Press Releases

Choice Hotels International Reports A 16-Percent Increase In Second Quarter Diluted Earnings Per Share
176 New Domestic Franchise Agreements Executed
PR Newswire
ROCKVILLE, Md.

 

ROCKVILLE, Md., Aug. 2, 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 June 30, 2017. Net income for the 2017 second quarter was $45.0 million, or $0.79 per diluted share, compared to $38.8 million, or $0.68 per diluted share for the 2016 second quarter, representing a 16-percent increase. Second quarter adjusted earnings before income taxes, depreciation and amortization (EBITDA) was $81.1 million compared to $70.4 million in the prior-year second quarter, a 15-percent increase.

 

"Choice Hotels' overall strategy to successfully focus on franchisee profitability has led to our robust development pipeline and continues to deliver strong financial results," said Stephen P. Joyce, chief executive officer, Choice Hotels. "For second quarter of 2017, 176 new domestic franchise agreements were executed, a 20-percent increase when compared to second quarter of 2016. In fact, we have experienced one of the strongest January through June development periods in our company's history, as new franchise agreements increased 30-percent and new construction agreements increased 65-percent, versus the first six months of 2016."

"Our midscale and upscale brands continue to be core areas of strength and expansion," said Patrick Pacious, Choice Hotel's president, chief operating officer and incoming chief executive officer. "The brands in our midscale segment, including Comfort, Quality and Sleep Inn, are experiencing continued growth in both RevPAR and our development pipeline. In addition, our upscale brands - Cambria Hotels and The Ascend Hotel Collection - are aggressively expanding. These results reinforce that we have very effective distribution channels and a high-performing franchisee business model."

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

Overall Results

    --  Diluted earnings per share (EPS) for the second quarter was $0.79, a
        16-percent increase from the second quarter of the prior year; Diluted
        EPS increased 11-percent compared to our adjusted diluted EPS for the
        second quarter of 2016, which excluded executive termination benefits
        incurred in 2016.
    --  Total revenues and hotel franchising revenues for the second quarter
        increased 14 percent and 10 percent, respectively, from the second
        quarter of the prior year.
    --  Adjusted EBITDA totaled $81.1 million for the second quarter, a
        15-percent increase from the second quarter of the prior year.
    --  Adjusted EBITDA from hotel franchising activities for the second quarter
        increased 11 percent from the prior year second quarter to $84.0
        million.
    --  Adjusted hotel franchising margins for the second quarter increased 100
        basis points from the prior year second quarter to 70.5 percent.

Royalties

    --  Domestic royalty fees for second quarter totaled $87.0 million, a
        7.2-percent increase from the second quarter of the prior year.
    --  Domestic system-wide revenue per available room (RevPAR) increased 2.0
        percent for the second quarter compared to the prior year second
        quarter.  Occupancy and average daily rates increased 30 basis points
        and 1.5 percent, respectively, in the second quarter compared to the
        same period of 2016.
    --  The Comfort brands extended their consecutive months of RevPAR index
        gains, compared to their focused competition, to 33 months.
    --  Effective royalty rate increased 19 basis points for the second quarter
        of 2017, compared to the second quarter of the prior year.
    --  Domestic franchised hotels, as of June 30, 2017, increased 2.6 percent
        from June 30, 2016.
    --  Cambria Hotels surpassed 30 open hotels with three new Cambria Hotels
        opening during the second quarter, including our first Los Angeles
        property and our second hotel in Chicago.
    --  Domestic and international rooms, as of June 30, 2017, increased 2.2
        percent and 1.8 percent, respectively, from June 30, 2016.

Development

    --  New, executed franchised hotel development contracts totaled 176 in the
        second quarter, a 20-percent increase from the comparable period of the
        prior year.
    --  New construction and conversion franchise agreements increased 33
        percent and 14 percent, respectively, in the second quarter of 2017,
        compared to the second quarter of the prior year.
    --  The company executed 11 Cambria Hotels new construction franchise
        agreements in the second quarter of 2017, a 22-percent increase compared
        to the second quarter of the prior year. The domestic new construction
        pipeline for the Cambria Hotels brand now totals nearly 70 hotels.
    --  Domestic relicensing and contract renewal transactions totaled 127 for
        the three months ended June 30, 2017, a 19-percent increase from the
        same period of 2016.
    --  The company's total domestic pipeline of hotels awaiting conversion,
        under construction or approved for development, as of June 30, 2017,
        increased 22 percent to 721 hotels from June 30, 2016.
    --  The new construction and conversion domestic pipelines totaled 523 and
        198 hotels, respectively at June 30, 2017, representing increases of 30
        percent and 5 percent from June 30, 2016.

Use of Cash Flows

Dividends
During the six months ended June 30, 2017, the company paid cash dividends totaling approximately $24 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 six months ended June 30, 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 brand, the company advanced approximately $64 million in support of the brand's development during the six months ended June 30, 2017. The company also recycled approximately $2 million of prior investments in Cambria development projects, resulting in net advances of $62 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 June 30, 2017, the company had approximately $261 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.

Special Item

During the three and six months ended June 30, 2016, the company recorded an executive termination benefit charge of approximately $2.2 million. This special item impacted diluted EPS by $0.03 and $0.02 per share for the three and six months ended June 30, 2016, respectively. The company evaluates the non-GAAP measures presented herein that exclude executive termination benefits because those non-GAAP measures allow for period-over-period comparison of ongoing core operations before the impact of these charges. These non-GAAP measures, which are reconciled to the comparable GAAP measures in Exhibit 6, include adjusted net income, adjusted diluted EPS, adjusted hotel franchising selling, general and administrative expenses, adjusted EBITDA, adjusted hotel franchising EBITDA and adjusted hotel franchising margins.

Outlook

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

Consolidated Outlook

    --  Net income for full-year 2017 is expected to range between $160 million
        and $163 million.
    --  Adjusted EBITDA for full-year 2017 is expected to range between $293
        million and $297 million.
    --  The company's third-quarter 2017 adjusted diluted EPS is expected to
        range between $0.90 and $0.92.
    --  The company expects full-year 2017 adjusted diluted EPS to range between
        $2.81 and $2.86.
    --  The effective tax rate is expected to be approximately 33 percent for
        both the third quarter and full-year 2017.
    --  All estimates for 2017 exclude any potential costs associated with the
        company's recently announced executive succession plan.
    --  Adjusted 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 adjusted diluted 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 $299 million and $303 million.
    --  Net domestic unit growth for 2017 is expected to range between
        approximately 2 percent and 3 percent.
    --  RevPAR is expected to increase between 1 percent and 2 percent for the
        third quarter and range between 2 percent and 3 percent for full-year
        2017.
    --  The effective royalty rate is expected to increase between 17 and 19
        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
        $5 million and $7 million.

