Choice Hotels International, Inc.,
-- Diluted earnings per share ("EPS") for full-year 2006 were $1.68, up
27% compared to $1.32 for full-year 2005; Diluted EPS for fourth
quarter 2006 were $0.37, a 16% increase compared to $0.32 for the same
period in 2005.
-- Adjusted diluted EPS for full-year 2006 were $1.49, an 18% increase
compared to $1.26 for full-year 2005; Adjusted diluted EPS for fourth
quarter 2006 were $0.36, up 13% compared to $0.32 reported in the same
period of the prior year.
-- Operating income increased 16% to $166.6 million for full-year 2006, as
compared to $143.8 reported in the same period of the prior year.
Operating income for fourth quarter 2006 increased 10% to $39.9 million
compared to $36.2 million reported for the same period in 2005.
-- Earnings before interest, taxes, depreciation and amortization
("EBITDA") for full-year 2006 increased 15% to $176 million from $153
million in 2005. EBITDA for fourth quarter 2006 was $42.3 million, an
increase of 10% compared to $38.5 million reported for the same period
in 2005.
-- Franchising revenues and total revenues increased 14% for full-year
2006. Franchising revenues increased 10% and total revenues increased
18% for fourth quarter 2006 compared to the same period of the prior
year.
-- New domestic hotel franchise contracts for full-year 2006 increased 13%
to a record 720. Fourth quarter new domestic hotel franchise contracts
increased 21% to 267 compared to fourth quarter 2005.
-- Domestic unit growth increased 4 percent for 2006.
-- Domestic system-wide revenue per available room (RevPAR) increased 6.1%
for full-year 2006 and 3.7% for the fourth quarter. Domestic RevPAR
for the company's midscale without food and beverage brands increased
approximately 9% for 2006 and approximately 6% for the fourth quarter
of 2006.
-- The domestic hotel pipeline of hotels under construction, awaiting
conversion or approved for development increased more than 43% to 860
hotels representing 66,238 rooms; the worldwide pipeline increased 35%
to 930 hotels representing 72,555 rooms.
-- Thirty domestic hotel contracts executed for the new upscale Cambria
Suites brand during 2006, with 43 executed since the brand was
introduced in 2005.
"2006 was another strong year for Choice Hotels, as we saw significant growth in domestic franchise contracts for both new construction and conversion hotels," said Charles A. Ledsinger, Jr., vice chairman and chief executive officer. "We are very pleased with Cambria Suites' progress and the momentum we are seeing for the brand among hotel developers. For 2007 and beyond, our solid operating model, prudent management of our strong portfolio of ten brands, and continued focus on both new construction and conversion markets positions Choice for continued long-term growth."
Outlook for 2007
The company's first quarter 2007 diluted EPS is expected to be $0.23. The company expects full year 2007 diluted EPS of $1.59. Earnings before interest, taxes, depreciation and amortization ("EBITDA") for full-year 2007 is expected to be approximately $186 million. These estimates include the following assumptions.
-- The company expects net domestic unit growth of approximately 4% in
2007;
-- RevPAR is expected to increase 2% for first quarter 2007 and 4% for
full-year 2007;
-- The effective royalty rate is expected to increase 3 basis points for
full-year 2007;
-- All figures assume the existing share count and assume an effective tax
rate of 36.25%;
-- All figures assume approximately $3.6 million ($0.03 diluted EPS) in
first-quarter 2007 and $4.5 million ($0.04 diluted EPS) for full-year
2007, respectively, of severance costs related to the previously
announced termination of certain executive officers.
Adjusted Net Income and Diluted EPS
Net income and diluted earnings per share for the three and twelve months ended December 31, 2006 include a reduction of income tax expense related to reversal of provisions for certain income tax contingencies of approximately $0.2 million and $12.8 million, respectively. Net income and diluted earnings per share for the twelve months ended December 31, 2006 also include a loss of approximately $0.3 million ($0.2 million, net of the related tax effect) related to the extinguishment of debt. Those items represent diluted EPS of $0.01 and $0.19, net, for the three and twelve months ended December 31, 2006, respectively. Adjusted diluted EPS and adjusted net income for the three and twelve months ended December 31, 2006 exclude these items.
