Choice Hotels International, Inc.,
-- Diluted earnings per share ("EPS") for full-year 2007 were $1.70
compared to $1.68 for full-year 2006. Diluted EPS for fourth quarter
2007 were $0.44, a 19% increase compared to $0.37 for the same period
in 2006. Full-year 2007 results include termination benefits expense
totaling $3.7 million (approximately $0.04 diluted EPS) resulting from
previously announced separations of certain executive officers.
-- Adjusted diluted EPS for full-year 2007 were $1.70, a 14% increase
compared to adjusted diluted EPS of $1.49 for full-year 2006. Adjusted
diluted EPS for fourth quarter 2007 were $0.44, a 22% increase compared
to adjusted diluted EPS of $0.36 for the same period of 2006. Adjusted
diluted earnings per share exclude reductions of income tax expense
related to reversal of income tax contingency provisions of
approximately $0.01 and $0.19 per share for the fourth quarter and
full-year 2006, respectively.
-- Operating income increased 11% to $185.2 million for full-year 2007,
compared to $166.6 million in the same period of the prior year.
Operating income for fourth quarter 2007 increased 21% to $48.1 million
compared to $39.9 million for fourth quarter 2006.
-- Earnings before interest, taxes and depreciation ("EBITDA") for
full-year 2007 increased 10% to $193.8 million from $176.3 million in
2006. EBITDA for fourth quarter 2007 was $50.3 million, an increase of
19% compared to $42.3 million for fourth quarter 2006.
-- Franchising revenues and total revenues increased 12% and 14%,
respectively for full-year 2007 compared to the same period in 2006.
Franchising revenues increased 14% and total revenues increased 19% for
fourth quarter 2007 compared to the same period of 2006.
-- Franchising margins for full-year 2007 were 62.5% compared to 63.1% for
the same period of 2006. Franchising margins for full-year 2007 reflect
the impact of $3.7 million of termination benefits for certain
executive officers and the commencement of direct franchising
operations in continental Europe.
-- Domestic unit growth increased 5.6 percent for full-year 2007.
-- Domestic system-wide revenue per available room (RevPAR) increased 4.0%
for full-year 2007 and 4.7% for fourth quarter 2007 compared to the
same periods in 2006. Domestic RevPAR for the company's mid-scale
without food and beverage brands (Comfort Inn, Comfort Suites and Sleep
Inn), which represent approximately half of the company's domestic
rooms online, increased 5.2% for both full-year and fourth quarter
2007.
-- New domestic hotel franchise contracts for full-year 2007 increased 7%
to a record 770. Fourth quarter new domestic hotel franchise contracts
increased 13% to 301 compared to fourth quarter 2006.
-- The number of domestic hotels under construction, awaiting conversion
or approved for development increased 17% to 1,004 hotels representing
79,342 rooms; the worldwide pipeline increased 18% to 1,093 hotels
representing 87,982 rooms.
"2007 was another very strong year for the company, as we continued to successfully execute our strategy of profitably growing our franchise system and domestic market share of branded hotel rooms," said Charles A. Ledsinger, Jr., vice chairman and chief executive officer. "We achieved another record year for new domestic hotel franchise contract sales, which highlights our ability to attract owners to our family of ten powerful brands by leveraging our size, scale, and distribution to deliver guests and create opportunities for our franchisees to achieve exceptional returns on their investment."
Items Affecting Comparability
Fourth Quarter 2006 Acquisition of Continental Europe Franchising Operations
During the fourth quarter of 2006, the company terminated the master franchising agreement covering continental Europe and acquired the direct franchising operations in this region from the former master franchisor. As a result of the acquisition, franchising revenues and selling, general and administrative costs for the three months ended December 31, 2007 increased approximately $0.5 million and $0.7 million, respectively, compared to fourth quarter 2006. Franchising revenues and selling, general and administrative costs for the full-year 2007 increased approximately $3.3 million and $3.3 million, respectively, compared to the same period in 2006.
Outlook for 2008
The company's first quarter 2008 diluted EPS is expected to be $0.26. The company expects full year 2008 diluted EPS of $1.87. Earnings before interest, taxes, depreciation and amortization ("EBITDA") for full-year 2008 is expected to be approximately $207 million. These estimates include the following assumptions.