Conference Call
Choice will conduct a conference call on Wednesday, August 2, 2017, at 10:00 a.m. ET to discuss the company's 2017 second 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 Wednesday, August 2, 2017, by calling 1-855-859-2056 (domestic) or 1-404-537-3406 (international) and entering access code 43105678. 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 over 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 June 30, 2017, 792 hotels were in our development pipeline. Our company's Ascend Hotel Collection®, Cambria® Hotels, 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 32 million members, 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 our hotel development and financing 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 report on Form 10-K for 2016 and our quarterly reports filed on Form 10-Q. Except as may be required by law, 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, adjusted hotel franchising margins and adjusted diluted EPS 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, mark to market adjustments on non-qualified retirement plan investments and executive termination benefits. 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 from these measures 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 June 30,               Six Months Ended June 30,
                                                       ---------------------------            -------------------------

                                                                                                          Variance                                               Variance

                                                                                 2017    2016                                 $  %               2017         2016                  $    %
                                                                                 ----    ----                               --- ---              ----         ----                ---   ---

    (In thousands, except
     per share amounts)


    REVENUES:


    Royalty fees                                                              $92,486 $86,195                            $6,291          7%   $161,475     $151,054            $10,421            7%

    Initial franchise and
     relicensing fees                                                           6,981   5,706                             1,275         22%     11,987       10,862              1,125           10%

    Procurement services                                                       11,068  10,308                               760          7%     17,544       16,104              1,440            9%

    Marketing and
     reservation system                                                       158,035 133,814                            24,221         18%    267,510      260,175              7,335            3%

    Other                                                                       8,229   5,728                             2,501         44%     16,181       10,674              5,507           52%
                                                                                -----   -----                             -----         ---      ------       ------              -----           ---

          Total revenues                                                      276,799 241,751                            35,048         14%    474,697      448,869             25,828            6%


    OPERATING EXPENSES:


    Selling, general and
     administrative                                                            38,208  40,039                           (1,831)       (5%)     71,054       75,158            (4,104)         (5%)

    Depreciation and
     amortization                                                               3,050   2,956                                94          3%      6,120        5,721                399            7%

    Marketing and
     reservation system                                                       158,035 133,814                            24,221         18%    267,510      260,175              7,335            3%
                                                                              ------- -------                            ------         ---     -------      -------              -----           ---

    Total operating
     expenses                                                                 199,293 176,809                            22,484         13%    344,684      341,054              3,630            1%


    Operating income                                                           77,506  64,942                            12,564         19%    130,013      107,815             22,198           21%


    OTHER INCOME AND
     EXPENSES, NET:

    Interest expense                                                           11,280  11,224                                56          0%     22,485       22,316                169            1%

    Interest income                                                           (1,438)  (827)                            (611)        74%    (2,702)     (1,666)           (1,036)          62%

    Other (gains) losses                                                        (576)  (321)                            (255)        79%    (1,473)       (259)           (1,214)         469%

    Equity in net (income)
     loss of affiliates                                                           859   (744)                            1,603      (215%)      2,939        1,436              1,503          105%

    Total other income and
     expenses, net                                                             10,125   9,332                               793          8%     21,249       21,827              (578)         (3%)
                                                                               ------   -----                               ---         ---      ------       ------               ----           ---


    Income before income
     taxes                                                                     67,381  55,610                            11,771         21%    108,764       85,988             22,776           26%

    Income taxes                                                               22,386  16,788                             5,598         33%     35,025       26,003              9,022           35%
                                                                               ------  ------                             -----         ---      ------       ------              -----           ---

    Net income                                                                $44,995 $38,822                            $6,173         16%    $73,739      $59,985            $13,754           23%
                                                                              ======= =======                            ======         ===     =======      =======            =======           ===



    Basic earnings per
     share                                                                      $0.80   $0.69                             $0.11         16%      $1.31        $1.06              $0.25           24%
                                                                                =====   =====                             =====         ===       =====        =====              =====           ===



    Diluted earnings per
     share                                                                      $0.79   $0.68                             $0.11         16%      $1.30        $1.06              $0.24           23%
                                                                                =====   =====                             =====         ===       =====        =====              =====           ===

 

 

 


    Choice Hotels International, Inc. and
     Subsidiaries                                                                              Exhibit 2

    Consolidated Balance Sheets



    (In thousands, except per share amounts)                   June 30,                                 December 31,

                                                                               2017                                      2016
                                                                               ----                                      ----

                                                              (Unaudited)


    ASSETS


    Cash and cash equivalents                                           $197,957                                  $202,463

    Accounts receivable, net                                             146,653                                   107,336

    Other current assets                                                  35,617                                    35,074
                                                                          ------                                    ------

                                 Total
                                 current
                                 assets                                     380,227                                   344,873


    Fixed assets and intangibles, net                                   178,271                                   178,704

    Notes receivable, net of allowances                                 132,004                                   110,608

    Investments in unconsolidated entities                              131,722                                    94,839

    Investments, employee benefit plans, at fair
     value                                                               19,451                                    16,975

    Other assets                                                          106,298                                   106,469
                                                                          -------                                   -------


                                 Total
                                 assets              $947,973                         $852,468
                                                     --------                         --------




    LIABILITIES AND SHAREHOLDERS' DEFICIT


    Accounts payable                                                     $67,736                                   $48,071

    Accrued expenses and other current liabilities                       71,973                                    81,184

    Deferred revenue                                                     135,350                                   133,218

    Current portion of long-term debt                                     1,302                                     1,195

                                 Total current
                                 liabilities          276,361                          263,668


    Long-term debt                                                       862,965                                   839,409

    Deferred compensation & retirement plan
     obligations                                                         23,927                                    21,595

    Other liabilities                                                      37,337                                    39,145
                                                                           ------                                    ------


                                 Total
                                 liabilities                              1,200,590                                 1,163,817



                                 Total
                                 shareholders'
                                 deficit            (252,617)                       (311,349)



                                Total
                                 liabilities
                                 and
                                 shareholders'
                                 deficit           $947,973                         $852,468
                                                   --------                         --------

 

 

 


    Choice Hotels
     International,
     Inc. and
     Subsidiaries                                        Exhibit 3

    Consolidated
     Statements
     of Cash
     Flows

    (Unaudited)




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


                                                    2017                2016
                                                    ----                ----

    CASH FLOWS
     FROM
     OPERATING
     ACTIVITIES:


    Net income                                   $73,739             $59,985


    Adjustments
     to reconcile
     net income
     to net cash
     provided

     by operating
      activities:

      Depreciation
       and
       amortization                                6,120               5,721

      Loss on
       disposal of
       assets                                          4                   7

      Provision for
       bad debts,
       net                                           916                 962

      Non-cash
       stock
       compensation
       and other
       charges                                     6,809               7,966

      Non-cash
       interest and
       other
       (income)
       loss                                        (274)                958

      Deferred
       income taxes                              (1,446)              4,030

      Equity in net
       losses from
       unconsolidated
       joint
       ventures
       less
       distributions
       received                                    3,543               2,193


    Changes in
     assets and
     liabilities:

      Receivables                               (40,673)           (39,058)

      Advances to/
       from
       marketing
       and
       reservation
       activities,
       net                                        17,407            (42,671)

      Forgivable
       notes
       receivable,
       net                                      (14,108)           (13,174)

      Accounts
       payable                                    18,955              10,567

      Accrued
       expenses and
       other
       current
       liabilities                              (11,286)            (8,842)

      Income taxes
       payable/
       receivable                                  5,629              10,463

      Deferred
       revenue                                     2,061              42,164

      Other assets                               (1,764)           (10,834)

      Other
       liabilities                               (1,524)            (2,576)
                                                  ------              ------


     NET CASH
      PROVIDED BY
      OPERATING
      ACTIVITIES                                  64,108              27,861
                                                  ------              ------


    CASH FLOWS
     FROM
     INVESTING
     ACTIVITIES:


    Investment in
     property and
     equipment                                  (10,687)           (10,912)

    Investment in
     intangible
     assets                                      (2,228)              (322)

    Proceeds from
     sales of
     assets                                            -              1,700

    Acquisitions
     of real
     estate                                            -           (25,389)

    Contributions
     to equity
     method
     investments                                (42,127)           (19,688)

    Distributions
     from equity
     method
     investments                                   1,696               3,619

    Purchases of
     investments,
     employee
     benefit
     plans                                       (1,736)            (1,140)

    Proceeds from
     sales of
     investments,
     employee
     benefit
     plans                                         2,094               1,136

    Issuance of
     mezzanine
     and other
     notes
     receivable                                 (14,977)           (13,048)