Net income and diluted earnings per share for the twelve months ended December 31, 2005 include additional income tax expense of approximately $1.2 million related to the Company's plan to repatriate approximately $23.5 million of foreign earnings pursuant to the American Jobs Creation Act. Net income and diluted earnings per share for the three and twelve months ended December 31, 2005 include a reduction of income tax expense related to the reversal of provisions for certain income tax contingencies of approximately $0.5 million and $4.9 million, respectively. Those items represent diluted EPS of less than $0.01, net, for the three months and $0.06, net, for the twelve months ended December 31, 2006. Adjusted diluted EPS and adjusted net income for the three and twelve months ended December 31, 2005 exclude these items.
Use of Free Cash Flow
The company has consistently used its free cash flow (cash flow from operations less capital expenditures) generated from its operations to return value to shareholders. This is primarily achieved through share repurchases and dividends.
For the twelve months ended December 31, 2006, the company paid $35.4 million of cash dividends to shareholders. The annual dividend rate per common share was increased 15% by the Board of Directors in September 2006 and is now $0.60.
The company has authorization to purchase up to an additional 5.1 million shares under the share repurchase program. Repurchases will continue to be made in the open market and through privately negotiated transactions subject to market and other conditions. No minimum number of shares has been fixed. Since Choice announced its stock repurchase program on June 25, 1998, the company has repurchased 33.6 million shares of its common stock for a total cost of $711.9 million through February 13, 2007. Considering the effect of a two-for-one stock split in October 2005, the company has repurchased 66.6 million shares at an average price of $10.69 per share.
The company expects to continue to return value to its shareholders through a combination of share repurchases and dividends, subject to market and other conditions.
Conference Call
Choice will conduct a conference call on Wednesday, February 14, 2007 at 9:30 a.m. EST to discuss the company's fourth quarter and full-year 2006 results. The call-in number to listen to the call is 1-877-209-0397. International callers should dial 612-332-0637. The conference call also will be Web cast simultaneously via the company's Web site, http://www.choicehotels.com/. Interested investors and other parties wishing to access the call on the Web should go to the Web site and click on the Investor Info link. The Investor Information page will feature a conference call microphone icon to access the call.
The audio of the call will be archived and available on http://www.choicehotels.com/ for those unable to listen to the call on February 14th. The call will also be available for replay beginning at 4:30 p.m. EST on February 14 and will be available until March 14 by calling 1-800-475-6701, access code 860608. International callers should dial 320-365-3844 and enter access code 860608.
Items Impacting Comparability Acquisition of Suburban
During 2005, the company acquired Suburban Franchise Holding Company, Inc. ("Suburban"), which included 67 Suburban Extended Stay Hotel units open and operating in the United States. The results of operations for Suburban have been included in the company's results of operations since September 28, 2005.
About Choice Hotels
Choice Hotels International franchises more than 5,300 hotels, representing more than 435,000 rooms, in the United States and more than 40 countries and territories. As of December 31, 2006, 860 hotels are under development in the United States, representing 66,238 rooms, and an additional 70 hotels, representing 6,317 rooms, are under development in more than 15 countries and territories. The company's Cambria Suites, Comfort Inn, Comfort Suites, Quality, Clarion, Sleep Inn, Econo Lodge, Rodeway Inn, MainStay Suites and Suburban Extended Stay Hotel brands serve guests worldwide.
Additional corporate information may be found on Choice Hotels' Internet site, which may be accessed at http://www.choicehotels.com/.
Forward-Looking Statements
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. The company's Form 10-K for the year ended December 31, 2005 details some of the important risk factors that you should review.
