Press Releases

Choice Hotels International Reports A 38-Percent Increase In First Quarter Diluted Earnings Per Share
106 New Domestic Franchise Agreements Executed, a 51-percent increase
PR Newswire
ROCKVILLE, Md.

ROCKVILLE, Md., May 4, 2017 /PRNewswire/ -- Choice Hotels International, Inc. (NYSE: CHH), one of the world's largest hotel companies, today reported its results for the three months ended March 31, 2017. Net income for the first quarter of 2017 was $28.7 million or $0.51 per diluted share, compared with $21.2 million or $0.37 per diluted share for the first quarter of 2016. First quarter adjusted earnings before income taxes, depreciation and amortization (EBITDA) was $56.4 million, compared with $45.6 million in the prior year first quarter, a 24-percent increase.

"Choice Hotels continues to be a leader in the hospitality industry, representing 1 in 10 hotels in the U.S. The success of our first quarter financial and development results builds on our 2016 momentum," said Stephen P. Joyce, chief executive officer. "Our strategic focus to help increase franchisee profitability, grow our development pipeline, and strengthen our core business is reflected in our operating results, highlighted by our continued RevPAR growth and the 51-percent increase in new domestic franchise agreements from the first quarter 2016. More importantly, Choice is optimistic that these positive outcomes will continue for both our franchisees and shareholders."

Highlights of the company's first quarter 2017 results are as follows:

Overall Results

    --  Diluted earnings per share (EPS) for the first quarter totaled $0.51, an
        increase of 38 percent from the first quarter of the prior year.
    --  Net income totaled $28.7 million for the first quarter, an increase of
        36 percent from the comparable period of the prior year.
    --  Adjusted EBITDA from hotel franchising activities for the first quarter
        increased 15 percent from the prior year first quarter to $57.6 million.
    --  Adjusted hotel franchising margins for the first quarter increased 300
        basis points from the prior year first quarter to 64.6 percent.

Royalties

    --  Domestic royalty fees for first quarter totaled $64.5 million, an
        increase of 6.6 percent from the first quarter of the prior year.
    --  Domestic system-wide revenue per available room (RevPAR) increased 3.8
        percent for the first quarter. Occupancy and average daily rates
        increased 100 basis points and 1.9 percent, respectively in the first
        quarter from the same period of 2016.
    --  Domestic RevPAR performance for the first quarter of 2017 exceeded total
        industry results by 40 basis points and also exceeded growth reported by
        Smith Travel Research for the primary chain scale segments in which the
        company competes.
    --  The Comfort brands and Sleep Inn recorded 30 and 34 consecutive months
        of RevPAR index gains, respectively, compared to its focused
        competition.
    --  Effective royalty rate increased 17 basis points for the first quarter
        of 2017, compared to the same period of the prior year.
    --  Domestic franchised hotels, as of March 31, 2017, increased 1.3 percent
        from March 31, 2016. Excluding the impact of our Comfort transformation
        strategy, our domestic franchised hotels on March 31, 2017, increased
        3.0 percent from March 31, 2016.
    --  Domestic and international rooms, as of March 31, 2017, increased 0.9
        percent and 1.5 percent, respectively, from March 31, 2016.

Development

    --  New, approved franchised hotel development contracts totaled 106 in the
        first quarter, an increase of 51 percent from the comparable period of
        the prior year.
    --  New construction and conversion franchise agreements increased 153
        percent and 24 percent, respectively, in the first quarter of 2017,
        compared to the first quarter of the prior year.
    --  The Comfort brands and Sleep Inn represent nearly 70 percent of the
        company's new construction franchise agreements, and the number of
        Comfort new construction agreements nearly doubled from the comparable
        period of the prior year.
    --  The domestic new construction pipeline for the company's Sleep Inn brand
        as of March 31, 2017, totaled 114 hotels, a 50-percent increase from
        March 31, 2016.
    --  The company's total domestic pipeline of hotels awaiting conversion,
        under construction or approved for development, as of March 31, 2017,
        increased 24 percent from March 31, 2016.
    --  Domestic relicensing and contract renewal transactions totaled 116 for
        the three months ended March 31, 2017, an increase of 8 percent from the
        same period of 2016.

Use of Cash Flows

Dividends
During the three months ended March 31, 2017, the company paid cash dividends totaling approximately $12 million. Based on the current quarterly dividend rate of $0.215 per common share, the company expects to pay dividends of approximately $49 million during 2017.

Share Repurchases
The company did not repurchase shares of common stock under its share repurchase program during the three months ended March 31, 2017. The company currently has authorization to purchase up to 4.0 million additional shares under this program.

Hotel Development & Financing
Pursuant to its program to encourage acceleration of the growth of our upscale Cambria hotels & suites brand, the company advanced approximately $43 million in support of the brand's development during the three months ended March 31, 2017. The company also recycled approximately $1 million of prior investments in Cambria development projects, resulting in net advances of $42 million for the current year. Advances under this program are primarily in the form of joint venture investments, forgivable key money loans, senior mortgage loans, development loans, mezzanine lending, and through the operation of a land-banking program. On March 31, 2017, the company had approximately $244 million reflected in its consolidated balance sheet pursuant to these financial support activities. With respect to lending and joint venture investments, the company generally expects to recycle these loans and investments within a five-year period.

Outlook

The company's consolidated 2017 outlook reflects the following assumptions:

Consolidated Outlook

    --  Net income for full-year 2017 is expected to range between $157 million
        and $160 million.
    --  Adjusted EBITDA for full-year 2017 is expected to range between $292
        million and $297 million.
    --  The company's second-quarter 2017 diluted EPS is expected to range
        between $0.75 and $0.77.
    --  The company expects full-year 2017 diluted EPS to range between $2.78
        and $2.84.
    --  The effective tax rate is expected to be approximately 34 percent and 33
        percent for the second quarter and full-year 2017, respectively.
    --  Diluted EPS estimates are based on the current number of shares
        outstanding, and thus do not factor in any changes that may occur due to
        new equity grants or any further repurchases of common stock, under the
        company's share repurchase program.
    --  The EPS and consolidated Adjusted EBITDA estimates assume that we incur
        net reductions in Adjusted EBITDA related to non-hotel franchising
        activities at the midpoint of the range for these investments.

Hotel Franchising

    --  Adjusted EBITDA from hotel franchising activities for full-year 2017 is
        expected to range between $297 million and $302 million.
    --  Net domestic unit growth for 2017 is expected to range between
        approximately 2 percent and 3 percent.
    --  RevPAR is expected to increase between 2 percent and 3 percent for the
        second quarter and range between 3 percent and 4 percent for full-year
        2017.
    --  The effective royalty rate is expected to increase between 12 and 14
        basis points for full-year 2017 as compared to full-year 2016.

Non-Hotel Franchising Activities

    --  Net reductions in full-year 2017 Adjusted EBITDA, relating to our
        non-hotel franchising operations, which primarily relate to SkyTouch and
        vacation rental activities are expected to range between approximately
        $4 million and $6 million.

Conference Call
Choice will conduct a conference call on Thursday, May 4, 2017, at 10:00 a.m. ET to discuss the company's 2017 first quarter results. The dial-in number to listen to the call domestically is 1-855-638-5678 and the number for international participants is 1-920-663-6286. The conference call also will be webcast simultaneously via the company's website, www.choicehotels.com. Interested investors and other parties wishing to access the call via the webcast should go to the website and click on the Investor Info link. The Investor page will feature a conference call microphone icon to access the call.

The call will be recorded and available for replay beginning at 1:00 p.m. ET on Thursday, May 4, 2017, by calling 1-855-859-2056 (domestic) or 1-404-537-3406 (international) and entering access code 3091150. In addition, the call will be archived and available on choicehotels.com via the Investor Info link.

About Choice Hotels
Choice Hotels International, Inc. (NYSE: CHH) is one of the world's largest hotel companies. With approximately 6,500 hotels franchised in more than 40 countries and territories, Choice Hotels International represents more than 500,000 rooms around the globe. As of March 31, 2017, 795 hotels were in our development pipeline. Our company's Ascend Hotel Collection®, Cambria® hotels & suites, Comfort Inn®, Comfort Suites®, Sleep Inn®, Quality®, Clarion®, MainStay Suites®, Suburban Extended Stay Hotel®, Econo Lodge®, Rodeway Inn®, and Vacation Rentals by Choice Hotels(TM) brands provide a spectrum of lodging choices to meet guests' needs. With more than 30 million members and counting, our Choice Privileges® rewards program enhances every trip a guest takes, with benefits ranging from instant, every day rewards to exceptional experiences, starting right when they join. All hotels and vacation rentals are independently owned and operated. Visit us at www.choicehotels.com for more information.

