Choice Hotels International, Inc.,
-- Adjusted diluted earnings per share ("EPS") for third quarter 2009
were $0.56, compared to $0.57 for the same period of the prior year.
Diluted EPS were $0.55 for third quarter 2009 compared to $0.57 for
third quarter 2008. Adjusted diluted EPS for third quarter 2009
exclude certain special items, as described below, totaling $0.01.
-- Excluding special items, adjusted earnings before interest, taxes and
depreciation ("EBITDA") were $51.7 million for the three months ended
September 30, 2009, compared to $64.4 million for the same period of
2008. Operating income for the three months ended September 30, 2009
was $48.1 million compared to $61.9 million for the same period of
2008.
-- Adjusted selling, general and administrative ("SG&A") costs for the
third quarter of 2009 totaled $23.0 million which represented an 8%
decline from the same period of the prior year. Adjusted SG&A costs
exclude special items totaling $1.5 million and $0.5 million for the
three months ended September 30, 2009 and 2008, respectively.
-- Domestic unit and room growth increased 4.9 percent and 4.8 percent,
respectively, from September 30, 2008.
-- Domestic system-wide revenue per available room ("RevPAR") declined
15.9% for the third quarter of 2009 compared to the same period of
2008.
-- The effective royalty rate increased 4 basis points to 4.23% for the
three months ended September 30, 2009 compared to 4.19% for the same
period of the prior year.
-- Franchising revenues declined 16% from $89.0 million for the three
months ended September 30, 2008 to $74.6 million for the same period
of 2009. Total revenues for the three months ended September 30, 2009
declined 13% compared to the same period of 2008.
-- The company executed 79 new domestic hotel franchise contracts for the
three months ended September 30, 2009, a decline of 51% compared to
the 160 contracts executed in the same period of the prior year.
-- The number of domestic hotels under construction, awaiting conversion
or approved for development declined 22% from September 30, 2008 to
744 hotels representing 59,121 rooms; the worldwide pipeline declined
20% from September 30, 2008 to 860 hotels representing 68,541 rooms.
-- Interest and other investment income for the three months ended
September 30, 2009 improved by approximately $5.4 million from the
same period of the prior year primarily due to the appreciation in the
fair value of investments held in the Company's non-qualified employee
benefit plans during the current period compared to a decline in the
fair value of these investments in the prior year.
"Our well-known diversified brands and our unrelenting focus on our owners' property-level profitability and return on investment has fueled our continued unit and room growth in the face of a continued difficult economic and lodging industry environment," said Stephen P. Joyce, president and chief executive officer. "Recently, we announced that we reached the 6,000 property milestone and we remain confident that the strength of brands will allow us to continue to attract hotels into our global distribution system."
Special Items
During the three and nine months ended September 30, 2009, the company recorded employee termination benefits of approximately $1.5 million and $2.3 million, respectively. In addition, during the nine months ended September 30, 2009, the company recorded a $1.5 million charge related to the sublease of a portion of its office space. These special items represent diluted EPS of $0.01 and $0.03 for the three and nine months ended September 30, 2009, respectively.
During the three and nine months ended September 30, 2008, the company recorded employee termination benefits of approximately $0.5 million and $0.8 million, respectively. Furthermore, the company incurred $6.1 million of benefit costs during the nine months ended September 30, 2008 resulting from the acceleration of the company's management succession plan. These special items represented diluted EPS of $0.07 for the nine months ended September 30, 2008.
Outlook for 2009
The uncertainty around the current economic environment and credit market conditions and their impact on travel patterns and hotel development activities makes it difficult to predict future results, particularly as they relate to underlying assumptions for RevPAR, new hotel franchise and relicensing sales and interest and investment income and expense.
The company's fourth quarter 2009 adjusted diluted EPS is expected to be $0.40. The company expects full-year 2009 adjusted diluted EPS of $1.68. Adjusted EBITDA for full-year 2009 are expected to be approximately $164.5 million. These estimates include the following assumptions:
-- The company expects net domestic unit growth of approximately 4.0% in
2009;
-- RevPAR is expected to decline approximately 12% for the fourth quarter
of 2009 and decline between 13% and 14% for full-year 2009;
-- The effective royalty rate is expected to increase 5 basis points for
full-year 2009;
-- All figures assume the existing share count and an effective tax rate
of 36.3% and 36.0% for the fourth quarter and full-year 2009,
respectively;
-- Adjusted diluted EPS for fourth quarter 2009 exclude approximately
$0.01 diluted EPS related to employee termination benefits.
-- Adjusted EBITDA and adjusted diluted EPS for full year 2009 exclude
$4.8 million ($3.0 million after tax and approximately $0.05 diluted
EPS) of operating expenses related to employee termination benefits
and a loss on the sublease of office space.
Use of Free Cash Flow
The company has historically used its free cash flow (cash flow from operations less capital expenditures) to return value to shareholders, primarily through share repurchases and dividends.
For the nine months ended September 30, 2009 the company paid $33.3 million of cash dividends to shareholders. The current quarterly dividend rate per common share is $0.185, subject to declaration by our board of directors.
