Press Releases

Choice Hotels International Reports Third Quarter Financial Results
Domestic Unit Growth Increased 2.8%

ROCKVILLE, Md., Nov. 6, 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 September 30, 2017. Net income for the 2017 third quarter was $47.6 million, or $0.84 per diluted share, compared to $47.6 million or $0.84 per diluted share for the 2016 third quarter. Third quarter adjusted diluted earnings per share (EPS) was $0.95, a 13 percent increase from the 2016 third quarter. Third quarter adjusted earnings before income taxes, depreciation and amortization (EBITDA) was $92.5 million, compared to $82.0 million in the prior-year third quarter, a 13 percent increase from the 2016 third quarter.

Choice Hotels International Logo chain (PRNewsFoto/Choice Hotels International, Inc)

"Choice Hotels is uniquely positioned in the industry as a company at the intersection of hospitality, franchising and technology. Our strong brands, focus on the guest experience and franchisee profitability, and industry-leading technology solutions and tools continue to drive positive results," said Patrick Pacious, president and chief executive officer, Choice Hotels. "In the third quarter, our impressive performance was highlighted by a 13 percent increase in adjusted diluted earnings per share and a nearly 3 percent increase in our domestic unit growth."

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

Overall Results

  • Adjusted diluted EPS for the third quarter was $0.95, a 13 percent increase from the third quarter of the prior year.
     
  • Adjusted EBITDA totaled $92.5 million for the third quarter, a 13 percent increase from the third quarter of the prior year.
     
  • Adjusted EBITDA from hotel franchising activities for the third quarter increased 9 percent from the third quarter of the prior year to $94.0 million.
     
  • Total revenues and hotel franchising revenues for the third quarter both increased 10 percent from the third quarter of the prior year.

Royalties

  • Domestic royalty fees for the third quarter totaled $98.3 million, an 8.4 percent increase from the third quarter of the prior year.
     
  • Domestic system-wide revenue per available room (RevPAR) increased 2.1 percent for the third quarter compared to the third quarter of the prior year. Occupancy and average daily rates increased 70 basis points and 1.2 percent, respectively, in the third quarter compared to the same period of 2016.
     
  • Effective royalty rate increased 19 basis points for the third quarter of 2017, compared to the third quarter of the prior year.
     
  • Domestic franchised hotels, as of September 30, 2017, increased 2.8 percent from September 30, 2016.
     
  • Quality Inn surpassed 1,500 open domestic hotels during the third quarter, and the number of domestic hotels under this brand increased over 7 percent from September 30, 2016.
     
  • Domestic and international rooms, as of September 30, 2017, increased 2.1 percent and 2.3 percent, respectively, from September 30, 2016.

Development

  • New, executed domestic franchised hotel development contracts totaled 133 in the third quarter. Executed domestic franchised hotel development for the nine months ended September 30, 2017, totaled 415, a 10 percent increase from the same period of the prior year.
     
  • The company executed 24 new domestic franchise agreements during the third quarter for its upscale brands, Cambria Hotels and the Ascend Hotel Collection, a 71 percent increase from the same period of the prior year. The domestic pipeline for the company's upscale brands now exceeds 135 hotels.
     
  • Domestic relicensing and contract renewal transactions totaled 121 for the three months ended September 30, 2017, a 6 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 September 30, 2017, increased 16 percent to 751 hotels from September 30, 2016.
     
  • The new construction domestic pipeline totaled 530 hotels at September 30, 2017, a 26 percent increase from September 30, 2016.

Use of Cash Flows

Dividends
During the nine months ended September 30, 2017, the company paid cash dividends totaling approximately $36 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
During the nine months ended September 30, 2017, the company repurchased $9 million of common stock under its share repurchase program as well as repurchases from employees in connection with tax withholding and option exercises relating to awards under the company's equity incentive plans. The company currently has authorization to purchase up to 4.0 million additional shares under its share repurchase program. 

