Press Releases

Choice Hotels Reports A 20% Increase In Second Quarter 2012 Diluted EPS And Domestic RevPAR Growth Of 7.7%
New Domestic Hotel Franchise Contracts Rise 54%
PR Newswire
SILVER SPRING, Md.

SILVER SPRING, Md., July 26, 2012 /PRNewswire/ -- Choice Hotels International, Inc., (NYSE: CHH) today reported the following highlights for the second quarter of 2012:

    --  Diluted earnings per share ("EPS") for the second quarter of 2012 of
        $0.55 compared to diluted EPS of $0.46 for the second quarter of 2011, a
        20% increase.
    --  Earnings before interest, taxes, depreciation and amortization
        ("EBITDA") increased 14% to $53.6 million for the three months ended
        June 30, 2012, compared to $47.0 million for the three months ended June
        30, 2011. Operating income increased 14% from $45.1 million for the
        three months ended June 30, 2011 to $51.6 million for the same period of
        2012.
    --  Franchising revenues increased 6% to $77.8 million for the three months
        ended June 30, 2012 from $73.4 million for the same period of 2011. 
        Total revenues increased 5% to $173.6 million for the three months ended
        June 30, 2012 compared to the same period of 2011.
    --  Domestic royalty fees for the three months ended June 30, 2012 increased
        $4.4 million to $59.8 million from $55.4 million in the three months
        ended June 30, 2011, an increase of 8%.
    --  Franchising margins increased from 61.2% for the three months ended June
        30, 2011 to 65.9% for the same period of the current year.
    --  Worldwide unit growth increased 1.3 percent from June 30, 2011 comprised
        of domestic and international unit growth of 1.3 percent and 1.6
        percent, respectively.
    --  Domestic system-wide revenue per available room ("RevPAR") increased
        7.7% for the three months ended June 30, 2012 compared to the same
        period of 2011 as occupancy and average daily rates increased 250 basis
        points and 2.8 percent, respectively.
    --  The company executed 106 new domestic hotel franchise contracts for the
        three months ended June 30, 2012 compared to 69 new domestic hotel
        franchise contracts in the same period of the prior year, a 54%
        increase.
    --  The number of worldwide hotels under construction, awaiting conversion
        or approved for development as of June 30, 2012 was 453 hotels
        representing 37,380 rooms.

"We are very pleased with our results for the quarter. People are traveling, we are driving record traffic to our hotels and the development environment is improving. Our second quarter results, in fact, were highlighted by the 106 new domestic franchise agreements we executed in the second quarter of 2012, a 54% increase over the prior year," said Stephen P. Joyce, president and chief executive officer. "These results demonstrate our ability to attract owners to our family of eleven brands due to our size, scale and distribution which allow us to deliver guests and create opportunities for our franchisees to achieve exceptional returns on investment. We are also excited about our recent announcement of the declaration of a $600 million special cash dividend to shareholders which further illustrates our commitment and adds to our already strong history of returning value to our shareholders over time."

 

Use of Free Cash Flow
The company has historically used its free cash flow (cash flow from operations less capital expenditures) to return value to shareholders, primarily through share repurchases and dividends.

 

Dividends

 

For the six months ended June 30, 2012, the company paid $21.4 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.

On July 26, 2012, the company announced that its board of directors declared a special cash dividend in the amount of $10.41 per share or approximately $600 million in the aggregate. The record date for the special cash dividend is August 20, 2012 and the special cash dividend will be paid on August 23, 2012. The company has been informed by the New York Stock Exchange that, in accordance with its rules, the ex-dividend date is expected to be August 24, 2012. Accordingly, stockholders who sell their shares on or before the payment date will not be entitled to receive the special cash dividend.

The special cash dividend is being paid with the proceeds from the company's recent offering of $400 million, 5.75% unsecured senior notes and its new senior secured credit facility. On June 27, 2012, the company issued unsecured senior notes in an aggregate principal amount of $400 million, in an underwritten, registered public offering. The notes will mature in July 2022 and bear a coupon rate of interest of 5.75%. Considering bond issuance costs, the company's effective interest cost related to these senior notes is approximately 5.94%.

On July 25, 2012, the company entered into a senior secured credit facility consisting of a $200 million revolving credit tranche and a $150 million term loan tranche, with a four year term. The company expects to utilize the proceeds from the term loan as well as approximately $50 million under the revolving credit tranche for payment of the special dividend. As a result of entering into the senior secured credit facility, the company's existing $300 million senior unsecured revolving credit facility was terminated.

The senior secured credit facility is secured by a first priority pledge of equity by certain wholly-owned subsidiaries and contains customary financial covenants, including with respect to restrictions on liens, incurring indebtedness, making investments, restricted payments and effecting mergers and/or asset sales. In addition, the senior secured credit facility imposes certain financial maintenance covenants. The company may elect to have borrowings under the senior secured credit facility bear interest at (i) a base rate plus a margin ranging from 100 to 325 basis points based on the company's total leverage ratio or (ii) LIBOR plus a margin ranging from 200 to 425 basis points based on the company's total leverage ratio.

 

Share Repurchases

 

During the three months ended June 30, 2012, the company purchased approximately 0.2 million shares of its common stock at an average price of $37.39 for a total cost of $7.0 million under the share repurchase program. During the six months ended June 30, 2012, the company repurchased 0.5 million shares for a total cost of $19.9 million at an average price of $37.02 and has authorization to purchase up to an additional 1.4 million shares under this program. We expect to continue making repurchases under our share repurchase program in the open market and through privately negotiated transactions, subject to market and other conditions. No minimum number of share repurchases has been fixed. Since Choice announced its stock repurchase program on June 25, 1998, the company has repurchased 45.3 million shares of its common stock for a total cost of $1.1 billion through June 30, 2012. Considering the effect of a two-for-one stock split in October 2005, the company had repurchased 78.3 million shares through June 30, 2012 under the share repurchase program at an average price of $13.89 per share.

Other

 

Our board of directors previously authorized us to enter into programs which permit us to offer financing, investment and guaranty support to qualified franchisees as well as to acquire and resell real estate to incent franchise development for certain brands in strategic markets. Over the next several years, we expect to continue to opportunistically deploy capital pursuant to these programs to promote growth of our emerging brands. The amount and timing of the investment in these programs will be dependent on market and other conditions. Notwithstanding these programs, the company expects to continue to return value to its shareholders through a combination of share repurchases and dividends, subject to market and other conditions.

 

Outlook for 2012
The company's third quarter 2012 diluted EPS is expected to be $0.61. The company expects full-year 2012 diluted EPS to range between $1.91 and $1.94. EBITDA for full-year 2012 are expected to range between $201.0 million and $203.5 million. These estimates include the following assumptions:

    --  The company expects net domestic unit growth to range between flat and a
        1% increase in 2012;
    --  RevPAR is expected to increase approximately 5% for third quarter of
        2012 and increase between 6% and 7% for full-year 2012;
    --  The effective royalty rate is expected to remain flat for full-year
        2012;
    --  All figures assume the existing share count and an effective tax rate of
        34.0% for the third quarter and 33.8% for full-year 2012.
    --  Diluted EPS guidance for full-year 2012 reflects the impact of increased
        borrowing costs to be incurred as the result of the declaration of a
        $600 million special cash dividend to be paid in the third quarter of
        2012 which is expected to total approximately $14 million or $0.16 per
        share.

 

Conference Call
Choice will conduct a conference call on Friday, July 27, 2012 at 9:30 a.m. EST to discuss the company's second quarter 2012 results. The dial-in number to listen to the call is 1-866-730-5767, and the access code is 51535988. International callers should dial 1-857-350-1591 and enter the access code 51535988. 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 12:00 p.m. EST on Friday, July 27, 2012 through Monday, August 27, 2012 by calling 1-888-286-8010 and entering access code 76425859. The international dial-in number for the replay is 1-617-801-6888, access code 76425859. In addition, the call will be archived and available on www.choicehotels.com via the Investor Info link.

 

 

About Choice Hotels
Choice Hotels International, Inc. franchises approximately 6,200 hotels, representing more than 495,000 rooms, in the United States and more than 30 other countries and territories. As of June 30, 2012, more than 375 hotels were under construction, awaiting conversion or approved for development in the United States, representing more than 30,000 rooms, and 75 hotels, representing approximately 6,700 rooms, were under construction, awaiting conversion or approved for development in 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 serve guests worldwide. In addition, via its Ascend Collection membership program, travelers 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 Private Securities Litigation Reform Act of 1995. Generally, our use of words such as "expect," "estimate," "believe," "anticipate," "will," "forecast," "plan"," project," "assume" or similar words of futurity identify such forward-looking statements. These forward-looking statements are based on management's current beliefs, assumptions and expectations regarding future events, which in turn are based on information currently available to management. Such statements may relate to projections of the company's revenue, earnings and other financial and operational measures, company debt levels, ability to repay outstanding indebtedness, payment of dividends, and future operations, among other matters. We caution you not to place undue reliance on any such forward-looking statements. Forward-looking statements do not guarantee future performance and involve known and unknown risks, uncertainties and other factors.

