.12% for the same period of the prior year.
-- Franchising revenues increased 1% and total revenues increased 9% for third quarter 2008 compared to the same period in 2007. Year to date franchising revenues and total revenues increased 6% and 9%, respectively, compared to the same period of 2007.
-- Executed 160 new domestic hotel franchise contracts during the third quarter of 2008 compared to 182 for third quarter 2007. Overall, year to date, new domestic hotel franchise contracts executed increased 5% to 491 compared to 469 in the same period of the prior year.
-- The number of domestic hotels under construction, awaiting conversion or approved for development increased 10% from September 30, 2007 to 955 hotels representing 76,269 rooms; the worldwide pipeline increased 13% from September 30, 2007 to 1,074 hotels representing 85,916 rooms.
"The fundamental resiliency of Choice's business model was evident in our third quarter results, as the company grew its franchising revenues and once again demonstrated robust domestic unit and room growth during a period marked by significant industry-wide occupancy declines," said Stephen P. Joyce, president and chief executive officer. "As we continue to face an uncertain economic environment, we are confident that our unrelenting focus on our franchisees' profitability, aided by Choice's strong centralized support systems will position us well to achieve continued long-term profitable growth. We also anticipate benefitting from hotel developers' interest in our portfolio of conversion brands, which are appropriate for the various stages of a hotel asset's long lifecycle. We remain focused on executing our strategy of increasing domestic market share, strengthening our brands, and returning value to our shareholders."
Outlook for 2008
The uncertainty around the current economic environment and credit market conditions and their impact on travel patterns and hotel development activities makes it difficult to predict future results, particularly as it relates to underlying assumptions for RevPAR, new hotel franchise and relicensing sales and interest and investment income and expense.
The company's fourth quarter 2008 diluted EPS is expected to be $0.40. The company expects full year 2008 adjusted diluted EPS of $1.76. Adjusted EBITDA for full-year 2008 are expected to be approximately $197.5 million. These estimates include the following assumptions:
-- The company expects net domestic unit growth of approximately 5.5% in 2008;
-- RevPAR is expected to decline approximately 6% for fourth quarter 2008 and decline approximately 1.5% for full-year 2008;
-- The effective royalty rate is expected to increase 6 basis points for full-year 2008;
-- All figures assume the share count as of October 27, 2008 and an effective tax rate of 36.25% for fourth quarter 2008 and 37% for full year 2008;
-- All figures exclude a $6.1 million charge ($3.8 million after-tax and approximately $0.06 diluted EPS) resulting from the previously announced acceleration of the Company's management succession plan.
Use of Free Cash Flow
The company has consistently used its free cash flow (cash flow from operations less capital expenditures) to return value to shareholders, primarily through share repurchases and dividends.
The annual dividend rate per common share was increased 9 percent by the Board of Directors in September and is now $0.74. During the nine months ended September 30, 2008, the company paid $31.6 million of cash dividends to shareholders.
The company did not repurchase any shares under it share repurchase program during the three and nine months ended September 30, 2008. Subsequent to September 30, 2008 and through October 27, 2008, the Company repurchased 0.5 million shares at a total cost of $12.6 million at an average price of $23.06 per share. The company has authorization to purchase up to an additional 2.6 million shares under the share repurchase program. We expect to continue making repurchases in the open market and through privately negotiated transactions, subject to market and other conditions. No minimum number of share repurchases has been fixed. Since Choice announced its stock repurchase program on June 25, 1998, the company has repurchased 39.1 million shares of its common stock for a total cost of $908.5 million through October 27, 2008. Considering the effect of a two-for-one stock split in October 2005, the company has repurchased 72.1 million shares under the share repurchase program at an average price of $12.60 per share.
Our Board has authorized us to enter into programs which permit us to offer financing, investment and guaranty support to qualified franchisees to incent multi-unit franchise development in top markets. We expect to opportunistically deploy this capital over the next several years. Our current expectation is that our annual investment in these programs would range from $20 to $40 million beginning in 2009 (2008 investment in these programs is not expected to be significant), depending on market and other conditions. In addition to these programs, the company expects to continue to return value to its shareholders through a combination of share repurchases and dividends, also subject to market and other conditions.