    Collections
     of mezzanine
     and other
     notes
     receivable                                      552              10,158

    Other items,
     net                                             110                  11
                                                     ---                 ---


     NET CASH USED
      IN INVESTING
      ACTIVITIES                                (67,303)           (53,875)
                                                 -------             -------


    CASH FLOWS
     FROM
     FINANCING
     ACTIVITIES:


    Net
     borrowings
     pursuant to
     revolving
     credit
     facilities                                   23,200              87,950

    Principal
     payments on
     long-term
     debt                                          (309)              (623)

    Purchases of
     treasury
     stock                                       (7,414)           (28,278)

    Dividends
     paid                                       (24,333)           (23,193)

    Proceeds from
     exercise of
     stock
     options                                       6,590               4,234
                                                   -----               -----


     NET CASH
      PROVIDED
      (USED) BY
      FINANCING
      ACTIVITIES                                 (2,266)             40,090
                                                  ------              ------


    Net change in
     cash and
     cash
     equivalents                                 (5,461)             14,076

    Effect of
     foreign
     exchange
     rate changes
     on cash and
     cash
     equivalents                                     955                 371

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


    CASH AND CASH
     EQUIVALENTS
     AT END OF
     PERIOD                                     $197,957            $207,888
                                                ========            ========

 

 

 


                                                                                                                                                                                                                                                  CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES                                                                                                          Exhibit 4

                                                                                                                                                                                                                                                          SUPPLEMENTAL OPERATING INFORMATION

                                                                                                                                                                                                                                                                 DOMESTIC HOTEL SYSTEM

                                                                                                                                                                                                                                                                      (UNAUDITED)





                                                                                                             For the Six Months Ended June 30, 2017                                              For the Six Months Ended June 30, 2016                                       Change
                                                                                                             --------------------------------------                                              --------------------------------------                                       ------


                                                                                                                     Average Daily                                                                                                                                             Average Daily                                                      Average Daily

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


    Comfort Inn                                                                                                                          $92.00                                           64.7%                                             $59.48                                                   $90.11                64.0%         $57.67                   2.1%                70    bps                 3.1%

    Comfort Suites                                                                                                                        96.16                                           69.3%                                              66.65                                                    95.51                68.9%          65.80                   0.7%                40    bps                 1.3%

    Sleep                                                                                                                                 82.29                                           65.0%                                              53.51                                                    81.13                64.2%          52.08                   1.4%                80    bps                 2.7%

    Quality                                                                                                                               77.45                                           58.5%                                              45.32                                                    75.79                57.9%          43.88                   2.2%                60    bps                 3.3%

    Clarion                                                                                                                               82.30                                           58.9%                                              48.45                                                    80.52                56.3%          45.35                   2.2%               260    bps                 6.8%

    Econo Lodge                                                                                                                           60.64                                           53.2%                                              32.26                                                    59.24                52.4%          31.03                   2.4%                80    bps                 4.0%

    Rodeway                                                                                                                               62.61                                           55.1%                                              34.51                                                    60.72                54.6%          33.15                   3.1%                50    bps                 4.1%

    MainStay                                                                                                                              74.51                                           67.1%                                              49.99                                                    75.80                63.4%          48.02                 (1.7%)               370    bps                 4.1%

    Suburban                                                                                                                              51.74                                           76.2%                                              39.44                                                    49.67                74.9%          37.21                   4.2%               130    bps                 6.0%

    Cambria hotel & suites                                                                                                               133.34                                           72.9%                                              97.16                                     NA                              NA             NA                  NA                   NA                         NA

    Ascend Hotel Collection                                                                                                              123.71                                           54.1%                                              66.96                                                   125.21                56.9%          71.28                 (1.2%)             (280)   bps               (6.1%)
                                                                                                                                         ------                                            ----                                               -----                                                   ------                 ----           -----                  -----               ----    ---                -----


    Total  (1)                                                                                                                           $82.16                                           61.1%                                             $50.22                                                   $80.77                60.5%         $48.84                   1.7%                60    bps                 2.8%
                                                                                                                                         ======                                            ====                                              ======                                                   ======                 ====          ======                    ===                ===    ===                  ===




                                                                                                            For the Three Months Ended June 30, 2017                                            For the Three Months Ended June 30, 2016                                      Change
                                                                                                            ----------------------------------------                                            ----------------------------------------                                      ------


                                                                                                                     Average Daily                                                                                                                                             Average Daily                                                      Average Daily

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


    Comfort Inn                                                                                                                          $95.96                                           70.6%                                             $67.76                                                   $93.87                70.1%         $65.84                   2.2%                50    bps                 2.9%

    Comfort Suites                                                                                                                        98.54                                           73.4%                                              72.32                                                    98.19                73.6%          72.24                   0.4%              (20)   bps                 0.1%

    Sleep                                                                                                                                 84.84                                           69.9%                                              59.27                                                    83.93                69.5%          58.35                   1.1%                40    bps                 1.6%

    Quality                                                                                                                               80.36                                           63.6%                                              51.12                                                    78.61                63.3%          49.79                   2.2%                30    bps                 2.7%

    Clarion                                                                                                                               85.70                                           63.9%                                              54.76                                                    84.14                62.3%          52.46                   1.9%               160    bps                 4.4%

    Econo Lodge                                                                                                                           63.31                                           57.6%                                              36.48                                                    61.84                57.3%          35.46                   2.4%                30    bps                 2.9%

    Rodeway                                                                                                                               64.94                                           58.7%                                              38.12                                                    63.13                57.9%          36.56                   2.9%                80    bps                 4.3%

    MainStay                                                                                                                              76.88                                           72.4%                                              55.62                                                    78.07                68.4%          53.40                 (1.5%)               400    bps                 4.2%

    Suburban                                                                                                                              52.42                                           78.2%                                              41.00                                                    51.07                76.9%          39.27                   2.6%               130    bps                 4.4%

    Cambria hotel & suites                                                                                                               142.23                                           77.2%                                             109.78                                     NA                              NA             NA                  NA                   NA                         NA

    Ascend Hotel Collection                                                                                                              129.17                                           56.8%                                              73.32                                                   133.28                60.0%          79.94                 (3.1%)             (320)   bps               (8.3%)
                                                                                                                                         ------                                            ----                                               -----                                                   ------                 ----           -----                  -----               ----    ---                -----


    Total  (1)                                                                                                                           $85.19                                           65.9%                                             $56.17                                                   $83.89                65.6%         $55.07                   1.5%                30    bps                 2.0%
                                                                                                                                         ======                                            ====                                              ======                                                   ======                 ====          ======                    ===                ===    ===                  ===




                                                                                                                 For the Quarter Ended                             For the Six Months Ended
                                                                                                                 ---------------------                             ------------------------

                                                                                                                                      6/30/2017                                      6/30/2016                                          6/30/2017                                               6/30/2016


    System-wide effective royalty rate                                                                                                    4.58%                                          4.39%         (1)                                  4.56%                                                   4.39%    (1)




    (1)Totals for the three and six months ended June 30, 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)




                             June 30, 2017     June 30, 2016              Variance
                             -------------     -------------            --------


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


    Comfort Inn                          1,093               84,956           1,138                                     88,085        (45)       (3,129)      (4.0%)            (3.6%)

    Comfort Suites                         565               43,721             564                                     43,522           1            199         0.2%              0.5%

    Sleep                                  385               27,574             380                                     27,188           5            386         1.3%              1.4%

    Quality                              1,493              116,961           1,395                                    110,952          98          6,009         7.0%              5.4%

    Clarion                                163               22,159             168                                     23,033         (5)         (874)      (3.0%)            (3.8%)

    Econo Lodge                            843               51,757             847                                     52,385         (4)         (628)      (0.5%)            (1.2%)