-- The company expects net domestic unit growth of approximately 5% in
2008;
-- RevPAR is expected to increase approximately 2% for first quarter 2008
and approximately 3% for full-year 2008;
-- The effective royalty rate is expected to increase 4 basis points for
full-year 2008;
-- All figures assume the existing share count and an effective tax rate
of 36% for first quarter 2008 and 36.5% for full-year 2008
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, primarily through share repurchases and dividends.
For the year ended December 31, 2007, the company paid $40.1 million of cash dividends to shareholders. The annual dividend rate per common share is $0.68.
For the three months ended December 31, 2007, the company purchased approximately 0.8 million shares of its common stock at an average price of $36.16 for a total cost of $28.7 million under its share repurchase program.
For the year ended December 31, 2007, the company purchased approximately 4.9 million shares of its common stock at an average price of $37.47 for a total cost of $184 million. At December 31, 2007, the company had authorization to purchase up to an additional 3.2 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 38.6 million shares of its common stock for a total cost of $895.9 million through December 31, 2007. Considering the effect of a two-for-one stock split in October 2005, the company has repurchased 71.5 million shares under the share repurchase program at an average price of $12.52 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 13, 2008 at 9:30 a.m. EST to discuss the company's fourth quarter and full-year results. The call-in number to listen to the call is 1-800-230-1092. International callers should dial 612-332-0107. The conference call also will be Web cast simultaneously via the company's Web site, 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 www.choicehotels.com beginning at 11:30 a.m. EST on February 13 and will be available through March 13 by calling 1-800-475-6701, access code 905026. International callers should dial 320-365-3844 and enter access code 905026.
About Choice Hotels
Choice Hotels International franchises more than 5,500 hotels, representing more than 450,000 rooms, in the United States and 37 countries and territories. As of December 31, 2007, 1,004 hotels are under development in the United States, representing 79,342 rooms, and an additional 89 hotels, representing 8,640 rooms, are under development in more than 15 countries and territories. The company's Comfort Inn, Comfort Suites, Quality, Sleep Inn, Clarion, Cambria Suites, MainStay Suites, Suburban Extended Stay Hotel, Econo Lodge and Rodeway Inn brands serve guests worldwide.
Additional corporate information may be found on Choice Hotels Web site, which may be accessed at www.choicehotels.com.
Forward-Looking Statements
Certain matters discussed in this press release constitute forward-looking statements within the meaning of the federal securities law. Generally, our use of words such as "expect," "estimate," "believe," "anticipate," "will," "forecast," "plan," project," "assume" or similar words of futurity identify statements that are forward-looking and that we intend to be included within the Safe Harbor protections provided by Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934. Such 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 for the company's revenue, earnings and other financial and operational measures, company debt levels, payment of stock dividends, and future operations. We caution you not to place undue reliance on any forward- looking statements, which are made as of the date of this press release. 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; 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 reservations systems and other operating systems; fluctuations in the supply and demand for hotels rooms; and our ability to manage effectively our indebtedness. These and other risk factors are discussed in detail in the Risk Factors section of the company's Form 10-K for the year ended December 31, 2006, filed with the Securities and Exchange Commission on March 1, 2007. 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
Franchising revenues, franchising margins, adjusted diluted EPS and EBITDA 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 total revenues, operating margins, diluted EPS and operating income. 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 an exhibit accompanying this release that reconciles these measures to the comparable GAAP measurement.