Hotel Development & Financing
Pursuant to its program to encourage acceleration of the growth of the upscale Cambria Hotels brand, the company advanced approximately $75 million in support of the brand's development during the nine months ended September 30, 2017. The company also recycled approximately $29 million of prior investments in Cambria Hotels development projects, resulting in net advances of $46 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 September 30, 2017, the company had approximately $244 million reflected in its consolidated balance sheet pursuant to these financial support activities. With respect to lending and joint venture investments, the company generally expects to recycle these loans and investments within a five-year period.

Special Items

During the three and nine months ended September 30, 2017, the company accelerated certain compensation expenses totaling $12.0 million in conjunction with the company's chief executive officer succession plan. In addition, the company recognized an impairment on a below market lease intangible recorded in conjunction with the company's acquisition of an office building leased to a third-party in 2014. The impairment of this below market lease intangible resulted in a reduction to the company's selling, general and administrative expenses totaling $1.2 million during the three and nine months ended September 30, 2017. These special items impacted diluted EPS by $0.11 per share for the three and nine months ended September 30, 2017.

During the nine months ended September 30, 2016, the company recorded an executive termination benefit charge of approximately $2.2 million. This special item impacted diluted EPS by $0.02 per share for the nine months ended September 30, 2016.

The company evaluates the non-GAAP measures presented herein that exclude executive termination benefits, impairment of below market lease costs and acceleration of the company's executive succession plan 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

  • Adjusted EBITDA for full-year 2017 is expected to range between $294 million and $298 million.
  • The company's fourth-quarter 2017 adjusted diluted EPS is expected to range between $0.60 and $0.62.
  • The company expects full-year 2017 adjusted diluted EPS to range between $2.84 and $2.88.
  • The effective tax rate is expected to be approximately 33 percent for the fourth quarter and 32 percent for full-year 2017.
  • All estimates for 2017 exclude costs associated with the company's executive succession plan and impairment of lease acquisition costs.
  • 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 the company incurs 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 $301 million and $305 million.
  • Net domestic unit growth for 2017 is expected to range between approximately 2.5 percent and 3 percent.
  • RevPAR is expected to increase between 1 percent and 3 percent for the fourth 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 the company's non-hotel franchising operations are expected to be approximately $7 million.

Conference Call
Choice will conduct a conference call on Monday, November 6, 2017, at 10:00 a.m. ET to discuss the company's 2017 third 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 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 Monday, November 6, 2017, by calling 1-855-859-2056 (domestic) or 1-404-537-3406 (international) and entering access code 88756097. 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 September 30, 2017, over 800 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 33 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 Net Income and Adjusted Diluted Earnings Per Share: Adjusted net income and diluted EPS excludes the impact of executive termination benefits, impairment of lease acquisition costs and the acceleration of the company's executive succession plan. We exclude these items because they occur infrequently and can vary considerably from period to period without reference to the company's operating performance. We consider adjusted net income and diluted EPS to be an indicator of operating performance because excluding these items allows for period-over period comparisons of our ongoing operations.

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, executive termination benefits, impairment of lease acquisition costs and acceleration of the company's executive succession plan. 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 September 30,

 

Nine Months Ended September 30,

           

Variance

         

Variance

   

2017

 

2016

 

$

 

%

 

2017

 

2016

 

$

 

%

(In thousands, except per share amounts)

                               
                                 

REVENUES:

                               
                                 

Royalty fees

 

$            104,252

 

$              96,114

 

$     8,138

 

8%

 

$            265,727

 

$            247,168

 

$     18,559

 

8%

Initial franchise and relicensing fees

 

6,403

 

6,284

 

119

 

2%

 

18,390

 

17,146

 

1,244

 

7%

Procurement services

 

8,103

 

7,615

 

488

 

6%

 

25,647

 

23,719

 

1,928

 

8%

Marketing and reservation system

 

167,763

 

152,018

 

15,745

 

10%

 

435,273

 

412,193

 

23,080

 

6%

Other

 

8,567

 

5,546

 

3,021

 

54%

 

24,748

 

16,220

 

8,528

 

53%

      Total revenues

 

295,088

 

267,577

 

27,511

 

10%

 

769,785

 

716,446

 

53,339

 

7%

                                 