    Rodeway                                586               34,085             528                                     29,771          58          4,314        11.0%             14.5%

    MainStay                                56                4,074              54                                      4,020           2             54         3.7%              1.3%

    Suburban                                59                6,578              58                                      6,471           1            107         1.7%              1.7%

    Cambria hotel & suites                  31                4,160              25                                      3,113           6          1,047        24.0%             33.6%

    Ascend Hotel Collection                135               10,877             116                                      9,650          19          1,227        16.4%             12.7%
                                           ---               ------             ---                                      -----         ---          -----         ----               ----


    Domestic Franchises                  5,409              406,902           5,273                                    398,190         136          8,712         2.6%              2.2%


    International Franchises             1,144              113,322           1,156                                    111,366        (12)         1,956       (1.0%)              1.8%
                                         -----              -------           -----                                    -------         ---          -----        -----                ---


    Total Franchises                     6,553              520,224           6,429                                    509,556         124         10,668         1.9%              2.1%
                                         =====              =======           =====                                    =======         ===         ======          ===                ===

 

 

 


                  CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES                                                                                                  Exhibit 6

                     SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION

                                     (UNAUDITED)



    HOTEL FRANCHISING REVENUES AND ADJUSTED HOTEL FRANCHISING MARGINS


    (dollar amounts in thousands)                                               Three Months Ended June 30,                     Six Months Ended June 30,
                                                                                ---------------------------                     -------------------------


                                                                                                                 2017                                           2016                           2017                    2016
                                                                                                                 ----                                           ----                           ----                    ----

                  Hotel Franchising Revenues:


                  Total Revenues                                                                               $276,799                                       $241,751                       $474,697                $448,869

                  Adjustments:

                       Marketing and reservation system
                        revenues                                                                              (158,035)                                     (133,814)                     (267,510)              (260,175)

                       Non-hotel franchising activities                                                         (2,557)                                       (2,068)                       (5,112)                (4,097)

                  Hotel Franchising Revenues                                                                   $116,207                                       $105,869                       $202,075                $184,597



                  Adjusted Hotel Franchising Margins:


                  Operating Margin:


                  Total Revenues                                                                               $276,799                                       $241,751                       $474,697                $448,869

                  Operating Income                                                                              $77,506                                        $64,942                       $130,013                $107,815

                       Operating Margin                                                                           28.0%                                         26.9%                         27.4%                  24.0%



                  Adjusted Hotel Franchising Margin:


                  Hotel Franchising Revenues                                                                   $116,207                                       $105,869                       $202,075                $184,597


                  Operating Income                                                                              $77,506                                        $64,942                       $130,013                $107,815

                  Mark to market
                   adjustments on
                   non-qualified
                   retirement plan
                   investments                                    $590                                                     $315                                               $1,441                       $255

                  Executive termination benefits                                            $                         -                                        $2,206                  $           -                 $2,206

                   Non-hotel franchising activities
                   operating loss                                                                                 3,801                                          6,084                          5,906                  11,740

                   Adjusted Hotel Franchising
                   Operating Income                                                                             $81,897                                        $73,547                       $137,360                $122,016



                       Adjusted Hotel Franchising Margins                                                         70.5%                                         69.5%                         68.0%                  66.1%





    ADJUSTED HOTEL FRANCHISING SELLING, GENERAL AND ADMINISTRATION EXPENSES


    (dollar amounts in thousands)                                               Three Months Ended June 30,                     Six Months Ended June 30,
                                                                                ---------------------------                     -------------------------


                                                                                                                 2017                                           2016                           2017                    2016
                                                                                                                 ----                                           ----                           ----                    ----


                   Total Selling, General and
                   Administrative Expenses                                                                      $38,208                                        $40,039                        $71,054                 $75,158

                  Mark to market
                   adjustments on
                   non-qualified
                   retirement plan
                   investments                                  $(590)                                                  $(315)                                            $(1,441)                    $(255)

                  Executive termination benefits                                            $                         -                                      $(2,206)                $            -               $(2,206)

                  Non-hotel franchising activities                                                              (5,415)                                       (7,045)                       (9,095)               (13,715)

                  Adjusted Hotel
                   Franchising
                   Selling, General
                   and
                   Administration
                   Expenses                                    $32,203                                                  $30,473                                              $60,518                    $58,982
                  =================




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


    (dollar amounts in thousands)

                                                                                 Three Months Ended June 30,                     Six Months Ended June 30,
                                                                                 ---------------------------                     -------------------------


                                                                                                                 2017                                           2016                           2017                    2016
                                                                                                                 ----                                           ----                           ----                    ----


    Net income                                                                                               $44,995                                        $38,822                        $73,739                 $59,985

                  Income taxes                                                                                   22,386                                         16,788                         35,025                  26,003

                  Interest expense                                                                               11,280                                         11,224                         22,485                  22,316

                  Interest income                                                                               (1,438)                                         (827)                       (2,702)                (1,666)

                  Other (gains) losses                                                                            (576)                                         (321)                       (1,473)                  (259)

                   Equity in net (income) loss of
                   affiliates                                                                                       859                                          (744)                         2,939                   1,436

                  Depreciation and amortization                                                                   3,050                                          2,956                          6,120                   5,721

                  Executive termination benefits                                                                      -                                         2,206                              -                  2,206

                  Mark to market
                   adjustments on
                   non-qualified
                   retirement plan
                   investments                                     590                                                      315                                                1,441                        255
                  ---------------

    Adjusted EBITDA                                                                                          $81,146                                        $70,419                       $137,574                $115,997
                                                                                                             =======                                        =======                       ========                ========


    Hotel franchising                                                                                        $84,004                                        $75,397                       $141,557                $125,616

    Non-hotel franchising activities                                                                         (2,858)                                       (4,978)                       (3,983)                (9,619)

                                                                                                              $81,146                                        $70,419                       $137,574                $115,997
                                                                                                              =======                                        =======                       ========                ========




    ADJUSTED NET INCOME AND ADJUSTED DILUTED EARNINGS PER SHARE (EPS)


    (dollar amounts in thousands, except per
     share amounts)                                                             Three Months Ended June 30,                     Six Months Ended June 30,
                                                                                ---------------------------                     -------------------------


                                                                                                                 2017                                           2016                           2017                    2016
                                                                                                                 ----                                           ----                           ----                    ----


    Net Income                                                                                               $44,995                                        $38,822                        $73,739                 $59,985

    Adjustments:

                  Executive termination benefits                                                                      -                                         1,394                              -                  1,394

    Adjusted Net Income                                                                                      $44,995                                        $40,216                        $73,739                 $61,379
                                                                                                             =======                                        =======                        =======                 =======



    Diluted Earnings Per Share                                                                                 $0.79                                          $0.68                          $1.30                   $1.06

    Adjustments:

                  Executive termination benefits                                                                      -                                          0.03                              -                   0.02

    Adjusted Diluted Earnings Per Share
     (EPS)                                                                                                     $0.79                                          $0.71                          $1.30                   $1.08
                                                                                                               =====                                          =====                          =====                   =====




    ADJUSTED EBITDA FULL YEAR FORECAST


    (dollar amounts in thousands)

                                                                                            Range
                                                                                            -----

                                                                                  Estimated Adjusted EBITDA

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


    Net income                                                                                              $160,000                                       $163,000

                  Income taxes                                                                                   77,500                                         78,500

                  Interest expense                                                                               45,900                                         45,900

                  Interest income                                                                               (5,100)                                       (5,100)

                  Gain on sale of assets                                                                              -                                             -

                  Other gains                                                                                   (1,500)                                       (1,500)

                  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                                   1,500                                                    1,500

    Adjusted EBITDA                                                                                         $293,000                                       $297,000
                                                                                                            ========                                       ========


    Hotel franchising                                                                                       $299,000                                       $303,000

    Non-hotel franchising activities                                                                         (6,000)                                       (6,000)

                                                                                                             $293,000                                       $297,000
                                                                                                             ========                                       ========

 

 

 

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SOURCE: Choice Hotels International, Inc.