Choice Hotels International, Inc. Exhibit 1
Consolidated Statements of Income
(Unaudited)
Three Months Ended December 31,
Variance
2007 2006 $ %
(In thousands, except per share
amounts)
REVENUES:
Royalty fees $60,623 $54,271 $6,352 12%
Initial franchise and relicensing fees 11,907 9,530 2,377 25%
Brand solutions 3,680 3,092 588 19%
Marketing and reservation 89,963 73,098 16,865 23%
Hotel operations 1,207 1,163 44 4%
Other 1,595 1,345 250 19%
Total revenues 168,975 142,499 26,476 19%
OPERATING EXPENSES:
Selling, general and administrative 27,855 26,316 1,539 6%
Depreciation and amortization 2,227 2,370 (143) (6%)
Marketing and reservation 89,963 73,098 16,865 23%
Hotel operations 839 829 10 1%
Total operating expenses 120,884 102,613 18,271 18%
Operating income 48,091 39,886 8,205 21%
OTHER INCOME AND EXPENSES:
Interest expense 4,087 2,807 1,280 46%
Interest and other investment
(income) loss 1,106 (942) 2,048 (217%)
Equity in net income of affiliates (393) (315) (78) 25%
Loss on extinguishment of debt - - - NM
Total other income and expenses, net 4,800 1,550 3,250 210%
Income before income taxes 43,291 38,336 4,955 13%
Income taxes 15,344 13,707 1,637 12%
Net income $27,947 $24,629 $3,318 13%
Weighted average shares outstanding-
basic 62,086 65,728
Weighted average shares outstanding-
diluted 63,109 67,171
Basic earnings per share $0.45 $0.37 $0.08 22%
Diluted earnings per share $0.44 $0.37 $0.07 19%
Twelve Months Ended December 31,
Variance
2007 2006 $ %
(In thousands, except per share amounts)
REVENUES:
Royalty fees $236,346 $211,645 $24,701 12%
Initial franchise and relicensing fees 33,389 29,629 3,760 13%
Brand solutions 16,283 13,945 2,338 17%
Marketing and reservation 316,827 273,267 43,560 16%
Hotel operations 4,692 4,505 187 4%
Other 7,957 6,912 1,045 15%
Total revenues 615,494 539,903 75,591 14%
OPERATING EXPENSES:
Selling, general and administrative 101,590 87,112 14,478 17%
Depreciation and amortization 8,637 9,705 (1,068) (11%)
Marketing and reservation 316,827 273,267 43,560 16%
Hotel operations 3,241 3,194 47 1%
Total operating expenses 430,295 373,278 57,017 15%
Operating income 185,199 166,625 18,574 11%
OTHER INCOME AND EXPENSES:
Interest expense 14,293 14,098 195 1%
Interest and other investment (income)
loss (1,750) (2,041) 291 (14%)
Equity in net income of affiliates (1,230) (1,052) (178) 17%
Loss on extinguishment of debt - 342 (342) (100%)
Total other income and expenses, net 11,313 11,347 (34) (0%)
Income before income taxes 173,886 155,278 18,608 12%
Income taxes 62,585 42,491 20,094 47%
Net income $111,301 $112,787 $(1,486) (1%)
Weighted average shares outstanding-
basic 64,213 65,387
Weighted average shares outstanding-
diluted 65,331 67,050
Basic earnings per share $1.73 $1.72 $0.01 1%
Diluted earnings per share $1.70 $1.68 $0.02 1%
Choice Hotels International, Inc. Exhibit 2
Consolidated Balance Sheets
(In thousands, except per share amounts)
December 31, December 31,
2007 2006
(Unaudited)
ASSETS
Cash and cash equivalents $46,377 $35,841
Accounts receivable, net 40,855 41,694
Deferred income taxes 2,387 1,790
Investments, employee benefit plans,
at fair value 1,002 -
Other current assets 15,330 7,757
Total current assets 105,951 87,082
Fixed assets and intangibles, net 141,679 144,124
Receivable -- marketing fees 6,782 6,662
Investments, employee benefit plans, at fair
value 33,488 31,529
Other assets 40,484 33,912
Total assets $328,384 $303,309
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current portion of long-term debt $- $146