Statement Concerning Non-GAAP Financial Measurements
Adjusted net income, adjusted diluted EPS, franchising revenues, franchising margins, EBITDA, and free cash flows are non-GAAP financial measurements. These financial measurements are presented as supplemental disclosures because they are used by management in reviewing and analyzing the company's performance. This information should not be considered as an alternative to any measure of performance as promulgated under accounting principles generally accepted in the United States (GAAP), such as net income, diluted earnings per share, total revenues, operating income, operating margins, and cash flows from operations. The company's calculation of these measurements may be different from the calculation used by other companies and therefore comparability may be limited. The company has included exhibits accompanying this release that reconcile these measures to the comparable GAAP measurement.
Cambria Suites, Comfort Inn, Comfort Suites, Quality, Clarion, Sleep Inn, MainStay Suites, Suburban Extended Stay Hotel, Econo Lodge, and Rodeway Inn are proprietary trademarks and service marks of Choice Hotels International, Inc.
Choice Hotels International, Inc. Exhibit 1
Consolidated Statements of Income
(Unaudited)
Three Months Ended December 31,
Variance
2006 2005 $ %
(In thousands, except per share
amounts)
REVENUES:
Royalty fees $54,271 $49,120 $5,151 10%
Initial franchise and relicensing
fees 9,530 8,717 813 9%
Brand solutions 3,092 3,024 68 2%
Marketing and reservation 74,307 58,629 15,678 27%
Hotel operations 1,163 1,079 84 8%
Other 1,345 1,416 (71) (5%)
Total revenues 143,708 121,985 21,723 18%
OPERATING EXPENSES:
Selling, general and administrative 26,316 23,987 2,329 10%
Depreciation and amortization 2,370 2,282 88 4%
Marketing and reservation 74,307 58,629 15,678 27%
Hotel operations 829 840 (11) (1%)
Total operating expenses 103,822 85,738 18,084 21%
Operating income 39,886 36,247 3,639 10%
OTHER INCOME AND EXPENSES:
Interest expense 2,807 4,031 (1,224) (30%)
Interest and other investment income (942) (134) (808) 603%
Equity in net income of affiliates (315) (182) (133) 73%
Loss on extinguishment of debt - - - NM
Other - (3) 3 (100%)
Total other income and
expenses, net 1,550 3,712 (2,162) (58%)
Income before income taxes 38,336 32,535 5,801 18%
Income taxes 13,707 10,983 2,724 25%
Net income $24,629 $21,552 $3,077 14%
Weighted average shares outstanding-
basic 65,728 64,360
Weighted average shares outstanding-
diluted 67,171 66,360
Basic earnings per share $0.37 $0.33 $0.04 12%
Diluted earnings per share $0.37 $0.32 $0.05 16%
Twelve Months Ended December 31,
Variance
2006 2005 $ %
(In thousands, except per share
amounts)
REVENUES:
Royalty fees $211,645 $187,340 $24,305 13%
Initial franchise and relicensing
fees 29,629 25,388 4,241 17%
Brand solutions 13,945 13,382 563 4%
Marketing and reservation 278,026 243,123 34,903 14%
Hotel operations 4,505 4,293 212 5%
Other 6,912 3,873 3,039 78%
Total revenues 544,662 477,399 67,263 14%
OPERATING EXPENSES:
Selling, general and administrative 87,112 78,250 8,862 11%
Depreciation and amortization 9,705 9,051 654 7%
Marketing and reservation 278,026 243,123 34,903 14%
Hotel operations 3,194 3,225 (31) (1%)
Total operating expenses 378,037 333,649 44,388 13%
Operating income 166,625 143,750 22,875 16%
OTHER INCOME AND EXPENSES:
Interest expense 14,098 15,325 (1,227) (8%)
Interest and other investment income (2,041) (1,094) (947) 87%
Equity in net income of affiliates (1,052) (803) (249) 31%
Loss on extinguishment of debt 342 - 342 NM
Other - (420) 420 (100%)
Total other income and
expenses, net 11,347 13,008 (1,661) (13%)
Income before income taxes 155,278 130,742 24,536 19%
Income taxes 42,491 43,177 (686) (2%)
Net income $112,787 $87,565 $25,222 29%