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," "should," "will," "forecast," "plan," "project," "assume" or similar words of futurity identify such forward-looking statements. These forward-looking statements are based on management's current beliefs, assumptions and expectations regarding future events, which in turn are based on information currently available to management. Such statements may relate to projections of the company's revenue, earnings and other financial and operational measures, company debt levels, ability to repay outstanding indebtedness, payment of dividends, repurchases of common stock and future operations, among other matters. We caution you not to place undue reliance on any such forward-looking statements. Forward-looking statements do not guarantee future performance and involve known and unknown risks, uncertainties and other factors.

Several factors could cause actual results, performance or achievements of the company to differ materially from those expressed in or contemplated by the forward-looking statements. Such risks include, but are not limited to, changes to general, domestic and foreign economic conditions; foreign currency fluctuations; 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 marketing and reservations systems and other operating systems; our ability to grow our franchise system; exposure to risks related to development activities; fluctuations in the supply and demand for hotels rooms; our ability to realize anticipated benefits from acquired businesses; the level of acceptance of alternative growth strategies we may implement; operating risks associated with our international operations; the outcome of litigation; and our ability to manage our indebtedness. These and other risk factors are discussed in detail in the company's filings with the Securities and Exchange Commission including our annual reports on Form 10-K and our quarterly reports filed on Form 10-Q. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Statement Concerning Non-GAAP Financial Measurements Presented in this Press Release
Adjusted EBITDA, hotel franchising revenues, adjusted hotel franchising SG&A, Adjusted EBITDA from hotel franchising activities and adjusted hotel franchising margins are non-GAAP financial measurements. These measures should not be considered as an alternative to any measure of performance or liquidity as promulgated under or authorized by generally accepted accounting principles in the United States ("GAAP"), such as net 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 items to the most comparable GAAP financial measures. We discuss management's reasons for reporting these non-GAAP measures below.

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization: Adjusted EBITDA reflects net income excluding the impact of interest expense, interest income, provision for income taxes, depreciation and amortization, other (gains) and losses, equity in net income of unconsolidated affiliates and mark to market adjustments on non-qualified retirement plan investments. We consider adjusted EBITDA to be an indicator of operating performance because we use it to measure our ability to service debt, fund capital expenditures, and expand our business. We also use adjusted EBITDA, as do analysts, lenders, investors and others, to evaluate companies because it excludes certain items that can vary widely across different industries or among companies within the same industry. For example, interest expense can be dependent on a company's capital structure, debt levels and credit ratings. Accordingly, the impact of interest expense on earnings can vary significantly among companies. The tax positions of companies can also vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the jurisdictions in which they operate. As a result, effective tax rates and provision for income taxes can vary considerably among companies. Adjusted EBITDA also excludes depreciation and amortization because companies utilize productive assets of different ages and use different methods of both acquiring and depreciating productive assets. These differences can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies. Mark to market adjustments on non-qualified retirement plan investments recorded in SG&A are excluded from EBITDA as the company accounts for these investments in accordance with accounting for deferred compensation arrangements when investments are held in a rabbi trust and invested. Changes in the fair value of the investments are recognized as both compensation expense in SG&A and other gains and losses. As a result, the changes in the fair value of the investments do not have a material impact on the company's net income. These amounts are excluded from EBITDA as they can vary widely across reporting periods based on the performance of the investments and are not an indicator of the operating performance of the company.

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

© 2017 Choice Hotels International, Inc. All rights reserved.

 

 

 


    Choice Hotels International, Inc. and Subsidiaries                                                                                                                           Exhibit 1

    Consolidated Statements of Income

    (Unaudited)




                                                                                                                           Three Months Ended March 31,
                                                                                                                         ----------------------------

                                                                                                                                                                                           Variance

                                                                                                                                       2017                    2016 (1)       $                      %
                                                                                                                                       ----                     -------     ---                     ---

    (In thousands, except per share amounts)


    REVENUES:


    Royalty fees                                                                                                                    $68,989                     $64,859   $4,130                               6%

    Initial franchise and relicensing fees                                                                                            5,006                       5,156    (150)                            (3%)

    Procurement services                                                                                                              6,476                       5,796      680                              12%

    Marketing and reservation system                                                                                                109,475                     126,361 (16,886)                           (13%)

    Other                                                                                                                             7,952                       4,946    3,006                              61%
                                                                                                                                      -----                       -----    -----                              ---

          Total revenues                                                                                                            197,898                     207,118  (9,220)                            (4%)


    OPERATING EXPENSES:


    Selling, general and administrative                                                                                              32,846                      35,119  (2,273)                            (6%)

    Depreciation and amortization                                                                                                     3,070                       2,765      305                              11%

    Marketing and reservation system                                                                                                109,475                     126,361 (16,886)                           (13%)
                                                                                                                                    -------                     -------  -------                             ----

    Total operating expenses                                                                                                        145,391                     164,245 (18,854)                           (11%)


    Operating income                                                                                                                 52,507                      42,873    9,634                              22%


    OTHER INCOME AND EXPENSES, NET:

    Interest expense                                                                                                                 11,205                      11,092      113                               1%

    Interest income                                                                                                                 (1,264)                      (839)   (425)                             51%

    Other (gains) losses                                                                                                              (897)                         62    (959)                         (1547%)

    Equity in net (income) loss of affiliates                                                                                         2,080                       2,180    (100)                            (5%)

    Total other income and expenses, net                                                                                             11,124                      12,495  (1,371)                           (11%)
                                                                                                                                     ------                      ------   ------                             ----


    Income before income taxes                                                                                                       41,383                      30,378   11,005                              36%

    Income taxes                                                                                                                     12,639                       9,215    3,424                              37%
                                                                                                                                     ------                       -----    -----                              ---

    Net income                                                                                                                      $28,744                     $21,163   $7,581                              36%
                                                                                                                                    =======                     =======   ======                              ===



    Basic earnings per share                                                                                                          $0.51                       $0.38    $0.13                              34%
                                                                                                                                      =====                       =====    =====                              ===



    Diluted earnings per share                                                                                                        $0.51                       $0.37    $0.14                              38%
                                                                                                                                      =====                       =====    =====                              ===



    (1)Results for the three months ended March 31, 2016 reflect the adoption of Accounting Standards Update Compensation-Stock Compensation (Topic 718):

       Improvements to Employee Share-Based Payment Accounting ("ASU No. 2016-09") in the second quarter of 2016.  ASU 2016-09 requires companies

       to recognize excess tax benefits and deficiencies as income tax expense or benefit in the income statement.  Adoption of the standard required that the

       company retrospectively apply the requirement to the beginning of the year of adoption, January 1, 2016.  As a result, the company has reduced its

       previously reported income tax expense for the first quarter of 2016 by $1.6 million

 

 


    Choice Hotels International, Inc. and Subsidiaries                                     Exhibit 2

    Consolidated Balance Sheets



    (In thousands, except per share amounts)              March 31,           December 31,

                                                                         2017                    2016
                                                                         ----                    ----

                                                        (Unaudited)


    ASSETS


    Cash and cash equivalents                                        $187,472                $202,463

    Accounts receivable, net                                          117,878                 107,336

    Other current assets                                               37,512                  35,074
                                                                       ------                  ------

                                                                      342,862                 344,873

    Total current assets


    Fixed assets and intangibles, net                                 177,075                 178,704

    Notes receivable, net of allowances                               123,878                 110,608

    Investments in unconsolidated entities                            123,550                  94,839

    Investments, employee benefit plans, at fair value                 18,755                  16,975

    Other assets                                                      118,012                 106,469
                                                                      -------                 -------


                                                                     $904,132                $852,468

    Total assets
                                                                                                 ---




    LIABILITIES AND SHAREHOLDERS' DEFICIT


    Accounts payable                                                  $59,090                 $48,071

    Accrued expenses and other current liabilities                     67,933                  81,184

    Deferred revenue                                                  145,833                 133,218

    Current portion of long-term debt                                   1,225                   1,195
                                                                        -----                   -----

                                                                      274,081                 263,668

    Total current liabilities


    Long-term debt                                                    862,389                 839,409

    Deferred compensation & retirement plan obligations                23,044                  21,595

    Other liabilities                                                  37,105                  39,145
                                                                       ------                  ------


                                                                    1,196,619               1,163,817

    Total liabilities



                                                                    (292,487)              (311,349)

    Total shareholders' deficit



                                                                     $904,132                $852,468

    Total liabilities and shareholders' deficit
                                                                                                 ---

 

 