Other current liabilities 147,516 139,645
Total current liabilities 147,516 139,791
Long-term debt 272,378 172,390
Deferred compensation & retirement
plan obligations 43,132 40,101
Other liabilities 22,419 13,407
Total liabilities 485,445 365,689
Common stock, $0.01 par value 621 664
Additional paid-in-capital 86,243 81,689
Accumulated other comprehensive income
(loss) 346 (772)
Treasury stock, at cost (798,110) (627,311)
Retained earnings 553,839 483,350
Total shareholders' deficit (157,061) (62,380)
Total liabilities and
shareholders' deficit $328,384 $303,309
Choice Hotels International, Inc. Exhibit 3
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands) Twelve Months Ended December 31,
2007 2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $111,301 $112,787
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 8,637 9,705
Provision for bad debts 905 (163)
Non-cash stock compensation and other
charges 11,392 10,644
Non-cash interest and other (income) loss 29 (1,576)
Loss on extinguishment of debt - 342
Dividends received from equity method
investees 1,245 1,095
Equity in net income of affiliates (1,230) (1,052)
Changes in assets and liabilities, net of
acquisitions:
Receivables 671 (3,007)
Receivable - marketing and reservation
fees, net 11,997 19,049
Accounts payable 13,466 6,888
Accrued expenses and other (5,364) (7,631)
Income taxes payable/receivable (5,395) 2,857
Deferred income taxes (7,651) (17,214)
Deferred revenue 1,493 15,036
Other assets (2,559) (1,724)
Other liabilities 7,198 7,892
NET CASH PROVIDED BY OPERATING ACTIVITIES 146,135 153,928
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in property and equipment (11,963) (7,707)
Acquisitions, net of cash acquired (343) (826)
Purchases of investments, employee benefit
plans (8,686) (10,515)
Proceeds from sales of investments,
employee benefit plans 6,049 3,728
Issuance of notes receivable (7,395) (2,433)
Collections of notes receivable 1,806 868
Other items, net (728) (446)
NET CASH USED IN INVESTING ACTIVITIES (21,260) (17,331)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of long-term debt (422) (146)
Net borrowings (repayments) pursuant
to revolving credit facility 100,199 (101,500)
Debt issuance costs - (477)
Excess tax benefits from stock-based
compensation 6,209 12,699
Purchase of treasury stock (185,935) (1,365)
Dividends paid (40,139) (35,386)
Proceeds from exercise of stock options 5,749 8,498
NET CASH USED IN FINANCING ACTIVITIES (114,339) (117,677)
Net change in cash and cash equivalents 10,536 18,920
Cash and cash equivalents at beginning of
period 35,841 16,921
CASH AND CASH EQUIVALENTS AT END OF PERIOD $46,377 $35,841
CHOICE HOTELS INTERNATIONAL, INC. Exhibit 4
SUPPLEMENTAL OPERATING INFORMATION
DOMESTIC HOTEL SYSTEM
(UNAUDITED)
For the Twelve Months Ended
December 31, 2007
Average Daily
Rate Occupancy RevPAR
Comfort Inn $77.14 63.1% $48.70
Comfort Suites 87.23 65.5% 57.11
Sleep 69.67 62.5% 43.52
Midscale without Food & Beverage 78.23 63.5% 49.70
Quality 70.30 54.2% 38.09
Clarion 80.86 51.7% 41.79
Midscale with Food & Beverage 72.74 53.6% 38.97
Econo Lodge 54.40 48.0% 26.10
Rodeway 53.24 47.6% 25.32
Economy 54.14 47.9% 25.93
MainStay 70.04 68.5% 47.98
Suburban 40.13 67.3% 27.01
Extended Stay 47.10 67.6% 31.83
Total $72.07 57.9% $41.75
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
Suburban 38.30 72.4% 27.73
Extended Stay 43.81 71.8% 31.46
Total $68.71 58.4% $40.13
Change
Average Daily
Rate Occupancy RevPAR
Comfort Inn 5.6% 10 bps 5.7%
Comfort Suites 5.2% (150)bps 2.7%
Sleep 4.9% 10 bps 5.0%