Weighted average shares outstanding-
basic 65,387 64,429
Weighted average shares outstanding-
diluted 67,050 66,336
Basic earnings per share $1.72 $1.36 $0.36 26%
Diluted earnings per share $1.68 $1.32 $0.36 27%
Choice Hotels International, Inc. Exhibit 2
Consolidated Balance Sheets
(In thousands) December 31, December 31,
2006 2005
(Unaudited)
ASSETS
Cash and cash equivalents $35,841 $16,921
Accounts receivable, net 41,694 37,155
Deferred income taxes 1,790 2,616
Other current assets 7,757 6,308
Total current assets 87,082 63,000
Fixed assets and intangibles, net 144,124 150,376
Receivable -- marketing fees 6,662 13,225
Investments, employee benefit plans, at fair
value 31,529 23,337
Other assets 33,912 15,333
Total assets 303,309 265,271
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current portion of long-term debt 146 146
Other current liabilities 139,645 120,170
Total current liabilities 139,791 120,316
Long-term debt 172,390 273,972
Deferred compensation & retirement plan
obligations 40,101 28,987
Other liabilities 13,407 9,172
Total liabilities 365,689 432,447
Total shareholders' deficit (62,380) (167,176)
Total liabilities and shareholders'
deficit $303,309 $265,271
Choice Hotels International, Inc. Exhibit 3
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands) Twelve months ended December 31,
2006 2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $112,787 $87,565
Adjustments to reconcile net income
to net cash provided
by operating activities:
Depreciation and amortization 9,705 9,051
Gain on sale of assets - (386)
Provision for bad debts (163) 391
Non-cash stock compensation and other
charges 10,644 5,288
Loss on extinguishment of debt 342 -
Non-cash interest and other income (1,576) (294)
Dividends received from equity method
investees 1,095 681
Equity in net income of affiliates (1,052) (803)
Changes in assets and liabilities, net
of acquisitions:
Receivables (3,007) (2,415)
Receivable - marketing and
reservation fees, net 19,049 19,393
Accounts payable 6,888 1,923
Accrued expenses and other (7,631) 12,894
Income taxes payable 2,857 11,250
Deferred income taxes (17,214) (13,318)
Deferred revenue 15,036 8,822
Other assets (1,724) (2,040)
Other liabilities 7,892 (4,414)
NET CASH PROVIDED BY OPERATING ACTIVITIES* 153,928 133,588
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in property and equipment (7,707) (11,504)
Acquisitions, net of cash acquired (826) (7,314)
Purchases of investments (10,515) (8,929)
Proceeds from sales of investments 3,728 3,539
Issuance of notes receivable (2,433) (2,667)
Collection of notes receivable 868 462
Proceeds from disposition of assets - 2,811
Other items, net (446) (929)
NET CASH USED IN INVESTING ACTIVITIES (17,331) (24,531)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of long-term debt (146) (150)
Net repayments pursuant to revolving
credit facility (101,500) (55,129)
Debt issuance costs (477) (193)
Excess tax benefits from stock-based
compensation 12,699 -
Purchase of treasury stock (1,365) (49,154)
Dividends paid (35,386) (30,241)
Proceeds from exercise of stock options 8,498 14,213
NET CASH USED IN FINANCING ACTIVITIES (117,677) (120,654)
Net change in cash and cash equivalents 18,920 (11,597)
Cash and cash equivalents at beginning of
period 16,921 28,518
CASH AND CASH EQUIVALENTS AT END OF PERIOD $35,841 $16,921
* Net cash provided by operating activities for the twelve months ended
December 31, 2005 includes approximately $9.9 million of excess
tax benefits related to stock-based compensation. Effective January 1,
2006, the Company began reporting these excess tax benefits as
cash flows from financing activities as a result of the adoption of
Statement of Financial Accounting Standards No. 123R
"Accounting for Stock-Based Compensation."
