Choice Hotels International, Inc.
Net income for 2000, including the impact of the settlement of the Sunburst Hospitality receivable, a company-wide restructuring and Choice's investment in Friendly Hotels plc, was $42.4 million or $0.80 diluted EPS, compared to $57.1 million in net income and $1.03 diluted EPS for 1999. For fourth quarter 2000, net income was $2.5 million or $0.05 diluted EPS, compared to $14.0 million and $0.26 for the same period a year ago.
Recurring earnings before interest, taxes, depreciation and amortization (EBITDA) increased to $109.7 million for the year, an increase of 7.7% over the $101.9 million for 1999. EBITDA margins increased to 65.5% for 2000 from 64.6% for 1999.
The company reported royalty revenues of $137.7 million for 2000, compared to $128.7 million for 1999, an increase of 7.0%. For fourth quarter 2000, royalty revenues were $35.1 million, a 6.0% increase over the $33.1 million for the same period in 1999.
"2000 proved to be a pivotal year in getting the company better positioned for future growth" said Charles A. Ledsinger, Jr., president and chief executive officer. "The settlement of the Sunburst receivable strengthens our balance sheet considerably. As a result, we have more capability to build our core business and to capitalize on new development opportunities. We also continue to aggressively buy back shares of our common stock, with our Board authorizing an additional five million shares just last week."
He added, "In our hotel franchising business, we enjoyed another good year for unit growth, executing almost 300 new domestic contracts and opening more than 300 new properties. In addition, we ended the year with nearly 500 projects under development."
As previously disclosed, the company recorded certain charges in the fourth quarter related to the settlement of the Sunburst receivable, a corporate-wide restructuring and its investment in Friendly Hotels.
Choice recognized a $5.6 million charge related to the company's domestic and international operations reorganization. The restructuring will improve service and support to its franchisees and create a more focused and competitive overhead structure. The restructuring charges also include the costs related to the termination of an in-room Internet initiative launched earlier in the year.
In January 2001, the company received from Sunburst approximately $102 million in cash and an 11-3/8% seven-year senior subordinated note in the amount of $35 million. For the year 2000, the company recognized a loss of $7.6 million on the monetization of the Sunburst note.
In Europe, Friendly Hotels plc announced a comprehensive restructuring program to strengthen its balance sheet, improve its operations and accelerate growth of its franchising business. Elements of the restructuring include a revaluation of its real estate portfolio, disposal of non-core assets, restructuring of its banking arrangements and certain commercial arrangements with Choice, and a strengthened management team. Choice recorded an equity loss of $12.1 million associated with this restructuring for the year 2000. The company is required to recognize changes in Friendly's book value as an equity adjustment to its recorded investment.
System Growth
In 2000, the total number of domestic Choice hotels on-line grew 3.9% to 3,244 from 3,123 for 1999. For the year, the total number of domestic hotel rooms increased 3.0% to 265,962 from 258,120 in 1999. Choice executed 298 new domestic hotel franchise contracts in 2000 and opened a total of 274 domestic hotels. At the end of 2000, Choice had 493 hotels under development in its domestic hotel system, representing 39,539 rooms.
As of December 31, 2000, the total number of Choice hotels worldwide grew 3.4% to 4,392 from 4,248 as of the same date a year ago. This represents an increase of 3.6% in the number of rooms open of 350,351 from 338,254.
Domestic revenue per available room (RevPAR) increased 4.4% from $35.17 in 1999 to $36.72 for 2000. For fourth quarter 2000, RevPAR increased 4.7% from $34.94 to $36.59.
For the year 2000, the effective royalty rate increased 5 basis points from 3.80% to 3.85%. In fourth quarter 2000, the effective royalty increased from 3.86% to 3.89%.
Notable Events
Among the notable company events occurring since the previous earnings report:
* Authorization for an additional repurchase of up to five million shares
of common stock. Since the Board first authorized a share repurchase
program in October 1997, the company has repurchased approximately 16
million shares. Currently there are approximately 45 million shares of
common stock outstanding.
* Selection of Arnold Worldwide/Washington as the company's agency of
record to create a new marketing campaign for the company's hotel
brands.
Choice Hotels International is the second-largest hotel franchisor in the world with 4,392 hotels open, representing 350,351 rooms, and another 703 hotels under development, representing 60,927 rooms, in 43 countries, as of December 31, 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 Statements of Income
(Unaudited)
(In thousands, except per share
amounts) Three Months Ended For the Year Ended
December December December December
31, 31, 31, 31,
Revenues 2000 1999 2000 1999
Royalty fees $35,117 $33,109 $137,721 $128,653
Initial franchise fees and
relicensing fees 2,092 4,016 12,154 13,910
Partner service revenue 3,783 2,892 10,300 9,055
Other 3,556 3,640 7,297 6,111
Total revenues 44,548 43,657 167,472 157,729
Operating expenses
Selling, general and administrative 16,998 17,051 57,780 55,860
Restructuring charges 5,637 -- 5,637 --
Depreciation and amortization 3,238 2,694 11,623 7,687
Total operating expenses 25,873 19,745 75,040 63,547
Operating income 18,675 23,912 92,432 94,182
Other
Interest and dividend income (3,849) (4,478) (15,534) (17,146)
Interest expense and other 4,371 4,349 18,495 16,409
Equity loss-Friendly Hotels 10,291 175 12,071 380
Loss on note-Sunburst 3,465 -- 7,565 --
Loss on investment - 1,328 -- 1,328
Loss of sale of property 254 -- 253 --
Gain on sale of stock -- -- -- (1,260)
Total other 14,532 1,374 22,850 (289)
Income before income taxes 4,143 22,538 69,582 94,471
Income taxes 1,616 8,529 27,137 37,316
Net income $2,527 $14,009 $42,445 $57,155
Recurring net income (a) $14,786 $14,839 $58,373 $57,236
Weighted average shares outstanding 52,512 53,957 52,895 54,859
Diluted shares outstanding 52,827 54,830 53,253 55,667
Diluted earnings per share $0.05 $0.26 $0.80 $1.03
Diluted recurring earnings per share
(a) $0.28 $0.27 $1.10 $1.03
(a) Recurring net income and diluted recurring earnings per share exclude the impact of the equity loss-Friendly Hotels, the loss on note-Sunburst, loss on investment, loss of sale of property, gain on sale of stock, and restructuring charges.
