Choice Hotels International, Inc.
Earnings before interest, taxes, depreciation and amortization (EBITDA) increased to $35.5 million for the quarter, an increase of 11.3% over the $31.9 million for the third quarter of 1999. EBITDA margins increased to 71.3% for the quarter from 67.7% for the third quarter of 1999.
"As a result of a very strong summer season, our franchised hotels delivered a robust performance this quarter," said Charles A. Ledsinger, Jr., president and chief executive officer. "The continued improvement in our brands' quality and amenities helped attract more guests, resulting in improved room rates. RevPAR gains, improvement in effective royalty rates, successful cost control and room supply additions resulted in solid EBITDA growth and expanding EBITDA margins."
"Revenue on bookings through our central reservations system is up 9% for the year to date, with revenue from global distribution sources up 21% and from our proprietary Internet site up 124%," he added. "Our Web site volume has doubled in the past year, and now represents more than 6% of our bookings, generated almost $75 million in revenue through September."
He continued, "Looking ahead, the recently announced restructuring of our note from Sunburst Hospitality, under which Choice will receive approximately $76 million in cash, will significantly strengthen an already solid balance sheet. Choice will be better positioned to take advantage of new growth opportunities and to continue to buy back stock at accretive valuations."
The company reported royalty revenues of $43.4 million for third quarter 2000, compared to $40.5 million for third quarter 1999, an increase of 7.2%. The system-wide domestic effective royalty rate also increased from 3.82% in third quarter 1999 to 3.88% for the third quarter of 2000. Domestic revenue per available room (RevPAR) increased 5.6% from $43.42 in third quarter 1999 to $45.85 in the quarter just ended.
For the first nine months of 2000, Choice reported recurring net income of $43.6 million or $0.82 recurring diluted EPS, increases of 2.8% and 7.9% respectively, over the $42.4 million and $0.76 recurring diluted EPS reported for the first nine months of 1999.
Royalty revenues for the first three quarters of 2000 increased 7.4% to $102.6 million from the $95.5 million for the same period a year ago. The system-wide domestic effective royalty rate increased 6 basis points for the first nine months of 2000 to 3.84% from 3.78% for the same period a year ago. Domestic RevPAR also was up 4.3% from $35.24 for the first three quarters of 1999 to $36.76 for the first nine months of 2000.
System Growth
As of September 30, 2000, the total number of Choice domestic hotels on- line grew 3.6% to 3,234 from 3,121 as of the same date a year ago. This represents an increase of 2.7% in the number of domestic rooms open of 265,906 from 258,892. At the end of the third quarter of 2000, Choice had 488 hotels under development in its domestic hotel system, representing 39,530 rooms.
At the end of the first nine months of 2000, the total number of Choice hotels worldwide on-line grew 4.6% to 4,371 from 4,179 as of the same period a year ago. As of September 30, 2000, the total number of rooms worldwide increased 4.1% to 349,392 from 335,524 as of the same date a year ago.
As of September 30, 2000, the company had 694 franchised hotels with 61,244 rooms either in design or under construction in its worldwide hotel system.
Sunburst Agreement
Choice and Sunburst Hospitality Corporation reached agreement on September 20, 2000 on the terms of a proposed restructuring of a $136 million note. Contingent on the closing of Sunburst's announced recapitalization, Choice will receive a cash payment of approximately $76 million plus additional interest accruing from the date of the agreement until closing.
In addition, Choice will receive a newly issued 11-3/8% seven-year senior subordinated note in the amount of $60 million, which will contain standard and customary high-yield loan terms and conditions. This new note will contain, among other things, a cash pay interest feature that begins 18 months from issuance.
Friendly Investment
Choice continues 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 $45 million. Any write down or deferral so made is not expected to be material to Choice's cash flow or financial condition.
Notable Events
Among the notable company events occurring since the previous earnings report:
* Appointed Wayne Wielgus as senior vice president, marketing, and Gary
Thomson, senior vice president and chief information officer.
* Named Don Brockway, vice president, worldwide reservations operations,
and Janna Morrison, vice president, property systems, as officers of
the company.
Choice Hotels International is the second-largest hotel franchisor in the world with 4,371 hotels open, representing 349,392 rooms, and another 694 hotels under development, representing 61,244 rooms, in 41 countries, as of September 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) September 30, December 31,
2000 1999
(Unaudited)
ASSETS
Cash and cash equivalents $ 14,181 $ 11,850
Other current assets 35,507 30,072
Total current assets 49,688 41,922
Fixed assets and
intangibles, net 176,254 166,062
Note receivable from
Sunburst Hospitality 137,032 141,853
Investments and other 131,452 114,821
Total assets 494,426 464,658
LIABILITIES
Current portion of
long-term debt 50,846 44,646
Other current liabilities 45,193 44,179
Total current liabilities 96,039 88,825
Long-term debt 256,699 262,710
Deferred income taxes
and other 54,036 47,507
Total liabilities 406,774 399,042
Total shareholders'
equity 87,652 65,616
Total liabilities and
shareholders' equity $494,426 $464,658
Choice Hotels International, Inc.