OPERATING EXPENSES:

                               
                                 

Selling, general and administrative

 

46,364

 

34,357

 

12,007

 

35%

 

117,418

 

109,515

 

7,903

 

7%

Depreciation and amortization

 

3,095

 

2,986

 

109

 

4%

 

9,215

 

8,707

 

508

 

6%

Marketing and reservation system

 

167,763

 

152,018

 

15,745

 

10%

 

435,273

 

412,193

 

23,080

 

6%

Total operating expenses

 

217,222

 

189,361

 

27,861

 

15%

 

561,906

 

530,415

 

31,491

 

6%

                                 

Gain (loss) on sale of assets, net

 

(32)

 

402

 

(434)

 

(108%)

 

(32)

 

402

 

(434)

 

(108%)

                                 

Operating income

 

77,834

 

78,618

 

(784)

 

(1%)

 

207,847

 

186,433

 

21,414

 

11%

                                 

OTHER INCOME AND EXPENSES, NET:

                               

Interest expense

 

11,399

 

11,150

 

249

 

2%

 

33,884

 

33,466

 

418

 

1%

Interest income

 

(1,575)

 

(836)

 

(739)

 

88%

 

(4,277)

 

(2,502)

 

(1,775)

 

71%

Other gains

 

(778)

 

(746)

 

(32)

 

4%

 

(2,251)

 

(1,005)

 

(1,246)

 

124%

Equity in net (income) loss of affiliates

 

274

 

(1,150)

 

1,424

 

(124%)

 

3,213

 

286

 

2,927

 

1023%

Total other income and expenses, net

 

9,320

 

8,418

 

902

 

11%

 

30,569

 

30,245

 

324

 

1%

                                 

Income before income taxes

 

68,514

 

70,200

 

(1,686)

 

(2%)

 

177,278

 

156,188

 

21,090

 

14%

Income taxes

 

20,919

 

22,635

 

(1,716)

 

(8%)

 

55,944

 

48,638

 

7,306

 

15%

Net income

 

$              47,595

 

$              47,565

 

$         30

 

0%

 

$            121,334

 

$            107,550

 

$     13,784

 

13%

                                 
                                 

Basic earnings per share

 

$                  0.84

 

$                  0.85

 

$     (0.01)

 

(1%)

 

$                  2.15

 

$                  1.91

 

$        0.24

 

13%

                                 
                                 

Diluted earnings per share

 

$                  0.84

 

$                  0.84

 

$          -

 

0%

 

$                  2.14

 

$                  1.90

 

$        0.24

 

13%

 

 

Choice Hotels International, Inc. and Subsidiaries

   

Exhibit 2

Consolidated Balance Sheets

       
               
               

(In thousands, except per share amounts)

 September 30, 

 

 December 31, 

         

2017

 

2016

         

(Unaudited)

   
               

ASSETS

           
               

Cash and cash equivalents

   

$           238,848

 

$         202,463

Accounts receivable, net

   

151,672

 

107,336

Other current assets

   

64,803

 

35,074

 

Total current assets

   

455,323

 

344,873

               

Fixed assets and intangibles, net

 

178,879

 

178,704

Notes receivable, net of allowances

 

139,803

 

110,608

Investments in unconsolidated entities

131,128

 

94,839

Investments, employee benefit plans, at fair value

19,749

 

16,975

Other assets

     

36,310

 

106,469

               
   

Total assets

 

$           961,192

 

$         852,468

               
               
               

LIABILITIES AND SHAREHOLDERS' DEFICIT

     
               

Accounts payable 

   

$              68,261

 

$            48,071

Accrued expenses and other current liabilities

66,515

 

81,184

Deferred revenue

   

136,956

 

133,218

Current portion of long-term debt

 

1,302

 

1,195

 

Total current liabilities

 

273,034

 

263,668

               

Long-term debt

   

800,001

 

839,409

Deferred compensation & retirement plan obligations  

24,355

 

21,595

Other liabilities

     

64,182

 

39,145

               
 

Total liabilities

   

1,161,572

 

1,163,817

               
 