Conference Call
Choice will conduct a conference call on Tuesday, October 28, 2008 at 9:30 a.m. EDT to discuss the company's third quarter results. The dial-in number to listen to the call is 1-800-230-1085. International callers should dial 612-288-0329. The conference call also will be Webcast simultaneously via the company's Web site, http://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 audio of the call will be archived and available on either http://www.choicehotels.com/ or by calling 1-800-475-6701 and entering access code 962339 beginning at 11:30 a.m. EDT on October 28, 2008 and will remain available through November 28, 2008. The international dial-in for the replay is 320-365-3844, access code 929522.
About Choice Hotels
Choice Hotels International franchises more than 5,700 hotels, representing more than 465,000 rooms, in the United States and more than 35 countries and territories. As of September 30, 2008, 955 hotels are under construction, awaiting conversion or approved for development in the United States, representing 76,269 rooms, and an additional 119 hotels, representing 9,647 rooms, are under construction, awaiting conversion or approved for development in more than 20 countries and territories. The company's Comfort Inn, Comfort Suites, Quality, Sleep Inn, Clarion, Cambria Suites, MainStay Suites, Suburban Extended Stay Hotel, Econo Lodge and Rodeway Inn brands serve guests worldwide.
Additional corporate information may be found on the Choice Hotels Web site, which may be accessed at http://www.choicehotels.com/.
Forward-Looking Statements
Certain matters discussed in this press release constitute forward-looking statements within the meaning of the federal securities law. Generally, our use of words such as "expect," "estimate," "believe," "anticipate," "will," "forecast," "plan," project," "assume" or similar words of futurity identify statements that are forward-looking and that we intend to be included within the Safe Harbor protections provided by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward- looking statements are based on management's current beliefs, assumptions and expectations regarding future events, which in turn are based on information currently available to management. Such statements may relate to projections of the company's revenue, earnings and other financial and operational measures, company debt levels, payment of stock dividends, and future operations, among other matters. We caution you not to place undue reliance on any such forward-looking statements. Forward-looking statements do not guarantee future performance and involve known and unknown risks, uncertainties and other factors.
Several factors could cause actual results, performance or achievements of the company to differ materially from those expressed in or contemplated by the forward-looking statements. Such risks include, but are not limited to, changes to general, domestic and foreign economic conditions; operating risks common in the lodging and franchising industries; changes to the desirability of our brands as viewed by hotel operators and customers; changes to the terms or termination of our contracts with franchisees; our ability to keep pace with improvements in technology utilized for reservations systems and other operating systems; fluctuations in the supply and demand for hotels rooms; and our ability to manage effectively our indebtedness. These and other risk factors are discussed in detail in the Risk Factors section of the company's Form 10-K for the year ended December 31, 2007, filed with the Securities and Exchange Commission on February 29, 2008. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
Statement Concerning Non-GAAP Financial Measurements
Adjusted diluted EPS, adjusted EBITDA, franchising revenues and adjusted franchising margins are non-GAAP financial measurements. This information should not be considered as an alternative to any measure of performance as promulgated under accounting principles generally accepted in the United States (GAAP), such as diluted earnings per share, operating income, total revenues and operating margins. The company's calculation of these measurements may be different from the calculations used by other companies and therefore comparability may be limited. The company has included an exhibit accompanying this release that reconciles these measures to the comparable GAAP measurement. We discuss management's reasons for reporting these non-GAAP measures below.
Earnings Before Interest, Taxes, Depreciation and Amortization: EBITDA reflects earnings excluding the impact of interest expense, tax expense, depreciation and amortization. Our management considers EBITDA to be an indicator of operating performance because it can be used to measure our ability to service debt, fund capital expenditures, and expand our business. EBITDA is a commonly used measure of performance in our industry. In addition, it is used by analysts, lenders, investors and others, as well as by us, to facilitate comparisons between the Company and its competitors because it excludes certain items that can vary widely across different industries or among companies within the same industry.