During the three months ended September 30, 2009, the company purchased approximately 0.7 million shares of its common stock at an average price of $27.37 for a total cost of $20.5 million under the share repurchase program. During the nine months ended September 30, 2009, the company purchased approximately 2.1 million shares of its common stock at an average price of $26.90 for a total cost of $55.3 million and has authorization to purchase up to an additional 3.9 million shares under this program. We expect to continue making repurchases in the open market and through privately negotiated transactions, subject to market and other conditions. No minimum number of share repurchases has been fixed. Since Choice announced its stock repurchase program on June 25, 1998, the company has repurchased 42.8 million shares of its common stock for a total cost of $1 billion through September 30, 2009. Considering the effect of a two-for-one stock split in October 2005, the company has repurchased 75.8 million shares under the share repurchase program at an average price of $13.26 per share.
Our Board has authorized us to enter into programs which permit us to offer financing, investment and guaranty support to qualified franchisees to incent multi-unit franchise development in top markets. We expect to opportunistically deploy this capital over the next several years. Our annual investment in these programs is dependent on market and other conditions. Notwithstanding these programs, the company expects to continue to return value to its shareholders through a combination of share repurchases and dividends, subject to market and other conditions.
Impact of the Adoption of New Accounting Pronouncements on Earnings Per Share
In June 2008, the Financial Accounting Standards Board ("FASB") issued FASB Staff Position Emerging Issues Task Force No. 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities" ("FSP EITF 03-6-1"). FSP EITF 03-6-1 clarified that all share-based payment awards that contain rights to non-forfeitable dividends participate in undistributed earnings with common shareholders. Therefore, awards of this nature are considered participating securities and the two-class method of computing basic and diluted earnings per share must be applied rather than the treasury stock method. FSP EITF 03-6-1 is effective for fiscal years beginning after December 15, 2008. In addition, once effective, all prior period earnings per share data presented must be adjusted retrospectively to conform to the provisions of FSP EITF 03-6-1.
The Company's outstanding unvested restricted stock awards contain rights to non-forfeitable dividends and as a result, the Company applied this guidance in the first quarter of 2009. The two-class method of calculating earnings per share is more dilutive to both basic and diluted shares outstanding than the previously utilized treasury stock method. In accordance with FSP EITF 03-6-1, the Company has retrospectively adjusted its basic and diluted shares outstanding for the three and nine months ended September 30, 2008 under the two-class method which resulted in a reduction of the Company's basic and diluted earnings per share for the nine months ended September 30, 2008 from $1.31 to $1.30 and $1.30 to $1.29 per share, respectively. In addition, basic earnings per share for the three months ended September 30, 2008 has been revised from $0.58 to $0.57 per share.
Conference Call
Choice will conduct a conference call on Friday, November 6, 2009 at 10:00 a.m. EST to discuss the company's third quarter results. The dial-in number to listen to the call is 1-800-510-0219, and the access code is 72342358. International callers should dial 1-617-614-3451 and enter the access code 72342358. The conference call also will be Webcast simultaneously via the company's Web site, www.choicehotels.com. Interested investors and other parties wishing to access the call via the Webcast should go to the Web site and click on the Investor Info link. The Investor Information page will feature a conference call microphone icon to access the call.
The call will be recorded and available for replay beginning at 1:00 p.m. EST on November 6, 2009 through December 6, 2009 by calling 1-888-286-8010 and entering access code 56845732. The international dial-in number for the replay is 617-801-6888, access code 56845732. In addition, the call will be archived and available on www.choicehotels.com via the Investor Info link.
About Choice Hotels
Choice Hotels International, Inc. franchises more than 6,000 hotels, representing more than 485,000 rooms, in the United States and more than 35 other countries and territories. As of September 30, 2009, more than 700 hotels are under construction, awaiting conversion or approved for development in the United States, representing more than 59,000 rooms, and more than 100 hotels, representing approximately 9,400 rooms, are under construction, awaiting conversion or approved for development in more than 20 other countries and territories. The company's Comfort Inn, Comfort Suites, Quality, Sleep Inn, Clarion, Cambria Suites, MainStay Suites, Suburban Extended Stay Hotel, Econo Lodge and Rodeway Inn brands serve guests worldwide. In addition, via its Ascend Collection membership program, travelers in the United States and the Caribbean have upscale lodging options at historic, boutique and unique hotels.
Additional corporate information may be found on the Choice Hotels International, Inc. Web site, which may be accessed at www.choicehotels.com.
Forward-Looking Statements
Certain matters discussed in this press release constitute forward-looking statements within the meaning of the federal securities law. Generally, our use of words such as "expect," "estimate," "believe," "anticipate," "will," "forecast," "plan," project," "assume" or similar words of futurity identify statements that are forward-looking and that we intend to be included within the Safe Harbor protections provided by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements are based on management's current beliefs, assumptions and expectations regarding future events, which in turn are based on information currently available to management. Such statements may relate to projections of the company's revenue, earnings and other financial and operational measures, company debt levels, payment of stock dividends, and future operations, among other matters. We caution you not to place undue reliance on any such forward-looking statements. Forward-looking statements do not guarantee future performance and involve known and unknown risks, uncertainties and other factors.