    Choice Hotels International, Inc. and Subsidiaries                                                                  Exhibit 3

    Consolidated Statements of Cash Flows

    (Unaudited)




    (In thousands)                                                                         Three Months Ended March 31,
                                                                                          ----------------------------


                                                                                                         2017             2016 (1)
                                                                                                         ----              -------

    CASH FLOWS FROM OPERATING ACTIVITIES:


    Net income                                                                                        $28,744              $21,163


    Adjustments to reconcile net income to net cash provided (used)

     by operating activities:

      Depreciation and amortization                                                                     3,070                2,765

      (Gain) loss on disposal of assets                                                                     -                   9

      Provision for bad debts, net                                                                        561                  655

      Non-cash stock compensation and other charges                                                     3,681                3,354

      Non-cash interest and other (income) loss                                                         (301)                 667

      Deferred income taxes                                                                           (1,900)               6,198

      Equity in net losses from unconsolidated joint ventures less distributions received               2,386                2,471


    Changes in assets and liabilities:

      Receivables                                                                                    (11,365)            (14,473)

      Advances to/from marketing and reservation activities, net                                        (216)            (39,804)

      Forgivable notes receivable, net                                                                (4,483)             (6,464)

      Accounts payable                                                                                  9,203              (3,980)

      Accrued expenses and other current liabilities                                                 (25,048)            (24,521)

      Income taxes payable/receivable                                                                  13,012              (1,788)

      Deferred revenue                                                                                 12,579               40,458

      Other assets                                                                                    (4,958)             (7,238)

      Other liabilities                                                                                 (751)               (842)
                                                                                                         ----                 ----


     NET CASH PROVIDED BY (USED) IN OPERATING ACTIVITIES                                               24,214             (21,370)
                                                                                                       ------              -------


    CASH FLOWS FROM INVESTING ACTIVITIES:


    Investment in property and equipment                                                              (4,718)             (5,306)

    Investment in intangible assets                                                                   (2,088)               (162)

    Proceeds from sales of assets                                                                           -               1,700

    Acquisitions of real estate                                                                             -            (25,389)

    Contributions to equity method investments                                                       (31,610)             (4,293)

    Distributions from equity method investments                                                          510                   67

    Purchases of investments, employee benefit plans                                                  (1,424)               (896)

    Proceeds from sales of investments, employee benefit plans                                            843                  363

    Issuance of mezzanine and other notes receivable                                                  (9,863)             (7,487)

    Collections of mezzanine and other notes receivable                                                   522                  109

    Other items, net                                                                                      (4)                  26
                                                                                                          ---                  ---


     NET CASH USED IN INVESTING ACTIVITIES                                                           (47,832)            (41,268)
                                                                                                      -------              -------


    CASH FLOWS FROM FINANCING ACTIVITIES:


    Net borrowings pursuant to revolving credit facilities                                             22,800               79,267

    Principal payments on long-term debt                                                                (153)               (318)

    Purchases of treasury stock                                                                       (7,271)             (8,857)

    Dividends paid                                                                                   (12,139)            (11,612)

    Proceeds from exercise of stock options                                                             4,963                4,137
                                                                                                        -----                -----


     NET CASH PROVIDED BY FINANCING ACTIVITIES                                                          8,200               62,617
                                                                                                        -----               ------


    Net change in cash and cash equivalents                                                          (15,418)                (21)

    Effect of foreign exchange rate changes on cash and cash equivalents                                  427                  652

    Cash and cash equivalents at beginning of period                                                  202,463              193,441
                                                                                                      -------              -------


    CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                       $187,472             $194,072
                                                                                                     ========             ========



    (1) Results for the three months ended March 31, 2016 reflect the adoption of ASU No. 2016-09, which requires companies to recognize
        excess tax benefits related to the exercise of share based awards as operating activities in the statement of cash flows.
        The company adopted this ASU in the second quarter of 2016 and elected to apply the ASU retrospectively. As a result,
        excess tax benefits totaling $1.6 million for the three months ended March 31, 2016 have been reclassified from cash flows from
        financing activities to cash flows from operating activities

 

 


                                                                                                                                                                                                                          CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES                                                                                                  Exhibit 4

                                                                                                                                                                                                                                                SUPPLEMENTAL OPERATING INFORMATION

                                                                                                                                                                                                                                                      DOMESTIC HOTEL SYSTEM

                                                                                                                                                                                                                                                           (UNAUDITED)





                                                                                                  For the Three Months Ended March 31, 2017                                           For the Three Months Ended March 31, 2016                                      Change
                                                                                                  -----------------------------------------                                           -----------------------------------------                                      ------


                                                                                                           Average Daily                                                                                                                                              Average Daily                                          Average Daily

                                                                                                               Rate                                             Occupancy                                          RevPAR                                                 Rate              Occupancy        RevPAR               Rate              Occupancy                     RevPAR
                                                                                                               ----                                             ---------                                          ------                                                 ----              ---------        ------               ----              ---------                     ------


    Comfort Inn                                                                                                                $87.03                                           58.5%                                              $50.90                                           $85.39            57.7%         $49.27                   1.9%                80    bps                     3.3%

    Comfort Suites                                                                                                              93.40                                           65.1%                                               60.84                                            92.40            64.1%          59.26                   1.1%               100    bps                     2.7%

    Sleep                                                                                                                       79.20                                           60.0%                                               47.54                                            77.71            58.7%          45.61                   1.9%               130    bps                     4.2%

    Quality                                                                                                                     73.76                                           53.1%                                               39.20                                            72.23            52.2%          37.72                   2.1%                90    bps                     3.9%

    Clarion                                                                                                                     78.05                                           53.6%                                               41.83                                            75.90            50.1%          38.06                   2.8%               350    bps                     9.9%

    Econo Lodge                                                                                                                 57.33                                           48.6%                                               27.84                                            55.99            47.3%          26.46                   2.4%               130    bps                     5.2%

    Rodeway                                                                                                                     59.63                                           51.1%                                               30.49                                            57.77            51.0%          29.47                   3.2%                10    bps                     3.5%

    MainStay                                                                                                                    71.66                                           61.7%                                               44.21                                            72.91            57.9%          42.23                 (1.7%)               380    bps                     4.7%

    Suburban                                                                                                                    51.01                                           74.2%                                               37.82                                            48.28            73.0%          35.26                   5.7%               120    bps                     7.3%

    Cambria hotel & suites                                                                                                     122.24                                           68.1%                                               83.26                                     NA                  NA             NA                  NA                   NA                             NA

    Ascend Hotel Collection                                                                                                    117.29                                           51.3%                                               60.21                                           115.55            53.7%          62.01                   1.5%             (240)   bps                   (2.9%)
                                                                                                                               ------                                            ----                                                -----                                           ------             ----           -----                    ---               ----    ---                    -----


    Total  (1)                                                                                                                 $78.41                                           56.1%                                              $43.98                                           $76.92            55.1%         $42.39                   1.9%               100    bps                     3.8%
                                                                                                                               ======                                            ====                                               ======                                           ======             ====          ======                    ===                ===    ===                      ===






                                                                                                       For the Quarter Ended
                                                                                                       ---------------------

                                                                                                                            3/31/2017                                      3/31/2016


    System-wide effective royalty rate                                                                                          4.55%                                          4.38%          (1)




    (1)Totals for the three months ended March 31, 2016 have been revised from previous disclosures to include the operating statistics for the Cambria hotel & suites brand

 

 


                                                                     CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES                                                               Exhibit 5

                                                                                        SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA

                                                                                                      (UNAUDITED)




                             March 31, 2017    March 31, 2016                                 Variance
                             --------------    --------------                               --------


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


    Comfort Inn                          1,103                85,583                              1,143                                88,294        (40)       (2,711)      (3.5%)                 (3.1%)

    Comfort Suites                         566                43,740                                566                                43,669           -            71         0.0%                   0.2%

    Sleep                                  382                27,301                                379                                27,139           3            162         0.8%                   0.6%

    Quality                              1,457               114,837                              1,394                               111,124          63          3,713         4.5%                   3.3%

    Clarion                                161                22,159                                172                                23,893        (11)       (1,734)      (6.4%)                 (7.3%)

    Econo Lodge                            845                52,113                                853                                52,784         (8)         (671)      (0.9%)                 (1.3%)

    Rodeway                                558                32,103                                519                                28,931          39          3,172         7.5%                  11.0%

    MainStay                                57                 4,148                                 54                                 4,019           3            129         5.6%                   3.2%

    Suburban                                59                 6,598                                 59                                 6,634           -          (36)        0.0%                 (0.5%)

    Cambria hotel & suites                  28                 3,667                                 25                                 3,113           3            554        12.0%                  17.8%