Franchising Revenues and Margins: The Company reports franchising revenues and margins which exclude marketing and reservations revenues and hotel operations. Marketing and reservation activities are excluded from revenues and operating margins since the Company is contractually required by its franchise agreements to use these fees collected for marketing and reservation activities. Cumulative reservation and marketing fees not expended are recorded as a payable on the Company's financial statements and are carried over to the next fiscal year and expended in accordance with the franchise agreements. Cumulative marketing and reservation expenditures in excess of fees collected for marketing and reservation activities are recorded as a receivable on the Company's financial statements. In addition, the Company has the contractual authority to require that the franchisees in the system at any given point repay the Company for any deficits related to marketing and reservation activities. Hotel operations are excluded since they do not reflect the most accurate measure of the Company's core franchising business. These non-GAAP measures are a commonly used measure of performance in our industry and facilitate comparisons between the Company and its competitors.
Adjusted EBITDA, Adjusted Franchising Margins and Adjusted Diluted EPS: The Company's management also uses Adjusted EBITDA, Adjusted Franchising Margins and Adjusted Diluted EPS which exclude the impact of the acceleration of the Company's management succession plan in the nine months ended September 30, 2008 and the impact of termination benefits incurred related to the separation of certain executive officers in the nine months ended September 30, 2007. The Company utilizes these non-GAAP measures to enable investors to perform meaningful comparisons of past, present and future operating results and as a means to emphasize the results of on-going operations.
Cambria Suites, Comfort Inn, Comfort Suites, Quality, Clarion, Sleep Inn, MainStay Suites, Suburban Extended Stay Hotel, Econo Lodge, and Rodeway Inn are proprietary trademarks and service marks of Choice Hotels International, Inc.
Choice Hotels International, Inc. Exhibit 1
Consolidated Statements of Income
(Unaudited)
Three Months Ended September 30,
Variance
2008 2007 $ %
(In thousands, except per share
amounts)
REVENUES:
Royalty fees $76,595 $73,219 $3,376 5%
Initial franchise and relicensing
fees 7,012 8,902 (1,890) (21%)
Procurement services 3,836 3,622 214 6%
Marketing and reservation 100,811 85,485 15,326 18%
Hotel operations 1,353 1,196 157 13%
Other 1,604 2,675 (1,071) (40%)
Total revenues 191,211 175,099 16,112 9%
OPERATING EXPENSES:
Selling, general and administrative 25,579 24,230 1,349 6%
Depreciation and amortization 2,038 2,158 (120) (6%)
Marketing and reservation 100,811 85,485 15,326 18%
Hotel operations 914 867 47 5%
Total operating expenses 129,342 112,740 16,602 15%
Operating income 61,869 62,359 (490) (1%)
OTHER INCOME AND EXPENSES, NET:
Interest expense 2,157 3,992 (1,835) (46%)
Interest and other investment (income)
loss 2,402 (534) 2,936 (550%)
Equity in net income of affiliates (436) (462) 26 (6%)
Total other income and expenses,
net 4,123 2,996 1,127 38%
Income before income taxes 57,746 59,363 (1,617) (3%)
Income taxes 21,831 20,969 862 4%
Net income $35,915 $38,394 $(2,479) (6%)
Weighted average shares outstanding-
basic 62,316 63,556
Weighted average shares outstanding-
diluted 62,887 64,602
Basic earnings per share $0.58 $0.60 $(0.02) (3%)
Diluted earnings per share $0.57 $0.59 $(0.02) (3%)
Nine Months Ended September 30,
Variance
2008 2007 $ %
(In thousands, except per share
amounts)
REVENUES:
Royalty fees $188,151 $175,723 $12,428 7%
Initial franchise and relicensing fees 21,202 21,482 (280) (1%)
Procurement services 13,650 12,603 1,047 8%
Marketing and reservation 254,573 226,864 27,709 12%
Hotel operations 3,683 3,485 198 6%
Other 5,927 6,362 (435) (7%)
Total revenues 487,186 446,519 40,667 9%
OPERATING EXPENSES:
Selling, general and administrative 83,409 73,735 9,674 13%
Depreciation and amortization 6,165 6,410 (245) (4%)
Marketing and reservation 254,573 226,864 27,709 12%