Midscale without Food & Beverage 5.5% (20)bps 5.2%
Quality 5.1% (110)bps 2.9%
Clarion 2.4% 50 bps 3.4%
Midscale with Food & Beverage 4.3% (70)bps 2.9%
Econo Lodge 2.5% 30 bps 3.1%
Rodeway 3.1% 180 bps 7.0%
Economy 2.5% 60 bps 3.8%
MainStay 4.1% (90)bps 2.8%
Suburban 4.8% (510)bps (2.6%)
Extended Stay 7.5% (420)bps 1.2%
Total 4.9% (50)bps 4.0%
For the Three Months Ended
December 31, 2007
Average Daily
Rate Occupancy RevPAR
Comfort Inn $77.45 63.9% $49.47
Comfort Suites 86.32 64.1% 55.29
Sleep 70.10 61.4% 43.03
Midscale without Food & Beverage 78.31 63.5% 49.76
Quality 69.86 53.4% 37.28
Clarion 82.27 52.3% 43.04
Midscale with Food & Beverage 72.68 53.1% 38.61
Econo Lodge 54.33 47.7% 25.89
Rodeway 52.17 46.7% 24.37
Economy 53.82 47.4% 25.52
MainStay 70.40 70.7% 49.77
Suburban 40.65 64.6% 26.24
Extended Stay 48.50 66.1% 32.04
Total $72.16 57.6% $41.58
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
Suburban 38.16 67.7% 25.82
Extended Stay 44.47 68.7% 30.57
Total $68.40 58.0% $39.70
Change
Average Daily
Rate Occupancy RevPAR
Comfort Inn 5.9% 40 bps 6.5%
Comfort Suites 4.8% (200)bps 1.6%
Sleep 6.1% (110)bps 4.2%
Midscale without Food & Beverage 5.8% (40)bps 5.2%
Quality 6.2% (120)bps 3.9%
Clarion 5.0% 130 bps 7.7%
Midscale with Food & Beverage 5.7% (60)bps 4.6%
Econo Lodge 3.0% 10 bps 3.1%
Rodeway 4.8% 330 bps 12.8%
Economy 3.1% 70 bps 4.7%
MainStay 5.2% (210)bps 2.1%
Suburban 6.5% (310)bps 1.6%
Extended Stay 9.1% (260)bps 4.8%
Total 5.5% (40)bps 4.7%
For the Quarter Ended
12/31/2007 12/31/2006
System-wide effective royalty rate 4.15% 4.12%
For the Twelve Months Ended
12/31/2007 12/31/2006
System-wide effective royalty rate 4.14% 4.09%
CHOICE HOTELS INTERNATIONAL, INC. Exhibit 5
SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA
(UNAUDITED)
December 31, 2007 December 31, 2006
Hotels Rooms Hotels Rooms
Comfort Inn 1,434 112,042 1,415 110,877
Comfort Suites 481 37,358 433 33,976
Sleep 346 25,728 327 24,575
Midscale without Food & Beverage 2,261 175,128 2,175 169,428
Quality 828 79,276 736 72,054
Clarion 167 23,319 162 23,945
Midscale with Food & Beverage 995 102,595 898 95,999
Econo Lodge 825 50,403 816 49,679
Rodeway 276 16,523 233 14,168
Economy 1,101 66,926 1,049 63,847
MainStay 30 2,258 29 2,183
Suburban 54 6,773 60 7,984
Extended Stay 84 9,031 89 10,167
Cambria Suites 4 459 - -
Domestic Franchises 4,445 354,139 4,211 339,441
International Franchises 1,125 97,888 1,165 97,944
Total Franchises 5,570 452,027 5,376 437,385
Variance
Hotels Rooms % %
Comfort Inn 19 1,165 1.3% 1.1%
Comfort Suites 48 3,382 11.1% 10.0%
Sleep 19 1,153 5.8% 4.7%
Midscale without Food & Beverage 86 5,700 4.0% 3.4%
Quality 92 7,222 12.5% 10.0%
Clarion 5 (626) 3.1% (2.6%)
Midscale with Food & Beverage 97 6,596 10.8% 6.9%
Econo Lodge 9 724 1.1% 1.5%
Rodeway 43 2,355 18.5% 16.6%
Economy 52 3,079 5.0% 4.8%
MainStay 1 75 3.4% 3.4%
Suburban (6) (1,211) (10.0%) (15.2%)
Extended Stay (5) (1,136) (5.6%) (11.2%)
Cambria Suites 4 459 NM NM
Domestic Franchises 234 14,698 5.6% 4.3%
International Franchises (40) (56) (3.4%) (0.1%)
Total Franchises 194 14,642 3.6% 3.3%
CHOICE HOTELS INTERNATIONAL, INC. Exhibit 6
SUPPLEMENTAL INFORMATION BY BRAND
DEVELOPMENT RESULTS -- DOMESTIC NEW HOTEL CONTRACTS
(UNAUDITED)
For the Twelve Months Ended
December 31, 2007
New
Construction Conversion Total
Comfort Inn 48 62 110
Comfort Suites 114 4 118
Sleep 71 1 72
Midscale without Food & Beverage 233 67 300
Quality 11 153 164
Clarion 6 42 48
Midscale with Food & Beverage 17 195 212
Econo Lodge 3 77 80
Rodeway 2 99 101
Economy 5 176 181
MainStay 22 2 24