    Ascend Hotel Collection                127                10,451                                112                                 9,378          15          1,073        13.4%                  11.4%
                                           ---                ------                                ---                                 -----         ---          -----         ----                    ----


    Domestic Franchises                  5,343               402,700                              5,276                               398,978          67          3,722         1.3%                   0.9%


    International Franchises             1,151               112,672                              1,169                               110,984        (18)         1,688       (1.5%)                   1.5%
                                         -----               -------                              -----                               -------         ---          -----        -----                     ---


    Total Franchises                     6,494               515,372                              6,445                               509,962          49          5,410         0.8%                   1.1%
                                         =====               =======                              =====                               =======         ===          =====          ===                     ===

 

 


                                                                                                             CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES                                                                                          Exhibit 6

                                                                                                                                   SUPPLEMENTAL INFORMATION BY BRAND

                                                                                                                          DEVELOPMENT RESULTS -- DOMESTIC NEW HOTEL CONTRACTS

                                                                                                                                              (UNAUDITED)





                            For the Three Months Ended March 31, 2017  For the Three Months Ended March 31,
                                                                                       2016                             % Change
                            ----------------------------------------- -------------------------------------             --------


                                                New                                                                                                          New                                                     New

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


    Comfort Inn                                                     7                                     10                  17                                                6                4           10                  17%                150%                     70%

    Comfort Suites                                                  8                                      -                  8                                                2                -           2                 300%           NM                           300%

    Sleep                                                          11                                      2                  13                                                2                -           2                 450%           NM                           550%

    Quality                                                         1                                     21                  22                                                -              23           23            NM                       (9%)                    (4%)

    Clarion                                                         -                                     3                   3                                                1                3            4               (100%)                  0%                   (25%)

    Econo Lodge                                                     -                                     7                   7                                                -              14           14            NM                      (50%)                   (50%)

    Rodeway                                                         -                                    21                  21                                                -              10           10            NM                       110%                    110%

    MainStay                                                        9                                      -                  9                                                1                -           1                 800%           NM                           800%

    Suburban                                                        -                                     -                  -                                               -               -           -           NM                  NM                          NM

    Ascend Hotel Collection                                         1                                      4                   5                                                1                1            2                   0%                300%                    150%

    Cambria hotel & suites                                          1                                      -                  1                                                2                -           2                (50%)           NM                          (50%)
                                                                  ---                                    ---                ---                                              ---              ---         ---                 ----           ---                           ----


    Total Domestic System                                          38                                     68                 106                                               15               55           70                 153%                 24%                     51%
                                                                  ===                                    ===                 ===                                              ===              ===          ===                  ===                  ===                      ===

 

 


                                                                                                                                                              CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES                                                                                                             Exhibit 7

                                                                                                                                                     DOMESTIC PIPELINE OF HOTELS UNDER CONSTRUCTION, AWAITING CONVERSION OR APPROVED FOR DEVELOPMENT

                                                                                                                                                                                               (UNAUDITED)


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



                                                                                                                                                                                                                                                                      Variance
                                                                                                                                                                                                                                                                      --------

                                                                                         March 31, 2017            March 31, 2016

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

                                                                                           Conversion                    New            Total                       Conversion                                        New                            Total      Units            %            Units        %          Units            %
                                                                                                                    Construction                                                                                 Construction
                                                                                                                    ------------                                                                                 ------------


    Comfort Inn                                                                                               40                   96            136                                    35                                               84                 119                5          14%          12        14%           17             14%

    Comfort Suites                                                                                             3                  117            120                                     3                                               92                  95                -          0%          25        27%           25             26%

    Sleep Inn                                                                                                  2                  114            116                                     -                                              76                  76                2      NM               38        50%           40             53%

    Quality                                                                                                   51                    6             57                                    47                                                5                  52                4           9%           1        20%            5             10%

    Clarion                                                                                                   17                    4             21                                     7                                                3                  10               10         143%           1        33%           11            110%

    Econo Lodge                                                                                               25                    4             29                                    26                                                4                  30              (1)        (4%)           -        0%          (1)           (3%)

    Rodeway                                                                                                   38                    1             39                                    40                                                2                  42              (2)        (5%)         (1)     (50%)          (3)           (7%)

    MainStay                                                                                                   -                  80             80                                     -                                              55                  55                -     NM               25        45%           25             45%

    Suburban                                                                                                   4                    4              8                                     4                                                8                  12                -          0%         (4)     (50%)          (4)          (33%)

    Ascend Hotel Collection                                                                                   34                   23             57                                    27                                               20                  47                7          26%           3        15%           10             21%

    Cambria hotel & suites                                                                                     5                   56             61                                     5                                               39                  44                -          0%          17        44%           17             39%
                                                                                                             ---                  ---            ---                                   ---                                              ---                 ---              ---         ---          ---        ---           ---             ---


                                                                                                             219                  505            724                                   194                                              388                 582               25          13%         117        30%          142             24%
                                                                                                             ===                  ===            ===                                   ===                                              ===                 ===              ===          ===          ===        ===           ===             ===

 

 


                                                                           CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES                              Exhibit 8



                                                                               SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION



                                                                                               (UNAUDITED)



    HOTEL FRANCHISING REVENUES AND ADJUSTED HOTEL FRANCHISING MARGINS


    (dollar amounts in thousands)                                                                                             Three Months Ended March 31,
                                                                                                                              ----------------------------


                                                                                                                                             2017                2016
                                                                                                                                             ----                ----



    Hotel Franchising Revenues:


                                                                                                                                         $197,898            $207,118

    Total Revenues



    Adjustments:

    Marketing and reservation system revenues                                                                                           (109,475)          (126,361)

    Non-hotel franchising activities                                                                                                      (2,555)            (2,029)

                                                                                                                                          $85,868             $78,728

    Hotel Franchising Revenues





    Adjusted Hotel Franchising Margins:




    Operating Margin:


                                                                                                                                         $197,898            $207,118

    Total Revenues

                                                                                                                                          $52,507             $42,873

    Operating Income

    Operating Margin                                                                                                                        26.5%              20.7%
                                                                                                                                             ----                ----




    Adjusted Hotel Franchising Margin:


                                                                                                                                          $85,868             $78,728

    Hotel Franchising Revenues


                                                                                                                                          $52,507             $42,873

    Operating Income

                                                                                                                                             $851               $(60)

    Mark to market adjustments on non-qualified retirement plan investments

                                                                                                                                            2,105               5,656

    Non-hotel franchising activities operating loss

                                                                                                                                          $55,463             $48,469

    Adjusted Hotel Franchising Operating Income



                                                                                                                                            64.6%              61.6%

    Adjusted Hotel Franchising Margins
                                                                                                                                                                 ---






    ADJUSTED HOTEL FRANCHISING SELLING, GENERAL AND ADMINISTRATION EXPENSES


    (dollar amounts in thousands)                                                                                             Three Months Ended March 31,
                                                                                                                              ----------------------------


                                                                                                                                             2017                2016
                                                                                                                                             ----                ----


                                                                                                                                          $32,846             $35,119

    Total Selling, General and Administrative Expenses

                                                                                                                                           $(851)                $60

    Mark to market adjustments on non-qualified retirement plan investments

                                                                                                                                          (3,680)            (6,670)

    Non-hotel franchising activities

                                                                                                                                          $28,315             $28,509

    Adjusted Hotel Franchising Selling, General and Administration Expenses







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


    (dollar amounts in thousands)

                                                                                                                              Three Months Ended March 31,
                                                                                                                              ----------------------------


                                                                                                                                             2017                2016
                                                                                                                                             ----                ----


    Net income                                                                                                                            $28,744             $21,163

                                                                                                                                           12,639               9,215

    Income taxes

                                                                                                                                           11,205              11,092

    Interest expense

                                                                                                                                          (1,264)              (839)

    Interest income

                                                                                                                                            (897)                 62

    Other (gains) losses

                                                                                                                                            2,080               2,180

    Equity in net (income) loss of affiliates

                                                                                                                                            3,070               2,765

    Depreciation and amortization

                                                                                                                                              851                (60)

    Mark to market adjustments on non-qualified retirement plan investments
                                                                                                                                                                 ---

    Adjusted EBITDA                                                                                                                       $56,428             $45,578
                                                                                                                                          =======             =======


    Hotel franchising                                                                                                                     $57,553             $50,219

    Non-hotel franchising activities                                                                                                      (1,125)            (4,641)

                                                                                                                                          $56,428             $45,578
                                                                                                                                          =======             =======





    ADJUSTED EBITDA FULL YEAR FORECAST


    (dollar amounts in thousands)

                                                                                                                                          Range
                                                                                                                                          -----

                                                                                                                                Estimated Adjusted EBITDA

                                                                                                                                    Fiscal Year 2017
                                                                                                                                    ----------------


    Net income                                                                                                                           $157,100            $160,500

                                                                                                                                           77,400              79,000

    Income taxes

                                                                                                                                           47,300              47,300

    Interest expense

                                                                                                                                          (4,500)            (4,500)

    Interest income

                                                                                                                                                -                  -

    Gain on sale of assets

                                                                                                                                            (850)              (850)

    Other gains

                                                                                                                                            1,600               1,600

    Equity in net loss of affiliates

                                                                                                                                           13,100              13,100

    Depreciation and amortization

                                                                                                                                              850                 850

    Mark to market adjustments on non-qualified retirement plan investments

    Adjusted EBITDA                                                                                                                      $292,000            $297,000
                                                                                                                                         ========            ========


    Hotel franchising                                                                                                                    $297,000            $302,000

    Non-hotel franchising activities                                                                                                      (5,000)            (5,000)

                                                                                                                                         $292,000            $297,000
                                                                                                                                         ========            ========

 

 

 

SOURCE Choice Hotels International, Inc.

