ROCKVILLE, Md., July 26, 2013 /PRNewswire/ -- Choice Hotels International, Inc., (NYSE:CHH) today reported the following highlights for the second quarter of 2013:
-- Franchising revenues increased 6% to $82.6 million for the three months
ended June 30, 2013 from $77.8 million for the same period of 2012.
Total revenues increased 6% to $183.6 million for the three months ended
June 30, 2013 compared to the same period of 2012.
-- Domestic royalty fees for the three months ended June 30, 2013 increased
4% to $62.2 million from $59.8 million for the three months ended June
30, 2012.
-- Domestic system-wide revenue per available room ("RevPAR") increased
3.5% for the three months ended June 30, 2013 compared to the same
quarter of the prior year as occupancy and average daily rates increased
90 basis points and 1.8%, respectively.
-- Domestic unit and room growth increased 1.9% and 1.0% from June 30,
2012, respectively.
-- The effective domestic royalty rate increased 3 basis points to 4.35%
for the three months ended June 30, 2013 compared to 4.32% for the same
period of the prior year.
-- Initial and relicensing fees for the three months ended June 30, 2013
increased $1.2 million or 39% to $4.4 million from the same period of
the prior year.
-- The company executed 104 new domestic hotel franchise contracts for the
three months ended June 30, 2013 compared to 106 new domestic hotel
franchise contracts in the same period of the prior year.
-- Domestic relicensing and contract renewal transactions increased from 47
contracts during the three months ended June 30, 2012 to 63 in the
current period, a 34% increase.
-- The number of worldwide hotels under construction, awaiting conversion
or approved for development as of June 30, 2013 was 448 hotels
representing 36,487 rooms.
-- Selling, general and administrative ("SG&A") expenses increased $5.6
million to $30.2 million for the three months ended June 30, 2013
compared to the same period of the prior year. SG&A expenses include
expenses related to the company's SkyTouch Technology division totaling
$3.2 million and $0.8 million during the three months ended June 30,
2013 and 2012, respectively. In addition, SG&A for the second quarter
of 2013 includes approximately $0.7 million of costs that are not
expected to recur in future periods related to the relocation of the
company's corporate headquarters during the second quarter as well as
additional variable expenses totaling approximately $0.5 million related
to an increase in initial fees and procurement services revenues.
-- The effective income tax rate for the three months ended June 30, 2013
was 29.6% compared to 33.5% for the same period of 2012.
-- Diluted earnings per share ("EPS") for second quarter 2013 were $0.48
compared to $0.55 for the second quarter of 2012. EPS for the second
quarter of 2013 reflect $7.3 million of additional interest expense
compared to the prior year reflecting the financing transactions entered
into during the second and third quarters of 2012 in conjunction with
the payment of the $600 million special cash dividend on August 23,
2012.
"We are excited about the growth prospects for our core franchising business. We are seeing particularly strong RevPAR performance for our upscale Ascend Collection, Suburban Extended Stay Hotel brand and our Sleep Inn brand which delivered impressive results as more of our franchisees upgrade their hotels to our new Design to Dream proto-type," said Stephen P. Joyce, president and chief executive officer. "On the development side of the business, conversion franchise sales for our flagship Comfort brand and our Ascend Collection continued to outpace last year's results demonstrating that Choice remains a top option for hotel developers."
"We are also excited to report that we debuted SkyTouch Technology's cloud based technology products to the hospitality industry in June at the Hospitality Financial and Technology Professional's HITEC conference and are pleased with the level of interest we received," said Stephen P. Joyce, president and chief executive officer. "We have executed our first customer contracts for this division and are excited that our new customers will experience the benefits that our cloud based technology products will deliver to their hotels."
Use of Free Cash Flow
The company has historically used its free cash flow (cash flow from operations less cash flow from investing activities) to return value to shareholders, primarily through share repurchases and dividends.
Dividends
During the six months ended June 30, 2013, the company paid $11.3 million of cash dividends to shareholders. The company's current quarterly dividend rate per common share is $0.185, subject to declaration by our board of directors. The company's regular dividend for the first quarter was paid in December 2012.