Several factors could cause actual results, performance or achievements of the company to differ materially from those expressed in or contemplated by the forward-looking statements. Such risks include, but are not limited to, changes to general, domestic and foreign economic conditions; operating risks common in the lodging and franchising industries; changes to the desirability of our brands as viewed by hotel operators and customers; changes to the terms or termination of our contracts with franchisees; our ability to keep pace with improvements in technology utilized for reservations systems and other operating systems; fluctuations in the supply and demand for hotels rooms; and our ability to manage effectively our indebtedness. These and other risk factors are discussed in detail in the Risk Factors section of the company's Form 10-K for the year ended December 31, 2008, filed with the Securities and Exchange Commission on March 2, 2009. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
Statement Concerning Non-GAAP Financial Measurements
Adjusted diluted EPS, adjusted EBITDA, adjusted SG&A, franchising revenues and adjusted franchising margins are non-GAAP financial measurements. This information should not be considered as an alternative to any measure of performance as promulgated under accounting principles generally accepted in the United States (GAAP), such as diluted earnings per share, operating income, total revenues and operating margins. The company's calculation of these measurements may be different from the calculations used by other companies and therefore comparability may be limited. The company has included an exhibit accompanying this release that reconciles these measures to the comparable GAAP measurement. We discuss management's reasons for reporting these non-GAAP measures below.
Earnings Before Interest, Taxes, Depreciation and Amortization: EBITDA reflects earnings excluding the impact of interest expense, tax expense, depreciation and amortization. Our management considers EBITDA to be an indicator of operating performance because it can be used to measure our ability to service debt, fund capital expenditures, and expand our business. EBITDA is a commonly used measure of performance in our industry. In addition, it is used by analysts, lenders, investors and others, as well as by us, to facilitate comparisons between the Company and its competitors because it excludes certain items that can vary widely across different industries or among companies within the same industry.
Franchising Revenues and Margins: The Company reports franchising revenues and margins which exclude marketing and reservation revenues and hotel operations. Marketing and reservation activities are excluded from revenues and operating margins since the Company is contractually required by its franchise agreements to use these fees collected for marketing and reservation activities. Cumulative reservation and marketing fees not expended are recorded as a payable on the Company's financial statements and are carried over to the next fiscal year and expended in accordance with the franchise agreements. Cumulative marketing and reservation expenditures in excess of fees collected for marketing and reservation activities are recorded as a receivable on the Company's financial statements. In addition, the Company has the contractual authority to require that the franchisees in the system at any given point repay the Company for any deficits related to marketing and reservation activities. Hotel operations are excluded since they do not reflect the most accurate measure of the Company's core franchising business. These non-GAAP measures are a commonly used measure of performance in our industry and facilitate comparisons between the Company and its competitors.
Adjusted Diluted EPS, Adjusted EBITDA, Adjusted SG&A and Adjusted Franchising Margins: The Company's management also uses adjusted diluted EPS, adjusted EBITDA, adjusted SG&A and adjusted franchising margins which exclude employee termination benefits and a loss on the sublease of a portion of the Company's office space for 2009 and the impact of the acceleration of the Company's management succession plan and employee termination benefits for the periods ended September 30, 2008. The Company utilizes these non-GAAP measures to enable investors to perform meaningful comparisons of past, present and future operating results and as a means to emphasize the results of on-going operations.