Photo:https://mma.prnewswire.com/media/324540/choice_hotels_international_logo.jpg
http://photoarchive.ap.org/

 

SOURCE: Choice Hotels International, Inc.

 

Choice Hotels International Reports A 38-Percent Increase In First Quarter Diluted Earnings Per Share

106 New Domestic Franchise Agreements Executed, a 51-percent increase

PR Newswire

ROCKVILLE, Md., May 4, 2017 /PRNewswire/ -- Choice Hotels International, Inc. (NYSE: CHH), one of the world's largest hotel companies, today reported its results for the three months ended March 31, 2017. Net income for the first quarter of 2017 was $28.7 million or $0.51 per diluted share, compared with $21.2 million or $0.37 per diluted share for the first quarter of 2016.  First quarter adjusted earnings before income taxes, depreciation and amortization (EBITDA) was $56.4 million, compared with $45.6 million in the prior year first quarter, a 24-percent increase.

"Choice Hotels continues to be a leader in the hospitality industry, representing 1 in 10 hotels in the U.S. The success of our first quarter financial and development results builds on our 2016 momentum," said Stephen P. Joyce, chief executive officer.  "Our strategic focus to help increase franchisee profitability, grow our development pipeline, and strengthen our core business is reflected in our operating results, highlighted by our continued RevPAR growth and the 51-percent increase in new domestic franchise agreements from the first quarter 2016. More importantly, Choice is optimistic that these positive outcomes will continue for both our franchisees and shareholders."

Highlights of the company's first quarter 2017 results are as follows:

Overall Results

  • Diluted earnings per share (EPS) for the first quarter totaled $0.51, an increase of 38 percent from the first quarter of the prior year.
  • Net income totaled $28.7 million for the first quarter, an increase of 36 percent from the comparable period of the prior year.
  • Adjusted EBITDA from hotel franchising activities for the first quarter increased 15 percent from the prior year first quarter to $57.6 million.
  • Adjusted hotel franchising margins for the first quarter increased 300 basis points from the prior year first quarter to 64.6 percent.

Royalties

  • Domestic royalty fees for first quarter totaled $64.5 million, an increase of 6.6 percent from the first quarter of the prior year.
  • Domestic system-wide revenue per available room (RevPAR) increased 3.8 percent for the first quarter. Occupancy and average daily rates increased 100 basis points and 1.9 percent, respectively in the first quarter from the same period of 2016.
  • Domestic RevPAR performance for the first quarter of 2017 exceeded total industry results by 40 basis points and also exceeded growth reported by Smith Travel Research for the primary chain scale segments in which the company competes.
  • The Comfort brands and Sleep Inn recorded 30 and 34 consecutive months of RevPAR index gains, respectively, compared to its focused competition.
  • Effective royalty rate increased 17 basis points for the first quarter of 2017, compared to the same period of the prior year.
  • Domestic franchised hotels, as of March 31, 2017, increased 1.3 percent from March 31, 2016. Excluding the impact of our Comfort transformation strategy, our domestic franchised hotels on March 31, 2017, increased 3.0 percent from March 31, 2016.
  • Domestic and international rooms, as of March 31, 2017, increased 0.9 percent and 1.5 percent, respectively, from March 31, 2016.

Development

  • New, approved franchised hotel development contracts totaled 106 in the first quarter, an increase of 51 percent from the comparable period of the prior year.
  • New construction and conversion franchise agreements increased 153 percent and 24 percent, respectively, in the first quarter of 2017, compared to the first quarter of the prior year.
  • The Comfort brands and Sleep Inn represent nearly 70 percent of the company's new construction franchise agreements, and the number of Comfort new construction agreements nearly doubled from the comparable period of the prior year.
  • The domestic new construction pipeline for the company's Sleep Inn brand as of March 31, 2017, totaled 114 hotels, a 50-percent increase from March 31, 2016.
  • The company's total domestic pipeline of hotels awaiting conversion, under construction or approved for development, as of March 31, 2017, increased 24 percent from March 31, 2016.
  • Domestic relicensing and contract renewal transactions totaled 116 for the three months ended March 31, 2017, an increase of 8 percent from the same period of 2016.

Use of Cash Flows

Dividends
During the three months ended March 31, 2017, the company paid cash dividends totaling approximately $12 million. Based on the current quarterly dividend rate of $0.215 per common share, the company expects to pay dividends of approximately $49 million during 2017.

Share Repurchases
The company did not repurchase shares of common stock under its share repurchase program during the three months ended March 31, 2017. The company currently has authorization to purchase up to 4.0 million additional shares under this program. 

Hotel Development & Financing
Pursuant to its program to encourage acceleration of the growth of our upscale Cambria hotels & suites brand, the company advanced approximately $43 million in support of the brand's development during the three months ended March 31, 2017. The company also recycled approximately $1 million of prior investments in Cambria development projects, resulting in net advances of $42 million for the current year. Advances under this program are primarily in the form of joint venture investments, forgivable key money loans, senior mortgage loans, development loans, mezzanine lending, and through the operation of a land-banking program.  On March 31, 2017, the company had approximately $244 million reflected in its consolidated balance sheet pursuant to these financial support activities. With respect to lending and joint venture investments, the company generally expects to recycle these loans and investments within a five-year period.

Outlook

The company's consolidated 2017 outlook reflects the following assumptions:

Consolidated Outlook

  • Net income for full-year 2017 is expected to range between $157 million and $160 million.
  • Adjusted EBITDA for full-year 2017 is expected to range between $292 million and $297 million.
  • The company's second-quarter 2017 diluted EPS is expected to range between $0.75 and $0.77.
  • The company expects full-year 2017 diluted EPS to range between $2.78 and $2.84.
  • The effective tax rate is expected to be approximately 34 percent and 33 percent for the second quarter and full-year 2017, respectively.
  • Diluted EPS estimates are based on the current number of shares outstanding, and thus do not factor in any changes that may occur due to new equity grants or any further repurchases of common stock, under the company's share repurchase program.
  • The EPS and consolidated Adjusted EBITDA estimates assume that we incur net reductions in Adjusted EBITDA related to non-hotel franchising activities at the midpoint of the range for these investments.

Hotel Franchising

  • Adjusted EBITDA from hotel franchising activities for full-year 2017 is expected to range between $297 million and $302 million.
  • Net domestic unit growth for 2017 is expected to range between approximately 2 percent and 3 percent.
  • RevPAR is expected to increase between 2 percent and 3 percent for the second quarter and range between 3 percent and 4 percent for full-year 2017.
  • The effective royalty rate is expected to increase between 12 and 14 basis points for full-year 2017 as compared to full-year 2016.

Non-Hotel Franchising Activities

  • Net reductions in full-year 2017 Adjusted EBITDA, relating to our non-hotel franchising operations, which primarily relate to SkyTouch and vacation rental activities are expected to range between approximately $4 million and $6 million.

Conference Call
Choice will conduct a conference call on Thursday, May 4, 2017, at 10:00 a.m. ET to discuss the company's 2017 first quarter results. The dial-in number to listen to the call domestically is 1-855-638-5678 and the number for international participants is 1-920-663-6286.  The conference call also will be webcast simultaneously via the company's website, www.choicehotels.com.  Interested investors and other parties wishing to access the call via the webcast should go to the website and click on the Investor Info link.  The Investor page will feature a conference call microphone icon to access the call.