Share Repurchases
The company did not repurchase any shares of common stock under the share repurchase program during the three and six months ended June 30, 2013 but has authorization to purchase up to an additional 1.4 million shares under this program. We expect we will make repurchases from time to time under our share repurchase program in the open market and through privately negotiated transactions, subject to market and other conditions. No minimum number of share repurchases has been fixed. Since Choice announced its stock repurchase program on June 25, 1998, the company has repurchased 45.3 million shares of its common stock for a total cost of $1.1 billion through June 30, 2013. Considering the effect of a two-for-one stock split in October 2005, the company has repurchased 78.3 million shares through June 30, 2013 under the share repurchase program at an average price of $13.89 per share.
Other
Our board of directors previously authorized us to enter into a program which permits us to offer financing, investment and guaranty support to qualified franchisees as well as to acquire and resell real estate to incent franchise development for certain brands in strategic markets. Over the next several years, we expect to continue to opportunistically deploy capital pursuant to this program to promote growth of our emerging brands. Our current expectation is that our annual investment in this program will range between $20 million and $40 million per year and we generally expect to recycle these investments over a 5 year period. However, the amount and timing of the investment in this program will be dependent on market and other conditions. Notwithstanding this program, 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.
Balance Sheet
At June 30, 2013, the company had gross debt of $866.5 million and cash and cash equivalents totaling $143.8 million resulting in net debt of $722.7 million. At December 31, 2012, the company had gross debt of $855.3 million and cash equivalents totaling $134.2 million resulting in net debt of $721.1 million.
At June 30, 2013 and December 31, 2012, the company had outstanding mezzanine financing, real estate investments and sliver equity investments totaling $69 million and $68 million, respectively pursuant to its program to offer financing and investment support to incent franchise development for the Cambria Suites brand in strategic markets. These investments are reported in other current assets and other assets on the company's consolidated balance sheet.
Outlook
The company's third quarter 2013 diluted EPS is expected to be $0.66. The company expects full-year 2013 diluted EPS to range between $1.84 and $1.87. Earnings before interest, taxes and depreciation ("EBITDA") for full-year 2013 are expected to range between $203.5 million and $206.5 million. These estimates include the following assumptions:
-- The company expects net domestic unit growth to increase by
approximately 2% in 2013;
-- RevPAR is expected to increase approximately 3% for the third quarter of
2013 and increase between 3.5% and 4.25% for full-year 2013; RevPAR
growth is expected to moderate in the second half of the year and
continue to grow at a moderate pace into 2014;
-- The effective royalty rate is expected to increase 2 basis points for
full-year 2013;
-- All figures assume the existing share count;
-- The effective tax rate is expected to be 29.5% and 30.0% for the third
quarter and full-year 2013, respectively; and
-- Our EBITDA outlook for the full year includes expenses related to the
company's SkyTouch Technology division ranging between $12 million and
$14 million for investment in the infrastructure of this division
including business development, sales and marketing and other costs as
well as continued software development expenditures related to the
division's technology related products and services.
Conference Call
Choice will conduct a conference call on Friday, July 26, 2013 at 10:00 a.m. EDT to discuss the company's second quarter 2013 results. The dial-in number to listen to the call is 1-877-280-4959, and the access code is 31314907. International callers should dial 1-857-244-7316 and enter the access code 31314907. The conference call also will be Webcast simultaneously via the company's Web site, www.choicehotels.com. Interested investors and other parties wishing to access the call via the Webcast 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 call will be recorded and available for replay beginning at 12:00 p.m. EDT on Friday, July 26, 2013 through Friday, August 2, 2013 by calling 1-888-286-8010 and entering access code 26118362. The international dial-in number for the replay is 1-617-801-6888, access code 26118362. In addition, the call will be archived and available on www.choicehotels.com via the Investor Info link.
