Choice Hotels International, Inc.
"Although our second quarter growth was essentially flat, we are encouraged by our strong domestic RevPAR performance and the almost 10% growth in royalty revenues," said Charles A. Ledsinger, Jr., president and chief executive officer. "The margins, however, were negatively impacted by costs associated with our various Internet initiatives and severance costs associated with the recent outsourcing of the company's information technology support function."
He continued, "We are enjoying a strong summer season, setting new records for the revenues booked through Choice 2001, our central reservations system. In fact, for the first time ever, we exceeded the $7 million mark for a single day three times and recorded 29 days exceeding $6 million, more than double the number of $6 million days in the previous year. Bookings through Choice's web site have generated more than $43 million in the first six months of this year, a 130% increase over the same period a year ago."
The company reported royalty revenues of $34.3 million for second quarter 2000, compared to $31.3 million for second quarter 1999, an increase of 9.8%. Domestic revenue per available room (RevPAR) increased 5.6% from $35.47 in second quarter 1999 to $37.47 in the quarter just ended.
For the first six months of 2000, Choice reported recurring net income of $24.2 million or $0.45 recurring diluted EPS versus recurring net income of $24.1 million and $0.43 recurring diluted EPS reported for the first six months of 1999.
Royalty revenues for the first half of 2000 increased 7.5% to $59.2 million from the $55.1 million for the same period a year ago. The system- wide domestic effective royalty rate increased eight basis points for the first six months of 2000 to 3.71% from 3.63% for the same period a year ago. Domestic RevPAR also was up 3.3% from $31.23 for the first half of 1999 to $32.27 for the first six months of 2000.
System Growth
As of June 30, 2000, the total number of Choice hotels worldwide on-line grew 5.3% to 4,303 from 4,088 as of the same date a year ago. As of the same date, the total number of rooms worldwide increased 4.9% to 343,511 from 327,505 as of the same date a year ago.
As of June 30, 2000, the company had 685 franchised hotels with 58,191 rooms either in design or under construction in its worldwide hotel system.
Friendly Investment
Choice is continuing to review its strategic options with respect to its investment in Friendly Hotels plc, the company's master franchisor for the United Kingdom, Ireland and continental Europe. Such options may include discussions with the board of Friendly, which may lead to a capital restructuring of Friendly and amendments to the master franchise agreement with Choice.
It is possible that such actions could result in a write down or deferral of certain amounts due to Choice and other Choice assets related to Friendly, which currently represent a total net investment of approximately $48 million. Any write down or deferral so made is not expected to be material to Choice's cash flow or financial condition.
Sunburst Agreement
Choice and Sunburst Hospitality Corporation exercised their rights under a previously negotiated "put/call" agreement related to three of Sunburst's MainStay Suites hotels. Sunburst will transfer title to these properties to Choice as consideration for $16.3 million of the $149 million amount due to Choice under Sunburst's subordinated note. The fair market value of these assets is approximately $12.2 million. Accordingly, Choice has recognized a pre-tax loss on early prepayment of note of $4.1 million in the quarter ended June 30, 2000.
Notable Events
Among the notable company events occurring since the previous earnings report:
* Continuation of the stock repurchase program announced June 25, 1998.
The company has purchased 8.7 million shares of common stock at a total
cost of $123.6 million, as of July 27, 2000, and has remaining authority
to acquire up to 5.1 million shares.
* ChoiceBuys.com, the company's on-line purchasing system for franchisees,
was named one of the 200 most promising business-to-business (B2B) web
sites by Forbes.com in its first annual Best of the Web:B2B guide.
* Promoted Daniel Rothfeld to senior vice president, e-commerce and
emerging business opportunities, and named Thomas F. Hall vice president
of emerging brands.
Choice Hotels International is the second-largest hotel franchisor in the world with 4,303 hotels open, representing 343,511 rooms, and another 685 hotels under development, representing 58,191 rooms, in 39 countries, as of June 30, 2000. Its Comfort, Quality, Clarion, Sleep Inn, Econo Lodge, Rodeway Inn and MainStay Suites brands serve guests worldwide.
Certain matters discussed in this press release may constitute forward- looking statements within the meaning of the federal securities law. Such statements are based on management's beliefs, assumptions and expectations, which in turn are based on information currently available to management. Actual performance and results could differ from those expressed in or contemplated by the forward-looking statements due to a number of risks, uncertainties and other factors, many of which are beyond Choice's ability to predict or control. For further information on factors that could impact Choice and the statements contained therein, we refer you to the filings made by Choice with the Securities and Exchange Commission, including its registration statement on Form S-4 and report on Form 10-Q for the period ended June 30, 1999.
Additional corporate information may be found on the Choice Hotels' internet site, which may be accessed at http://www.choicehotels.com/
Comfort, Quality, Clarion, Sleep Inn, Econo Lodge, Rodeway Inn, MainStay Suites and ChoiceBuys.com are registered trademarks and service marks of Choice Hotels International Inc.
Choice Hotels International, Inc.
Consolidated Balance Sheets
(In thousands) June 30, December 31,
2000 1999
(Unaudited)
ASSETS
Cash and cash equivalents $17,573 $11,850
Other current assets 30,958 30,072
Total current assets 48,531 41,922
Fixed assets and intangibles, net 165,538 166,062
Note receivable from
Sunburst Hospitality, net 145,421 141,853
Investments and other 136,222 114,821
Total assets 495,712 464,658
LIABILITIES
Current portion of long-term debt 49,446 44,646
Other current liabilities 33,530 45,012
Total current liabilities 82,976 89,658
Long-term debt 286,719 262,710
Deferred income taxes and other 54,466 46,674
Total liabilities 424,161 399,042
Total shareholders' equity 71,551 65,616
Total liabilities and shareholders' equity $495,712 $464,658
Choice Hotels International, Inc.