Total shareholders' deficit

 

(200,380)

 

(311,349)

               
   

Total liabilities and shareholders' deficit

$           961,192

 

$         852,468

 

 

Choice Hotels International, Inc. and Subsidiaries

   

Exhibit 3

Consolidated Statements of Cash Flows

     

(Unaudited)

     
       
       
   

(In thousands)

Nine Months Ended September 30,

       
 

2017

 

2016

CASH FLOWS FROM OPERATING ACTIVITIES:

     
       

Net income

$                  121,334

 

$            107,550

       

Adjustments to reconcile net income to net cash provided

     

 by operating activities:

     

  Depreciation and amortization  

9,215

 

8,707

  Loss (gain) on disposal of assets

32

 

(377)

  Provision for bad debts, net

1,796

 

1,093

  Non-cash stock compensation and other charges

20,369

 

11,037

  Non-cash interest and other (income) loss

(451)

 

807

  Deferred income taxes

44,777

 

(4,329)

  Equity in net losses from unconsolidated joint ventures less distributions received

4,278

 

1,654

       

Changes in assets and liabilities, net of acquisition:

     

  Receivables

(47,520)

 

(42,426)

  Advances to/from marketing and reservation activities, net

43,697

 

(25,783)

  Forgivable notes receivable, net

(21,443)

 

(15,109)

  Accounts payable

19,679

 

(3,532)

  Accrued expenses and other current liabilities

(11,540)

 

(14,261)

  Income taxes payable/receivable

(20,114)

 

21,368

  Deferred revenue

3,650

 

49,976

  Other assets

(1,162)

 

(9,958)

  Other liabilities

(1,578)

 

1,992

       

 NET CASH PROVIDED BY OPERATING ACTIVITIES 

165,019

 

88,409

       

CASH FLOWS FROM INVESTING ACTIVITIES:

     
       

Investment in property and equipment

(17,514)

 

(17,584)

Investment in intangible assets

(2,376)

 

(482)

Contributions to equity method investments

(44,876)

 

(24,179)

Distributions from equity method investments

4,307

 

3,700

Purchases of investments, employee benefit plans

(2,140)

 

(1,430)

Proceeds from sales of investments, employee benefit plans

2,150

 

1,395

Issuance of mezzanine and other notes receivable

(18,565)

 

(20,281)

Collections of mezzanine and other notes receivable

630

 

11,040

Proceeds from sales of assets

-

 

8,360

Acquisitions of real estate

-

 

(25,263)

Business acquisition, net of cash acquired

-

 

(1,341)

Other items, net

109

 

60

       

 NET CASH USED IN INVESTING ACTIVITIES 

(78,275)

 

(66,005)

       

CASH FLOWS FROM FINANCING ACTIVITIES:

     
       

Net (repayments) borrowings pursuant to revolving credit facilities

(39,974)

 

52,814

Principal payments on long-term debt

(484)

 

(836)

Debt issuance costs

-

 

(284)

Purchases of treasury stock

(8,887)

 

(33,958)

Dividends paid

(36,483)

 

(34,690)

Proceeds from transfer of interest in notes receivable

24,237

 

-

Proceeds from exercise of stock options

9,799

 

6,802

       

 NET CASH USED BY FINANCING ACTIVITIES

(51,792)

 

(10,152)

       

Net change in cash and cash equivalents

34,952

 

12,252

Effect of foreign exchange rate changes on cash and cash equivalents

1,433

 

260

Cash and cash equivalents at beginning of period

202,463

 

193,441

       

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$                  238,848

 

$            205,953

 

 

                                   

Exhibit 4

CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES

SUPPLEMENTAL OPERATING INFORMATION 

DOMESTIC HOTEL SYSTEM

(UNAUDITED)

                                         
                                         
                                         
                                         
   

For the Nine Months Ended September 30, 2017

 

For the Nine Months Ended September 30, 2016

 

Change

 
                                         
   

Average Daily

         

Average Daily

         

Average Daily

           
   

Rate

 

Occupancy

 

RevPAR

 

Rate

 

Occupancy

 