Several factors could cause actual results, performance or achievements of the company to differ materially from those expressed in or contemplated by the forward-looking statements. Such risks include, but are not limited to, changes to general, domestic and foreign economic conditions; operating risks common in the lodging and franchising industries; changes to the desirability of our brands as viewed by hotel operators and customers; changes to the terms or termination of our contracts with franchisees; our ability to keep pace with improvements in technology utilized for reservations systems and other operating systems; fluctuations in the supply and demand for hotels rooms; and our ability to manage effectively our indebtedness. These and other risk factors are discussed in detail in the Risk Factors section of the company's Form 10-K for the year ended December 31, 2011, filed with the Securities and Exchange Commission on February 29, 2012 and our quarterly reports filed on Form 10-Q. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Statement Concerning Non-GAAP Financial Measurements Presented in Exhibit 8
Adjusted diluted EPS, EBITDA, franchising revenues and 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 required by its franchise agreements to use these fees collected for marketing and reservation activities. Cumulative reservation and marketing system fees not expended are recorded as a liability on the company's financial statements and are carried over to the next fiscal year and expended in accordance with the franchise agreements. Cumulative marketing and reservation expenditures in excess of system fees collected for marketing and reservation activities are recorded as a receivable on the company's financial statements. In addition, the company has the contractual authority to require that the franchisees in the system at any given point repay the company for any deficits related to marketing and reservation activities. Hotel operations are excluded since they do not reflect the most accurate measure of the company's core franchising business. These non-GAAP measures are a commonly used measure of performance in our industry and facilitate comparisons between the company and its competitors.

 

Adjusted Diluted EPS: The company's management uses adjusted diluted EPS, which excludes a reduction in the carrying amount of land held for sale resulting in a loss of $1.8 million included in other gains and losses during the six months ended June 30, 2011. This amount represented net income of $1.1 million and diluted EPS of $0.02 for the six months ended June 30, 2011. The company utilizes this non-GAAP measure 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.

© 2012 Choice Hotels International, Inc. All rights reserved.

    Choice Hotels International, Inc.                                                                                                         Exhibit 1
    Consolidated Statements of Income
    (Unaudited)



                                      Three Months Ended June 30,          Six Months Ended June 30,
                                      ---------------------------          -------------------------
                                                                                 Variance                                  Variance
                                                       2012          2011                      $      %              2012               2011        $    %
                                                       ----          ----                    ---     ---             ----               ----      ---   ---
    (In thousands, except
     per share amounts)

    REVENUES:

    Royalty fees                                    $66,064       $61,620                 $4,444              7% $113,917           $105,414   $8,503           8%
    Initial franchise and
     relicensing fees                                 3,178         2,779                    399             14%    5,706              5,500      206           4%
    Procurement services                              6,836         6,673                    163              2%   10,151              9,934      217           2%
    Marketing and
     reservation                                     94,633        90,832                  3,801              4%  165,562            153,799   11,763           8%
    Hotel operations                                  1,224         1,073                    151             14%    2,202              1,937      265          14%
    Other                                             1,686         2,324                   (638)          (27%)    5,252              3,998    1,254          31%
                                                      -----         -----                   ----           ----     -----              -----    -----         ---
          Total revenues                            173,621       165,301                  8,320              5%  302,790            280,582   22,208           8%

    OPERATING EXPENSES:

    Selling, general and
     administrative                                  24,554        26,539                 (1,985)           (7%)   48,903             50,386   (1,483)        (3%)
    Depreciation and
     amortization                                     1,977         1,948                     29              1%    3,994              3,903       91           2%
    Marketing and
     reservation                                     94,633        90,832                  3,801              4%  165,562            153,799   11,763           8%
    Hotel operations                                    867           860                      7              1%    1,676              1,693      (17)        (1%)
                                                        ---           ---                    ---            ---     -----              -----      ---         ---
    Total operating
     expenses                                       122,031       120,179                  1,852              2%  220,135            209,781   10,354           5%

    Operating income                                 51,590        45,122                  6,468             14%   82,655             70,801   11,854          17%

    OTHER INCOME AND
     EXPENSES, NET:
    Interest expense                                  3,540         3,267                    273              8%    6,657              6,491      166           3%
    Interest income                                    (394)         (221)                  (173)            78%     (731)              (431)    (300)         70%
    Other (gains) and
     losses                                             377           (38)                   415         (1092%)   (1,626)             1,005   (2,631)      (262%)
    Equity in net (income)
     loss of affiliates                                 128             -                    128     NM               183               (301)     484       (161%)
    Total other income and
     expenses, net                                    3,651         3,008                    643             21%    4,483              6,764   (2,281)       (34%)
                                                      -----         -----                    ---            ---     -----              -----   ------        ----

    Income before income
     taxes                                           47,939        42,114                  5,825             14%   78,172             64,037   14,135          22%
    Income taxes                                     16,077        14,536                  1,541             11%   26,313             20,729    5,584          27%
                                                     ------        ------                  -----            ---    ------             ------    -----
    Net income                                      $31,862       $27,578                 $4,284             16%  $51,859            $43,308   $8,551          20%
                                                    =======       =======                 ======            ===   =======            =======   ======         ===


    Basic earnings per
     share                                            $0.55         $0.46                  $0.09             20%    $0.89              $0.72    $0.17          24%
                                                      =====         =====                  =====            ===     =====              =====    =====         ===

    Diluted earnings per
     share                                            $0.55         $0.46                  $0.09             20%    $0.89              $0.72    $0.17          24%
                                                      =====         =====                  =====            ===     =====              =====    =====         ===

 

    Choice Hotels International, Inc.                                                                                                  Exhibit 2
    Consolidated Balance Sheets
                                                                                                                                                
                                                                                                                                                
    (In thousands, except per share amounts)                                          June 30,                               December 31,
                                                                                                   2012                                   2011
                                                                                                   ----                                   ----
                                                                                  (Unaudited)
                                                                                                                                                
    ASSETS
                                                                                                                                                
    Cash and cash equivalents                                                                  $485,390                               $107,057
    Accounts receivable, net                                                                     62,643                                 53,012
    Investments, employee benefit plans, at fair value                                            5,184                                 12,094
    Other current assets                                                                         30,656                                 22,633
                                                                                                 ------                                 ------
                              Total current assets                                              583,873                                194,796
                                                                                                                                                
    Fixed assets and intangibles, net                                                           131,992                                135,252
    Receivable -- marketing and reservation fees                                                 64,838                                 54,014
    Investments, employee benefit plans, at fair value                                           12,221                                 11,678
    Other assets                                                                                 64,814                                 51,949
                                                                                                 ------                                 ------
                                                                                                                                                
                              Total assets                                                     $857,738                               $447,689
                                                                                               --------                               --------
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
    LIABILITIES AND SHAREHOLDERS' DEFICIT
                                                                                                                                                
    Accounts payable and accrued expenses                                                       $81,685                                $92,240
    Deferred revenue                                                                             64,422                                 68,825
    Deferred compensation & retirement plan obligations                                          19,276                                 18,935
    Current portion of long-term debt                                                               683                                    673
    Other current liabilities                                                                    15,674                                  3,892
                                                                                                 ------                                  -----
                               Total current
                               liabilities                                                      181,740                                184,565
                                                                                                                                                
    Long-term debt                                                                              651,717                                252,032
    Deferred compensation & retirement plan obligations                                          19,482                                 20,593
    Other liabilities                                                                            16,042                                 16,060
                                                                                                 ------                                 ------
                                                                                                                                                
                              Total liabilities                                                 868,981                                473,250
                              -------------
                                                                                                                                                
    Common stock, $0.01 par value                                                                   580                                    583
    Additional paid-in-capital                                                                  101,719                                102,665
    Accumulated other comprehensive loss                                                         (6,350)                                (6,801)
    Treasury stock, at cost                                                                    (932,663)                              (916,955)
    Retained earnings                                                                           825,471                                794,947
                                                                                                -------                                -------
                                                                                                                                                
                               Total shareholders'
                               deficit                                                          (11,243)                               (25,561)
                              -------------
                                                                                                                                                
                               Total liabilities and shareholders'
                               deficit                                                         $857,738                               $447,689
                                                                                               --------                               --------

 

    Choice Hotels International,
     Inc.                                                      Exhibit 3
    Consolidated Statements of Cash
     Flows
    (Unaudited)