About Choice Hotels
Choice Hotels International, Inc. franchises more than 6,200 hotels, representing more than 500,000 rooms, in the United States and more than 30 other countries and territories. As of June 30, 2013, 365 hotels, representing more than 29,000 rooms, were under construction, awaiting conversion or approved for development in the United States. Additionally, 83 hotels, representing approximately 7,200 rooms, were under construction, awaiting conversion or approved for development in more than 15 other 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, as well as its Ascend Hotel Collection membership program, serve guests worldwide.
SkyTouch Technology is an initiative of Choice Hotels International, Inc. that develops and markets cloud-based technology products to help industry-wide hoteliers improve their efficiency and profitability.
Additional corporate information can be found on the Choice Hotels International, Inc. 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 Private Securities Litigation Reform Act of 1995. Generally, our use of words such as "expect," "estimate," "believe," "anticipate," "will," "forecast," "plan"," project," "assume" or similar words of futurity identify such forward-looking statements. These 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 of the company's revenue, earnings and other financial and operational measures, company debt levels, ability to repay outstanding indebtedness, payment of dividends, and future operations, among other matters. We caution you not to place undue reliance on any such forward-looking statements. 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, 2012, filed with the Securities and Exchange Commission on February 28, 2013 and our quarterly reports filed on Form 10-Q. 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 Presented in Exhibit 8
EBITDA, franchising revenues and franchising margins are non-GAAP financial measurements. This information should not be considered as an alternative to any measure of performance as promulgated under generally accepted accounting principles in the United States ("GAAP"), such as operating income, total revenues and operating margins. The company's calculation of these measurements may be different from the calculations 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. We discuss management's reasons for reporting these non-GAAP measures below.
Earnings Before Interest, Taxes, Depreciation and Amortization: EBITDA reflects earnings excluding the impact of interest expense, interest income, provision for income taxes, depreciation and amortization, other (gains) and losses and equity in net income (loss) of unconsolidated affiliates. We consider EBITDA to be an indicator of operating performance because we use it to measure our ability to service debt, fund capital expenditures, and expand our business. We also use EBITDA, as do analysts, lenders, investors and others, to evaluate companies because it excludes certain items that can vary widely across different industries or among companies within the same industry. For example, interest expense can be dependent on a company's capital structure, debt levels and credit ratings. Accordingly, the impact of interest expense on earnings can vary significantly among companies. The tax positions of companies can also vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the jurisdictions in which they operate. As a result, effective tax rates and provision for income taxes can vary considerably among companies. EBITDA also excludes depreciation and amortization because companies utilize productive assets of different ages and use different methods of both acquiring and depreciating productive assets. These differences can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies.
Franchising Revenues and Margins: The company reports franchising revenues and margins which exclude marketing and reservation revenues, SkyTouch Technology and hotel operations. Marketing and reservation activities are excluded from revenues and operating margins since the company is required by its franchise agreements to use these fees collected for marketing and reservation activities. Cumulative reservation and marketing system fees not expended are recorded as a liability on the company's financial statements and are carried over to the next year and expended in accordance with the franchise agreements. Cumulative marketing and reservation expenditures in excess of system fees collected for marketing and reservation activities are recorded as a receivable on the company's financial statements. In addition, the company has the contractual authority to require that the franchisees in the system at any given point repay the company for any deficits related to marketing and reservation activities. Hotel operations reflect the company's ownership of three MainStay Suites hotels. SkyTouch Technology is a division of the company that develops and markets cloud-based technology products to help industry-wide hoteliers improve their efficiency and profitability. Hotel and SkyTouch Technology operations are excluded from franchising revenue and margins since they do not reflect the most accurate measure of the company's core franchising business but are adjacent, complimentary lines of business. These non-GAAP measures are a commonly used measure of performance in our industry and facilitate comparisons between the company and its competitors.
Choice Hotels, Choice Hotels International, Comfort Inn, Comfort Suites, Quality, Sleep Inn, Clarion, Cambria Suites, MainStay Suites, Suburban Extended Stay Hotel, Econo Lodge, Rodeway Inn, Ascend Hotel Collection and SkyTouch Technology are proprietary trademarks and service marks of Choice Hotels International.
© 2013 Choice Hotels International, Inc. All rights reserved.