Hotel operations 2,540 2,402 138 6%
Total operating expenses 346,687 309,411 37,276 12%
Operating income 140,499 137,108 3,391 2%
OTHER INCOME AND EXPENSES, NET:
Interest expense 8,687 10,206 (1,519) (15%)
Interest and other investment (income)
loss 3,329 (2,856) 6,185 (217%)
Equity in net income of affiliates (938) (837) (101) 12%
Total other income and expenses,
net 11,078 6,513 4,565 70%
Income before income taxes 129,421 130,595 (1,174) (1%)
Income taxes 47,921 47,241 680 1%
Net income $81,500 $83,354 $(1,854) (2%)
Weighted average shares outstanding-
basic 62,084 64,929
Weighted average shares outstanding-
diluted 62,778 66,077
Basic earnings per share $1.31 $1.28 $0.03 2%
Diluted earnings per share $1.30 $1.26 $0.04 3%
Choice Hotels International, Inc. Exhibit 2
Consolidated Balance Sheets
(In thousands, except per share amounts) September 30, December 31,
2008 2007
(Unaudited)
ASSETS
Cash and cash equivalents $62,527 $46,377
Accounts receivable, net 48,919 40,855
Deferred income taxes 6,673 2,387
Investments, employee benefit plans, at fair
value 10,676 1,002
Other current assets 16,693 15,330
Total current assets 145,488 105,951
Fixed assets and intangibles, net 138,536 141,679
Receivable -- marketing fees 12,256 6,782
Investments, employee benefit plans, at fair
value 19,524 33,488
Other assets 34,126 40,484
Total assets 349,930 328,384
LIABILITIES AND SHAREHOLDERS' DEFICIT
Accounts payable and accrued expenses $75,487 $96,195
Deferred revenue 49,897 48,660
Deferred compensation & retirement plan
obligations 11,033 1,002
Other current liabilities 16,679 1,659
Total current liabilities 153,096 147,516
Long-term debt 234,400 272,378
Deferred compensation & retirement plan
obligations 34,373 43,132
Other liabilities 18,568 22,419
Total liabilities 440,437 485,445
Common stock, $0.01 par value 629 621
Additional paid-in-capital 88,036 86,243
Accumulated other comprehensive income (1,253) 346
Treasury stock, at cost (780,564) (798,110)
Retained earnings 602,645 553,839
Total shareholders' deficit (90,507) (157,061)
Total liabilities and shareholders'
deficit $349,930 $328,384
Choice Hotels International, Inc. Exhibit 3
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands) Nine Months Ended September 30,
2008 2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $81,500 $83,354
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 6,165 6,410
Provision for bad debts 870 133
Non-cash stock compensation and other charges 9,989 9,080
Non-cash interest and other (income) loss 4,489 (1,599)
Dividends received from equity method
investments 673 495
Equity in net income of affiliates (938) (837)
Changes in assets and liabilities, net of
acquisitions:
Receivables (8,646) (11,680)
Receivable - marketing and reservation fees,
net (3,803) 17,248
Accounts payable (16,061) (952)
Accrued expenses (5,416) (9,507)
Income taxes payable/receivable 16,750 8,523
Deferred income taxes 782 (9,034)
Deferred revenue 1,292 (80)
Other assets 2,465 (432)
Other liabilities 2,280 9,040
NET CASH PROVIDED BY OPERATING ACTIVITIES 92,391 100,162
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in property and equipment (7,873) (8,734)
Acquisitions, net of cash acquired - (343)
Purchases of investments, employee benefit
plans (6,908) (7,128)
Proceeds from sales of investments, employee
benefit plans 6,857 2,703
Issuance of notes receivable (6,411) (6,066)
Collections of notes receivable 368 1,675
Other items, net (965) (689)
NET CASH USED IN INVESTING ACTIVITIES (14,932) (18,582)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of long-term debt (100,000) (422)
Net borrowings pursuant to revolving credit
facility 62,000 106,200
Excess tax benefits from stock-based
compensation 4,653 4,870
Purchase of treasury stock (1,568) (156,749)
Dividends paid (31,626) (29,522)
Proceeds from exercise of stock options 6,085 5,093
NET CASH USED IN FINANCING ACTIVITIES (60,456) (70,530)
Net change in cash and cash
equivalents 17,003 11,050
Effect of foreign exchange rate
changes on cash and cash equivalents (853) 463
Cash and cash equivalents at
beginning of period 46,377 35,841
CASH AND CASH EQUIVALENTS AT END OF PERIOD $62,527 $47,354
EXHIBIT 4
CHOICE HOTELS INTERNATIONAL, INC.