    (In thousands)                     Six Months Ended June
                                                30,
                                      ----------------------

                                                         2012       2011
                                                         ----       ----
    CASH FLOWS FROM OPERATING
     ACTIVITIES:

    Net income                                        $51,859    $43,308

    Adjustments to reconcile net
     income to net cash provided
     by operating activities:
      Depreciation and amortization                     3,994      3,903
      Provision for bad debts                           1,236      1,340
      Non-cash stock compensation and
       other charges                                    4,868      7,436
      Non-cash interest and other
       (income) loss                                     (820)        22
      Dividends received from equity
       method investments                                 399        159
      Equity in net (income) loss of
       affiliates                                         183       (301)

    Changes in assets and
     liabilities:
      Receivables                                     (12,258)   (11,058)
      Receivable -marketing and
       reservation fees, net                           (2,389)   (11,387)
      Accounts payable                                  6,330      6,026
      Accrued expenses                                (17,659)   (11,004)
      Income taxes payable/receivable                  11,808     11,404
      Deferred income taxes                              (194)        40
      Deferred revenue                                 (4,404)    (6,463)
      Other assets                                     (4,331)      (750)
      Other liabilities                                  (820)      (624)
                                                         ----       ----

     NET CASH PROVIDED BY OPERATING
      ACTIVITIES                                       37,802     32,051
                                                       ------     ------

    CASH FLOWS FROM INVESTING
     ACTIVITIES:

    Investment in property and
     equipment                                         (6,236)    (5,110)
    Equity method investments                          (6,315)    (1,600)
    Purchases of investments,
     employee benefit plans                              (969)    (1,139)
    Proceeds from sales of
     investments, employee benefit
     plans                                              8,969        347
    Issuance of notes receivable                       (5,820)    (2,651)
    Collections of notes receivable                       210         13
    Other items, net                                     (226)      (192)
                                                         ----       ----

     NET CASH USED IN INVESTING
      ACTIVITIES                                      (10,387)   (10,332)
                                                      -------    -------

    CASH FLOWS FROM FINANCING
     ACTIVITIES:

    Net repayments pursuant to
     revolving credit facilities                            -       (200)
    Repayments of long-term debt                         (333)       (13)
    Proceeds from the issuance of
     long-term debt                                   393,444         75
    Purchase of treasury stock                        (22,173)    (2,527)
    Dividends paid                                    (21,396)   (21,922)
    Excess tax benefits from stock-
     based compensation                                   641      1,061
    Debt issuance costs                                  (153)    (2,356)
    Proceeds from exercise of stock
     options                                              445      3,132
                                                          ---      -----

     NET CASH PROVIDED (USED) BY
      FINANCING ACTIVITIES                            350,475    (22,750)
                                                      -------    -------

    Net change in cash and cash
     equivalents                                      377,890     (1,031)
    Effect of foreign exchange rate
     changes on cash and cash
     equivalents                                          443        733
    Cash and cash equivalents at
     beginning of period                              107,057     91,259
                                                      -------     ------

    CASH AND CASH EQUIVALENTS AT END
     OF PERIOD                                       $485,390    $90,961
                                                     ========    =======

 

                                                                                                                                                     CHOICE HOTELS INTERNATIONAL, INC.                                                                                Exhibit 4
                                                                                                                                                    SUPPLEMENTAL OPERATING INFORMATION
                                                                                                                                                           DOMESTIC HOTEL SYSTEM
                                                                                                                                                                (UNAUDITED)




                                              For the Six Months Ended June 30, 2012*                       For the Six Months Ended June 30, 2011*                   Change
                                               --------------------------------------                       --------------------------------------                    ------

                                                    Average Daily                                                                                       Average Daily                                                     Average Daily
                                                        Rate                           Occupancy                                RevPAR                      Rate                       Occupancy            RevPAR            Rate           Occupancy         RevPAR
                                                        ----                           ---------                                ------                      ----                       ---------            ------            ----           ---------         ------

    Comfort Inn                                                  $77.48                               53.6%                              $41.52                      $75.27                           51.1%        $38.47               2.9%           250 bps                   7.9%
    Comfort Suites                                                83.15                               57.6%                               47.92                       81.82                           53.7%         43.96               1.6%           390 bps                   9.0%
    Sleep                                                         69.90                               52.0%                               36.32                       67.81                           48.7%         33.03               3.1%           330 bps                  10.0%
    Quality                                                       66.29                               46.8%                               31.03                       64.47                           44.7%         28.81               2.8%           210 bps                   7.7%
    Clarion                                                       71.85                               44.6%                               32.07                       70.89                           42.4%         30.07               1.4%           220 bps                   6.7%
    Econo Lodge                                                   52.48                               44.0%                               23.09                       51.60                           42.4%         21.89               1.7%           160 bps                   5.5%
    Rodeway                                                       49.36                               46.2%                               22.81                       47.78                           43.2%         20.66               3.3%           300 bps                  10.4%
    MainStay                                                      67.02                               67.4%                               45.16                       64.06                           61.8%         39.57               4.6%           560 bps                  14.1%
    Suburban                                                      40.48                               67.3%                               27.24                       39.82                           65.3%         25.99               1.7%           200 bps                   4.8%
    Ascend Collection                                            109.96                               59.4%                               65.28                      106.96                           55.3%         59.19               2.8%           410 bps                  10.3%
                                                                 ------                               ----                                -----                      ------                           ----          -----               ---            --- ---                  ----

    Total                                                        $70.38                               50.7%                              $35.66                      $68.57                           48.2%        $33.02               2.6%           250 bps                   8.0%
                                                                 ======                               ====                               ======                      ======                           ====         ======               ===            === ===                   ===

    * Operating statistics represent hotel operations from December through May


                                             For the Three Months Ended June 30, 2012*                       For the Three Months Ended June 30,
                                                                                                                          2011*                                Change
                                             -----------------------------------------                      ------------------------------------                 ------

                                                    Average Daily                                                                                       Average Daily                                                     Average Daily
                                                        Rate                           Occupancy                                RevPAR                      Rate                       Occupancy            RevPAR            Rate           Occupancy         RevPAR
                                                        ----                           ---------                                ------                      ----                       ---------            ------            ----           ---------         ------

    Comfort Inn                                                  $79.87                               60.2%                              $48.05                      $77.54                           57.7%        $44.73               3.0%           250 bps                   7.4%
    Comfort Suites                                                85.71                               64.2%                               55.01                       83.89                           60.3%         50.55               2.2%           390 bps                   8.8%
    Sleep                                                         72.52                               58.7%                               42.56                       69.95                           55.0%         38.45               3.7%           370 bps                  10.7%
    Quality                                                       68.43                               52.5%                               35.95                       66.58                           50.4%         33.58               2.8%           210 bps                   7.1%
    Clarion                                                       74.71                               50.2%                               37.53                       73.14                           47.9%         35.01               2.1%           230 bps                   7.2%
    Econo Lodge                                                   54.14                               49.2%                               26.62                       53.10                           47.4%         25.14               2.0%           180 bps                   5.9%
    Rodeway                                                       51.10                               50.4%                               25.76                       49.34                           47.7%         23.55               3.6%           270 bps                   9.4%
    MainStay                                                      69.06                               72.9%                               50.32                       66.31                           69.2%         45.87               4.1%           370 bps                   9.7%
    Suburban                                                      41.58                               71.9%                               29.89                       41.13                           69.7%         28.68               1.1%           220 bps                   4.2%
    Ascend Collection                                            114.40                               66.4%                               75.94                      113.44                           60.4%         68.50               0.8%           600 bps                  10.9%
                                                                 ------                               ----                                -----                      ------                           ----          -----               ---            --- ---                  ----

    Total                                                        $72.69                               56.6%                              $41.16                      $70.72                           54.1%        $38.22               2.8%           250 bps                   7.7%
                                                                 ======                               ====                               ======                      ======                           ====         ======               ===            === ===                   ===


    * Operating statistics represent hotel operations from March through May



                                                For the Quarter Ended                                                  For the Six Months Ended
                                                ---------------------                                                  ------------------------
                                                              6/30/2012                          6/30/2011                                                        6/30/2012                      6/30/2011

    System-wide effective
     royalty rate                                                  4.32%                              4.33%                                                            4.33%                          4.34%

 


                                                                 CHOICE HOTELS INTERNATIONAL, INC.                                                       Exhibit 5
                                                              SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA
                                                                            (UNAUDITED)



                        June 30, 2012     June 30, 2011                     Variance
                        -------------     -------------                     --------

                            Hotels            Rooms                   Hotels                          Rooms         Hotels      Rooms          %                    %
                            ------            -----                   ------                          -----         ------      -----         ---                  ---