Choice Hotels, Choice Hotels International, Comfort Inn, Comfort Suites, Quality, Sleep Inn, Clarion, Cambria Suites, MainStay Suites, Suburban Extended Stay Hotel, Econo Lodge, Rodeway Inn and Ascend Collection are proprietary trademarks and service marks of Choice Hotels International.
2009 Choice Hotels International, Inc. All rights reserved.
Choice Hotels International, Inc. Exhibit 1
Consolidated Statements of Income
(Unaudited)
Three Months Ended September 30,
--------------------------------
Variance
2009 2008 $ %
---- ---- --- ---
(In thousands, except per share
amounts)
REVENUES:
Royalty fees $66,401 $76,595 $(10,194) (13%)
Initial franchise and
relicensing fees 2,957 7,012 (4,055) (58%)
Procurement services 3,922 3,836 86 2%
Marketing and reservation 90,465 100,811 (10,346) (10%)
Hotel operations 934 1,353 (419) (31%)
Other 1,297 1,604 (307) (19%)
----- ----- ---- ---
Total revenues 165,976 191,211 (25,235) (13%)
OPERATING EXPENSES:
Selling, general and
administrative 24,517 25,579 (1,062) (4%)
Depreciation and amortization 2,105 2,038 67 3%
Marketing and reservation 90,465 100,811 (10,346) (10%)
Hotel operations 764 914 (150) (16%)
--- --- ---- ---
Total operating expenses 117,851 129,342 (11,491) (9%)
Operating income 48,125 61,869 (13,744) (22%)
OTHER INCOME AND EXPENSES:
Interest expense 926 2,157 (1,231) (57%)
Interest and other investment
(income) loss (2,961) 2,402 (5,363) (223%)
Equity in net income of affiliates (336) (436) 100 (23%)
---- ---- --- ---
Total other income and
expenses, net (2,371) 4,123 (6,494) (158%)
------ ----- ------ ----
Income before income taxes 50,496 57,746 (7,250) (13%)
Income taxes 17,688 21,831 (4,143) (19%)
------ ------ ------ ---
Net income $32,808 $35,915 $(3,107) (9%)
======= ======= ======= ==
Weighted average shares
outstanding-basic* 59,733 62,836
====== ======
Weighted average shares outstanding-
diluted* 59,818 63,390
====== ======
Basic earnings per share* $0.55 $0.57 $(0.02) (4%)
===== ===== ====== ==
Diluted earnings per share* $0.55 $0.57 $(0.02) (4%)
===== ===== ====== ==
Nine Months Ended September 30,
-------------------------------
Variance
2009 2008 $ %
---- ---- --- ---
(In thousands, except per
share amounts)
REVENUES:
Royalty fees $164,771 $188,151 $(23,380) (12%)
Initial franchise and
relicensing fees 9,599 21,202 (11,603) (55%)
Procurement services 14,084 13,650 434 3%
Marketing and reservation 227,803 254,573 (26,770) (11%)
Hotel operations 3,231 3,683 (452) (12%)
Other 3,989 5,927 (1,938) (33%)
----- ----- ------ ---
Total revenues 423,477 487,186 (63,709) (13%)
OPERATING EXPENSES:
Selling, general and
administrative 73,054 83,409 (10,355) (12%)
Depreciation and amortization 6,252 6,165 87 1%
Marketing and reservation 227,803 254,573 (26,770) (11%)
Hotel operations 2,378 2,540 (162) (6%)
----- ----- ---- --
Total operating expenses 309,487 346,687 (37,200) (11%)
Operating income 113,990 140,499 (26,509) (19%)
OTHER INCOME AND EXPENSES:
Interest expense 3,731 8,687 (4,956) (57%)
Interest and other investment
(income) loss (5,302) 3,329 (8,631) (259%)
Equity in net income of
affiliates (779) (938) 159 (17%)
---- ---- --- ---
Total other income and
expenses, net (2,350) 11,078 (13,428) (121%)
------ ------ ------- ----
Income before income taxes 116,340 129,421 (13,081) (10%)
Income taxes 41,721 47,921 (6,200) (13%)
------ ------ ------ ---
Net income $74,619 $81,500 $(6,881) (8%)
======= ======= ======= ==
Weighted average shares
outstanding-basic* 60,241 62,606
====== ======
Weighted average shares
outstanding-diluted* 60,412 63,253
====== ======
Basic earnings per share* $1.24 $1.30 $(0.06) (5%)
===== ===== ====== ==
Diluted earnings per share* $1.24 $1.29 $(0.05) (4%)
===== ===== ====== ==
* The Company's weighted average shares outstanding for the three
and nine months ended September 30, 2008 have been retrospectively
adjusted due to the application of EITF Issue 03-6-1 "Determining
Whether Instruments Granted in Share Based Payment Transactions are
Participating Securities" which became effective for the Company in
2009. The application of this guidance has resulted in the revision of
basic and diluted earnings per share for the nine months ended September
30, 2008 from $1.31 to $1.30 and $1.30 to $1.29 per share, respectively.
In addition, basic earnings per share for the three months ended
September 30, 2008 has been revised from $0.58 to $0.57 per share.
Choice Hotels International, Inc. Exhibit 2
Consolidated Balance Sheets
(In thousands, except per
share amounts) September 30, December 31,
2009 2008
---- ----
(Unaudited)
ASSETS
Cash and cash equivalents $63,645 $52,680
Accounts receivable, net 51,396 43,141