CHOICE HOTELS INTERNATIONAL, INC. EXHIBIT 4
SUPPLEMENTAL OPERATING INFORMATION
DOMESTIC HOTEL SYSTEM
(UNAUDITED)
For the Twelve Months Ended
December 31, 2006
Average Daily
Rate Occupancy RevPAR
Comfort Inn $73.08 63.0% $46.06
Comfort Suites 82.93 67.0% 55.59
Sleep 66.44 62.4% 41.43
Midscale without Food & Beverage 74.18 63.7% 47.26
Quality 66.89 55.3% 37.01
Clarion 78.98 51.2% 40.41
Midscale with Food & Beverage 69.76 54.3% 37.87
Econo Lodge 53.09 47.7% 25.31
Rodeway 51.66 45.8% 23.66
Economy 52.83 47.3% 24.99
MainStay 67.26 69.4% 46.66
Total Domestic System* $69.71 58.0% $40.46
For the Twelve Months Ended
December 31, 2005
Average Daily
Rate Occupancy RevPAR
Comfort Inn $68.84 61.7% $42.45
Comfort Suites 77.51 66.3% 51.36
Sleep 62.52 61.0% 38.16
Midscale without Food & Beverage 69.68 62.4% 43.51
Quality 64.86 54.6% 35.41
Clarion 74.62 52.5% 39.15
Midscale with Food & Beverage 67.41 54.0% 36.41
Econo Lodge 50.95 48.2% 24.56
Rodeway 49.91 46.7% 23.31
Economy 50.78 48.0% 24.35
MainStay 64.76 65.7% 42.54
Total Domestic System* $66.24 57.6% $38.15
Change
Average Daily
Rate Occupancy RevPAR
Comfort Inn 6.2% 130 bps 8.5%
Comfort Suites 7.0% 70 bps 8.2%
Sleep 6.3% 140 bps 8.6%
Midscale without Food & Beverage 6.5% 130 bps 8.6%
Quality 3.1% 70 bps 4.5%
Clarion 5.8% -130 bps 3.2%
Midscale with Food & Beverage 3.5% 30 bps 4.0%
Econo Lodge 4.2% -50 bps 3.1%
Rodeway 3.5% -90 bps 1.5%
Economy 4.0% -70 bps 2.6%
MainStay 3.9% 370 bps 9.7%
Total Domestic System* 5.2% 40 bps 6.1%
For the Three Months Ended
December 31, 2006
Average Daily
Rate Occupancy RevPAR
Comfort Inn $73.14 63.5% $46.46
Comfort Suites 82.35 66.1% 54.42
Sleep 66.04 62.5% 41.29
Midscale without Food & Beverage 74.04 63.9% 47.30
Quality 65.79 54.6% 35.89
Clarion 78.38 51.0% 39.98
Midscale with Food & Beverage 68.79 53.7% 36.91
Econo Lodge 52.74 47.6% 25.10
Rodeway 49.79 43.4% 21.61
Economy 52.18 46.7% 24.38
MainStay 66.91 72.8% 48.74
Total Domestic System* $69.27 57.8% $40.04
For the Three Months Ended
December 31, 2005
Average Daily
Rate Occupancy RevPAR
Comfort Inn $68.81 63.4% $43.65
Comfort Suites 77.28 68.2% 52.70
Sleep 62.68 62.0% 38.88
Midscale without Food & Beverage 69.68 64.1% 44.69
Quality 63.47 55.1% 34.95
Clarion 75.70 53.9% 40.80
Midscale with Food & Beverage 66.57 54.8% 36.46
Econo Lodge 50.83 47.9% 24.35
Rodeway 48.01 44.7% 21.47
Economy 50.37 47.3% 23.85
MainStay 65.55 68.1% 44.64
Total Domestic System* $65.99 58.5% $38.60
Change
Average Daily
Rate Occupancy RevPAR
Comfort Inn 6.3% 10 bps 6.4%
Comfort Suites 6.6% -210 bps 3.3%
Sleep 5.4% 50 bps 6.2%
Midscale without Food & Beverage 6.3% -20 bps 5.8%
Quality 3.7% -50 bps 2.7%
Clarion 3.5% -290 bps (2.0%)
Midscale with Food & Beverage 3.3% -110 bps 1.2%
Econo Lodge 3.8% -30 bps 3.1%
Rodeway 3.7% -130 bps 0.7%
Economy 3.6% -60 bps 2.2%