 

Choice Hotels International Reports A 16-Percent Increase In Second Quarter Diluted Earnings Per Share

176 New Domestic Franchise Agreements Executed

PR Newswire

 

ROCKVILLE, Md., Aug. 2, 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 June 30, 2017. Net income for the 2017 second quarter was $45.0 million, or $0.79 per diluted share, compared to $38.8 million, or $0.68 per diluted share for the 2016 second quarter, representing a 16-percent increase.  Second quarter adjusted earnings before income taxes, depreciation and amortization (EBITDA) was $81.1 million compared to $70.4 million in the prior-year second quarter, a 15-percent increase.

 

"Choice Hotels' overall strategy to successfully focus on franchisee profitability has led to our robust development pipeline and continues to deliver strong financial results," said Stephen P. Joyce, chief executive officer, Choice Hotels. "For second quarter of 2017, 176 new domestic franchise agreements were executed, a 20-percent increase when compared to second quarter of 2016. In fact, we have experienced one of the strongest January through June development periods in our company's history, as new franchise agreements increased 30-percent and new construction agreements increased 65-percent, versus the first six months of 2016."

"Our midscale and upscale brands continue to be core areas of strength and expansion," said Patrick Pacious, Choice Hotel's president, chief operating officer and incoming chief executive officer. "The brands in our midscale segment, including Comfort, Quality and Sleep Inn, are experiencing continued growth in both RevPAR and our development pipeline. In addition, our upscale brands – Cambria Hotels and The Ascend Hotel Collection – are aggressively expanding. These results reinforce that we have very effective distribution channels and a high-performing franchisee business model."

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

Overall Results

  • Diluted earnings per share (EPS) for the second quarter was $0.79, a 16-percent increase from the second quarter of the prior year; Diluted EPS increased 11-percent compared to our adjusted diluted EPS for the second quarter of 2016, which excluded executive termination benefits incurred in 2016. 
  • Total revenues and hotel franchising revenues for the second quarter increased 14 percent and 10 percent, respectively, from the second quarter of the prior year.
  • Adjusted EBITDA totaled $81.1 million for the second quarter, a 15-percent increase from the second quarter of the prior year.
  • Adjusted EBITDA from hotel franchising activities for the second quarter increased 11 percent from the prior year second quarter to $84.0 million
  • Adjusted hotel franchising margins for the second quarter increased 100 basis points from the prior year second quarter to 70.5 percent.

Royalties

  • Domestic royalty fees for second quarter totaled $87.0 million, a 7.2-percent increase from the second quarter of the prior year.
  • Domestic system-wide revenue per available room (RevPAR) increased 2.0 percent for the second quarter compared to the prior year second quarter.  Occupancy and average daily rates increased 30 basis points and 1.5 percent, respectively, in the second quarter compared to the same period of 2016.
  • The Comfort brands extended their consecutive months of RevPAR index gains, compared to their focused competition, to 33 months.
  • Effective royalty rate increased 19 basis points for the second quarter of 2017, compared to the second quarter of the prior year.
  • Domestic franchised hotels, as of June 30, 2017, increased 2.6 percent from June 30, 2016.
  • Cambria Hotels surpassed 30 open hotels with three new Cambria Hotels opening during the second quarter, including our first Los Angeles property and our second hotel in Chicago.
  • Domestic and international rooms, as of June 30, 2017, increased 2.2 percent and 1.8 percent, respectively, from June 30, 2016.

Development

  • New, executed franchised hotel development contracts totaled 176 in the second quarter, a 20-percent increase from the comparable period of the prior year.
  • New construction and conversion franchise agreements increased 33 percent and 14 percent, respectively, in the second quarter of 2017, compared to the second quarter of the prior year.
  • The company executed 11 Cambria Hotels new construction franchise agreements in the second quarter of 2017, a 22-percent increase compared to the second quarter of the prior year. The domestic new construction pipeline for the Cambria Hotels brand now totals nearly 70 hotels.
  • Domestic relicensing and contract renewal transactions totaled 127 for the three months ended June 30, 2017, a 19-percent increase from the same period of 2016.
  • The company's total domestic pipeline of hotels awaiting conversion, under construction or approved for development, as of June 30, 2017, increased 22 percent to 721 hotels from June 30, 2016.
  • The new construction and conversion domestic pipelines totaled 523 and 198 hotels, respectively at June 30, 2017, representing increases of 30 percent and 5 percent from June 30, 2016.

Use of Cash Flows

Dividends
During the six months ended June 30, 2017, the company paid cash dividends totaling approximately $24 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 six months ended June 30, 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 brand, the company advanced approximately $64 million in support of the brand's development during the six months ended June 30, 2017. The company also recycled approximately $2 million of prior investments in Cambria development projects, resulting in net advances of $62 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 June 30, 2017, the company had approximately $261 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.

Special Item

During the three and six months ended June 30, 2016, the company recorded an executive termination benefit charge of approximately $2.2 million. This special item impacted diluted EPS by $0.03 and $0.02 per share for the three and six months ended June 30, 2016, respectively. The company evaluates the non-GAAP measures presented herein that exclude executive termination benefits because those non-GAAP measures allow for period-over-period comparison of ongoing core operations before the impact of these charges. These non-GAAP measures, which are reconciled to the comparable GAAP measures in Exhibit 6, include adjusted net income, adjusted diluted EPS, adjusted hotel franchising selling, general and administrative expenses, adjusted EBITDA, adjusted hotel franchising EBITDA and adjusted hotel franchising margins. 

Outlook

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

Consolidated Outlook

  • Net income for full-year 2017 is expected to range between $160 million and $163 million.
  • Adjusted EBITDA for full-year 2017 is expected to range between $293 million and $297 million.
  • The company's third-quarter 2017 adjusted diluted EPS is expected to range between $0.90 and $0.92.
  • The company expects full-year 2017 adjusted diluted EPS to range between $2.81 and $2.86.
  • The effective tax rate is expected to be approximately 33 percent for both the third quarter and full-year 2017. 
  • All estimates for 2017 exclude any potential costs associated with the company's recently announced executive succession plan.
  • Adjusted 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 adjusted diluted 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 $299 million and $303 million.
  • Net domestic unit growth for 2017 is expected to range between approximately 2 percent and 3 percent.
  • RevPAR is expected to increase between 1 percent and 2 percent for the third quarter and range between 2 percent and 3 percent for full-year 2017.
  • The effective royalty rate is expected to increase between 17 and 19 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 $5 million and $7 million.