The call will be recorded and available for replay beginning at 1:00 p.m. ET on Thursday, May 4, 2017, by calling 1-855-859-2056 (domestic) or 1-404-537-3406 (international) and entering access code 3091150. In addition, the call will be archived and available on choicehotels.com via the Investor Info link.

About Choice Hotels
Choice Hotels International, Inc. (NYSE: CHH) is one of the world's largest hotel companies. With approximately 6,500 hotels franchised in more than 40 countries and territories, Choice Hotels International represents more than 500,000 rooms around the globe.  As of March 31, 2017, 795 hotels were in our development pipeline. Our company's Ascend Hotel Collection®, Cambria® hotels & suites, Comfort Inn®, Comfort Suites®, Sleep Inn®, Quality®, Clarion®, MainStay Suites®, Suburban Extended Stay Hotel®, Econo Lodge®, Rodeway Inn®, and Vacation Rentals by Choice Hotels brands provide a spectrum of lodging choices to meet guests' needs. With more than 30 million members and counting, our Choice Privileges® rewards program enhances every trip a guest takes, with benefits ranging from instant, every day rewards to exceptional experiences, starting right when they join.  All hotels and vacation rentals are independently owned and operated. Visit us at www.choicehotels.com for more information.

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," "should," "will," "forecast," "plan," "project," "assume" or similar words of futurity identify such forward-looking statements.  These forward-looking statements are based on management's current beliefs, assumptions and expectations regarding future events, which in turn are based on information currently available to management.  Such statements may relate to projections of the company's revenue, earnings and other financial and operational measures, company debt levels, ability to repay outstanding indebtedness, payment of dividends, repurchases of common stock and future operations, among other matters.   We caution you not to place undue reliance on any such forward-looking statements.  Forward-looking statements do not guarantee future performance and involve known and unknown risks, uncertainties and other factors.

Several factors could cause actual results, performance or achievements of the company to differ materially from those expressed in or contemplated by the forward-looking statements.  Such risks include, but are not limited to, changes to general, domestic and foreign economic conditions; foreign currency fluctuations; 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 marketing and reservations systems and other operating systems; our ability to grow our franchise system; exposure to risks related to development activities; fluctuations in the supply and demand for hotels rooms; our ability to realize anticipated benefits from acquired businesses; the level of acceptance of alternative growth strategies we may implement; operating risks associated with our international operations; the outcome of litigation; and our ability to manage our indebtedness.  These and other risk factors are discussed in detail in the company's filings with the Securities and Exchange Commission including our annual reports on Form 10-K and our quarterly reports filed on Form 10-Q.  We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Statement Concerning Non-GAAP Financial Measurements Presented in this Press Release
Adjusted EBITDA, hotel franchising revenues, adjusted hotel franchising SG&A, Adjusted EBITDA from hotel franchising activities and adjusted hotel franchising margins are non-GAAP financial measurements.  These measures should not be considered as an alternative to any measure of performance or liquidity as promulgated under or authorized by generally accepted accounting principles in the United States ("GAAP"), such as net 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 items to the most comparable GAAP financial measures. We discuss management's reasons for reporting these non-GAAP measures below.

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization: Adjusted EBITDA reflects net income excluding the impact of interest expense, interest income, provision for income taxes, depreciation and amortization, other (gains) and losses, equity in net income of unconsolidated affiliates and mark to market adjustments on non-qualified retirement plan investments. We consider adjusted EBITDA to be an indicator of operating performance because we use it to measure our ability to service debt, fund capital expenditures, and expand our business. We also use adjusted EBITDA, as do analysts, lenders, investors and others, to evaluate companies because it excludes certain items that can vary widely across different industries or among companies within the same industry. For example, interest expense can be dependent on a company's capital structure, debt levels and credit ratings. Accordingly, the impact of interest expense on earnings can vary significantly among companies. The tax positions of companies can also vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the jurisdictions in which they operate. As a result, effective tax rates and provision for income taxes can vary considerably among companies. Adjusted EBITDA also excludes depreciation and amortization because companies utilize productive assets of different ages and use different methods of both acquiring and depreciating productive assets. These differences can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies. Mark to market adjustments on non-qualified retirement plan investments recorded in SG&A are excluded from EBITDA as the company accounts for these investments in accordance with accounting for deferred compensation arrangements when investments are held in a rabbi trust and invested.  Changes in the fair value of the investments are recognized as both compensation expense in SG&A and other gains and losses.  As a result, the changes in the fair value of the investments do not have a material impact on the company's net income. These amounts are excluded from EBITDA as they can vary widely across reporting periods based on the performance of the investments and are not an indicator of the operating performance of the company.

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

© 2017 Choice Hotels International, Inc. All rights reserved.

 

 

 

Choice Hotels International, Inc. and Subsidiaries

Exhibit 1

Consolidated Statements of Income

(Unaudited)

 
 
 
 

Three Months Ended March 31,

         

Variance

 

2017

 

2016 (1)

 

$

 

%

(In thousands, except per share amounts)

             
               

REVENUES:

             
               

Royalty fees

$              68,989

 

$              64,859

 

$     4,130

 

6%

Initial franchise and relicensing fees

5,006

 

5,156

 

(150)

 

(3%)

Procurement services

6,476

 

5,796

 

680

 

12%

Marketing and reservation system

109,475

 

126,361

 

(16,886)

 

(13%)

Other

7,952

 

4,946

 

3,006

 

61%

      Total revenues

197,898

 

207,118

 

(9,220)

 

(4%)

               

OPERATING EXPENSES:

             
               

Selling, general and administrative

32,846

 

35,119

 

(2,273)

 

(6%)

Depreciation and amortization

3,070

 

2,765

 

305

 

11%

Marketing and reservation system

109,475

 

126,361

 

(16,886)

 

(13%)

Total operating expenses

145,391

 

164,245

 

(18,854)

 

(11%)

               

Operating income

52,507

 

42,873

 

9,634

 

22%

               

OTHER INCOME AND EXPENSES, NET:

             

Interest expense

11,205

 

11,092

 

113

 

1%

Interest income

(1,264)

 

(839)

 

(425)

 

51%

Other (gains) losses

(897)

 

62

 

(959)

 

(1547%)

Equity in net (income) loss of affiliates

2,080

 

2,180

 

(100)

 

(5%)

Total other income and expenses, net

11,124

 

12,495

 

(1,371)

 

(11%)

               

Income before income taxes

41,383

 

30,378

 

11,005

 

36%

Income taxes

12,639

 

9,215

 

3,424

 

37%

Net income

$              28,744

 

$              21,163

 

$     7,581

 

36%

               
               

Basic earnings per share

$                  0.51

 

$                  0.38

 

$      0.13

 

34%

               
               

Diluted earnings per share

$                  0.51

 

$                  0.37

 

$      0.14

 

38%

               
               

(1)Results for the three months ended March 31, 2016 reflect the adoption of Accounting Standards Update Compensation-Stock Compensation (Topic 718):

   Improvements to Employee Share-Based Payment Accounting ("ASU No. 2016-09") in the second quarter of 2016.  ASU 2016-09 requires companies

   to recognize excess tax benefits and deficiencies as income tax expense or benefit in the income statement.  Adoption of the standard required that the

   company retrospectively apply the requirement to the beginning of the year of adoption, January 1, 2016.  As a result, the company has reduced its

   previously reported income tax expense for the first quarter of 2016 by $1.6 million

 

 

Choice Hotels International, Inc. and Subsidiaries

Exhibit 2

Consolidated Balance Sheets

 
 

(In thousands, except per share amounts)

 March 31, 

 

 December 31, 

 

2017

 

2016

 

(Unaudited)

   
       

ASSETS

     
       

Cash and cash equivalents

$           187,472

 

$         202,463

Accounts receivable, net

117,878

 

107,336

Other current assets

37,512

 

35,074

 

Total current assets

342,862

 

344,873

       

Fixed assets and intangibles, net

177,075

 

178,704

Notes receivable, net of allowances

123,878

 

110,608

Investments in unconsolidated entities

123,550

 

94,839

Investments, employee benefit plans, at fair value

18,755

 

16,975

Other assets

118,012

 

106,469

       

 

Total assets

$           904,132

 

$         852,468

       
       
       

LIABILITIES AND SHAREHOLDERS' DEFICIT

     
       

Accounts payable 

$              59,090

 

$            48,071

Accrued expenses and other current liabilities

67,933

 

81,184

Deferred revenue

145,833

 

133,218

Current portion of long-term debt

1,225

 

1,195

 

Total current liabilities

274,081

 

263,668

       

Long-term debt

862,389

 

839,409

Deferred compensation & retirement plan obligations  

23,044

 