MainStay 2.1% 470 bps 9.2%
Total Domestic System* 5.0% -70 bps 3.7%
* Amounts exclude Suburban activity because comparable pre-acquisition
data is not available
For the Quarter Ended For the Year Ended
12/31/2006 12/31/2005 12/31/2006 12/31/2005
System-wide effective
royalty rate 4.13% 4.08% 4.10% 4.08%
CHOICE HOTELS INTERNATIONAL, INC. EXHIBIT 5
SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA
(UNAUDITED)
December 31, 2006 December 31, 2005
Hotels Rooms Hotels Rooms
Comfort Inn 1,415 110,877 1,428 111,598
Comfort Suites 433 33,976 411 32,251
Sleep 327 24,575 319 24,205
Midscale without Food & Beverage 2,175 169,428 2,158 168,054
Quality 736 72,054 660 66,316
Clarion 162 23,945 153 23,554
Midscale with Food & Beverage 898 95,999 813 89,870
Econo Lodge 816 49,679 805 49,763
Rodeway 233 14,168 180 11,051
Economy 1,049 63,847 985 60,814
MainStay 29 2,183 27 2,047
Suburban 60 7,984 65 8,568
Extended Stay 89 10,167 92 10,615
Domestic Franchises 4,211 339,441 4,048 329,353
International Franchises 1,165 97,944 1,162 97,703
Total Franchises 5,376 437,385 5,210 427,056
Variance
Hotels Rooms % %
Comfort Inn (13) (721) (0.9%) (0.6%)
Comfort Suites 22 1,725 5.4% 5.3%
Sleep 8 370 2.5% 1.5%
Midscale without Food & Beverage 17 1,374 0.8% 0.8%
Quality 76 5,738 11.5% 8.7%
Clarion 9 391 5.9% 1.7%
Midscale with Food & Beverage 85 6,129 10.5% 6.8%
Econo Lodge 11 (84) 1.4% (0.2%)
Rodeway 53 3,117 29.4% 28.2%
Economy 64 3,033 6.5% 5.0%
MainStay 2 136 7.4% 6.6%
Suburban (5) (584) (7.7%) (6.8%)
Extended Stay (3) (448) (3.3%) (4.2%)
Domestic Franchises 163 10,088 4.0% 3.1%
International Franchises 3 241 0.3% 0.2%
Total Franchises 166 10,329 3.2% 2.4%
CHOICE HOTELS INTERNATIONAL, INC. EXHIBIT 6
SUPPLEMENTAL INFORMATION BY BRAND
DEVELOPMENT RESULTS -- NEW HOTEL CONTRACTS
(UNAUDITED)
For the Twelve For the Twelve
Months Ended Months Ended
December 31, 2006 December 31, 2005
New New
Construc- Conver- Construc- Conver-
tion sion Total tion sion Total
Comfort Inn 67 65 132 53 56 109
Comfort Suites 98 3 101 89 5 94
Sleep 58 1 59 55 2 57
Midscale without
Food & Beverage 223 69 292 197 63 260
Quality 6 143 149 5 148 153
Clarion 2 26 28 4 31 35
Midscale with Food
& Beverage 8 169 177 9 179 188
Econo Lodge 1 80 81 4 85 89
Rodeway 3 105 108 - 75 75
Economy 4 185 189 4 160 164
MainStay 9 1 10 14 - 14
Suburban 14 8 22 - - -
Extended Stay 23 9 32 14 - 14
Cambria Suites 30 - 30 13 - 13
Total Domestic System 288 432 720 237 402 639
% Change
New
Construction Conversion Total
Comfort Inn 26% 16% 21%
Comfort Suites 10% (40%) 7%
Sleep 5% (50%) 4%
Midscale without Food & Beverage 13% 10% 12%
Quality 20% (3%) (3%)
Clarion (50%) (16%) (20%)
Midscale with Food & Beverage (11%) (6%) (6%)
Econo Lodge (75%) (6%) (9%)
Rodeway NM 40% 44%
Economy 0% 16% 15%
MainStay (36%) NM (29%)
Suburban NM NM NM