RevPAR

 

Rate

 

Occupancy

 

RevPAR

 
                                         

Comfort Inn

 

$             95.42

 

67.8%

 

$          64.70

 

$             93.78

 

67.2%

 

$         63.00

 

1.7%

 

60

bps

 

2.7%

 

Comfort Suites

 

98.05

 

71.4%

 

70.01

 

97.44

 

70.8%

 

69.01

 

0.6%

 

60

bps

 

1.4%

 

Sleep

 

83.93

 

67.1%

 

56.34

 

83.09

 

66.4%

 

55.14

 

1.0%

 

70

bps

 

2.2%

 

Quality

 

80.46

 

61.5%

 

49.50

 

78.97

 

60.8%

 

48.00

 

1.9%

 

70

bps

 

3.1%

 

Clarion

 

85.09

 

61.7%

 

52.53

 

83.67

 

59.7%

 

49.95

 

1.7%

 

200

bps

 

5.2%

 

Econo Lodge

 

63.71

 

56.1%

 

35.74

 

62.33

 

55.3%

 

34.47

 

2.2%

 

80

bps

 

3.7%

 

Rodeway

 

65.73

 

57.9%

 

38.04

 

64.14

 

57.3%

 

36.74

 

2.5%

 

60

bps

 

3.5%

 

MainStay

 

76.65

 

69.7%

 

53.42

 

77.34

 

66.2%

 

51.18

 

(0.9%)

 

350

bps

 

4.4%

 

Suburban

 

51.99

 

77.1%

 

40.10

 

50.15

 

76.0%

 

38.11

 

3.7%

 

110

bps

 

5.2%

 

Cambria hotel & suites

 

136.93

 

75.1%

 

102.83

 

 NA 

 

 NA 

 

 NA 

 

 NA 

 

 NA 

   

 NA 

 

Ascend Hotel Collection

 

128.86

 

56.6%

 

72.87

 

130.34

 

59.0%

 

76.95

 

(1.1%)

 

(240)

bps

 

(5.3%)

 
                                         

Total  (1)

 

$             84.98

 

63.9%

 

$          54.28

 

$             83.71

 

63.2%

 

$         52.91

 

1.5%

 

70

bps

 

2.6%

 
                                         
                                         
                                         
   

For the Three Months Ended September 30, 2017

 

For the Three Months Ended September 30, 2016

 

Change

 
                                         
   

Average Daily

         

Average Daily

         

Average Daily

           
   

Rate

 

Occupancy

 

RevPAR

 

Rate

 

Occupancy

 

RevPAR

 

Rate

 

Occupancy

 

RevPAR

 
                                         

Comfort Inn

 

$           101.25

 

73.9%

 

$          74.82

 

$           100.02

 

73.4%

 

$         73.41

 

1.2%

 

50

bps

 

1.9%

 

Comfort Suites

 

101.43

 

75.5%

 

76.55

 

100.95

 

74.6%

 

75.35

 

0.5%

 

90

bps

 

1.6%

 

Sleep

 

86.85

 

71.3%

 

61.88

 

86.59

 

70.6%

 

61.15

 

0.3%

 

70

bps

 

1.2%

 

Quality

 

85.44

 

67.2%

 

57.43

 

84.31

 

66.4%

 

55.96

 

1.3%

 

80

bps

 

2.6%

 

Clarion

 

89.83

 

67.3%

 

60.46

 

88.98

 

66.4%

 

59.08

 

1.0%

 

90

bps

 

2.3%

 

Econo Lodge

 

68.87

 

61.7%

 

42.51

 

67.44

 

60.9%

 

41.08

 

2.1%

 

80

bps

 

3.5%

 

Rodeway

 

70.78

 

63.0%

 

44.56

 

69.72

 

62.3%

 

43.45

 

1.5%

 

70

bps

 

2.6%

 

MainStay

 

80.42

 

74.8%

 

60.17

 

79.91

 

71.5%

 

57.13

 

0.6%

 

330

bps

 

5.3%

 

Suburban

 

52.46

 

78.9%

 

41.39

 