Deferred income taxes 8,223 8,223
Other current assets 12,549 16,172
------ ------
Total current assets 135,813 120,216
Fixed assets and
intangibles, net 134,293 138,867
Receivable -- marketing and
reservation fees 32,903 13,527
Investments, employee
benefit plans, at fair
value 19,865 25,360
Other assets 30,154 30,249
------ ------
Total assets $353,028 $328,219
-------- --------
LIABILITIES AND SHAREHOLDERS' DEFICIT
Accounts payable and
accrued expenses $72,675 $79,897
Deferred revenue 52,456 47,004
Deferred compensation &
retirement plan obligations 2,190 6,960
Other current liabilities 21,910 1,206
------ -----
Total current liabilities 149,231 135,067
Long-term debt 292,300 284,400
Deferred compensation &
retirement plan
obligations 35,654 33,462
Other liabilities 8,753 12,960
----- ------
Total liabilities 485,938 465,889
------- -------
Common stock, $0.01 par
value 595 607
Additional paid-in-capital 86,156 90,141
Accumulated other
comprehensive loss (1,318) (3,472)
Treasury stock, at cost (870,085) (835,186)
Retained earnings 651,742 610,240
------- -------
Total shareholders'
deficit (132,910) (137,670)
-------- --------
Total liabilities and
shareholders' deficit $353,028 $328,219
-------- --------
Choice Hotels International, Inc. Exhibit 3
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
(In thousands) September 30,
-----------------
2009 2008
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $74,619 $81,500
Adjustments to reconcile net income to net
cash provided
by operating activities:
Depreciation and amortization 6,252 6,165
Provision for bad debts 1,643 870
Non-cash stock compensation and other charges 8,796 9,989
Non-cash interest and other (income) loss (4,953) 4,489
Dividends received from equity method investments 819 673
Equity in net income of affiliates (779) (938)
Changes in assets and liabilities:
Receivables (9,409) (8,646)
Receivable - marketing and reservation fees, net (13,742) (3,803)
Accounts payable (2,061) (16,061)
Accrued expenses (5,754) (5,416)
Income taxes payable/receivable 22,314 16,750
Deferred income taxes - 782
Deferred revenue 5,349 1,292
Other assets 2,087 2,465
Other liabilities (5,215) 2,280
------ -----
NET CASH PROVIDED BY OPERATING ACTIVITIES 79,966 92,391
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in property and equipment (7,539) (7,873)
Issuance of notes receivable (1,731) (6,411)
Collections of notes receivable 190 368
Purchases of investments, employee benefit plans (3,239) (6,908)
Proceeds from sales of investments, employee
benefit plans 13,839 6,857
Other items, net (447) (965)
---- ----
NET CASH PROVIDED (USED) IN INVESTING ACTIVITIES 1,073 (14,932)
----- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of long-term debt - (100,000)
Net borrowings pursuant to revolving credit facility 7,900 62,000
Purchase of treasury stock (57,042) (1,568)
Excess tax benefits from stock-based compensation 4,374 4,653
Dividends paid (33,335) (31,626)
Proceeds from exercise of stock options 6,744 6,085
----- -----
NET CASH USED IN FINANCING ACTIVITIES (71,359) (60,456)
------- -------
Net change in cash and cash equivalents 9,680 17,003
Effect of foreign exchange rate changes on cash and
cash equivalents 1,285 (853)
Cash and cash equivalents at beginning of period 52,680 46,377
------ ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $63,645 $62,527
======= =======
CHOICE HOTELS INTERNATIONAL, INC. Exhibit 4
SUPPLEMENTAL OPERATING INFORMATION
DOMESTIC HOTEL SYSTEM
(UNAUDITED)
For the Nine Months Ended
September 30, 2009*
-------------------------
Average Daily
Rate Occupancy RevPAR
---- --------- ------
Comfort Inn $77.48 54.7% $42.36
Comfort Suites 85.72 54.2% 46.50
Sleep 70.16 52.5% 36.80
----- ---- -----
Midscale without Food & Beverage 78.41 54.2% 42.53
----- ---- -----
Quality 68.73 46.9% 32.20
Clarion 77.95 43.0% 33.55
----- ---- -----
Midscale with Food & Beverage 70.54 46.1% 32.48
----- ---- -----
Econo Lodge 54.96 43.9% 24.15
Rodeway 53.24 43.9% 23.35
----- ---- -----
Economy 54.46 43.9% 23.92
----- ---- -----
MainStay 71.68 58.1% 41.65
Suburban 42.37 56.0% 23.72
----- ---- -----
Extended Stay 50.76 56.6% 28.71
----- ---- -----
Total $71.59 50.1% $35.85
====== ==== ======
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 $74.47 56.2% $41.87
====== ==== ======
Change
------
Average Daily
Rate Occupancy RevPAR
---- --------- ------
Comfort Inn (3.3%) (620) bps (13.2%)
Comfort Suites (4.7%) (830) bps (17.3%)
Sleep (2.6%) (720) bps (14.5%)
---- ---- --- -----
Midscale without Food &
Beverage (3.4%) (690) bps (14.3%)
---- ---- --- -----