SUPPLEMENTAL OPERATING INFORMATION
DOMESTIC HOTEL SYSTEM
(UNAUDITED)
For the Nine Months Ended
September 30, 2008*
Average Daily
Rate Occupancy RevPAR
Comfort Inn $80.12 60.9% $48.82
Comfort Suites 89.95 62.5% 56.26
Sleep 72.05 59.7% 43.02
Midscale without Food & Beverage 81.18 61.1% 49.61
Quality 72.08 53.0% 38.20
Clarion 85.04 51.0% 43.37
Midscale with Food & Beverage 74.87 52.6% 39.35
Econo Lodge 55.65 47.3% 26.33
Rodeway 55.51 48.7% 27.04
Economy 55.61 47.7% 26.51
MainStay 73.38 65.2% 47.86
Suburban 42.57 64.3% 27.37
Extended Stay 50.66 64.5% 32.70
Total Domestic System $74.47 56.2% $41.87
For the Nine Months Ended
September 30, 2007*
Average Daily
Rate Occupancy RevPAR
Comfort Inn $77.04 62.9% $48.45
Comfort Suites 87.54 66.0% 57.74
Sleep 69.53 62.8% 43.69
Midscale without Food & Beverage 78.20 63.5% 49.67
Quality 70.45 54.5% 38.37
Clarion 80.39 51.5% 41.38
Midscale with Food & Beverage 72.76 53.7% 39.10
Econo Lodge 54.43 48.1% 26.17
Rodeway 53.63 47.9% 25.68
Economy 54.25 48.0% 26.06
MainStay 69.91 67.8% 47.38
Suburban 39.98 68.1% 27.23
Extended Stay 46.69 68.0% 31.76
Total Domestic System $72.04 58.0% $41.80
Change
Average Daily
Rate Occupancy RevPAR
Comfort Inn 4.0% (200)bps 0.8%
Comfort Suites 2.8% (350)bps (2.6%)
Sleep 3.6% (310)bps (1.5%)
Midscale without Food & Beverage 3.8% (240)bps (0.1%)
Quality 2.3% (150)bps (0.4%)
Clarion 5.8% (50)bps 4.8%
Midscale with Food & Beverage 2.9% (110)bps 0.6%
Econo Lodge 2.2% (80)bps 0.6%
Rodeway 3.5% 80 bps 5.3%
Economy 2.5% (30)bps 1.7%
MainStay 5.0% (260)bps 1.0%
Suburban 6.5% (380)bps 0.5%
Extended Stay 8.5% (350)bps 3.0%
Total Domestic System 3.4% (180)bps 0.2%
* Operating statistics represent hotel operations from December through
August
For the Three Months Ended
September 30, 2008*
Average Daily
Rate Occupancy RevPAR
Comfort Inn $85.58 69.9% $59.79
Comfort Suites 92.58 68.7% 63.57
Sleep 74.93 66.2% 49.63
Midscale without Food & Beverage 85.65 69.1% 59.15
Quality 77.04 61.2% 47.15
Clarion 89.85 59.1% 53.06
Midscale with Food & Beverage 79.74 60.7% 48.43
Econo Lodge 60.26 55.7% 33.59
Rodeway 61.31 56.0% 34.34
Economy 60.54 55.8% 33.79
MainStay 76.09 70.0% 53.28
Suburban 43.27 65.8% 28.45
Extended Stay 52.27 66.9% 34.95
Total Domestic System $78.96 64.1% $50.62
For the Three Months Ended
September 30, 2007*
Rate Occupancy RevPAR
Comfort Inn $82.60 73.2% $60.51
Comfort Suites 90.64 72.7% 65.88
Sleep 73.09 70.8% 51.72
Midscale without Food & Beverage 82.93 72.8% 60.35
Quality 76.08 63.7% 48.47