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
Revenues 2000 1999 2000 1999
Royalty fees $34,328 $31,274 $59,213 $55,073
Initial franchise
fees and
relicensing fees 3,435 3,744 6,782 6,593
Partner service
revenue 2,088 2,092 4,386 3,808
Other 1,314 1,565 2,429 2,147
Total revenues 41,165 38,675 72,810 67,621
Operating expenses
Selling, general
and administrative 14,071 12,637 26,299 23,614
Depreciation and
amortization 3,053 1,625 5,555 3,303
Total operating
expenses 17,124 14,262 31,854 26,917
Operating income 24,041 24,413 40,956 40,704
Other
Interest and dividend
income (5,219) (5,141) (10,119) (9,842)
Interest expense and
other 5,917 5,179 11,568 10,063
Equity Loss-Friendly
Hotels 164 95 1,889 190
Loss on early
prepayment of note 4,100 - 4,100 -
Gain on sale of stock - - - (1,260)
Total other 4,962 133 7,438 (849)
Income before income
taxes 19,079 24,280 33,518 41,553
Income taxes 7,441 9,749 13,072 16,744
Net income $11,638 $14,531 $20,446 $24,809
Recurring net income(a) $14,297 $14,531 $24,182 $24,059
Weighted average shares
outstanding 53,092 54,998 53,038 55,449
Diluted shares outstanding53,534 55,809 53,688 56,153
Diluted earnings per share$0.22 $0.26 $0.38 $0.44
Diluted recurring
earnings per share $0.27 $0.26 $0.45 $0.43
(a)Recurring net income excludes the impact of the Equity loss-Friendly
Hotels and the Loss on early prepayment
of note.
CHOICE HOTELS INTERNATIONAL
SUPPLEMENTAL OPERATING INFORMATION BY BRAND
DOMESTIC HOTEL SYSTEM
(UNAUDITED)
For the Quarter Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
COMFORT INN
Hotels 1,265 1,196 1,265 1,196
Rooms 99,124 92,990 99,124 92,990
Avg. Daily Rate (ADR) $60.53 $57.55 $58.91 $56.18
Occupancy % 65.2% 65.6% 57.8% 59.0%
RevPAR $39.47 $37.76 $34.07 $33.14
COMFORT SUITES
Hotels 250 207 250 207
Rooms 20,141 16,902 20,141 16,902
Avg. Daily Rate (ADR) $71.37 $69.24 $70.21 $68.36
Occupancy % 68.5% 68.9% 62.3% 63.8%
RevPAR $48.89 $47.69 $43.75 $43.58
QUALITY
Hotels 432 435 432 435
Rooms 48,990 50,419 48,990 50,419
Avg. Daily Rate (ADR) $63.72 $61.32 $61.55 $59.73
Occupancy % 59.5% 60.2% 52.2% 53.9%
RevPAR $37.88 $36.93 $32.11 $32.17
CLARION
Hotels 113 112 113 112
Rooms 18,892 19,022 18,892 19,022
Avg. Daily Rate (ADR) $82.61 $73.08 $79.82 $71.92
Occupancy % 62.4% 61.7% 55.0% 56.4%
RevPAR $51.51 $45.06 $43.87 $40.56
SLEEP
Hotels 247 210 247 210
Rooms 18,825 16,123 18,825 16,123
Avg. Daily Rate (ADR) $55.38 $53.71 $53.96 $52.34
Occupancy % 62.6% 62.8% 55.1% 56.2%
RevPAR $34.65 $33.72 $29.73 $29.41
MAINSTAY
Hotels 32 26 32 26
Rooms 2,958 2,409 2,958 2,409
Avg. Daily Rate (ADR) $62.76 $56.62 $60.94 $56.00
Occupancy % 71.6% 66.1% 65.9% 59.4%
RevPAR $44.93 $37.41 $40.17 $33.27
ECONO LODGE
Hotels 682 690 682 690
Rooms 42,906 44,015 42,906 44,015
Avg. Daily Rate (ADR) $45.13 $43.82 $43.67 $42.56
Occupancy % 53.8% 54.6% 47.7% 48.9%
RevPAR $24.29 $23.91 $20.83 $20.82
RODEWAY
Hotels 155 181 155 181
Rooms 10,209 11,371 10,209 11,371
Avg. Daily Rate (ADR) $46.26 $44.06 $44.76 $42.61
Occupancy % 51.1% 50.1% 45.9% 46.2%
RevPAR $23.62 $22.07 $20.53 $19.70
TOTAL CHOICE - DOMESTIC
Hotels 3,176 3,057 3,176 3,057
Rooms 262,045 253,251 262,045 253,251
Avg. Daily Rate (ADR) $60.68 $57.36 $58.93 $56.05
Occupancy % 61.8% 61.8% 54.8% 55.7%
RevPAR $37.47 $35.47 $32.27 $31.23
SOURCE: Choice Hotels International
Contact: John Hawkins, Vice President of Corporate Communication,
301-592-5032, or email:
Vice President and Chief Financial Officer, 301-592-5006, or email:
Website: http://www.choicehotels.com/
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