51.09

 

78.2%

 

39.96

 

2.7%

 

70

bps

 

3.6%

 

Cambria hotel & suites

 

142.84

 

79.1%

 

112.95

 

 NA 

 

 NA 

 

 NA 

 

 NA 

 

 NA 

   

 NA 

 

Ascend Hotel Collection

 

137.02

 

60.9%

 

83.40

 

138.97

 

63.0%

 

87.50

 

(1.4%)

 

(210)

bps

 

(4.7%)

 
                                         

Total  (1)

 

$             89.78

 

69.2%

 

$          62.08

 

$             88.74

 

68.5%

 

$         60.81

 

1.2%

 

70

bps

 

2.1%

 
                                         
                                         
                                         
   

For the Quarter Ended

 

For the Nine Months Ended

                       
   

9/30/2017

 

9/30/2016

 

9/30/2017

 

9/30/2016

                       
                                         

System-wide effective royalty rate

 

4.58%

 

4.39%

(1)

4.57%

 

4.39%

(1)

                     
                                         
                                         
                                         

(1)Totals for the three and nine months ended September 30, 2016 have been revised from previous disclosures to include the operating statistics for the Cambria hotel & suites brand

           

 

 

                           

Exhibit 5

CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES

SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA

(UNAUDITED)

                                 
                                 
                                 
   

September 30, 2017

 

September 30, 2016

 

Variance

                                 
   

Hotels

 

Rooms

 

Hotels

 

Rooms

 

Hotels

 

Rooms

 

%

 

%

                                 

Comfort Inn

 

1,083

 

84,427

 

1,126

 

87,346

 

(43)

 

(2,919)

 

(3.8%)

 

(3.3%)

Comfort Suites

 

566

 

43,857

 

565

 

43,610

 

1

 

247

 

0.2%

 

0.6%

Sleep

 

382

 

27,365

 

378

 

27,035

 

4

 

330

 

1.1%

 

1.2%

Quality

 

1,509

 

117,948

 

1,407

 

111,564

 

102

 

6,384

 

7.2%

 

5.7%

Clarion

 

160

 

21,267

 

164

 

22,456

 

(4)

 

(1,189)

 

(2.4%)

 

(5.3%)

Econo Lodge

 

839

 

51,322

 

853

 

52,773

 

(14)

 

(1,451)

 

(1.6%)

 

(2.7%)

Rodeway

 

595

 

34,331

 

526

 

30,058

 

69

 

4,273

 

13.1%

 

14.2%

MainStay

 

57

 

4,135

 

54

 

4,020

 

3

 

115

 

5.6%

 

2.9%

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

 

140

 

11,062

 

119

 

9,761

 

21

 

1,301

 

17.6%

 

13.3%

                                 

Domestic Franchises

 

5,421

 

406,452

 

5,275

 

398,207

 

146

 

8,245

 

2.8%

 

2.1%

                                 

International Franchises

 

1,136

 

113,542

 

1,144

 

110,945

 

(8)

 

2,597

 

(0.7%)

 

2.3%

                                 

Total Franchises

 

6,557

 

519,994

 

6,419

 

509,152

 

138

 

10,842

 

2.1%

 

2.1%

 

 

       

Exhibit 6

 

CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES

     
 

SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION

     
 

(UNAUDITED)

     
                   
                   

HOTEL FRANCHISING REVENUES AND ADJUSTED HOTEL FRANCHISING MARGINS

           
                   

(dollar amounts in thousands)

 

Three Months Ended September 30, 

 

Nine Months Ended September 30, 

                   
     

2017

 

2016

 

2017

 

2016

 

Hotel Franchising Revenues:

               
                   
 

Total Revenues

 

$              295,088

 

$               267,577

 

$              769,785

 

$               716,446

 

Adjustments:

               
 

     Marketing and reservation system revenues

 

(167,763)

 

(152,018)

 

(435,273)

 

(412,193)

 

     Non-hotel franchising activities

 

(2,859)

 

(2,424)

 

(7,971)

 

(6,521)

 

Hotel Franchising Revenues

 