Conference Call
Choice will conduct a conference call on Wednesday, August 2, 2017, at 10:00 a.m. ET to discuss the company's 2017 second 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 Wednesday, August 2, 2017, by calling 1-855-859-2056 (domestic) or 1-404-537-3406 (international) and entering access code 43105678. 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 over 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 June 30, 2017, 792 hotels were in our development pipeline. Our company's Ascend Hotel Collection®, Cambria® Hotels, 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 32 million members, 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 our hotel development and financing 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 report on Form 10-K for 2016 and our quarterly reports filed on Form 10-Q.  Except as may be required by law, 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, adjusted hotel franchising margins and adjusted diluted EPS 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, mark to market adjustments on non-qualified retirement plan investments and executive termination benefits. 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 from these measures 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 June 30,

 

Six Months Ended June 30,

   
           

Variance

         

Variance

   
   

2017

 

2016

 

$

 

%

 

2017

 

2016

 

$

 

%

   

(In thousands, except per share amounts)

                                   
                                     

REVENUES:

                                   
                                     

Royalty fees

 

$              92,486

 

$              86,195

 

$     6,291

 

7%

 

$            161,475

 

$            151,054

 

$     10,421

 

7%

   

Initial franchise and relicensing fees

 

6,981

 

5,706

 

1,275

 

22%

 

11,987

 

10,862

 

1,125

 

10%

   

Procurement services

 

11,068

 

10,308

 

760

 

7%

 

17,544

 

16,104

 

1,440

 

9%

   

Marketing and reservation system

 

158,035

 

133,814

 

24,221

 

18%

 

267,510

 

260,175

 

7,335

 

3%

   

Other

 

8,229

 

5,728

 

2,501

 

44%

 

16,181

 

10,674

 

5,507

 

52%

   

      Total revenues

 

276,799

 

241,751

 

35,048

 

14%

 

474,697

 

448,869

 

25,828

 

6%

   
                                     

OPERATING EXPENSES:

                                   
                                     

Selling, general and administrative

 

38,208

 

40,039

 

(1,831)

 

(5%)

 

71,054

 

75,158

 

(4,104)

 

(5%)

   

Depreciation and amortization

 

3,050

 

2,956

 

94

 

3%

 

6,120

 

5,721

 

399

 

7%

   

Marketing and reservation system

 

158,035

 

133,814

 

24,221

 

18%

 

267,510

 

260,175

 

7,335

 

3%

   

Total operating expenses

 

199,293

 

176,809

 

22,484

 

13%

 

344,684

 

341,054

 

3,630

 

1%

   
                                     

Operating income

 

77,506

 

64,942

 

12,564

 

19%

 

130,013

 

107,815

 

22,198

 

21%

   
                                     

OTHER INCOME AND EXPENSES, NET:

                                   

Interest expense

 

11,280

 

11,224

 

56

 

0%

 

22,485

 

22,316

 

169

 

1%

   

Interest income

 

(1,438)

 

(827)

 

(611)

 

74%

 

(2,702)

 

(1,666)

 

(1,036)

 

62%

   

Other (gains) losses

 

(576)

 

(321)

 

(255)

 

79%

 

(1,473)

 

(259)

 

(1,214)

 

469%

   

Equity in net (income) loss of affiliates

 

859

 

(744)

 

1,603

 

(215%)

 

2,939

 

1,436

 

1,503

 

105%

   

Total other income and expenses, net

 

10,125

 

9,332

 

793

 

8%

 

21,249

 

21,827

 

(578)

 

(3%)

   
                                     

Income before income taxes

 

67,381

 

55,610

 

11,771

 

21%

 

108,764

 

85,988

 

22,776

 

26%

   

Income taxes

 

22,386

 

16,788

 

5,598

 

33%

 

35,025

 

26,003

 

9,022

 

35%

   

Net income

 

$              44,995

 

$              38,822

 

$     6,173

 

16%

 

$              73,739

 

$              59,985

 

$     13,754

 

23%

   
                                     
                                     

Basic earnings per share

 

$                  0.80

 

$                  0.69

 

$      0.11

 

16%

 

$                  1.31

 

$                  1.06

 

$        0.25

 

24%

   
                                     
                                     

Diluted earnings per share

 

$                  0.79

 

$                  0.68

 

$      0.11

 

16%

 

$                  1.30

 

$                  1.06

 

$        0.24

 

23%

   
                                     

 

 

 

 

Choice Hotels International, Inc. and Subsidiaries

   

Exhibit 2

Consolidated Balance Sheets

       
               
               

(In thousands, except per share amounts)

 June 30, 

 

 December 31, 

         

2017

 

2016

         

(Unaudited)

   
               

ASSETS

           
               

Cash and cash equivalents

   

$           197,957

 

$         202,463

Accounts receivable, net

   

146,653

 

107,336

Other current assets

   

35,617

 

35,074

 

Total current assets

   

380,227

 

344,873

               

Fixed assets and intangibles, net

 

178,271

 

178,704

Notes receivable, net of allowances

 

132,004

 

110,608

Investments in unconsolidated entities

131,722

 

94,839

Investments, employee benefit plans, at fair value

19,451

 

16,975

Other assets

     

106,298

 

106,469

               
   

Total assets

 

$           947,973

 

$         852,468

               
               
               

LIABILITIES AND SHAREHOLDERS' DEFICIT

     
               

Accounts payable 

   

$              67,736

 

$            48,071

Accrued expenses and other current liabilities

71,973

 

81,184

Deferred revenue

   

135,350

 

133,218

Current portion of long-term debt

 

1,302

 

1,195

 

Total current liabilities

 

276,361

 

263,668

               

Long-term debt

   

862,965

 

839,409

Deferred compensation & retirement plan obligations  

23,927

 

21,595

Other liabilities

     

37,337

 

39,145

               
 

Total liabilities

   

1,200,590

 

1,163,817

               
 

Total shareholders' deficit

 

(252,617)

 

(311,349)

               
   

Total liabilities and shareholders' deficit

$           947,973

 

$         852,468

               

 

 

 

 

Choice Hotels International, Inc. and Subsidiaries

   

Exhibit 3

Consolidated Statements of Cash Flows

     

(Unaudited)

     
       
       
   

(In thousands)

Six Months Ended June 30,

       
 

2017

 

2016

CASH FLOWS FROM OPERATING ACTIVITIES:

     
       

Net income

$                    73,739

 

$              59,985

       

Adjustments to reconcile net income to net cash provided

     

 by operating activities:

     

  Depreciation and amortization  

6,120

 

5,721

  Loss on disposal of assets

4

 

7

  Provision for bad debts, net

916

 

962

  Non-cash stock compensation and other charges

6,809

 

7,966

  Non-cash interest and other (income) loss

(274)

 

958

  Deferred income taxes

(1,446)

 

4,030

  Equity in net losses from unconsolidated joint ventures less distributions received

3,543

 

2,193

       

Changes in assets and liabilities:

     

  Receivables

(40,673)

 

(39,058)

  Advances to/from marketing and reservation activities, net

17,407

 

(42,671)

  Forgivable notes receivable, net

(14,108)

 

(13,174)

  Accounts payable

18,955

 

10,567

  Accrued expenses and other current liabilities

(11,286)

 

(8,842)

  Income taxes payable/receivable

5,629

 

10,463

  Deferred revenue

2,061

 

42,164

  Other assets

(1,764)

 

(10,834)

  Other liabilities

(1,524)

 

(2,576)

       

 NET CASH PROVIDED BY OPERATING ACTIVITIES 

64,108

 

27,861

       

CASH FLOWS FROM INVESTING ACTIVITIES:

     
       

Investment in property and equipment

(10,687)

 

(10,912)

Investment in intangible assets

(2,228)

 

(322)

Proceeds from sales of assets

-

 

1,700

Acquisitions of real estate

-

 

(25,389)

Contributions to equity method investments

(42,127)

 

(19,688)

Distributions from equity method investments

1,696

 

3,619

Purchases of investments, employee benefit plans

(1,736)

 

(1,140)

Proceeds from sales of investments, employee benefit plans

2,094

 

1,136

Issuance of mezzanine and other notes receivable

(14,977)

 

(13,048)

Collections of mezzanine and other notes receivable

552

 

10,158

Other items, net

110

 

11

       

 NET CASH USED IN INVESTING ACTIVITIES 

(67,303)

 

(53,875)

       

CASH FLOWS FROM FINANCING ACTIVITIES:

     
       

Net borrowings pursuant to revolving credit facilities

23,200

 

87,950

Principal payments on long-term debt

(309)

 

(623)

Purchases of treasury stock

(7,414)