21,595

Other liabilities

37,105

 

39,145

       

 

Total liabilities

1,196,619

 

1,163,817

       

 

Total shareholders' deficit

(292,487)

 

(311,349)

       

 

Total liabilities and shareholders' deficit

$           904,132

 

$         852,468

 

 

Choice Hotels International, Inc. and Subsidiaries

Exhibit 3

Consolidated Statements of Cash Flows

(Unaudited)

 
 
 

(In thousands)

Three Months Ended March 31,

       
 

2017

 

2016 (1)

CASH FLOWS FROM OPERATING ACTIVITIES:

     
       

Net income

$                    28,744

 

$              21,163

       

Adjustments to reconcile net income to net cash provided (used)

     

 by operating activities:

     

  Depreciation and amortization

3,070

 

2,765

  (Gain) loss on disposal of assets

-

 

9

  Provision for bad debts, net

561

 

655

  Non-cash stock compensation and other charges

3,681

 

3,354

  Non-cash interest and other (income) loss

(301)

 

667

  Deferred income taxes

(1,900)

 

6,198

  Equity in net losses from unconsolidated joint ventures less distributions received

2,386

 

2,471

       

Changes in assets and liabilities:

     

  Receivables

(11,365)

 

(14,473)

  Advances to/from marketing and reservation activities, net

(216)

 

(39,804)

  Forgivable notes receivable, net

(4,483)

 

(6,464)

  Accounts payable

9,203

 

(3,980)

  Accrued expenses and other current liabilities

(25,048)

 

(24,521)

  Income taxes payable/receivable

13,012

 

(1,788)

  Deferred revenue

12,579

 

40,458

  Other assets

(4,958)

 

(7,238)

  Other liabilities

(751)

 

(842)

       

 NET CASH PROVIDED BY (USED) IN OPERATING ACTIVITIES

24,214

 

(21,370)

       

CASH FLOWS FROM INVESTING ACTIVITIES:

     
       

Investment in property and equipment

(4,718)

 

(5,306)

Investment in intangible assets

(2,088)

 

(162)

Proceeds from sales of assets

-

 

1,700

Acquisitions of real estate

-

 

(25,389)

Contributions to equity method investments

(31,610)

 

(4,293)

Distributions from equity method investments

510

 

67

Purchases of investments, employee benefit plans

(1,424)

 

(896)

Proceeds from sales of investments, employee benefit plans

843

 

363

Issuance of mezzanine and other notes receivable

(9,863)

 

(7,487)

Collections of mezzanine and other notes receivable

522

 

109

Other items, net

(4)

 

26

       

 NET CASH USED IN INVESTING ACTIVITIES

(47,832)

 

(41,268)

       

CASH FLOWS FROM FINANCING ACTIVITIES:

     
       

Net borrowings pursuant to revolving credit facilities

22,800

 

79,267

Principal payments on long-term debt

(153)

 

(318)

Purchases of treasury stock

(7,271)

 

(8,857)

Dividends paid

(12,139)

 

(11,612)

Proceeds from exercise of stock options

4,963

 

4,137

       

 NET CASH PROVIDED BY FINANCING ACTIVITIES

8,200

 

62,617

       

Net change in cash and cash equivalents

(15,418)

 

(21)

Effect of foreign exchange rate changes on cash and cash equivalents

427

 

652

Cash and cash equivalents at beginning of period

202,463

 

193,441

       

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$                  187,472

 

$            194,072

   
   

(1)

Results for the three months ended March 31, 2016 reflect the adoption of ASU No. 2016-09, which requires companies to recognize
excess tax benefits related to the exercise of share based awards as operating activities in the statement of cash flows. 
The company adopted this ASU in the second quarter of 2016 and elected to apply the ASU retrospectively. As a result,
excess tax benefits totaling $1.6 million for the three months ended March 31, 2016 have been reclassified from cash flows from
financing activities to cash flows from operating activities

 

 

CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES

Exhibit 4

SUPPLEMENTAL OPERATING INFORMATION 

 

DOMESTIC HOTEL SYSTEM

 

(UNAUDITED)

 
 
 
 
 
 

For the Three Months Ended March 31, 2017

 

For the Three Months Ended March 31, 2016

 

Change

                                     
 

Average Daily

         

Average Daily

         

Average Daily

         
 

Rate

 

Occupancy

 

RevPAR

 

Rate

 

Occupancy

 

RevPAR

 

Rate

 

Occupancy

 

RevPAR

                                     

Comfort Inn

$             87.03

 

58.5%

 

$          50.90

 

$             85.39

 

57.7%

 

$         49.27

 

1.9%

 

80

bps

 

3.3%

Comfort Suites

93.40

 

65.1%

 

60.84

 

92.40

 

64.1%

 

59.26

 

1.1%

 

100

bps

 

2.7%

Sleep

79.20

 

60.0%

 

47.54

 

77.71

 

58.7%

 

45.61

 

1.9%

 

130

bps

 

4.2%

Quality

73.76

 

53.1%

 

39.20

 

72.23

 

52.2%

 

37.72

 

2.1%

 

90

bps

 

3.9%

Clarion

78.05

 

53.6%

 

41.83

 

75.90

 

50.1%

 

38.06

 

2.8%

 

350

bps

 

9.9%

Econo Lodge

57.33

 

48.6%

 

27.84

 

55.99

 

47.3%

 

26.46

 

2.4%

 

130

bps

 

5.2%

Rodeway

59.63

 

51.1%

 

30.49

 

57.77

 

51.0%

 

29.47

 

3.2%

 

10

bps

 

3.5%

MainStay

71.66

 

61.7%

 

44.21

 

72.91

 

57.9%

 

42.23

 

(1.7%)

 

380

bps

 

4.7%

Suburban

51.01

 

74.2%

 

37.82

 

48.28

 

73.0%

 

35.26

 

5.7%

 

120

bps

 

7.3%

Cambria hotel & suites

122.24

 

68.1%

 

83.26

 

 NA 

 

 NA 

 

 NA 

 

 NA 

 

 NA 

   

 NA 

Ascend Hotel Collection

117.29

 

51.3%

 

60.21

 

115.55

 

53.7%

 

62.01

 

1.5%

 

(240)

bps

 

(2.9%)

                                     

Total  (1)

$             78.41

 

56.1%

 

$          43.98

 

$             76.92

 

55.1%

 

$         42.39

 

1.9%

 

100

bps

 

3.8%

                                     
                                     
                                     
                                     
                                     
 

For the Quarter Ended

                         
 

3/31/2017

 

3/31/2016

                             
                                     

System-wide effective royalty rate

4.55%

 

4.38%

(1)

                           
                                     
                                     
                                     

(1)Totals for the three months ended March 31, 2016 have been revised from previous disclosures to include the operating statistics for the Cambria hotel & suites brand

 

 

CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES

Exhibit 5

SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA

 

(UNAUDITED)

 
 
 
 
 

March 31, 2017

 

March 31, 2016

 

Variance

                               
 

Hotels

 

Rooms

 

Hotels

 

Rooms

 

Hotels

 

Rooms

 

%

 

%

                               

Comfort Inn

1,103

 

85,583

 

1,143

 

88,294

 

(40)

 

(2,711)

 

(3.5%)

 

(3.1%)

Comfort Suites

566

 

43,740

 

566

 

43,669

 

-

 

71

 

0.0%

 

0.2%

Sleep

382

 

27,301

 

379

 

27,139

 

3

 

162

 

0.8%

 

0.6%

Quality

1,457

 

114,837

 

1,394

 

111,124

 

63

 

3,713

 

4.5%

 

3.3%

Clarion

161

 

22,159

 

172

 

23,893

 

(11)

 

(1,734)

 

(6.4%)

 

(7.3%)

Econo Lodge

845

 

52,113

 

853

 

52,784

 

(8)

 

(671)

 

(0.9%)

 

(1.3%)

Rodeway

558

 

32,103

 

519

 

28,931

 

39

 

3,172

 

7.5%

 

11.0%

MainStay

57

 

4,148

 

54

 

4,019

 

3

 

129

 

5.6%

 

3.2%

Suburban

59

 

6,598

 

59

 

6,634

 

-

 

(36)

 

0.0%

 

(0.5%)

Cambria hotel & suites

28

 

3,667

 

25

 

3,113

 

3

 

554

 

12.0%

 

17.8%

Ascend Hotel Collection

127

 

10,451

 

112

 

9,378

 

15

 

1,073

 

13.4%

 

11.4%

                               

Domestic Franchises

5,343

 

402,700

 

5,276

 

398,978

 

67

 

3,722

 

1.3%

 