    Comfort Inn                     1,379             107,895                 1,416                         110,736        (37)       (2,841)     (2.6%)               (2.6%)
    Comfort Suites                    608              46,903                   613                          47,441         (5)         (538)     (0.8%)               (1.1%)
    Sleep                             391              28,327                   394                          28,625         (3)         (298)     (0.8%)               (1.0%)
    Quality                         1,082              93,655                 1,027                          89,571         55         4,084        5.4%                 4.6%
    Clarion                           189              27,534                   193                          28,335         (4)         (801)     (2.1%)               (2.8%)
    Econo Lodge                       801              49,114                   778                          48,197         23           917        3.0%                 1.9%
    Rodeway                           401              22,671                   377                          20,506         24         2,165        6.4%                10.6%
    MainStay                           40               3,083                    39                           3,007          1            76        2.6%                 2.5%
    Suburban                           62               7,260                    61                           7,255          1             5        1.6%                 0.1%
    Ascend Collection                  52               4,652                    44                           3,392          8         1,260       18.2%                37.1%
    Cambria Suites                     19               2,221                    19                           2,215          -             6        0.0%                 0.3%
                                      ---               -----                   ---                           -----        ---           ---        ---                  ---

    Domestic Franchises             5,024             393,315                 4,961                         389,280         63         4,035        1.3%                 1.0%

    International
     Franchises                     1,175             104,522                 1,156                         102,086         19         2,436        1.6%                 2.4%
                                    -----             -------                 -----                         -------        ---         -----        ---                  ---

    Total Franchises                6,199             497,837                 6,117                         491,366         82         6,471        1.3%                 1.3%
                                    =====             =======                 =====                         =======        ===         =====        ===                  ===

 


                                                                                                                                                                                                                                    Exhibit 6
                                                                                                                           CHOICE HOTELS INTERNATIONAL, INC.
                                                                                                                           SUPPLEMENTAL INFORMATION BY BRAND
                                                                                                                  DEVELOPMENT RESULTS -- DOMESTIC NEW HOTEL CONTRACTS
                                                                                                                                      (UNAUDITED)




                    For the Six Months Ended June 30, 2012  For the Six Months Ended June 30, 2011       % Change
                    --------------------------------------  --------------------------------------     --------

                                      New                                                                                        New                                                                New
                                 Construction                              Conversion              Total                    Construction                              Conversion     Total     Construction        Conversion                 Total
                                 ------------                              ----------              -----                    ------------                              ----------     -----     ------------        ----------                 -----

    Comfort Inn                                           6                                     12          18                                   5                                18        23                 20%            (33%)                 (22%)
    Comfort Suites                                        7                                      4          11                                   1                                 4         5                600%               0%                  120%
    Sleep                                                11                                      1          12                                   3                                 1         4                267%               0%                  200%
    Quality                                               -                                     63          63                                   -                                35        35                 NM               80%                   80%
    Clarion                                               -                                      7           7                                   -                                 8         8                 NM             (13%)                 (13%)
    Econo Lodge                                           -                                     18          18                                   -                                18        18                 NM                0%                    0%
    Rodeway                                               -                                     31          31                                   -                                18        18                 NM               72%                   72%
    MainStay                                              1                                      1           2                                   1                                 3         4                  0%            (67%)                 (50%)
    Suburban                                              -                                      1           1                                   2                                 1         3              (100%)               0%                 (67%)
    Ascend
     Collection                                           1                                      4           5                                   -                                 5         5                 NM             (20%)                    0%
    Cambria Suites                                        2                                      -           2                                   2                                 -         2                  0%              NM                     0%
                                                        ---                                    ---         ---                                 ---                               ---       ---                ---              ---                   ---

    Total Domestic
     System                                              28                                    142         170                                  14                               111       125                100%              28%                   36%
                                                        ===                                    ===         ===                                 ===                               ===       ===                ===              ===                   ===





                   For the Three Months Ended June 30, 2012   For the Three Months Ended June 30,
                                                                              2011                     % Change
                   ----------------------------------------  ------------------------------------      --------

                                      New                                                                                        New                                                                New
                                 Construction                              Conversion              Total                    Construction                              Conversion     Total     Construction        Conversion                 Total
                                 ------------                              ----------              -----                    ------------                              ----------     -----     ------------        ----------                 -----

    Comfort Inn                                           5                                      4           9                                   3                                11        14                 67%            (64%)                 (36%)
    Comfort Suites                                        6                                      2           8                                   1                                 2         3                500%               0%                  167%
    Sleep                                                 8                                      1           9                                   1                                 1         2                700%               0%                  350%
    Quality                                               -                                     36          36                                   -                                11        11                 NM              227%                  227%
    Clarion                                               -                                      5           5                                   -                                 3         3                 NM               67%                   67%
    Econo Lodge                                           -                                     14          14                                   -                                12        12                 NM               17%                   17%
    Rodeway                                               -                                     19          19                                   -                                13        13                 NM               46%                   46%
    MainStay                                              1                                      1           2                                   -                                 3         3                 NM             (67%)                 (33%)
    Suburban                                              -                                      1           1                                   2                                 1         3              (100%)               0%                 (67%)
    Ascend
     Collection                                           -                                      2           2                                   -                                 4         4                 NM             (50%)                 (50%)
    Cambria Suites                                        1                                      -           1                                   1                                 -         1                  0%              NM                     0%
                                                        ---                                    ---         ---                                 ---                               ---       ---                ---              ---                   ---

    Total Domestic
     System                                              21                                     85         106                                   8                                61        69                163%              39%                   54%
                                                        ===                                    ===         ===                                 ===                               ===       ===                ===              ===                   ===

 

                                                                                                                                                                                                                                                                                                        Exhibit 7
                                                                                                                                                                                 CHOICE HOTELS INTERNATIONAL, INC.
                                                                                                                                               DOMESTIC HOTEL PIPELINE OF HOTELS UNDER CONSTRUCTION, AWAITING CONVERSION OR APPROVED FOR DEVELOPMENT
                                                                                                                                                                                            (UNAUDITED)

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


                                                                                                                                                                                                                                                                Variance
                                                                                                                                                                                                                                                                --------
                                             June 30, 2012                                     June 30, 2011
                                                 Units                                             Units               Conversion    New Construction                                  Total
                                                 -----                                             -----               ----------    ----------------                                  -----
                                               Conversion                                    New Construction            Total          Conversion                               New Construction                            Total                   Units         %               Units      %               Units      %
                                               ----------                                    ----------------            -----          ----------                               ----------------                            -----                   -----         ---             -----      ---             -----      ---

    Comfort Inn                                                   25                                                40            65                     27                                            50                             77                    (2)               (7%)       (10)     (20%)             (12)     (16%)
    Comfort Suites                                                 2                                                82            84                      3                                           108                            111                    (1)              (33%)       (26)     (24%)             (27)     (24%)
    Sleep Inn                                                      1                                                40            41                      -                                            62                             62                     1           NM              (22)     (35%)             (21)     (34%)
    Quality                                                       39                                                 3            42                     25                                             5                             30                    14                 56%        (2)     (40%)              12        40%
    Clarion                                                       14                                                 1            15                     16                                             2                             18                    (2)              (13%)        (1)     (50%)              (3)     (17%)
    Econo Lodge                                                   20                                                 1            21                     34                                             1                             35                   (14)              (41%)         -         0%             (14)     (40%)
    Rodeway                                                       31                                                 1            32                     15                                             1                             16                    16                107%         -         0%              16       100%
    MainStay                                                       1                                                22            23                      4                                            37                             41                    (3)              (75%)       (15)     (41%)             (18)     (44%)
    Suburban                                                       2                                                14            16                      -                                            22                             22                     2           NM               (8)     (36%)              (6)     (27%)
    Ascend
     Collection                                                    8                                                 5            13                      5                                             3                              8                     3                 60%         2        67%               5        63%
    Cambria Suites                                                 -                                                26            26                      -                                            31                             31                     -           NM               (5)     (16%)              (5)     (16%)
                                                                 ---                                               ---           ---                    ---                                           ---                            ---                   ---           ---             ---      ----              ---      ----

                                                                 143                                               235           378                    129                                           322                            451                    14                 11%       (87)     (27%)             (73)     (16%)
                                                                 ===                                               ===           ===                    ===                                           ===                            ===                   ===                ===        ===      ====              ===      ====

 

                                       CHOICE HOTELS INTERNATIONAL, INC.                                Exhibit 8
                                  SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION
                                                  (UNAUDITED)
                                                                                                                                                                                                                                              
    CALCULATION OF FRANCHISING REVENUES AND FRANCHISING MARGINS
                                                                                                                                                                                                                                                
    (dollar amounts in thousands)         Three Months Ended June 30,                  Six Months Ended June 30,
                                          ---------------------------                  -------------------------
                                                                                                                                                                                                                                                