 

(28,278)

Dividends paid

(24,333)

 

(23,193)

Proceeds from exercise of stock options

6,590

 

4,234

       

 NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES

(2,266)

 

40,090

       

Net change in cash and cash equivalents

(5,461)

 

14,076

Effect of foreign exchange rate changes on cash and cash equivalents

955

 

371

Cash and cash equivalents at beginning of period

202,463

 

193,441

       

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$                  197,957

 

$            207,888

       

 

 

 

 

CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES

Exhibit 4

SUPPLEMENTAL OPERATING INFORMATION 

 

DOMESTIC HOTEL SYSTEM

 

(UNAUDITED)

 
                                           
                                           
                                           
                                           
   

For the Six Months Ended June 30, 2017

 

For the Six Months Ended June 30, 2016

 

Change

   
                                           
   

Average Daily

         

Average Daily

         

Average Daily

             
   

Rate

 

Occupancy

 

RevPAR

 

Rate

 

Occupancy

 

RevPAR

 

Rate

 

Occupancy

 

RevPAR

   
                                           

Comfort Inn

 

$             92.00

 

64.7%

 

$          59.48

 

$             90.11

 

64.0%

 

$         57.67

 

2.1%

 

70

bps

 

3.1%

   

Comfort Suites

 

96.16

 

69.3%

 

66.65

 

95.51

 

68.9%

 

65.80

 

0.7%

 

40

bps

 

1.3%

   

Sleep

 

82.29

 

65.0%

 

53.51

 

81.13

 

64.2%

 

52.08

 

1.4%

 

80

bps

 

2.7%

   

Quality

 

77.45

 

58.5%

 

45.32

 

75.79

 

57.9%

 

43.88

 

2.2%

 

60

bps

 

3.3%

   

Clarion

 

82.30

 

58.9%

 

48.45

 

80.52

 

56.3%

 

45.35

 

2.2%

 

260

bps

 

6.8%

   

Econo Lodge

 

60.64

 

53.2%

 

32.26

 

59.24

 

52.4%

 

31.03

 

2.4%

 

80

bps

 

4.0%

   

Rodeway

 

62.61

 

55.1%

 

34.51

 

60.72

 

54.6%

 

33.15

 

3.1%

 

50

bps

 

4.1%

   

MainStay

 

74.51

 

67.1%

 

49.99

 

75.80

 

63.4%

 

48.02

 

(1.7%)

 

370

bps

 

4.1%

   

Suburban

 

51.74

 

76.2%

 

39.44

 

49.67

 

74.9%

 

37.21

 

4.2%

 

130

bps

 

6.0%

   

Cambria hotel & suites

 

133.34

 

72.9%

 

97.16

 

 NA 

 

 NA 

 

 NA 

 

 NA 

 

 NA 

   

 NA 

   

Ascend Hotel Collection

 

123.71

 

54.1%

 

66.96

 

125.21

 

56.9%

 

71.28

 

(1.2%)

 

(280)

bps

 

(6.1%)

   
                                           

Total  (1)

 

$             82.16

 

61.1%

 

$          50.22

 

$             80.77

 

60.5%

 

$         48.84

 

1.7%

 

60

bps

 

2.8%

   
                                           
                                           
                                           
   

For the Three Months Ended June 30, 2017

 

For the Three Months Ended June 30, 2016

 

Change

   
                                           
   

Average Daily

         

Average Daily

         

Average Daily

             
   

Rate

 

Occupancy

 

RevPAR

 

Rate

 

Occupancy

 

RevPAR

 

Rate

 

Occupancy

 

RevPAR

   
                                           

Comfort Inn

 

$             95.96

 

70.6%

 

$          67.76

 

$             93.87

 

70.1%

 

$         65.84

 

2.2%

 

50

bps

 

2.9%

   

Comfort Suites

 

98.54

 

73.4%

 

72.32

 

98.19

 

73.6%

 

72.24

 

0.4%

 

(20)

bps

 

0.1%

   

Sleep

 

84.84

 

69.9%

 

59.27

 

83.93

 

69.5%

 

58.35

 

1.1%

 

40

bps

 

1.6%

   

Quality

 

80.36

 

63.6%

 

51.12

 

78.61

 

63.3%

 

49.79

 

2.2%

 

30

bps

 

2.7%

   

Clarion

 

85.70

 

63.9%

 

54.76

 

84.14

 

62.3%

 

52.46

 

1.9%

 

160

bps

 

4.4%

   

Econo Lodge

 

63.31

 

57.6%

 

36.48

 

61.84

 

57.3%

 

35.46

 

2.4%

 

30

bps

 

2.9%

   

Rodeway

 

64.94

 

58.7%

 

38.12

 

63.13

 

57.9%

 

36.56

 

2.9%

 

80

bps

 

4.3%

   

MainStay

 

76.88

 

72.4%

 

55.62

 

78.07

 

68.4%

 

53.40

 

(1.5%)

 

400

bps

 

4.2%

   

Suburban

 

52.42

 

78.2%

 

41.00

 

51.07

 

76.9%

 

39.27

 

2.6%

 

130

bps

 

4.4%

   

Cambria hotel & suites

 

142.23

 

77.2%

 

109.78

 

 NA 

 

 NA 

 

 NA 

 

 NA 

 

 NA 

   

 NA 

   

Ascend Hotel Collection

 

129.17

 

56.8%

 

73.32

 

133.28

 

60.0%

 

79.94

 

(3.1%)

 

(320)

bps

 

(8.3%)

   
                                           

Total  (1)

 

$             85.19

 

65.9%

 

$          56.17

 

$             83.89

 

65.6%

 

$         55.07

 

1.5%

 

30

bps

 

2.0%

   
                                           
                                           
                                           
   

For the Quarter Ended

 

For the Six Months Ended

                         
   

6/30/2017

 

6/30/2016

 

6/30/2017

 

6/30/2016

                         
                                           

System-wide effective royalty rate

 

4.58%

 

4.39%

(1)

4.56%

 

4.39%

(1)

                       
                                           
                                           
                                           

(1)Totals for the three and six months ended June 30, 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)

 
                                   
                                   
                                   
   

June 30, 2017

 

June 30, 2016

 

Variance

 
                                   
   

Hotels

 

Rooms

 

Hotels

 

Rooms

 

Hotels

 

Rooms

 

%

 

%

 
                                   

Comfort Inn

 

1,093

 

84,956

 

1,138

 

88,085

 

(45)

 

(3,129)

 

(4.0%)

 

(3.6%)

 

Comfort Suites

 

565

 

43,721

 

564

 

43,522

 

1

 

199

 

0.2%

 

0.5%

 

Sleep

 

385

 

27,574

 

380

 

27,188

 

5

 

386

 

1.3%

 

1.4%

 

Quality

 

1,493

 

116,961

 

1,395

 

110,952

 

98

 

6,009

 

7.0%

 

5.4%

 

Clarion

 

163

 

22,159

 

168

 

23,033

 

(5)

 

(874)

 

(3.0%)

 

(3.8%)

 

Econo Lodge

 

843

 

51,757

 

847

 

52,385

 

(4)

 

(628)

 

(0.5%)

 

(1.2%)

 

Rodeway

 

586

 

34,085

 

528

 

29,771

 

58

 

4,314

 

11.0%

 

14.5%

 

MainStay

 

56

 

4,074

 

54

 

4,020

 

2

 

54

 

3.7%

 

1.3%

 

Suburban

 

59

 

6,578

 

58

 

6,471

 

1

 

107

 

1.7%

 

1.7%

 

Cambria hotel & suites

 

31

 

4,160

 

25

 

3,113

 

6

 

1,047

 

24.0%

 

33.6%

 

Ascend Hotel Collection

 