0.9%

                               

International Franchises

1,151

 

112,672

 

1,169

 

110,984

 

(18)

 

1,688

 

(1.5%)

 

1.5%

                               

Total Franchises

6,494

 

515,372

 

6,445

 

509,962

 

49

 

5,410

 

0.8%

 

1.1%

 

 

CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES

Exhibit 6

SUPPLEMENTAL INFORMATION BY BRAND

 

DEVELOPMENT RESULTS -- DOMESTIC NEW HOTEL CONTRACTS

 

(UNAUDITED)

 
 
 
 
 
 

For the Three Months Ended March 31, 2017

 

For the Three Months Ended March 31, 2016

 

% Change

                                   
 

New

         

New

         

New

       
 

Construction

 

Conversion

 

Total

 

Construction

 

Conversion

 

Total

 

Construction

 

Conversion

 

Total

                                   

Comfort Inn

7

 

10

 

17

 

6

 

4

 

10

 

17%

 

150%

 

70%

Comfort Suites

8

 

-

 

8

 

2

 

-

 

2

 

300%

 

NM

 

300%

Sleep

11

 

2

 

13

 

2

 

-

 

2

 

450%

 

NM

 

550%

Quality

1

 

21

 

22

 

-

 

23

 

23

 

NM

 

(9%)

 

(4%)

Clarion

-

 

3

 

3

 

1

 

3

 

4

 

(100%)

 

0%

 

(25%)

Econo Lodge

-

 

7

 

7

 

-

 

14

 

14

 

NM

 

(50%)

 

(50%)

Rodeway

-

 

21

 

21

 

-

 

10

 

10

 

NM

 

110%

 

110%

MainStay

9

 

-

 

9

 

1

 

-

 

1

 

800%

 

NM

 

800%

Suburban

-

 

-

 

-

 

-

 

-

 

-

 

NM

 

NM

 

NM

Ascend Hotel Collection

1

 

4

 

5

 

1

 

1

 

2

 

0%

 

300%

 

150%

Cambria hotel & suites

1

 

-

 

1

 

2

 

-

 

2

 

(50%)

 

NM

 

(50%)

                                   

Total Domestic System

38

 

68

 

106

 

15

 

55

 

70

 

153%

 

24%

 

51%

 

 

CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES

Exhibit 7

DOMESTIC PIPELINE OF HOTELS UNDER CONSTRUCTION, AWAITING CONVERSION OR APPROVED FOR DEVELOPMENT

 

(UNAUDITED)

 
 

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

 
 
 

Variance

   

 March 31, 2017

 

March 31, 2016

                       
   

Units

 

Units

 

Conversion

 

New Construction

 

Total

   

Conversion

 

New
Construction

 

Total

 

Conversion

 

New
Construction

 

Total

 

Units

 

%

 

Units

 

%

 

Units

 

%

                                                 

Comfort Inn

 

40

 

96

 

136

 

35

 

84

 

119

 

5

 

14%

 

12

 

14%

 

17

 

14%

Comfort Suites

 

3

 

117

 

120

 

3

 

92

 

95

 

-

 

0%

 

25

 

27%

 

25

 

26%

Sleep Inn

 

2

 

114

 

116

 

-

 

76

 

76

 

2

 

NM

 

38

 

50%

 

40

 

53%

Quality

 

51

 

6

 

57

 

47

 

5

 

52

 

4

 

9%

 

1

 

20%

 

5

 

10%

Clarion

 

17

 

4

 

21

 

7

 

3

 

10

 

10

 

143%

 

1

 

33%

 

11

 

110%

Econo Lodge

 

25

 

4

 

29

 

26

 

4

 

30

 

(1)

 

(4%)

 

-

 

0%

 

(1)

 

(3%)

Rodeway

 

38

 

1

 

39

 

40

 

2

 

42

 

(2)

 

(5%)

 

(1)

 

(50%)

 

(3)

 

(7%)

MainStay

 

-

 

80

 

80

 

-

 

55

 

55

 

-

 

NM

 

25

 

45%

 

25

 

45%

Suburban

 

4

 

4

 

8

 

4

 

8

 

12

 

-

 

0%

 

(4)

 

(50%)

 

(4)

 

(33%)

Ascend Hotel Collection

 

34

 

23

 

57

 

27

 

20

 

47

 

7

 

26%

 

3

 

15%

 

10

 

21%

Cambria hotel & suites

 

5

 

56

 

61

 

5

 

39

 

44

 

-

 

0%

 

17

 

44%

 

17

 

39%

                                                 
   

219

 

505

 

724

 

194

 

388

 

582

 

25

 

13%

 

117

 

30%

 

142

 

24%

 

 

CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES

Exhibit 8

 

SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION

 

 

(UNAUDITED)

 
 
 

HOTEL FRANCHISING REVENUES AND ADJUSTED HOTEL FRANCHISING MARGINS

   

(dollar amounts in thousands)

Three Months Ended March 31,

       
 

2017

 

2016

 

Hotel Franchising Revenues:

     
       

 

Total Revenues

$              197,898

 

$               207,118

 

Adjustments:

     

Marketing and reservation system revenues

(109,475)

 

(126,361)

Non-hotel franchising activities

(2,555)

 

(2,029)

 

Hotel Franchising Revenues

$                85,868

 

$                 78,728

       

 

Adjusted Hotel Franchising Margins:

     
       

 

Operating Margin:

     
       

 

Total Revenues

$              197,898

 

$              207,118

 

Operating Income

$                52,507

 

$                42,873

Operating Margin

26.5%

 

20.7%

       

 

Adjusted Hotel Franchising Margin:

     
       

 

Hotel Franchising Revenues

$                85,868

 

$                 78,728

       

 

Operating Income

$                52,507

 

$                 42,873

 

Mark to market adjustments on non-qualified retirement plan investments

$                     851

 

$                      (60)

 

Non-hotel franchising activities operating loss

2,105

 

5,656

 

Adjusted Hotel Franchising Operating Income

$                55,463

 

$                 48,469

       

 

Adjusted Hotel Franchising Margins

64.6%

 

61.6%

       
       
       
       
       

ADJUSTED HOTEL FRANCHISING SELLING, GENERAL AND ADMINISTRATION EXPENSES

       

(dollar amounts in thousands)

Three Months Ended March 31,

       
 

2017

 

2016

       

 

Total Selling, General and Administrative Expenses

$                   32,846

 

$                  35,119

 

Mark to market adjustments on non-qualified retirement plan investments

$                      (851)

 

$                         60

 

Non-hotel franchising activities

(3,680)

 

(6,670)

 

Adjusted Hotel Franchising Selling, General and Administration Expenses

$                   28,315

 

$                  28,509

       
       
       
       
       

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

       

(dollar amounts in thousands)

     
 

Three Months Ended March 31,

       
 

2017

 

2016

       

Net income

$                28,744

 

$                 21,163

 

Income taxes

12,639

 

9,215

 

Interest expense

11,205

 

11,092

 

Interest income

(1,264)

 

(839)

 

Other (gains) losses

(897)

 

62

 

Equity in net (income) loss of affiliates

2,080

 

2,180

 

Depreciation and amortization

3,070

 

2,765

 

Mark to market adjustments on non-qualified retirement plan investments

851

 

(60)

Adjusted EBITDA

$                56,428

 

$                 45,578

       

Hotel franchising

$                57,553

 

$                 50,219

Non-hotel franchising activities

(1,125)

 

(4,641)

 

$                56,428

 

$                 45,578

       
       
       
       

ADJUSTED EBITDA FULL YEAR FORECAST

       

(dollar amounts in thousands)

     
 

Range

 

Estimated Adjusted EBITDA

 

Fiscal Year 2017

       

Net income

$              157,100

 

$               160,500

 

Income taxes

77,400

 

79,000

 

Interest expense

47,300

 

47,300

 

Interest income

(4,500)

 

(4,500)

 

Gain on sale of assets

-

 

-

 

Other gains

(850)

 

(850)

 

Equity in net loss of affiliates

1,600

 

1,600

 

Depreciation and amortization

13,100

 

13,100

 

Mark to market adjustments on non-qualified retirement plan investments

850

 

850

Adjusted EBITDA

$              292,000

 

$               297,000

       

Hotel franchising

$              297,000

 

$               302,000

Non-hotel franchising activities

(5,000)

 

(5,000)

 

$              292,000

 

$               297,000

 

 

 

 

SOURCE Choice Hotels International, Inc.

CONTACT: Scott Oaksmith, SVP, Finance & Chief Accounting Officer, (301) 592-6659; Scott Carman, Director, Public Relations, (301) 592-6361