                                                                  2012                                       2011                                       2012                                       2011
                                                                  ----                                       ----                                       ----                                       ----
    Franchising Revenues:
                                                                                                                                                                                                                                              
                                                            $173,621                                   $165,301                                   $302,790                                   $280,582
    Total Revenues
                                                                                                                                                                                                                                              
    Adjustments:
                                                             (94,633)                                   (90,832)                                  (165,562)                                  (153,799)
         Marketing and reservation revenues
                                                              (1,224)                                    (1,073)                                    (2,202)                                    (1,937)
         Hotel operations
                                                             $77,764                                    $73,396                                   $135,026                                   $124,846
    Franchising Revenues
                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                              
    Franchising Margins:
                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                              
    Operating Margin:
                                                                                                                                                                                                                                              
                                                            $173,621                                   $165,301                                   $302,790                                   $280,582
    Total Revenues
                                                             $51,590                                    $45,122                                    $82,655                                    $70,801
    Operating Income
                                                                29.7%                                      27.3%                                      27.3%                                      25.2%
         Operating Margin
                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                              
     Franchising Margin:
                                                                                                                                                                                                                                              
                                                             $77,764                                    $73,396                                   $135,026                                   $124,846
    Franchising Revenues
                                                                                                                                                                                                                                              
                                                             $51,590                                    $45,122                                    $82,655                                    $70,801
    Operating Income
                                                                (357)                                      (213)                                      (526)                                      (244)
    Hotel operations
                                                             $51,233                                    $44,909                                    $82,129                                    $70,557
                                                             -------                                    -------                                    -------                                    -------
                                                                                                                                                                                                                                              
                                                                65.9%                                      61.2%                                      60.8%                                      56.5%
         Franchising Margins
                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                              
    CALCULATION OF ADJUSTED NET INCOME AND ADJUSTED DILUTED EARNINGS PER SHARE (EPS)
                                                                                                                                                                                                                                              
    (In thousands, except per share
     amounts)                           Three Months Ended June 30,                  Six Months Ended June 30,
                                        ---------------------------                  -------------------------
                                                                                                                                                                                                                                              
                                                                2012                                       2011                                       2012                                       2011
                                                                ----                                       ----                                       ----                                       ----
                                                                                                                                                                                                                                              
    Net Income                                               $31,862                                    $27,578                                    $51,859                                    $43,308
    Adjustments, net of tax:
                            Loss on
                            land
                            held for
                            sale                                   -                                          -                                          -                                      1,111
    Adjusted Net Income                                      $31,862                                    $27,578                                    $51,859                                    $44,419
                                                             -------                                    -------                                    -------                                    -------
                                                                                                                                                                                                                                              
    Weighted average shares
     outstanding-diluted                                      58,088                                     59,918                                     58,204                                     59,854
                                                                                                                                                                                                                                              
    Diluted Earnings Per Share                                 $0.55                                      $0.46                                      $0.89                                      $0.72
    Adjustments:
                            Loss on
                            land
                            held for
                            sale                                   -                                          -                                          -                                       0.02
    Adjusted Diluted Earnings Per
     Share (EPS)                                               $0.55                                      $0.46                                      $0.89                                      $0.74
                                                               -----                                      -----                                      -----                                      -----
                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                              
    EBITDA Reconciliation
                                                                                                                                                                                                                                              
    (in millions)
                                               Q2 2012 Actuals                            Q2 2011 Actuals                       Six Months Ended June 30,                  Six Months Ended June 30,
                                                                                                                                       2012 Actuals                               2011 Actuals                       Full-Year 2012 Outlook
                                               ---------------                                  ---------------                --------------------------                 --------------------------                 ----------------------
                                                                                                                                                                                                                                              
                                                               $51.6                                      $45.1                                      $82.7                                      $70.8                          $192.7-$195.2
    Operating Income (per GAAP)
                                                                 2.0                                        1.9                                        4.0                                        3.9                                    8.3
    Depreciation and amortization
                                                                                                                                                                                                                    
                                                               $53.6                                      $47.0                                      $86.7                                      $74.7                          $201.0-$203.5
    Earnings before interest, taxes, depreciation & amortization
     (non-GAAP)
                                                                                                                                                                                                                                         ===

 

SOURCE Choice Hotels International, Inc.

 

SOURCE: Choice Hotels International, Inc.

 

Choice Hotels Reports A 20% Increase In Second Quarter 2012 Diluted EPS And Domestic RevPAR Growth Of 7.7%

New Domestic Hotel Franchise Contracts Rise 54%

PR Newswire

SILVER SPRING, Md., July 26, 2012 /PRNewswire/ -- Choice Hotels International, Inc., (NYSE: CHH) today reported the following highlights for the second quarter of 2012:

  • Diluted earnings per share ("EPS") for the second quarter of 2012 of $0.55 compared to diluted EPS of $0.46 for the second quarter of 2011, a 20% increase. 
  • Earnings before interest, taxes, depreciation and amortization ("EBITDA") increased 14% to $53.6 million for the three months ended June 30, 2012, compared to $47.0 million for the three months ended June 30, 2011. Operating income increased 14% from $45.1 million for the three months ended June 30, 2011 to $51.6 million for the same period of 2012.
  • Franchising revenues increased 6% to $77.8 million for the three months ended June 30, 2012 from $73.4 million for the same period of 2011.  Total revenues increased 5% to $173.6 million for the three months ended June 30, 2012 compared to the same period of 2011.
  • Domestic royalty fees for the three months ended June 30, 2012 increased $4.4 million to $59.8 million from $55.4 million in the three months ended June 30, 2011, an increase of 8%.
  • Franchising margins increased from 61.2% for the three months ended June 30, 2011 to 65.9% for the same period of the current year.
  • Worldwide unit growth increased 1.3 percent from June 30, 2011 comprised of domestic and international unit growth of 1.3 percent and 1.6 percent, respectively. 
  • Domestic system-wide revenue per available room ("RevPAR") increased 7.7% for the three months ended June 30, 2012 compared to the same period of 2011 as occupancy and average daily rates increased 250 basis points and 2.8 percent, respectively.  
  • The company executed 106 new domestic hotel franchise contracts for the three months ended June 30, 2012 compared to 69 new domestic hotel franchise contracts in the same period of the prior year, a 54% increase.
  • The number of worldwide hotels under construction, awaiting conversion or approved for development as of June 30, 2012 was 453 hotels representing 37,380 rooms.

"We are very pleased with our results for the quarter. People are traveling, we are driving record traffic to our hotels and the development environment is improving. Our second quarter results, in fact, were highlighted by the 106 new domestic franchise agreements we executed in the second quarter of 2012, a 54% increase over the prior year," said Stephen P. Joyce, president and chief executive officer. "These results demonstrate our ability to attract owners to our family of eleven brands due to our size, scale and distribution which allow us to deliver guests and create opportunities for our franchisees to achieve exceptional returns on investment. We are also excited about our recent announcement of the declaration of a $600 million special cash dividend to shareholders which further illustrates our commitment and adds to our already strong history of returning value to our shareholders over time."

 

Use of Free Cash Flow
The company has historically used its free cash flow (cash flow from operations less capital expenditures) to return value to shareholders, primarily through share repurchases and dividends.

 

Dividends

 

For the six months ended June 30, 2012, the company paid $21.4 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.

On July 26, 2012, the company announced that its board of directors declared a special cash dividend in the amount of $10.41 per share or approximately $600 million in the aggregate.  The record date for the special cash dividend is August 20, 2012 and the special cash dividend will be paid on August 23, 2012.  The company has been informed by the New York Stock Exchange that, in accordance with its rules, the ex-dividend date is expected to be August 24, 2012. Accordingly, stockholders who sell their shares on or before the payment date will not be entitled to receive the special cash dividend.

The special cash dividend is being paid with the proceeds from the company's recent offering of $400 million, 5.75% unsecured senior notes and its new senior secured credit facility.  On June 27, 2012, the company issued unsecured senior notes in an aggregate principal amount of $400 million, in an underwritten, registered public offering. The notes will mature in July 2022 and bear a coupon rate of interest of 5.75%. Considering bond issuance costs, the company's effective interest cost related to these senior notes is approximately 5.94%.

On July 25, 2012, the company entered into a senior secured credit facility consisting of a $200 million revolving credit tranche and a $150 million term loan tranche, with a four year term. The company expects to utilize the proceeds from the term loan as well as approximately $50 million under the revolving credit tranche for payment of the special dividend. As a result of entering into the senior secured credit facility, the company's existing $300 million senior unsecured revolving credit facility was terminated.