Clarion 85.09 60.0% 51.05
Midscale with Food & Beverage 78.10 62.8% 49.08
Econo Lodge 59.07 56.3% 33.24
Rodeway 58.55 57.3% 33.52
Economy 58.95 56.5% 33.31
MainStay 73.34 75.3% 55.26
Suburban 40.89 70.3% 28.76
Extended Stay 49.27 71.6% 35.26
Total Domestic System $76.90 66.9% $51.43
Change
Average Daily
Rate Occupancy RevPAR
Comfort Inn 3.6% (330)bps (1.2%)
Comfort Suites 2.1% (400)bps (3.5%)
Sleep 2.5% (460)bps (4.0%)
Midscale without Food & Beverage 3.3% (370)bps (2.0%)
Quality 1.3% (250)bps (2.7%)
Clarion 5.6% (90)bps 3.9%
Midscale with Food & Beverage 2.1% (210)bps (1.3%)
Econo Lodge 2.0% (60)bps 1.1%
Rodeway 4.7% (130)bps 2.4%
Economy 2.7% (70)bps 1.4%
MainStay 3.7% (530)bps (3.6%)
Suburban 5.8% (450)bps (1.1%)
Extended Stay 6.1% (470)bps (0.9%)
Total Domestic System 2.7% (280)bps (1.6%)
* Operating statistics represent hotel operations from June through August
For the Quarter Ended For the Nine Months Ended
9/30/2008 9/30/2007 9/30/2008 9/30/2007
System-wide effective
royalty rate 4.19% 4.12% 4.19% 4.13%
EXHIBIT 5
CHOICE HOTELS INTERNATIONAL, INC.
SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA
(UNAUDITED)
September 30, 2008 September 30, 2007
Hotels Rooms Hotels Rooms
Comfort Inn 1,455 113,782 1,429 111,505
Comfort Suites 526 40,890 470 36,688
Sleep 359 26,478 345 25,617
Midscale without Food & Beverage 2,340 181,150 2,244 173,810
Quality 888 83,648 804 77,515
Clarion 173 23,031 166 23,685
Midscale with Food & Beverage 1,061 106,679 970 101,200
Econo Lodge 824 51,490 824 50,273
Rodeway 336 19,904 275 16,342
Economy 1,160 71,394 1,099 66,615
MainStay 34 2,605 29 2,166
Suburban 58 7,054 52 6,691
Extended Stay 92 9,659 81 8,857
Cambria Suites 8 857 2 219
Domestic Franchises 4,661 369,739 4,396 350,701
International Franchises 1,110 98,628 1,137 99,579
Total Franchises 5,771 468,367 5,533 450,280
Variance
Hotels Rooms % %
Comfort Inn 26 2,277 1.8% 2.0%
Comfort Suites 56 4,202 11.9% 11.5%
Sleep 14 861 4.1% 3.4%
Midscale without Food & Beverage 96 7,340 4.3% 4.2%
Quality 84 6,133 10.4% 7.9%
Clarion 7 (654) 4.2% (2.8%)
Midscale with Food & Beverage 91 5,479 9.4% 5.4%
Econo Lodge - 1,217 0.0% 2.4%
Rodeway 61 3,562 22.2% 21.8%
Economy 61 4,779 5.6% 7.2%
MainStay 5 439 17.2% 20.3%
Suburban 6 363 11.5% 5.4%
Extended Stay 11 802 13.6% 9.1%
Cambria Suites 6 638 300.0% 291.3%
Domestic Franchises 265 19,038 6.0% 5.4%
International Franchises (27) (951) (2.4%) (1.0%)
Total Franchises 238 18,087 4.3% 4.0%
EXHIBIT 6
CHOICE HOTELS INTERNATIONAL, INC.