Choice Hotels International, Inc.
Consolidated Balance Sheets
(In thousands) December 31, December 31,
2000 1999
(Unaudited)
ASSETS
Cash and cash equivalents $19,701 $11,850
Other current assets 32,386 30,072
Total current assets 52,087 41,922
Fixed assets and intangibles, net 174,772 166,062
Note receivable from Sunburst
Hospitality 137,492 141,853
Investments and other 119,770 114,821
Total assets 484,121 464,658
LIABILITIES
Current portion of long-term debt 50,046 44,646
Other current liabilities 43,784 44,097
Total current liabilities 93,830 88,743
Long-term debt 247,179 262,710
Deferred income taxes and other 53,020 47,589
Total liabilities 394,029 399,042
Total shareholders' equity 90,092 65,616
Total liabilities and
shareholders' equity $484,121 $464,658
Choice Hotels International
Supplemental Operating Information by Brand
Domestic Hotel System
(Unaudited)
For the Quarter For the Year
Ended Ended
December 31, December 31,
2000 1999 2000 1999
COMFORT INN
Hotels 1,291 1,246 1,291 1,246
Rooms 100,988 97,592 100,988 97,592
Avg. Daily Rate (ADR) $62.00 $58.95 $62.03 $59.09
Occupancy % 63.4% 64.1% 63.2% 64.2%
RevPAR $39.29 $37.79 $39.18 $37.91
Effective Royalty Rate 4.31% 4.28% 4.27% 4.21%
COMFORT SUITES
Hotels 277 224 277 224
Rooms 21,773 18,135 21,773 18,135
Avg. Daily Rate (ADR) $71.50 $69.14 $71.89 $69.70
Occupancy % 65.6% 65.9% 66.0% 66.7%
RevPAR $46.87 $45.57 $47.47 $46.48
Effective Royalty Rate 4.64% 4.60% 4.64% 4.57%
QUALITY
Hotels 436 431 436 431
Rooms 49,191 49,331 49,191 49,331
Avg. Daily Rate (ADR) $63.07 $60.22 $64.05 $61.58
Occupancy % 57.7% 56.9% 57.6% 57.8%
RevPAR $36.38 $34.28 $36.86 $35.58
Effective Royalty Rate 3.46% 3.43% 3.44% 3.41%
CLARION
Hotels 114 112 114 112
Rooms 18,537 18,815 18,537 18,815
Avg. Daily Rate (ADR) $80.71 $78.68 $81.37 $75.10
Occupancy % 58.2% 59.6% 58.8% 59.1%
RevPAR $46.98 $46.90 $47.86 $44.41
Effective Royalty Rate 2.71% 2.44% 2.57% 2.30%
SLEEP
Hotels 261 224 261 224
Rooms 20,158 17,199 20,158 17,199
Avg. Daily Rate (ADR) $55.85 $54.10 $55.82 $54.01
Occupancy % 59.1% 59.3% 59.6% 60.1%
RevPAR $32.99 $32.07 $33.25 $32.45
Effective Royalty Rate 3.88% 3.82% 3.85% 3.82%
MAINSTAY
Hotels 34 29 34 29
Rooms 3,099 2,681 3,099 2,681
Avg. Daily Rate (ADR) $65.91 $59.99 $63.69 $58.87
Occupancy % 70.1% 69.2% 70.0% 66.0%
RevPAR $46.17 $41.53 $44.59 $38.88
Effective Royalty Rate 1.18% 3.58% 1.23% 3.50%
ECONO LODGE
Hotels 684 691 684 691
Rooms 42,611 43,754 42,611 43,754
Avg. Daily Rate (ADR) $45.77 $43.89 $46.33 $44.77
Occupancy % 53.1% 52.8% 52.9% 53.8%
RevPAR $24.32 $23.19 $24.51 $24.08
Effective Royalty Rate 3.86% 3.84% 3.84% 3.82%
RODEWAY
Hotels 147 166 147 166
Rooms 9,605 10,613 9,605 10,613
Avg. Daily Rate (ADR) $46.57 $44.96 $48.25 $45.66
Occupancy % 50.7% 49.5% 50.3% 50.0%
RevPAR $23.60 $22.26 $24.25 $22.83
Effective Royalty Rate 2.87% 2.98% 2.79% 2.79%
TOTAL CHOICE - DOMESTIC
Hotels 3,244 3,123 3,244 3,123
Rooms 265,962 258,120 265,962 258,120
Avg. Daily Rate (ADR) $61.10 $58.40 $61.45 $58.46
Occupancy % 59.9% 59.8% 59.8% 60.2%
RevPAR $36.59 $34.94 $36.72 $35.17
Effective Royalty Rate 3.89% 3.86% 3.85% 3.80%
SOURCE: Choice Hotels International
Contact: John Hawkins, Corporate Communications, 301-592-5075; or Joe
Squeri, Chief Financial Officer, 301-592-5006, both of Choice Hotels
International
Website: http://www.choicehotels.com/
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