Suburban 21 3 24
Extended Stay 43 5 48
Cambria Suites 29 - 29
Total Domestic System 327 443 770
For the Twelve Months Ended
December 31, 2006
New
Construction Conversion Total
Comfort Inn 67 65 132
Comfort Suites 98 3 101
Sleep 58 1 59
Midscale without Food & Beverage 223 69 292
Quality 6 143 149
Clarion 2 26 28
Midscale with Food & Beverage 8 169 177
Econo Lodge 1 80 81
Rodeway 3 105 108
Economy 4 - 185 - 189
MainStay 9 1 10
Suburban 14 8 22
Extended Stay 23 9 32
Cambria Suites 30 - 30
Total Domestic System 288 432 720
% Change
New
Construction Conversion Total
Comfort Inn (28%) (5%) (17%)
Comfort Suites 16% 33% 17%
Sleep 22% 0% 22%
Midscale without Food & Beverage 4% (3%) 3%
Quality 83% 7% 10%
Clarion 200% 62% 71%
Midscale with Food & Beverage 113% 15% 20%
Econo Lodge 200% (4%) (1%)
Rodeway (33%) (6%) (6%)
Economy 25% (5%) (4%)
MainStay 144% 100% 140%
Suburban 50% (63%) 9%
Extended Stay 87% (44%) 50%
Cambria Suites (3%) NM (3%)
Total Domestic System 14% 3% 7%
For the Three Months Ended
December 31, 2007
New
Construction Conversion Total
Comfort Inn 22 30 52
Comfort Suites 36 - 36
Sleep 38 - 38
Midscale without Food & Beverage 96 30 126
Quality 4 57 61
Clarion 1 14 15
Midscale with Food & Beverage 5 71 76
Econo Lodge - 27 27
Rodeway - 37 37
Economy - 64 64
MainStay 12 1 13
Suburban 11 - 11
Extended Stay 23 1 24
Cambria Suites 11 - 11
Total Domestic System 135 166 301
For the Three Months Ended
December 31, 2006
New
Construction Conversion Total
Comfort Inn 29 22 51
Comfort Suites 43 - 43
Sleep 31 - 31
Midscale without Food & Beverage 103 22 125
Quality 1 43 44
Clarion 1 4 5
Midscale with Food & Beverage 2 47 49
Econo Lodge 1 37 38
Rodeway 1 32 33
Economy 2 69 71
MainStay 4 - 4
Suburban 5 3 8
Extended Stay 9 3 12
Cambria Suites 10 - 10
Total Domestic System 126 141 267
% Change
New
Construction Conversion Total
Comfort Inn (24%) 36% 2%
Comfort Suites (16%) NM (16%)
Sleep 23% NM 23%
Midscale without Food & Beverage (7%) 36% 1%
Quality 300% 33% 39%
Clarion 0% 250% 200%
Midscale with Food & Beverage 150% 51% 55%
Econo Lodge (100%) (27%) (29%)
Rodeway (100%) 16% 12%
Economy (100%) (7%) (10%)
MainStay 200% NM 225%
Suburban 120% (100%) 38%
Extended Stay 156% (67%) 100%
Cambria Suites 10% NM 10%
Total Domestic System 7% 18% 13%
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, 2007
Units
New
Conversion Construction Total
Comfort Inn 54 135 189
Comfort Suites 1 278 279
Sleep Inn - 138 138
Midscale without Food & Beverage 55 551 606
Quality 71 15 86
Clarion 30 7 37
Midscale with Food & Beverage 101 22 123
Econo Lodge 46 3 49
Rodeway 68 3 71
Economy 114 6 120
MainStay 2 46 48
Suburban 4 40 44
Extended Stay 6 86 92
Cambria Suites - 63 63
276 728 1,004
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
Variance
Conversion New Construction
Units % Units %
Comfort Inn (2) (4%) 11 9%
Comfort Suites (2) (67%) 45 19%
Sleep Inn - NM 15 12%
Midscale without Food & Beverage (4) (7%) 71 15%
Quality (5) (7%) 5 50%
Clarion 19 173% 3 75%
Midscale with Food & Beverage 14 16% 8 57%
Econo Lodge 5 12% (2) (40%)
Rodeway 2 3% - 0%
Economy 7 7% (2) (25%)
MainStay 2 NM 13 39%
Suburban (1) (20%) 16 67%
Extended Stay 1 20% 29 51%
Cambria Suites - NM 20 47%
18 7% 126 21%
Variance
Total
Units %
Comfort Inn 9 5%
Comfort Suites 43 18%
Sleep Inn 15 12%
Midscale without Food & Beverage 67 12%
Quality - 0%
Clarion 22 147%
Midscale with Food & Beverage 22 22%
Econo Lodge 3 7%
Rodeway 2 3%
Economy 5 4%
MainStay 15 45%
Suburban 15 52%
Extended Stay 30 48%
Cambria Suites 20 47%
144 17%
CHOICE HOTELS INTERNATIONAL, INC.
SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION
(UNAUDITED)
CALCULATION OF FRANCHISING REVENUES AND FRANCHISING MARGINS
Three Months Ended Twelve Months Ended
(dollar amounts in thousands) December 31, December 31,
2007 2006 2007* 2006
Franchising Revenues:
Total Revenues $168,975 $142,499 $615,494 $539,903
Adjustments:
Marketing and reservation
revenues (89,963) (73,098) (316,827) (273,267)
Hotel Operations (1,207) (1,163) (4,692) (4,505)
Franchising Revenues $77,805 $68,238 $293,975 $262,131
Franchising Margins:
Operating Margin:
Total Revenues $168,975 $142,499 $615,494 $539,903
Operating Income $48,091 $39,886 $185,199 $166,625
Operating Margin 28.5% 28.0% 30.1% 30.9%
Franchising Margin:
Franchising Revenues $77,805 $68,238 $293,975 $262,131
Operating Income $48,091 $39,886 $185,199 $166,625
Less: Hotel Operations 368 334 1,451 1,311
$47,723 $39,552 $183,748 $165,314
Franchising Margins 61.3% 58.0% 62.5% 63.1%
CALCULATION OF ADJUSTED NET INCOME AND ADJUSTED DILUTED EARNINGS PER SHARE
(EPS)
(In thousands, except per Three Months Ended Twelve Months Ended
share amounts) December 31, December 31,
2007 2006 2007* 2006
Net Income $27,947 $24,629 $111,301 $112,787
Adjustments:
Reversal of Provisions for
Income Tax
Contingencies/Unrecognized
Tax Benefits (48) (210) (349) (12,791)
Adjusted Net Income $27,899 $24,419 $110,952 $99,996
Weighted average shares
outstanding-diluted 63,109 67,171 65,331 67,050
Diluted Earnings Per Share $0.44 $0.37 $1.70 $1.68
Adjustments:
Reversal of Provisions for
Income Tax
Contingencies/Unrecognized
Tax Benefits - (0.01) - (0.19)
Adjusted Diluted Earnings Per
Share (EPS) $0.44 $0.36 $1.70 $1.49
EBITDA Reconciliation
(in millions)
Year Ended Year Ended Full-
December December Year
Q4 2007 Q4 2006 31, 2007 31, 2006 2008
Actuals Actuals Actuals* Actuals Outlook
Operating Income $48.1 $39.9 $185.2 $166.6 $196.9
Depreciation and
amortization 2.2 2.4 8.6 9.7 10.1
Earnings before interest,
taxes, depreciation &
amortization $50.3 $42.3 $193.8 $176.3 $207.0
* Year ended December 31, 2007 franchising margins, operating income and
EBITDA include approximately $3.7 million of severance costs related
to the previously announced termination of certain executive officers.
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.
First Call Analyst:
FCMN Contact: david_peikin@choicehotels.com
SOURCE: Choice Hotels International
CONTACT: David White, Chief Financial Officer, +1-301-592-5117, or David
Peikin, Senior Director, Corporate Communications, +1-301-592-6361, both of
Choice Hotels International
Web site: http://www.choicehotels.com/
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