SUPPLEMENTAL INFORMATION BY BRAND
DEVELOPMENT RESULTS -- DOMESTIC NEW HOTEL CONTRACTS
(UNAUDITED)
For the Nine Months Ended September 30, 2008
New
Construction Conversion Total
Comfort Inn 33 41 74
Comfort Suites 65 3 68
Sleep 47 3 50
Midscale without Food & Beverage 145 47 192
Quality 4 108 112
Clarion 6 29 35
Midscale with Food & Beverage 10 137 147
Econo Lodge 3 55 58
Rodeway 2 65 67
Economy 5 120 125
MainStay 7 - 7
Suburban 8 - 8
Extended Stay 15 - 15
Cambria Suites 12 - 12
Total Domestic System 187 304 491
For the Nine Months Ended September 30, 2007
New
Construction Conversion Total
Comfort Inn 26 32 58
Comfort Suites 78 4 82
Sleep 33 1 34
Midscale without Food & Beverage 137 37 174
Quality 7 96 103
Clarion 5 28 33
Midscale with Food & Beverage 12 124 136
Econo Lodge 3 50 53
Rodeway 2 62 64
Economy 5 112 117
MainStay 10 1 11
Suburban 10 3 13
Extended Stay 20 4 24
Cambria Suites 18 - 18
Total Domestic System 192 277 469
% Change
New
Construction Conversion Total
Comfort Inn 27% 28% 28%
Comfort Suites (17%) (25%) (17%)
Sleep 42% 200% 47%
Midscale without Food & Beverage 6% 27% 10%
Quality (43%) 13% 9%
Clarion 20% 4% 6%
Midscale with Food & Beverage (17%) 10% 8%
Econo Lodge 0% 10% 9%
Rodeway 0% 5% 5%
Economy 0% 7% 7%
MainStay (30%) (100%) (36%)
Suburban (20%) (100%) (38%)
Extended Stay (25%) (100%) (38%)
Cambria Suites (33%) NM (33%)
Total Domestic System (3%) 10% 5%
For the Three Months Ended September 30, 2008
New
Construction Conversion Total
Comfort Inn 11 14 25
Comfort Suites 23 - 23
Sleep 15 1 16
Midscale without Food & Beverage 49 15 64
Quality 2 33 35
Clarion 1 8 9
Midscale with Food & Beverage 3 41 44
Econo Lodge 2 16 18
Rodeway - 17 17
Economy 2 33 35
MainStay 6 - 6
Suburban 4 - 4
Extended Stay 10 - 10
Cambria Suites 7 - 7
Total Domestic System 71 89 160
For the Three Months Ended September 30, 2007
New
Construction Conversion Total
Comfort Inn 10 12 22
Comfort Suites 38 1 39
Sleep 17 - 17
Midscale without Food & Beverage 65 13 78
Quality 2 33 35
Clarion 1 7 8
Midscale with Food & Beverage 3 40 43
Econo Lodge 1 22 23
Rodeway 2 23 25
Economy 3 45 48
MainStay 6 - 6
Suburban 3 1 4
Extended Stay 9 1 10
Cambria Suites 3 - 3
Total Domestic System 83 99 182
% Change
New
Construction Conversion Total
Comfort Inn 10% 17% 14%
Comfort Suites (39%) (100%) (41%)
Sleep (12%) NM (6%)
Midscale without Food & Beverage (25%) 15% (18%)
Quality 0% 0% 0%
Clarion 0% 14% 13%
Midscale with Food & Beverage 0% 3% 2%
Econo Lodge 100% (27%) (22%)
Rodeway (100%) (26%) (32%)
Economy (33%) (27%) (27%)
MainStay 0% NM 0%
Suburban 33% (100%) 0%
Extended Stay 11% (100%) 0%
Cambria Suites 133% NM 133%
Total Domestic System (14%) (10%) (12%)
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.
September 30, 2008
Units
New
Conversion Construction Total
Comfort Inn 44 123 167
Comfort Suites 2 281 283
Sleep Inn 1 148 149
Midscale without Food & Beverage 47 552 599
Quality 77 16 93
Clarion 30 10 40
Midscale with Food & Beverage 107 26 133
Econo Lodge 33 5 38
Rodeway 43 1 44
Economy 76 6 82
MainStay - 38 38
Suburban 1 39 40
Extended Stay 1 77 78
Cambria Suites - 63 63
231 724 955
September 30, 2007
Units
New
Conversion Construction Total
Comfort Inn 41 121 162
Comfort Suites 1 258 259
Sleep Inn - 113 113
Midscale without Food & Beverage 42 492 534
Quality 61 12 73
Clarion 23 7 30
Midscale with Food & Beverage 84 19 103
Econo Lodge 45 4 49
Rodeway 52 3 55
Economy 97 7 104
MainStay 1 36 37
Suburban 6 31 37
Extended Stay 7 67 74
Cambria Suites - 57 57
230 642 872
Variance
New
Conversion Construction Total
Units % Units % Units %
Comfort Inn 3 7% 2 2% 5 3%
Comfort Suites 1 100% 23 9% 24 9%
Sleep Inn 1 NM 35 31% 36 32%
Midscale without Food & Beverage 5 12% 60 12% 65 12%
Quality 16 26% 4 33% 20 27%
Clarion 7 30% 3 43% 10 33%
Midscale with Food & Beverage 23 27% 7 37% 30 29%
Econo Lodge (12) (27%) 1 25% (11) (22%)
Rodeway (9) (17%) (2) (67%) (11) (20%)
Economy (21) (22%) (1) (14%) (22) (21%)
MainStay (1) (100%) 2 6% 1 3%
Suburban (5) (83%) 8 26% 3 8%
Extended Stay (6) (86%) 10 15% 4 5%
Cambria Suites - NM 6 11% 6 11%
1 0% 82 13% 83 10%
EXHIBIT 8
CHOICE HOTELS INTERNATIONAL, INC.
SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION
(UNAUDITED)
CALCULATION OF FRANCHISING REVENUES AND ADJUSTED FRANCHISING MARGINS
Three Months Ended Nine Months Ended
(dollar amounts in thousands) September 30, September 30,
2008 2007 2008 2007
Franchising Revenues:
Total Revenues $191,211 $175,099 $487,186 $446,519
Adjustments:
Marketing and reservation
revenues (100,811) (85,485) (254,573) (226,864)
Hotel Operations (1,353) (1,196) (3,683) (3,485)
Franchising Revenues $89,047 $88,418 $228,930 $216,170
Franchising Margins:
Operating Margin:
Total Revenues $191,211 $175,099 $487,186 $446,519
Operating Income $61,869 $62,359 $140,499 $137,108
Operating Margin 32.4% 35.6% 28.8% 30.7%
Adjusted Franchising Margin:
Franchising Revenues $89,047 $88,418 $228,930 $216,170
Operating Income $61,869 $62,359 $140,499 $137,108
Acceleration of management
succession plan benefits - - 6,069 -
Executive termination benefits - - - 3,690
Hotel Operations (439) (329) (1,143) (1,083)
$61,430 $62,030 $145,425 $139,715
Adjusted Franchising
Margin 69.0% 70.2% 63.5% 64.6%
CALCULATION OF ADJUSTED NET INCOME AND ADJUSTED DILUTED EARNINGS PER SHARE
(EPS)
(In thousands, except Three Months Ended Nine Months Ended
per share amounts) September 30, September 30, Full Year
2008 2007 2008 2007 2008
Net Income $35,915 $38,394 $81,500 $83,354 $106,779
Adjustments:
Acceleration of
management
succession plan - - 3,799 - 3,799
Executive
termination
benefits - - - 2,310 -
Adjusted Net Income $35,915 $38,394 $85,299 $85,664 $110,578
Weighted average
shares outstanding-
diluted 62,887 64,602 62,778 66,077 62,700
Diluted Earnings
Per Share $0.57 $0.59 $1.30 $1.26 $1.70
Adjustments:
Acceleration of
management
succession plan - - 0.06 - 0.06
Executive
termination
benefits - - - 0.04 -
Adjusted Diluted
Earnings Per Share
(EPS) $0.57 $0.59 $1.36 $1.30 $1.76
Adjusted EBITDA Reconciliation
(in millions)
Q3 2008 Q3 2007 YTD 2008 YTD 2007 Full Year
Actuals Actuals Actuals Actuals 2008
Operating Income
(per GAAP) $61.9 $62.4 $140.5 $137.1 $183.0
Acceleration of
management
succession plan - - 6.1 - 6.1
Executive
termination
benefits - - - 3.7 -
Depreciation and
amortization 2.0 2.1 6.2 6.4 8.4
Adjusted Earnings
before interest,
taxes, depreciation
& amortization
(non-GAAP) $63.9 $64.5 $152.8 $147.2 $197.5
First Call Analyst:
FCMN Contact: david_peikin@choicehotels.com
SOURCE: Choice Hotels International, Inc.
CONTACT: David White, Chief Financial Officer, +1-301-592-5117, or David
Peikin, Senior Director, Corporate Communications, +1-301-592-6361, both of
Choice Hotels International, Inc.
Web site: http://www.choicehotels.com/
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