Quality (4.6%) (610) bps (15.7%)
Clarion (8.3%) (800) bps (22.6%)
---- ---- --- -----
Midscale with Food &
Beverage (5.8%) (650) bps (17.5%)
---- ---- --- -----
Econo Lodge (1.2%) (340) bps (8.3%)
Rodeway (4.1%) (480) bps (13.6%)
---- ---- --- -----
Economy (2.1%) (380) bps (9.8%)
---- ---- --- ----
MainStay (2.3%) (710) bps (13.0%)
Suburban (0.5%) (830) bps (13.3%)
---- ---- --- -----
Extended Stay 0.2% (790) bps (12.2%)
--- ---- --- -----
Total (3.9%) (610) bps (14.4%)
==== ==== === =====
* Operating statistics represent hotel operations from
December through August
For the Three Months Ended
September 30, 2009*
--------------------------
Average Daily
Rate Occupancy RevPAR
---- --------- ------
Comfort Inn $81.35 62.7% $51.04
Comfort Suites 86.67 60.0% 52.02
Sleep 72.14 57.9% 41.74
----- ---- -----
Midscale without Food & Beverage 81.32 61.4% 49.89
----- ---- -----
Quality 72.71 53.7% 39.02
Clarion 81.07 47.8% 38.75
----- ---- -----
Midscale with Food & Beverage 74.33 52.4% 38.97
----- ---- -----
Econo Lodge 58.54 51.2% 29.94
Rodeway 57.37 51.1% 29.30
----- ---- -----
Economy 58.19 51.1% 29.75
----- ---- -----
MainStay 73.01 63.6% 46.44
Suburban 41.68 60.1% 25.06
----- ---- -----
Extended Stay 50.88 61.1% 31.10
----- ---- -----
Total $74.77 56.9% $42.56
====== ==== ======
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 $78.96 64.1% $50.62
====== ==== ======
Change
------
Average Daily
Rate Occupancy RevPAR
---- --------- ------
Comfort Inn (4.9%) (720) bps (14.6%)
Comfort Suites (6.4%) (870) bps (18.2%)
Sleep (3.7%) (830) bps (15.9%)
---- ---- --- -----
Midscale without Food & Beverage (5.1%) (770) bps (15.7%)
---- ---- --- -----
Quality (5.6%) (750) bps (17.2%)
Clarion (9.8%) (1,130) bps (27.0%)
---- ------ --- -----
Midscale with Food & Beverage (6.8%) (830) bps (19.5%)
---- ---- --- -----
Econo Lodge (2.9%) (450) bps (10.9%)
Rodeway (6.4%) (490) bps (14.7%)
---- ---- --- -----
Economy (3.9%) (470) bps (12.0%)
---- ---- --- -----
MainStay (4.0%) (640) bps (12.8%)
Suburban (3.7%) (570) bps (11.9%)
---- ---- --- -----
Extended Stay (2.7%) (580) bps (11.0%)
---- ---- --- -----
Total (5.3%) (720) bps (15.9%)
==== ==== === =====
* Operating statistics represent hotel operations from June through August
For the Quarter Ended For the Nine Months Ended
--------------------- -------------------------
9/30/2009 9/30/2008 9/30/2009 9/30/2008
System-wide effective
royalty rate 4.23% 4.19% 4.25% 4.19%
CHOICE HOTELS INTERNATIONAL, INC. Exhibit 5
SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA
(UNAUDITED)
September 30, September 30,
2009 2008
------------- ------------------
Hotels Rooms Hotels Rooms
------ ----- ------ -----
Comfort Inn 1,457 114,377 1,455 113,782
Comfort Suites 601 46,853 526 40,890
Sleep 389 28,459 359 26,478
--- ------ --- ------
Midscale without Food & Beverage 2,447 189,689 2,340 181,150
----- ------- ----- -------
Quality 963 88,129 888 83,648
Clarion 167 24,063 173 23,031
--- ------ --- ------
Midscale with Food & Beverage 1,130 112,192 1,061 106,679
----- ------- ----- -------
Econo Lodge 795 49,504 824 51,490
Rodeway 374 21,834 336 19,904
--- ------ --- ------
Economy 1,169 71,338 1,160 71,394
----- ------ ----- ------
MainStay 37 2,866 34 2,605
Suburban 63 7,531 58 7,054
-- ----- -- -----
Extended Stay 100 10,397 92 9,659
--- ------ -- -----
Ascend Collection 26 1,941 - -
Cambria Suites 18 2,073 8 857
-- ----- -- ---
Domestic Franchises 4,890 387,630 4,661 369,739
International Franchises 1,116 99,582 1,110 98,628
----- ------ ----- ------
Total Franchises 6,006 487,212 5,771 468,367
===== ======= ===== =======
Variance
--------
Hotels Rooms % %
------ ----- --- ---
Comfort Inn 2 595 0.1% 0.5%
Comfort Suites 75 5,963 14.3% 14.6%
Sleep 30 1,981 8.4% 7.5%
-- ----- --- ---
Midscale without Food & Beverage 107 8,539 4.6% 4.7%
--- ----- --- ---
Quality 75 4,481 8.4% 5.4%
Clarion (6) 1,032 (3.5%) 4.5%
-- ----- ---- ---
Midscale with Food & Beverage 69 5,513 6.5% 5.2%
-- ----- --- ---
Econo Lodge (29) (1,986) (3.5%) (3.9%)
Rodeway 38 1,930 11.3% 9.7%
-- ----- ---- ---
Economy 9 (56) 0.8% (0.1%)
-- --- --- ----
MainStay 3 261 8.8% 10.0%
Suburban 5 477 8.6% 6.8%
-- --- --- ---
Extended Stay 8 738 8.7% 7.6%
-- --- --- ---
Ascend Collection 26 1,941 NM NM
Cambria Suites 10 1,216 125.0% 141.9%
-- ----- ----- -----
Domestic Franchises 229 17,891 4.9% 4.8%
International Franchises 6 954 0.5% 1.0%
-- --- --- ---
Total Franchises 235 18,845 4.1% 4.0%
=== ====== === ===
Exhibit 6
CHOICE HOTELS INTERNATIONAL, INC.
SUPPLEMENTAL INFORMATION BY BRAND
DEVELOPMENT RESULTS -- DOMESTIC NEW HOTEL CONTRACTS