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
Revenues 2000 1999 2000 1999
Royalty fees $43,390 $40,472 $102,603 $95,545
Initial franchise
fees and relicensing
fees 3,279 3,300 10,061 9,893
Partner service
revenue 2,131 2,354 6,517 6,162
Other 979 1,001 3,408 3,148
Total revenues 49,779 47,127 122,589 114,748
Operating expenses
Selling, general and
administrative 14,290 15,192 40,591 38,808
Depreciation and
amortization 2,770 1,690 8,325 4,993
Total operating
expenses 17,060 16,882 48,916 43,801
Operating
income-franchising 32,719 30,245 73,673 70,947
Hotel operations 83 -- 83 --
Other
Interest and dividend
income (5,094) (5,259) (15,213) (15,103)
Interest expense
and other 6,084 5,108 17,650 15,171
Equity (gain)/
loss-Friendly Hotels (109) 15 1,780 205
Loss on early
prepayment of note -- -- 4,100 --
Gain on sale of stock -- -- -- (1,260)
Total other 881 (136) 8,317 (987)
Income before
income taxes 31,921 30,381 65,439 71,934
Income taxes 12,449 12,043 25,521 28,787
Net income $19,472 $18,338 $39,918 $43,147
Recurring net
income (a) $19,404 $18,338 $43,586 $42,397
Weighted average
shares outstanding 52,768 54,619 52,874 55,174
Diluted shares
outstanding 53,119 55,501 53,324 55,898
Diluted earnings
per share $0.37 $0.33 $0.75 $0.77
Diluted recurring
earnings per share $0.37 $0.33 $0.82 $0.76
(a)Recurring net income excludes the impact of the equity
(gain)/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 Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
COMFORT INN
Hotels 1,284 1,244 1,284 1,244
Rooms 100,557 97,506 100,557 97,506
Avg. Daily Rate (ADR) $66.86 $63.47 $62.03 $59.13
Occupancy % 74.0% 74.8% 63.1% 64.2%
RevPAR $49.46 $47.47 $39.14 $37.96
COMFORT SUITES
Hotels 267 220 267 220
Rooms 21,188 17,891 21,188 17,891
Avg. Daily Rate (ADR) $74.73 $72.18 $72.02 $69.91
Occupancy % 73.8% 74.2% 66.2% 67.0%
RevPAR $55.13 $53.55 $47.68 $46.82
QUALITY
Hotels 433 436 433 436
Rooms 49,286 50,330 49,286 50,330
Avg. Daily Rate (ADR) $69.20 $65.90 $64.37 $62.01
Occupancy % 67.6% 67.0% 57.5% 58.1%
RevPAR $46.79 $44.13 $37.02 $36.01
CLARION
Hotels 115 115 115 115
Rooms 18,542 19,388 18,542 19,388
Avg. Daily Rate (ADR) $84.03 $75.65 $81.56 $73.82
Occupancy % 66.3% 64.3% 59.0% 59.0%
RevPAR $55.69 $48.60 $48.12 $43.53
SLEEP
Hotels 257 220 257 220
Rooms 19,857 16,847 19,857 16,847
Avg. Daily Rate (ADR) $58.70 $56.33 $55.82 $53.98
Occupancy % 68.5% 69.1% 59.8% 60.4%
RevPAR $40.19 $38.95 $33.35 $32.58
MAINSTAY
Hotels 34 27 34 27
Rooms 3,099 2,506 3,099 2,506
Avg. Daily Rate (ADR) $66.10 $60.95 $62.91 $58.37
Occupancy % 77.2% 74.7% 70.0% 64.7%
RevPAR $50.99 $45.50 $44.03 $37.78
ECONO LODGE
Hotels 692 690 692 690
Rooms 43,405 43,778 43,405 43,778
Avg. Daily Rate (ADR) $50.83 $49.22 $46.51 $45.06
Occupancy % 63.7% 64.7% 52.8% 54.1%
RevPAR $32.37 $31.85 $24.57 $24.37
RODEWAY
Hotels 152 169 152 169
Rooms 9,972 10,646 9,972 10,646
Avg. Daily Rate (ADR) $55.55 $50.56 $48.77 $45.86
Occupancy % 60.2% 60.6% 50.1% 50.2%
RevPAR $33.44 $30.61 $24.45 $23.01
TOTAL CHOICE - DOMESTIC
Hotels 3,234 3,121 3,234 3,121
Rooms 265,906 258,892 265,906 258,892
Avg. Daily Rate (ADR) $65.73 $62.15 $61.57 $58.48
Occupancy % 69.8% 69.9% 59.7% 60.3%
RevPAR $45.85 $43.42 $36.76 $35.24
SOURCE: Choice Hotels International
Contact: John Hawkins, Vice President of Corporate Communication,
301-592-5032, or
President and Chief Financial Officer, 301-592-5006, or
Website: http://www.choicehotels.com/
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