Extended Stay 64% NM 129%
Cambria Suites 131% NM 131%
Total Domestic System 22% 7% 13%
For the Three For the Three
Months Ended Months Ended
December 31, 2006 December 31, 2005
New New
Construc- Conver- Construc- Conver-
tion sion Total tion sion Total
Comfort Inn 29 22 51 18 16 34
Comfort Suites 43 - 43 49 1 50
Sleep 31 - 31 19 1 20
Midscale without
Food & Beverage 103 22 125 86 18 104
Quality 1 43 44 1 36 37
Clarion 1 4 5 2 16 18
Midscale w/ Food
& Beverage 2 47 49 3 52 55
Econo Lodge 1 37 38 - 24 24
Rodeway 1 32 33 - 28 28
Economy 2 69 71 - 52 52
MainStay 4 - 4 4 - 4
Suburban 5 3 8 - - -
Extended Stay 9 3 12 4 - 4
Cambria Suites 10 - 10 5 - 5
Total Domestic System 126 141 267 98 122 220
% Change
New
Construction Conversion Total
Comfort Inn 61% 38% 50%
Comfort Suites (12%) (100%) (14%)
Sleep 63% (100%) 55%
Midscale without Food & Beverage 20% 22% 20%
Quality 0% 19% 19%
Clarion (50%) (75%) (72%)
Midscale w/ Food & Beverage (33%) (10%) (11%)
Econo Lodge NM 54% 58%
Rodeway NM 14% 18%
Economy NM 33% 37%
MainStay 0% NM 0%
Suburban NM NM NM
Extended Stay 125% NM 200%
Cambria Suites 100% NM 100%
Total Domestic System 29% 16% 21%
CHOICE HOTELS INTERNATIONAL, INC. Exhibit 7
DOMESTIC HOTEL PIPELINE OF HOTELS UNDER CONSTRUCTION,
AWAITING CONVERSION OR APPROVED FOR DEVELOPMENT
(UNAUDITED)
A hotel in the domestic pipeline does not always result in an open and
operating hotel due to various factors.
December 31, 2006
Units
New
Conversion Construction Total
Comfort Inn 56 124 180
Comfort Suites 3 233 236
Sleep Inn - 123 123
Midscale without Food & Beverage 59 480 539
Quality 76 10 86
Clarion 11 4 15
Midscale with Food & Beverage 87 14 101
Econo Lodge 41 5 46
Rodeway 66 3 69
Economy 107 8 115
MainStay - 33 33
Suburban 5 24 29
Extended Stay 5 57 62
Cambria Suites - 43 43
258 602 860
December 31, 2005
Units
New
Conversion Construction Total
Comfort Inn 41 85 126
Comfort Suites 2 165 167
Sleep Inn 1 88 89
Midscale without Food & Beverage 44 338 382
Quality 54 12 66
Clarion 13 4 17
Midscale with Food & Beverage 67 16 83
Econo Lodge 41 9 50
Rodeway 35 - 35
Economy 76 9 85
MainStay 1 29 30
Suburban 2 9 11
Extended Stay 3 38 41
Cambria Suites - 12 12
190 413 603
Variance
New
Conversion Construction Total
Units % Units % Units %
Comfort Inn 15 37% 39 46% 54 43%
Comfort Suites 1 50% 68 41% 69 41%
Sleep Inn (1) -100% 35 40% 34 38%
Midscale without Food & Beverage 15 34% 142 42% 157 41%
Quality 22 41% (2) -17% 20 30%
Clarion (2) -15% - 0% (2) -12%
Midscale with Food & Beverage 20 30% (2) -13% 18 22%
Econo Lodge - 0% (4) -44% (4) -8%
Rodeway 31 89% 3 NM 34 97%
Economy 31 41% (1) -11% 30 35%
MainStay (1) -100% 4 14% 3 10%
Suburban 3 150% 15 167% 18 164%
Extended Stay 2 67% 19 50% 21 51%
Cambria Suites - NM 31 258% 31 258%
68 36% 189 46% 257 43%
CHOICE HOTELS INTERNATIONAL, INC. EXHIBIT 8
SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION
(UNAUDITED)
CALCULATION OF FRANCHISING REVENUES AND FRANCHISING MARGINS
Three Months Ended Year Ended
(dollar amounts in thousands) December 31, December 31,
2006 2005 2006 2005
Franchising Revenues:
Total Revenues $143,708 $121,985 $544,662 $477,399
Adjustments:
Marketing and reservation
revenues (74,307) (58,629) (278,026) (243,123)
Hotel Operations (1,163) (1,079) (4,505) (4,293)
Franchising Revenues $68,238 $62,277 $262,131 $229,983
Franchising Margins:
Operating Margin:
Total Revenues $143,708 $121,985 $544,662 $477,399
Operating Income $39,886 $36,247 $166,625 $143,750
Operating Margin 27.8% 29.7% 30.6% 30.1%
Franchising Margin:
Franchising Revenues $68,238 $62,277 $262,131 $229,983
Operating Income $39,886 $36,247 $166,625 $143,750
Less: Hotel Operations 334 239 1,311 1,068
$39,552 $36,008 $165,314 $142,682
Franchising Margins 58.0% 57.8% 63.1% 62.0%
CALCULATION OF ADJUSTED NET INCOME AND ADJUSTED DILUTED
EARNINGS PER SHARE (EPS)
(In thousands, except per share Three Months Ended Year Ended
amounts) December 31, December 31,
2006 2005 2006 2005
Net Income $24,629 $21,552 $112,787 $87,565
Adjustments:
Loss on Debt Extinguishment Costs - - 217 -
Resolution of Provisions for Income
Tax Contingencies (210) (454) (12,791) (4,855)
Income Tax Expense Incurred Due to
Foreign Earnings Repatriation - - - 1,192
Adjusted Net Income $24,419 $21,098 $100,213 $83,902
Weighted average shares outstanding-
diluted 67,171 66,360 67,050 66,336
Diluted Earnings Per Share $0.37 $0.32 $1.68 $1.32
Adjustments:
Loss on Debt Extinguishment Costs - - - -
Resolution of Provisions for Income
Tax Contingencies (0.01) (0.00) (0.19) (0.08)
Income Tax Expense Incurred Due to
Foreign Earnings Repatriation - - - 0.02
Adjusted Diluted Earnings Per Share
(EPS) $0.36 $0.32 $1.49 $1.26
EBITDA Reconciliation
(in millions)
Year Year
Ended Ended Full-
December December Year
Q4 2006 Q4 2005 31, 2006 31, 2005 2007
Actuals Actuals Actuals Actuals Outlook*
Operating Income
(per GAAP) $39.9 $36.2 $166.6 $143.7 $176.2
Depreciation and
amortization 2.4 2.3 9.7 9.1 9.8
Earnings before
interest, taxes,
depreciation &
amortization (non-
GAAP) ("EBITDA") $42.3 $38.5 $176.3 $152.8 $186.0
* Full Year 2007 Operating income and EBITDA include approximately $4.5
million of severance costs related to the previously announced
termination certain executive officers.
First Call Analyst:
FCMN Contact: david_peikin@choicehotels.com
SOURCE: Choice Hotels International, Inc.
CONTACT: David White, Chief Financial Officer, +1-301-592-5117, or Anne
Madison, Vice President, Corporate Communications, +1-301-592-6723, both of
Choice Hotels International, Inc.
Web site: http://www.choicehotels.com/
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