(UNAUDITED)
For the Nine Months For the Nine Months
Ended September 30, Ended September 30,
2009 2008
-------------------- --------------------
New New
Const- Const-
ruction Conversion Total ruction Conversion Total
------- ---------- ----- ------- ---------- -----
Comfort Inn 4 22 26 33 41 74
Comfort Suites 9 1 10 65 3 68
Sleep 11 2 13 47 3 50
-- -- -- -- -- --
Midscale without
Food & Beverage 24 25 49 145 47 192
-- -- -- --- -- ---
Quality 3 87 90 4 108 112
Clarion 1 23 24 6 28 34
-- -- -- -- -- --
Midscale with
Food & Beverage 4 110 114 10 136 146
-- --- --- -- --- ---
Econo Lodge - 45 45 3 55 58
Rodeway 1 36 37 2 65 67
-- -- -- -- -- --
Economy 1 81 82 5 120 125
-- -- -- -- --- ---
MainStay 1 1 2 7 - 7
Suburban 2 - 2 8 - 8
-- -- -- -- -- --
Extended Stay 3 1 4 15 - 15
-- -- -- -- -- --
Ascend Collection 1 5 6 - 1 1
Cambria Suites 2 - 2 12 - 12
-- -- -- -- -- --
Total Domestic
System 35 222 257 187 304 491
== === === === === ===
% Change
--------
New
Construction Conversion Total
------------ ---------- -----
Comfort Inn (88%) (46%) (65%)
Comfort Suites (86%) (67%) (85%)
Sleep (77%) (33%) (74%)
--- --- ---
Midscale without Food &
Beverage (83%) (47%) (74%)
--- --- ---
Quality (25%) (19%) (20%)
Clarion (83%) (18%) (29%)
--- --- ---
Midscale with Food &
Beverage (60%) (19%) (22%)
--- --- ---
Econo Lodge (100%) (18%) (22%)
Rodeway (50%) (45%) (45%)
--- --- ---
Economy (80%) (33%) (34%)
--- --- ---
MainStay (86%) NM (71%)
Suburban (75%) NM (75%)
--- -- ---
Extended Stay (80%) NM (73%)
--- -- ---
Ascend Collection NM 400% 500%
Cambria Suites (83%) NM (83%)
--- -- ---
Total Domestic System (81%) (27%) (48%)
=== === ===
For the Three Months For the Three Months
Ended September 30, Ended September 30,
2009 2008
-------------------- --------------------
New New
Const- Const-
ruction Conversion Total ruction Conversion Total
------- ---------- ----- ------- ---------- -----
Comfort Inn 3 7 10 11 14 25
Comfort Suites 3 - 3 23 - 23
Sleep 4 - 4 15 1 16
-- -- -- -- -- --
Midscale without
Food & Beverage 10 7 17 49 15 64
-- -- -- -- -- --
Quality 1 23 24 2 33 35
Clarion 1 9 10 1 7 8
-- -- -- -- -- --
Midscale with
Food & Beverage 2 32 34 3 40 43
-- -- -- -- -- --
Econo Lodge - 16 16 2 16 18
Rodeway - 8 8 - 17 17
-- -- -- -- -- --
Economy - 24 24 2 33 35
-- -- -- -- -- --
MainStay - - - 6 - 6
Suburban - - - 4 - 4
-- -- -- -- -- --
Extended Stay - - - 10 - 10
-- -- -- -- -- --
Ascend Collection 1 3 4 - 1 1
Cambria Suites - - - 7 - 7
-- -- -- -- -- --
Total Domestic
System 13 66 79 71 89 160
== == == == == ===
% Change
--------
New
Construction Conversion Total
------------ ---------- -----
Comfort Inn (73%) (50%) (60%)
Comfort Suites (87%) NM (87%)
Sleep (73%) (100%) (75%)
--- ---- ---
Midscale without Food & Beverage (80%) (53%) (73%)
--- --- ---
Quality (50%) (30%) (31%)
Clarion 0% 29% 25%
- -- --
Midscale with Food & Beverage (33%) (20%) (21%)
--- --- ---
Econo Lodge (100%) 0% (11%)
Rodeway NM (53%) (53%)
-- --- ---
Economy (100%) (27%) (31%)
---- --- ---
MainStay (100%) NM (100%)
Suburban (100%) NM (100%)
---- -- ----
Extended Stay (100%) NM (100%)
---- -- ----
Ascend Collection NM 200% 300%
Cambria Suites (100%) NM (100%)
---- -- ----
Total Domestic System (82%) (26%) (51%)
=== === ===
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, 2009 September 30, 2008
Units Units
----- -----
New New
Const- Const-
Conversion ruction Total Conversion ruction Total
---------- ------- ----- ---------- ------- -----
Comfort Inn 37 97 134 44 123 167
Comfort Suites - 194 194 2 281 283
Sleep Inn 1 129 130 1 148 149
-- --- --- -- --- ---
Midscale
without Food &
Beverage 38 420 458 47 552 599
-- --- --- -- --- ---
Quality 49 16 65 77 16 93
Clarion 23 6 29 30 10 40
-- -- -- -- -- --
Midscale with
Food &
Beverage 72 22 94 107 26 133
-- -- -- --- -- ---
Econo Lodge 40 4 44 33 5 38
Rodeway 35 2 37 43 1 44
-- -- -- -- -- --
Economy 75 6 81 76 6 82
-- -- -- -- -- --
MainStay - 34 34 - 38 38
Suburban - 31 31 1 39 40
-- -- -- -- -- --
Extended
Stay - 65 65 1 77 78
-- -- -- -- -- --
Ascend Collection 1 2 3 - - -
Cambria Suites - 43 43 - 63 63
-- -- -- -- -- --
186 558 744 231 724 955
=== === === === === ===
Variance
--------
Conversion New Construction Total
---------- ---------------- -----
Units % Units % Units %
----- --- ----- --- ----- ---
Comfort Inn (7) (16%) (26) (21%) (33) (20%)
Comfort Suites (2) (100%) (87) (31%) (89) (31%)
Sleep Inn - 0% (19) (13%) (19) (13%)
-- -- --- --- --- ---
Midscale without Food &
Beverage (9) (19%) (132) (24%) (141) (24%)
-- --- ---- --- ---- ---
Quality (28) (36%) - 0% (28) (30%)
Clarion (7) (23%) (4) (40%) (11) (28%)