$              124,466

 

$               113,135

 

$              326,541

 

$               297,732

                   
 

Adjusted Hotel Franchising Margins:

               
                   
 

Operating Margin:

               
                   
 

Total Revenues

 

$              295,088

 

$               267,577

 

$              769,785

 

$               716,446

 

Operating Income

 

$                77,834

 

$                 78,618

 

$              207,847

 

$               186,433

 

     Operating Margin

 

26.4%

 

29.4%

 

27.0%

 

26.0%

                   
 

Adjusted Hotel Franchising Margin:

               
                   
 

Hotel Franchising Revenues

 

$              124,466

 

$               113,135

 

$              326,541

 

$               297,732

                   
 

Operating Income

 

$                77,834

 

$                 78,618

 

$              207,847

 

$               186,433

 

Mark to market adjustments on non-qualified retirement plan investments

773

 

748

 

2,214

 

1,003

 

Executive termination benefits

 

-

 

-

 

-

 

2,206

 

Acceleration of executive succession plan

 

11,964

 

-

 

11,964

 

-

 

Impairment of lease acquisition costs, net

 

(1,185)

 

-

 

(1,185)

 

-

 

Non-hotel franchising activities operating loss

 

2,414

 

5,400

 

8,320

 

17,140

 

Adjusted Hotel Franchising Operating Income

 

$                91,800

 

$                 84,766

 

$              229,160

 

$               206,782

                   
 

     Adjusted Hotel Franchising Margins

 

73.8%

 

74.9%

 

70.2%

 

69.5%

                   
                   
                   
                   
                   

ADJUSTED HOTEL FRANCHISING SELLING, GENERAL AND ADMINISTRATION EXPENSES

           
                   

(dollar amounts in thousands)

 

Three Months Ended September 30, 

 

Nine Months Ended September 30, 

                   
     

2017

 

2016

 

2017

 

2016

                   
 

Total Selling, General and Administrative Expenses

 

$                46,364

 

$                 34,357

 

$              117,418

 

$               109,515

 

Mark to market adjustments on non-qualified retirement plan investments

(773)

 

(748)

 

(2,214)

 

(1,003)

 

Executive termination benefits

 

-

 

-

 

-

 

(2,206)

 

Acceleration of executive succession plan

 

(11,964)

 

-

 

(11,964)

 

-

 

Impairment of lease acquisition costs, net

 

1,185

 

-

 

1,185

 

-

 

Non-hotel franchising activities

 

(4,387)

 

(6,723)

 

(13,482)

 

(20,438)

 

Adjusted Hotel Franchising Selling, General and Administration Expenses

$                30,425

 

$                 26,886

 

$                90,943

 

$                 85,868

                   
                   
                   
                   
                   

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

       
                   

(dollar amounts in thousands)

               
     

Three Months Ended September 30, 

 

Nine Months Ended September 30, 

                   
     

2017

 

2016

 

2017

 

2016

                   

Net income

 

$                47,595

 

$                 47,565

 

$              121,334

 

$               107,550

 

Income taxes

 

20,919

 

22,635

 

55,944

 

48,638

 

Interest expense

 

11,399

 

11,150

 

33,884

 

33,466

 

Interest income

 

(1,575)

 

(836)

 

(4,277)

 

(2,502)

 

Other (gains) losses

 

(778)

 

(746)

 

(2,251)

 

(1,005)

 

Equity in net (income) loss of affiliates

 

274

 

(1,150)

 

3,213

 

286

 

(Gain) loss on sale of assets

 

32

 

(402)

 

32

 

(402)

 

Depreciation and amortization

 

3,095

 

2,986

 

9,215

 

8,707

 

Executive termination benefits

 

-

 

-

 

-

 

2,206

 

Acceleration of executive succession plan

 

11,964

 

-

 

11,964

 

-

 

Impairment of lease acquisition costs, net

 

(1,185)

 

-

 

(1,185)

 

-

 

Mark to market adjustments on non-qualified retirement plan investments

773

 

748

 

2,214

 

1,003

Adjusted EBITDA

 

$                92,513

 