The senior secured credit facility is secured by a first priority pledge of equity by certain wholly-owned subsidiaries and contains customary financial covenants, including with respect to restrictions on liens, incurring indebtedness, making investments, restricted payments and effecting mergers and/or asset sales. In addition, the senior secured credit facility imposes certain financial maintenance covenants. The company may elect to have borrowings under the senior secured credit facility bear interest at (i) a base rate plus a margin ranging from 100 to 325 basis points based on the company's total leverage ratio or (ii) LIBOR plus a margin ranging from 200 to 425 basis points based on the company's total leverage ratio.  

 

Share Repurchases

 

During the three months ended June 30, 2012, the company purchased approximately 0.2 million shares of its common stock at an average price of $37.39 for a total cost of $7.0 million under the share repurchase program. During the six months ended June 30, 2012, the company repurchased 0.5 million shares for a total cost of $19.9 million at an average price of $37.02 and has authorization to purchase up to an additional 1.4 million shares under this program.  We expect to continue making repurchases under our share repurchase program in the open market and through privately negotiated transactions, subject to market and other conditions. No minimum number of share repurchases has been fixed. Since Choice announced its stock repurchase program on June 25, 1998, the company has repurchased 45.3 million shares of its common stock for a total cost of $1.1 billion through June 30, 2012. Considering the effect of a two-for-one stock split in October 2005, the company had repurchased 78.3 million shares through June 30, 2012 under the share repurchase program at an average price of $13.89 per share.

Other

 

Our board of directors previously authorized us to enter into programs which permit us to offer financing, investment and guaranty support to qualified franchisees as well as to acquire and resell real estate to incent franchise development for certain brands in strategic markets.  Over the next several years, we expect to continue to opportunistically deploy capital pursuant to these programs to promote growth of our emerging brands.  The amount and timing of the investment in these programs will be dependent on market and other conditions.  Notwithstanding these programs, the company expects to continue to return value to its shareholders through a combination of share repurchases and dividends, subject to market and other conditions.

 

Outlook for 2012
The company's third quarter 2012 diluted EPS is expected to be $0.61. The company expects full-year 2012 diluted EPS to range between $1.91 and $1.94.  EBITDA for full-year 2012 are expected to range between $201.0 million and $203.5 million. These estimates include the following assumptions:

  • The company expects net domestic unit growth to range between flat and a 1% increase in 2012;
  • RevPAR is expected to increase approximately 5% for third quarter of 2012 and increase between 6% and 7% for full-year 2012;
  • The effective royalty rate is expected to remain flat for full-year 2012;
  • All figures assume the existing share count and an effective tax rate of 34.0% for the third quarter and 33.8% for full-year 2012.
  • Diluted EPS guidance for full-year 2012 reflects the impact of increased borrowing costs to be incurred as the result of the declaration of a $600 million special cash dividend to be paid in the third quarter of 2012 which is expected to total approximately $14 million or $0.16 per share. 

 

Conference Call
Choice will conduct a conference call on Friday, July 27, 2012 at 9:30 a.m. EST to discuss the company's second quarter 2012 results. The dial-in number to listen to the call is 1-866-730-5767, and the access code is 51535988. International callers should dial 1-857-350-1591 and enter the access code 51535988.  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 12:00 p.m. EST on Friday, July 27, 2012 through Monday, August 27, 2012 by calling 1-888-286-8010 and entering access code 76425859. The international dial-in number for the replay is 1-617-801-6888, access code 76425859. In addition, the call will be archived and available on www.choicehotels.com via the Investor Info link.

 

 

About Choice Hotels
Choice Hotels International, Inc. franchises approximately 6,200 hotels, representing more than 495,000 rooms, in the United States and more than 30 other countries and territories.  As of June 30, 2012, more than 375 hotels were under construction, awaiting conversion or approved for development in the United States, representing more than 30,000 rooms, and 75 hotels, representing approximately 6,700 rooms, were under construction, awaiting conversion or approved for development in 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 serve guests worldwide.  In addition, via its Ascend Collection membership program, travelers 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 Private Securities Litigation Reform Act of 1995.  Generally, our use of words such as "expect," "estimate," "believe," "anticipate," "will," "forecast," "plan"," project," "assume" or similar words of futurity identify such forward-looking statements.  These forward-looking statements are based on management's current beliefs, assumptions and expectations regarding future events, which in turn are based on information currently available to management.  Such statements may relate to projections of the company's revenue, earnings and other financial and operational measures, company debt levels, ability to repay outstanding indebtedness, payment of dividends, and future operations, among other matters.   We caution you not to place undue reliance on any such forward-looking statements.  Forward-looking statements do not guarantee future performance and involve known and unknown risks, uncertainties and other factors.

Several factors could cause actual results, performance or achievements of the company to differ materially from those expressed in or contemplated by the forward-looking statements.  Such risks include, but are not limited to, changes to general, domestic and foreign economic conditions;  operating risks common in the lodging and franchising industries; changes to the desirability of our brands as viewed by hotel operators and customers; changes to the terms or termination of our contracts with franchisees; our ability to keep pace with improvements in technology utilized for reservations systems and other operating systems; fluctuations in the supply and demand for hotels rooms; and our ability to manage effectively our indebtedness.  These and other risk factors are discussed in detail in the Risk Factors section of the company's Form 10-K for the year ended December 31, 2011, filed with the Securities and Exchange Commission on February 29, 2012 and our quarterly reports filed on Form 10-Q.  We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Statement Concerning Non-GAAP Financial Measurements Presented in Exhibit 8
Adjusted diluted EPS, EBITDA, franchising revenues and 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 required by its franchise agreements to use these fees collected for marketing and reservation activities. Cumulative reservation and marketing system fees not expended are recorded as a liability on the company's financial statements and are carried over to the next fiscal year and expended in accordance with the franchise agreements. Cumulative marketing and reservation expenditures in excess of system fees collected for marketing and reservation activities are recorded as a receivable on the company's financial statements. In addition, the company has the contractual authority to require that the franchisees in the system at any given point repay the company for any deficits related to marketing and reservation activities.  Hotel operations are excluded since they do not reflect the most accurate measure of the company's core franchising business. These non-GAAP measures are a commonly used measure of performance in our industry and facilitate comparisons between the company and its competitors.

 

Adjusted Diluted EPS: The company's management uses adjusted diluted EPS, which excludes a reduction in the carrying amount of land held for sale resulting in a loss of $1.8 million included in other gains and losses during the six months ended June 30, 2011.   This amount represented net income of $1.1 million and diluted EPS of $0.02 for the six months ended June 30, 2011. The company utilizes this non-GAAP measure 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.

© 2012 Choice Hotels International, Inc.  All rights reserved.

Choice Hotels International, Inc.

         

Exhibit 1

Consolidated Statements of Income

               

(Unaudited)

               
                               
                               
                           
 

Three Months Ended June 30,

 

Six Months Ended June 30,

         

Variance

         

Variance

 

2012

 

2011

 

$

 

%

 

2012

 

2011

 

$

 

%

(In thousands, except per share amounts)

                             
                               

REVENUES:

                             
                               

Royalty fees

$   66,064

 

$  61,620

 

$4,444

 

7%

 

$113,917

 

$105,414

 

$8,503

 

8%

Initial franchise and relicensing fees

3,178

 

2,779

 

399

 

14%

 

5,706

 

5,500

 

206

 

4%

Procurement services

6,836

 

6,673

 

163

 

2%

 

10,151

 

9,934

 

217

 

2%

Marketing and reservation 

94,633

 

90,832

 

3,801

 

4%

 

165,562

 

153,799

 

11,763

 

8%

Hotel operations

1,224

 

1,073

 

151

 

14%

 

2,202

 

1,937

 

265

 

14%

Other

1,686

 

2,324

 

(638)

 

(27%)

 

5,252

 

3,998

 

1,254

 

31%

      Total revenues

173,621

 

165,301

 

8,320

 

5%

 

302,790

 

280,582

 

22,208

 

8%

                               

OPERATING EXPENSES:

                             
                               

Selling, general and administrative

24,554

 

26,539

 

(1,985)

 

(7%)

 

48,903

 

50,386

 

(1,483)

 

(3%)

Depreciation and amortization

1,977

 

1,948

 

29

 

1%

 

3,994

 

3,903

 

91

 

2%

Marketing and reservation

94,633

 

90,832

 

3,801

 

4%

 

165,562

 

153,799

 

11,763

 

8%

Hotel operations

867

 

860

 

7

 

1%

 

1,676

 

1,693

 

(17)

 

(1%)

Total operating expenses

122,031

 

120,179

 

1,852

 

2%

 

220,135

 

209,781

 

10,354

 

5%

                               

Operating income

51,590

 

45,122

 

6,468

 

14%

 