135

 

10,877

 

116

 

9,650

 

19

 

1,227

 

16.4%

 

12.7%

 
                                   

Domestic Franchises

 

5,409

 

406,902

 

5,273

 

398,190

 

136

 

8,712

 

2.6%

 

2.2%

 
                                   

International Franchises

 

1,144

 

113,322

 

1,156

 

111,366

 

(12)

 

1,956

 

(1.0%)

 

1.8%

 
                                   

Total Franchises

 

6,553

 

520,224

 

6,429

 

509,556

 

124

 

10,668

 

1.9%

 

2.1%

 
                                   

 

 

 

 

 

CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES

     

Exhibit 6

 

SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION

         
 

(UNAUDITED)

         
                       
                       

HOTEL FRANCHISING REVENUES AND ADJUSTED HOTEL FRANCHISING MARGINS

   
                       

(dollar amounts in thousands)

 

Three Months Ended June 30, 

 

Six Months Ended June 30, 

   
                       
     

2017

 

2016

 

2017

 

2016

   
 

Hotel Franchising Revenues:

                   
                       
 

Total Revenues

 

$              276,799

 

$               241,751

 

$              474,697

 

$               448,869

   
 

Adjustments:

                   
 

     Marketing and reservation system revenues

 

(158,035)

 

(133,814)

 

(267,510)

 

(260,175)

   
 

     Non-hotel franchising activities

 

(2,557)

 

(2,068)

 

(5,112)

 

(4,097)

   
 

Hotel Franchising Revenues

 

$              116,207

 

$               105,869

 

$              202,075

 

$               184,597

   
                       
 

Adjusted Hotel Franchising Margins:

                   
                       
 

Operating Margin:

                   
                       
 

Total Revenues

 

$              276,799

 

$               241,751

 

$              474,697

 

$               448,869

   
 

Operating Income

 

$                77,506

 

$                 64,942

 

$              130,013

 

$               107,815

   
 

     Operating Margin

 

28.0%

 

26.9%

 

27.4%

 

24.0%

   
                       
 

Adjusted Hotel Franchising Margin:

                   
                       
 

Hotel Franchising Revenues

 

$              116,207

 

$               105,869

 

$              202,075

 

$               184,597

   
                       
 

Operating Income

 

$                77,506

 

$                 64,942

 

$              130,013

 

$               107,815

   
 

Mark to market adjustments on non-qualified retirement plan investments

$                    590

 

$                      315

 

$                  1,441

 

$                      255

   
 

Executive termination benefits

 

$                         -

 

$                   2,206

 

$                         -

 

$                   2,206

   
 

Non-hotel franchising activities operating loss

 

3,801

 

6,084

 

5,906

 

11,740

   
 

Adjusted Hotel Franchising Operating Income

 

$                81,897

 

$                 73,547

 

$              137,360

 

$               122,016

   
                       
 

     Adjusted Hotel Franchising Margins

 

70.5%

 

69.5%

 

68.0%

 

66.1%

   
                       
                       
                       

ADJUSTED HOTEL FRANCHISING SELLING, GENERAL AND ADMINISTRATION EXPENSES

     
                       

(dollar amounts in thousands)

 

Three Months Ended June 30, 

 

Six Months Ended June 30, 

   
                       
     

2017

 

2016

 

2017

 

2016

   
                       
 

Total Selling, General and Administrative Expenses

 

$                38,208

 

$                 40,039

 

$                71,054

 

$                 75,158

   
 

Mark to market adjustments on non-qualified retirement plan investments

$                   (590)

 

$                     (315)

 

$                 (1,441)

 

$                     (255)

   
 

Executive termination benefits

 

$                         -

 

$                  (2,206)

 

$                          -

 

$                  (2,206)

   
 

Non-hotel franchising activities

 

(5,415)

 

(7,045)

 

(9,095)

 

(13,715)

   
 

Adjusted Hotel Franchising Selling, General and Administration Expenses

$                32,203

 

$                 30,473

 

$                60,518

 

$                 58,982

   
                       
                       
                       

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

       
                       

(dollar amounts in thousands)

                   
     

Three Months Ended June 30, 

 

Six Months Ended June 30, 

   
                       
     

2017

 

2016

 

2017

 

2016

   
                       

Net income

 

$                44,995

 

$                 38,822

 

$                73,739

 

$                 59,985

   
 

Income taxes

 

22,386

 

16,788

 

35,025

 

26,003

   
 

Interest expense

 

11,280

 

11,224

 

22,485

 

22,316

   
 

Interest income

 

(1,438)

 

(827)

 

(2,702)

 

(1,666)

   
 

Other (gains) losses

 

(576)

 

(321)

 

(1,473)

 

(259)

   
 

Equity in net (income) loss of affiliates

 

859

 

(744)

 

2,939

 

1,436

   
 

Depreciation and amortization

 

3,050

 

2,956

 

6,120

 

5,721

   
 

Executive termination benefits

 

-

 

2,206

 

-

 

2,206

   
 

Mark to market adjustments on non-qualified retirement plan investments

590

 

315

 

1,441

 

255

   

Adjusted EBITDA

 

$                81,146

 

$                 70,419

 

$              137,574

 

$               115,997

   
                       

Hotel franchising 

 

$                84,004

 

$                 75,397

 

$              141,557

 

$               125,616

   

Non-hotel franchising activities

 

(2,858)

 

(4,978)

 

(3,983)

 

(9,619)

   
     

$                81,146

 

$                 70,419

 

$              137,574

 

$               115,997

   
                       
                       
                       

ADJUSTED NET INCOME AND ADJUSTED DILUTED EARNINGS PER SHARE (EPS)

     
                       

(dollar amounts in thousands, except per share amounts)

 

Three Months Ended June 30, 

 

Six Months Ended June 30, 

   
                       
     

2017

 

2016

 

2017

 

2016

   
                       

Net Income

 

$                44,995

 

$                 38,822

 

$                73,739

 

$                 59,985

   

Adjustments:

                   
 

Executive termination benefits

 

-

 

1,394

 

-

 

1,394

   

Adjusted Net Income

 

$                44,995

 

$                 40,216

 

$                73,739

 

$                 61,379

   
                       
                       

Diluted Earnings Per Share

 

$                   0.79

 

$                     0.68

 

$                   1.30

 

$                     1.06

   

Adjustments:

                   
 

Executive termination benefits

 

-

 

0.03

 

-

 

0.02

   

Adjusted Diluted Earnings Per Share (EPS)

 

$                   0.79

 

$                     0.71

 

$                   1.30

 

$                     1.08

   
                       
                       
                       

ADJUSTED EBITDA FULL YEAR FORECAST

         
                       

(dollar amounts in thousands)

                   
     

Range

       
     

Estimated Adjusted EBITDA

       
     

Fiscal Year 2017

       
                       

Net income

 

$              160,000

 

$               163,000

           
 

Income taxes

 

77,500

 

78,500

           
 

Interest expense

 

45,900

 

45,900

           
 

Interest income

 

(5,100)

 

(5,100)

           
 

Gain on sale of assets

 

-

 

-

           
 

Other gains

 

(1,500)

 

(1,500)

           
 

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

1,500

 

1,500

           

Adjusted EBITDA

 

$              293,000

 

$               297,000

           
                       

Hotel franchising 

 

$              299,000

 

$               303,000

           

Non-hotel franchising activities

 

(6,000)

 

(6,000)

           
     

$              293,000

 

$               297,000

           
                       

 

 

 

 

View original content with multimedia:http://www.prnewswire.com/news-releases/choice-hotels-international-reports-a-16-percent-increase-in-second-quarter-diluted-earnings-per-share-300497928.html

SOURCE Choice Hotels International, Inc.

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