-- --- -- --- --- ---
Midscale with Food &
Beverage (35) (33%) (4) (15%) (39) (29%)
--- --- -- --- --- ---
Econo Lodge 7 21% (1) (20%) 6 16%
Rodeway (8) (19%) 1 100% (7) (16%)
-- --- -- --- -- ---
Economy (1) (1%) - 0% (1) (1%)
-- -- -- -- -- --
MainStay - NM (4) (11%) (4) (11%)
Suburban (1) (100%) (8) (21%) (9) (23%)
-- ---- -- --- -- ---
Extended Stay (1) (100%) (12) (16%) (13) (17%)
-- ---- --- --- --- ---
Ascend Collection 1 NM 2 NM 3 NM
Cambria Suites - NM (20) (32%) (20) (32%)
-- -- --- --- --- ---
(45) (19%) (166) (23%) (211) (22%)
=== === ==== === ==== ===
CHOICE HOTELS INTERNATIONAL, INC. Exhibit 8
SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION
(UNAUDITED)
CALCULATION OF FRANCHISING REVENUES AND ADJUSTED FRANCHISING MARGINS
(dollar Three Months
amounts in Ended September Nine Months Ended
thousands) 30, September 30,
---------------- -----------------
2009 2008 2009 2008
---- ---- ---- ----
Franchising Revenues:
Total Revenues $165,976 $191,211 $423,477 $487,186
Adjustments:
Marketing and
reservation
revenues (90,465) (100,811) (227,803) (254,573)
Hotel operations (934) (1,353) (3,231) (3,683)
---- ------ ------ ------
Franchising Revenues $74,577 $89,047 $192,443 $228,930
------- ------- -------- --------
Franchising Margins:
Operating Margin:
Total Revenues $165,976 $191,211 $423,477 $487,186
Operating Income $48,125 $61,869 $113,990 $140,499
------- ------- -------- --------
Operating Margin 29.0% 32.4% 26.9% 28.8%
---- ---- ---- ----
Adjusted Franchising
Margin:
Franchising Revenues $74,577 $89,047 $192,443 $228,930
Operating Income $48,125 $61,869 $113,990 $140,499
Acceleration of
management
succession plan
benefits - - - 6,069
Employee termination
benefits 1,496 461 2,270 842
Loss on sublease of office
space - - 1,503 -
Hotel operations (170) (439) (853) (1,143)
---- ---- ---- ------
$49,451 $61,891 $116,910 $146,267
------- ------- -------- --------
---- ---- ---- ----
Adjusted Franchising
Margins 66.3% 69.5% 60.8% 63.9%
---- ---- ---- ----
CALCULATION OF ADJUSTED SELLING, GENERAL AND ADMINISTRATIVE COSTS
Three Months Nine Months
(dollar amounts in Ended September Ended September
thousands) 30, 30,
---------------- ----------------
2009 2008 2009 2008
---- ---- ---- ----
Selling, general and
administrative costs $24,517 $25,579 $73,054 $83,409
Acceleration of management
succession plan benefits - - - (6,069)
Employee termination benefits (1,496) (461) (2,270) (842)
Loss on sublease of office space - - (1,503) -
- - ------ -
Adjusted Selling, General and
Administrative Costs $23,021 $25,118 $69,281 $76,498
======= ======= ======= =======
CALCULATION OF ADJUSTED NET INCOME AND ADJUSTED DILUTED EARNINGS
PER SHARE (EPS)
Three Months Nine Months
(In thousands, except per Ended Ended
share amounts) September 30, September 30,
--------------- ---------------
2009 2008 2009 2008
---- ---- ---- ----
Net Income $32,808 $35,915 $74,619 $81,500
Adjustments:
Acceleration of management
succession plan benefits - - - 3,799
Employee termination benefits 936 289 1,421 527
Loss on sublease of office space - - 941 -
- - --- -
Adjusted Net Income $33,744 $36,204 $76,981 $85,826
------- ------- ------- -------
Weighted average shares
outstanding-diluted 59,818 63,390 60,412 63,253
Diluted Earnings Per Share $0.55 $0.57 $1.24 $1.29
Adjustments:
Acceleration of management
succession plan - - - 0.06
Employee termination benefits 0.01 - 0.02 0.01
Loss on sublease of office space - - 0.01 -
-- -- ---- --
Adjusted Diluted Earnings Per
Share (EPS) $0.56 $0.57 $1.27 $1.36
----- ----- ----- -----
Adjusted EBITDA Reconciliation
(in
millions)
Nine Nine
Months Months
Ended Ended Full-
Q3 Q3 Sept. 30, Sept. 30, Year
2009 2008 2009 2008 2009
Actuals Actuals Actuals Actuals Outlook
------- ------- ---------- ---------- -------
Operating Income (per
GAAP) $48.1 $61.9 $114.0 $140.5 $151.4
Acceleration of
management
succession plan - - - 6.1 -
Employee
termination
benefits 1.5 0.5 2.3 0.8 3.3
Loss on sublease of
office space - - 1.5 - 1.5
Depreciation and
amortization 2.1 2.0 6.3 6.2 8.3
--- --- --- --- ---
Adjusted Earnings
before interest,
taxes, depreciation &
amortization (non-
GAAP) $51.7 $64.4 $124.1 $153.6 $164.5
===== ===== ====== ====== ======
First Call Analyst:
FCMN Contact: david_peikin@choicehotels.com
SOURCE: Choice Hotels International, Inc.
CONTACT: David White, Senior Vice President, Chief Financial Officer &
Treasurer, +1-301-592-5117, or David Peikin, Senior Director, Corporate
Communications, +1-301-592-6361
Web Site: http://www.choicehotels.com/
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