$                 81,950

 

$              230,087

 

$               197,947

                   

Hotel franchising 

 

$                94,041

 

$                 86,248

 

$              235,598

 

$               211,864

Non-hotel franchising activities

 

(1,528)

 

(4,298)

 

(5,511)

 

(13,917)

     

$                92,513

 

$                 81,950

 

$              230,087

 

$               197,947

                   
                   
                   
                   

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

           
                   

(dollar amounts in thousands, except per share amounts)

 

Three Months Ended September 30, 

 

Nine Months Ended September 30, 

                   
     

2017

 

2016

 

2017

 

2016

                   

Net Income

 

$                47,595

 

$                 47,565

 

$              121,334

 

$               107,550

Adjustments:

               
 

Executive termination benefits

 

-

 

-

 

-

 

1,394

 

Acceleration of executive succession plan

 

7,207

 

-

 

7,207

 

-

 

Impairment of lease acquisition costs, net

 

(747)

 

-

 

(747)

 

-

Adjusted Net Income

 

$                54,056

 

$                 47,565

 

$              127,795

 

$               108,944

                   
                   

Diluted Earnings Per Share

 

$                   0.84

 

$                     0.84

 

$                   2.14

 

$                     1.90

Adjustments:

               
 

Executive termination benefits

 

-

 

-

 

-

 

0.02

 

Acceleration of executive succession plan

 

0.12

 

-

 

0.12

 

-

 

Impairment of lease acquisition costs, net

 

(0.01)

 

-

 

(0.01)

 

-

Adjusted Diluted Earnings Per Share (EPS)

 

$                   0.95

 

$                     0.84

 

$                   2.25

 

$                     1.92

                   
                   
                   

ADJUSTED EBITDA FULL YEAR FORECAST

               
                   

(dollar amounts in thousands)

               
     

Range

   
     

Estimated Adjusted EBITDA

   
     

Fiscal Year 2017

   
                   

Net income

 

$              154,600

 

$               157,300

       
 

Income taxes

 

72,700

 

74,000

       
 

Interest expense

 

45,400

 

45,400

       
 

Interest income

 

(5,800)

 

(5,800)

       
 

Other gains

 

(2,200)

 

(2,200)

       
 

Equity in net loss of affiliates

 

3,200

 

3,200

       
 

Depreciation and amortization

 

13,100

 

13,100

       
 

Acceleration of management succession plan

 

12,000

 

12,000

       
 

Impairment of lease acquisition costs, net

 

(1,200)

 

(1,200)

       
 

Mark to market adjustments on non-qualified retirement plan investments

2,200

 

2,200

       

Adjusted EBITDA

 

$              294,000

 

$               298,000

       
                   

Hotel franchising 

 

$              301,000

 

$               305,000

       

Non-hotel franchising activities

 

(7,000)

 

(7,000)

       
     

$              294,000

 

$               298,000

       
                   
                   

ADJUSTED DILUTED EARNINGS PER SHARE (EPS) FULL YEAR FORECAST

           
                   

(dollar amounts in thousands, except per share amounts)

 

Range

       
               
     

Fiscal Year 2017

       
                   

Net Income

 

$              154,600

 

$               157,300

       

Adjustments:

               
 

Acceleration of executive succession plan

 

7,207

 

7,207

       
 

Impairment of lease acquisition costs, net

 

(747)

 

(747)

       

Adjusted Net Income

 

$              161,061

 

$               163,761

       
                   
                   

Diluted Earnings Per Share

 

$                   2.73

 

$                     2.77

       

Adjustments:

               
 

Acceleration of executive succession plan

 

0.12

 

0.12

       
 

Impairment of lease acquisition costs, net

 

(0.01)

 

(0.01)

       

Adjusted Diluted Earnings Per Share (EPS)

 

$                   2.84

 

$                     2.88

       

 

 

 

SOURCE Choice Hotels International, Inc.

For further information: Scott Oaksmith, SVP, Finance & Chief Accounting Officer, (301) 592-6659; Lorri Christou, Vice President, Public Relations, (301) 592-5044