82,655

 

70,801

 

11,854

 

17%

                               

OTHER INCOME AND EXPENSES, NET:

                             

Interest expense

3,540

 

3,267

 

273

 

8%

 

6,657

 

6,491

 

166

 

3%

Interest income

(394)

 

(221)

 

(173)

 

78%

 

(731)

 

(431)

 

(300)

 

70%

Other (gains) and losses

377

 

(38)

 

415

 

(1092%)

 

(1,626)

 

1,005

 

(2,631)

 

(262%)

Equity in net (income) loss of affiliates

128

 

-

 

128

 

NM

 

183

 

(301)

 

484

 

(161%)

Total other income and expenses, net

3,651

 

3,008

 

643

 

21%

 

4,483

 

6,764

 

(2,281)

 

(34%)

                               

Income before income taxes

47,939

 

42,114

 

5,825

 

14%

 

78,172

 

64,037

 

14,135

 

22%

Income taxes

16,077

 

14,536

 

1,541

 

11%

 

26,313

 

20,729

 

5,584

 

27%

Net income

$   31,862

 

$  27,578

 

$4,284

 

16%

 

$  51,859

 

$  43,308

 

$8,551

 

20%

                               
                               

Basic earnings per share

$       0.55

 

$      0.46

 

$ 0.09

 

20%

 

$      0.89

 

$      0.72

 

$ 0.17

 

24%

                               

Diluted earnings per share

$       0.55

 

$      0.46

 

$ 0.09

 

20%

 

$      0.89

 

$      0.72

 

$ 0.17

 

24%

                               

 

Choice Hotels International, Inc.

   

Exhibit 2

Consolidated Balance Sheets

     
           
           

(In thousands, except per share amounts)

 June 30, 

 

 December 31, 

     

2012

 

2011

     

(Unaudited)

   
           

ASSETS

       
           

Cash and cash equivalents

$           485,390

 

$         107,057

Accounts receivable, net

62,643

 

53,012

Investments, employee benefit plans, at fair value

5,184

 

12,094

Other current assets

30,656

 

22,633

 

Total current assets

583,873

 

194,796

           

Fixed assets and intangibles, net

131,992

 

135,252

Receivable -- marketing and reservation fees

64,838

 

54,014

Investments, employee benefit plans, at fair value

12,221

 

11,678

Other assets

 

64,814

 

51,949

           
   

Total assets

$           857,738

 

$         447,689

           
           
           

LIABILITIES AND SHAREHOLDERS' DEFICIT

     
           

Accounts payable and accrued expenses

$              81,685

 

$            92,240

Deferred revenue

64,422

 

68,825

Deferred compensation & retirement plan obligations

19,276

 

18,935

Current portion of long-term debt

683

 

673

Other current liabilities

15,674

 

3,892

 

Total current liabilities

181,740

 

184,565

           

Long-term debt

651,717

 

252,032

Deferred compensation & retirement plan obligations  

19,482

 

20,593

Other liabilities

 

16,042

 

16,060

           
 

Total liabilities

868,981

 

473,250

           

Common stock, $0.01 par value

580

 

583

Additional paid-in-capital

101,719

 

102,665

Accumulated other comprehensive loss

(6,350)

 

(6,801)

Treasury stock, at cost

(932,663)

 

(916,955)

Retained earnings

825,471

 

794,947

           
 

Total shareholders' deficit

(11,243)

 

(25,561)

           
   

Total liabilities and shareholders' deficit

$           857,738

 

$         447,689

           

 

Choice Hotels International, Inc.

   

Exhibit 3

Consolidated Statements of Cash Flows

     

(Unaudited)

     
       
       
   

(In thousands)

Six Months Ended June 30,

       
 

2012

 

2011

CASH FLOWS FROM OPERATING ACTIVITIES:

     
       

Net income

$               51,859

 

$         43,308

       

Adjustments to reconcile net income to net cash provided 

     

 by operating activities:

     

  Depreciation and amortization  

3,994

 

3,903

  Provision for bad debts

1,236

 

1,340

  Non-cash stock compensation and other charges

4,868

 

7,436

  Non-cash interest and other (income) loss

(820)

 

22

  Dividends received from equity method investments

399

 

159

  Equity in net (income) loss of affiliates

183

 

(301)

       

Changes in assets and liabilities:

     

  Receivables

(12,258)

 

(11,058)

  Receivable - marketing and reservation fees, net

(2,389)

 

(11,387)

  Accounts payable

6,330

 

6,026

  Accrued expenses

(17,659)

 

(11,004)

  Income taxes payable/receivable

11,808

 

11,404

  Deferred income taxes

(194)

 

40

  Deferred revenue

(4,404)

 

(6,463)

  Other assets

(4,331)

 

(750)

  Other liabilities

(820)

 

(624)

       

 NET CASH PROVIDED BY OPERATING ACTIVITIES

37,802

 

32,051

       

CASH FLOWS FROM INVESTING ACTIVITIES:

     
       

Investment in property and equipment

(6,236)

 

(5,110)

Equity method investments

(6,315)

 

(1,600)

Purchases of investments, employee benefit plans

(969)

 

(1,139)

Proceeds from sales of investments, employee benefit plans

8,969

 

347

Issuance of notes receivable

(5,820)

 

(2,651)

Collections of notes receivable

210

 

13

Other items, net

(226)

 

(192)

       

 NET CASH USED IN INVESTING ACTIVITIES

(10,387)

 

(10,332)

       

CASH FLOWS FROM FINANCING ACTIVITIES:

     
       

Net repayments pursuant to revolving credit facilities

-

 

(200)

Repayments of long-term debt

(333)

 

(13)

Proceeds from the issuance of long-term debt

393,444

 

75

Purchase of treasury stock

(22,173)

 

(2,527)

Dividends paid

(21,396)

 

(21,922)

Excess tax benefits from stock-based compensation

641

 

1,061

Debt issuance costs

(153)

 

(2,356)

Proceeds from exercise of stock options

445

 

3,132

       

 NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES

350,475

 

(22,750)

       

Net change in cash and cash equivalents

377,890

 

(1,031)

Effect of foreign exchange rate changes on cash and cash equivalents

443

 

733

Cash and cash equivalents at beginning of period

107,057

 

91,259

       

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$             485,390

 

$         90,961

       

 

CHOICE HOTELS INTERNATIONAL, INC.

Exhibit 4

SUPPLEMENTAL OPERATING INFORMATION 

   

DOMESTIC HOTEL SYSTEM

   

(UNAUDITED)

   
                                         
                                         
                                         
                                         
   

For the Six Months Ended June 30, 2012*

 

For the Six Months Ended June 30, 2011*

 

Change

 
                                         
   

Average Daily

         

Average Daily

         

Average Daily

           
   

Rate

 

Occupancy

 

RevPAR

 

Rate

 

Occupancy

 

RevPAR

 

Rate

 

Occupancy

 

RevPAR

 
                                         

Comfort Inn

 

$  77.48

 

53.6%

 

$41.52

 

$  75.27

 

51.1%

 

$38.47

 

2.9%

 

250

bps

 

7.9%

 

Comfort Suites

 

83.15

 

57.6%

 

47.92

 

81.82

 

53.7%

 

43.96

 

1.6%

 

390

bps

 

9.0%

 

Sleep

 

69.90

 

52.0%

 

36.32

 

67.81

 

48.7%

 

33.03

 

3.1%

 

330

bps

 

10.0%

 

Quality

 

66.29

 

46.8%

 

31.03

 

64.47

 

44.7%

 

28.81

 

2.8%

 

210

bps

 

7.7%

 

Clarion

 

71.85

 

44.6%

 

32.07

 

70.89

 

42.4%

 

30.07

 

1.4%

 

220

bps

 

6.7%

 

Econo Lodge

 

52.48

 

44.0%

 

23.09

 

51.60

 

42.4%

 

21.89

 

1.7%

 

160

bps

 

5.5%

 

Rodeway

 

49.36

 

46.2%

 

22.81

 

47.78

 

43.2%

 

20.66

 

3.3%

 

300

bps

 

10.4%

 

MainStay

 

67.02

 

67.4%

 

45.16

 

64.06

 

61.8%

 

39.57

 

4.6%

 

560

bps

 

14.1%

 

Suburban

 

40.48

 

67.3%

 

27.24

 

39.82

 

65.3%

 

25.99

 

1.7%

 

200

bps

 

4.8%

 

Ascend Collection

 

109.96

 

59.4%

 

65.28

 

106.96

 

55.3%

 

59.19

 

2.8%

 

410

bps

 

10.3%

 
                                         

Total 

 

$  70.38

 

50.7%

 

$35.66

 

$  68.57

 

48.2%

 

$33.02

 

2.6%

 

250

bps

 

8.0%

 
                                         

* Operating statistics represent hotel operations from December through May

                 
                                         
                                         
   

For the Three Months Ended June 30, 2012*

 

For the Three Months Ended June 30, 2011*

 

Change

 
                                         
   

Average Daily

         

Average Daily

         

Average Daily

           
   

Rate

 

Occupancy

 

RevPAR

 

Rate

 

Occupancy

 

RevPAR

 

Rate

 

Occupancy

 

RevPAR

 
                                         

Comfort Inn

 

$ 79.87

 

60.2%

 

$48.05

 

$  77.54

 

57.7%

 

$44.73

 

3.0%

 

250

bps

 

7.4%

 

Comfort Suites

 

85.71

 

64.2%

 

55.01

 

83.89

 

60.3%

 

50.55

 

2.2%

 

390

bps

 

8.8%

 

Sleep

 

72.52

 

58.7%

 

42.56

 

69.95

 

55.0%

 

38.45

 

3.7%

 

370

bps

 

10.7%

 

Quality

 

68.43

 

52.5%

 

35.95

 

66.58

 

50.4%

 

33.58

 

2.8%

 

210

bps

 

7.1%

 

Clarion

 

74.71

 

50.2%

 

37.53

 

73.14

 

47.9%

 

35.01

 

2.1%

 

230

bps

 

7.2%

 

Econo Lodge

 

54.14

 

49.2%

 

26.62

 

53.10

 

47.4%

 

25.14

 

2.0%

 

180

bps

 

5.9%

 

Rodeway

 

51.10

 

50.4%

 

25.76

 

49.34

 

47.7%

 

23.55

 

3.6%

 

270

bps

 

9.4%

 

MainStay

 

69.06

 

72.9%

 

50.32

 

66.31

 

69.2%

 

45.87

 

4.1%

 

370

bps

 

9.7%

 

Suburban

 

41.58

 

71.9%

 

29.89

 

41.13

 

69.7%

 

28.68

 

1.1%

 

220

bps

 

4.2%

 

Ascend Collection

 

114.40

 

66.4%

 

75.94

 

113.44

 

60.4%

 

68.50

 

0.8%

 

600

bps

 

10.9%

 
                                         

Total 

 

$ 72.69

 

56.6%

 

$41.16

 

$  70.72

 

54.1%

 

$38.22

 

2.8%

 

250

bps

 

7.7%

 
                                         
                                         

* Operating statistics represent hotel operations from March through May

                   
                                         
                                         
                                         
   

For the Quarter Ended

     

For the Six Months Ended

                   
   

6/30/2012

 

6/30/2011

     

6/30/2012

 

6/30/2011

                   
                                         

System-wide effective royalty rate

 

4.32%

 

4.33%

     

4.33%

 

4.34%

                   

 

                                 

CHOICE HOTELS INTERNATIONAL, INC. 

Exhibit 5

SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA

   

(UNAUDITED)

   
                                 
                                 
                                 
   

June 30, 2012

 

June 30, 2011

 

Variance

                                 
   

Hotels

 

Rooms

 

Hotels

 

Rooms

 

Hotels

 

Rooms

 

%

 

%

                                 

Comfort Inn

 

1,379

 

107,895

 

1,416

 

110,736

 

(37)

 

(2,841)

 

(2.6%)

 

(2.6%)

Comfort Suites

 

608

 

46,903

 

613

 

47,441

 

(5)

 

(538)

 

(0.8%)

 

(1.1%)

Sleep

 

391

 

28,327

 

394

 

28,625

 

(3)

 

(298)

 

(0.8%)

 

(1.0%)

Quality

 

1,082

 

93,655

 

1,027

 

89,571

 

55

 

4,084

 

5.4%

 

4.6%

Clarion

 

189

 

27,534

 

193

 

28,335

 

(4)

 

(801)

 

(2.1%)

 

(2.8%)

Econo Lodge

 

801

 

49,114

 

778

 

48,197

 

23

 

917

 

3.0%

 

1.9%

Rodeway

 

401

 

22,671

 

377

 

20,506

 

24

 

2,165

 

6.4%

 

10.6%

MainStay

 

40

 

3,083

 

39

 

3,007

 

1

 

76

 

2.6%

 

2.5%

Suburban

 

62

 

7,260

 

61

 

7,255

 

1

 

5

 

1.6%

 

0.1%

Ascend Collection

 

52

 

4,652

 

44

 

3,392

 

8

 

1,260

 

18.2%

 

37.1%

Cambria Suites

 

19

 

2,221

 

19

 

2,215

 

-

 

6

 

0.0%

 

0.3%

                                 

Domestic Franchises

 

5,024

 

393,315

 

4,961

 

389,280

 

63

 

4,035

 

1.3%

 

1.0%

                                 

International Franchises

 

1,175

 

104,522

 

1,156

 

102,086

 

19

 

2,436

 

1.6%

 

2.4%

                                 

Total Franchises

 

6,199

 

497,837

 

6,117

 

491,366

 

82

 

6,471

 

1.3%

 

1.3%

                                 

 

                                 

 

Exhibit 6

CHOICE HOTELS INTERNATIONAL, INC.

SUPPLEMENTAL INFORMATION BY BRAND

DEVELOPMENT RESULTS -- DOMESTIC NEW HOTEL CONTRACTS

(UNAUDITED)

                                     
                                     
                                     
                                     
   

For the Six Months Ended June 30, 2012

 

For the Six Months Ended June 30, 2011

 

% Change

                                     
   

New

         

New

         

New

       
   

Construction

 

Conversion

 

Total

 

Construction

 

Conversion

 

Total

 

Construction

 

Conversion

 

Total

                                     

Comfort Inn

6

 

12

 

18

 

5

 

18

 

23

 

20%

 

(33%)

 

(22%)

Comfort Suites

7

 

4

 

11

 

1

 

4

 

5

 

600%

 

0%

 

120%

Sleep

11

 

1

 

12

 

3

 

1

 

4

 

267%

 

0%

 

200%

Quality

-

 

63

 

63

 

-

 

35

 

35

 

NM

 

80%

 

80%

Clarion

-

 

7

 

7

 

-

 

8

 

8

 

NM

 

(13%)

 

(13%)

Econo Lodge

-

 

18

 

18

 

-

 

18

 

18

 

NM

 

0%

 

0%

Rodeway

-

 

31

 

31

 

-

 

18

 

18

 

NM

 

72%

 

72%

MainStay

1

 

1

 

2

 

1

 

3

 

4

 

0%

 

(67%)

 

(50%)

Suburban

-

 

1

 

1

 

2

 

1

 

3

 

(100%)

 

0%

 

(67%)

Ascend Collection

1

 

4

 

5

 

-

 

5

 

5

 

NM

 

(20%)

 

0%

Cambria Suites

2

 

-

 

2

 

2

 

-

 

2

 

0%

 

NM

 

0%

                                   

Total Domestic System

28

 

142

 

170

 

14

 

111

 

125

 

100%

 

28%

 

36%

                                   
                                   
                                   
                                   
                                   
 

For the Three Months Ended June 30, 2012

 

For the Three Months Ended June 30, 2011

 

% Change

                                   
 

New

         

New

         

New

       
 

Construction

 

Conversion

 

Total

 

Construction

 

Conversion

 

Total

 

Construction

 

Conversion

 

Total

                                   

Comfort Inn

5

 

4

 

9

 

3

 

11

 

14

 

67%

 

(64%)

 

(36%)

Comfort Suites

6

 

2

 

8

 

1

 

2

 

3

 

500%

 

0%

 

167%

Sleep

8

 

1

 

9

 

1

 

1

 

2

 

700%

 

0%

 

350%

Quality

-

 

36

 

36

 

-

 

11

 

11

 

NM

 

227%

 

227%

Clarion

-

 

5

 

5

 

-

 

3

 

3

 

NM

 

67%

 

67%

Econo Lodge

-

 

14

 

14

 

-

 

12

 

12

 

NM

 

17%

 

17%

Rodeway

-

 

19

 

19

 

-

 

13

 

13

 

NM

 

46%

 

46%

MainStay

1

 

1

 

2

 

-

 

3

 

3

 

NM

 

(67%)

 

(33%)

Suburban

-

 

1

 

1

 

2

 

1

 

3

 

(100%)

 

0%

 

(67%)

Ascend Collection

-

 

2

 

2

 

-

 

4

 

4

 

NM

 

(50%)

 

(50%)

Cambria Suites

1

 

-

 

1

 

1

 

-

 

1

 

0%

 

NM

 

0%

                                   

Total Domestic System

21

 

85

 

106

 

8

 

61

 

69

 

163%

 

39%

 

54%

                                   

 

                                           

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.