Choice Hotels International, Inc.
Exhibit 1
Consolidated Statements of Income
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
Variance Variance
2013 2012 $ % 2013 2012 $ %
---- ---- --- --- ---- ---- --- ---
(In thousands, except per share amounts)
REVENUES:
Royalty fees $68,379 $66,064 $2,315 4% $118,115 $113,917 $4,198 4%
Initial franchise and relicensing fees 4,416 3,178 1,238 39% 8,193 5,706 2,487 44%
Procurement services 7,546 6,836 710 10% 11,496 10,151 1,345 13%
Marketing and reservation 99,645 94,633 5,012 5% 176,085 165,562 10,523 6%
Hotel operations 1,334 1,224 110 9% 2,290 2,202 88 4%
Other 2,258 1,686 572 34% 4,271 5,252 (981) (19%)
----- ----- --- --- ----- ----- ---- ----
Total revenues 183,578 173,621 9,957 6% 320,450 302,790 17,660 6%
OPERATING EXPENSES:
Selling, general and administrative 30,180 24,554 5,626 23% 57,096 48,903 8,193 17%
Depreciation and amortization 2,520 1,977 543 27% 4,695 3,994 701 18%
Marketing and reservation 99,645 94,633 5,012 5% 176,085 165,562 10,523 6%
Hotel operations 911 867 44 5% 1,786 1,676 110 7%
--- --- --- --- ----- ----- --- ---
Total operating expenses 133,256 122,031 11,225 9% 239,662 220,135 19,527 9%
Operating income 50,322 51,590 (1,268) (2%) 80,788 82,655 (1,867) (2%)
OTHER INCOME AND EXPENSES, NET:
Interest expense 10,807 3,540 7,267 205% 21,577 6,657 14,920 224%
Interest income (659) (394) (265) 67% (1,303) (731) (572) 78%
Other (gains) and losses 147 377 (230) (61%) (563) (1,626) 1,063 (65%)
Equity in net (income) loss of affiliates (60) 128 (188) (147%) 81 183 (102) (56%)
Total other income and expenses, net 10,235 3,651 6,584 180% 19,792 4,483 15,309 341%
------ ----- ----- --- ------ ----- ------ ---
Income before income taxes 40,087 47,939 (7,852) (16%) 60,996 78,172 (17,176) (22%)
Income taxes 11,853 16,077 (4,224) (26%) 17,239 26,313 (9,074) (34%)
------ ------ ------ ---- ------ ------ ------
Net income $28,234 $31,862 $(3,628) (11%) $43,757 $51,859 $(8,102) (16%)
======= ======= ======= ==== ======= ======= ======= ====
Basic earnings per share $0.48 $0.55 $(0.07) (13%) $0.75 $0.89 $(0.14) (16%)
===== ===== ====== ==== ===== ===== ====== ====
Diluted earnings per share $0.48 $0.55 $(0.07) (13%) $0.74 $0.89 $(0.15) (17%)
===== ===== ====== ==== ===== ===== ====== ====
Choice Hotels International, Inc. Exhibit 2
Consolidated Balance Sheets
(In thousands, except per share amounts) June 30, December 31,
2013 2012
---- ----
(Unaudited)
ASSETS
Cash and cash equivalents $143,790 $134,177
Accounts receivable, net 70,951 52,270
Investments, employee benefit plans, at fair value 377 3,486
Other current assets 40,586 43,537
------ ------
Total
current
assets 255,704 233,470
Fixed assets and intangibles, net 147,034 130,937
Receivable -- marketing and reservation fees 54,786 42,179
Investments, employee benefit plans, at fair value 14,114 12,755
Other assets 91,074 91,431
------ ------
Total assets $562,712 $510,772
-------- --------
LIABILITIES AND SHAREHOLDERS' DEFICIT
Accounts payable and accrued expenses $102,291 $94,266
Deferred revenue 67,757 71,154
Deferred compensation & retirement plan obligations 2,393 2,522
Current portion of long-term debt 8,205 8,195
----- -----
Total current
liabilities 180,646 176,137
Long-term debt 858,273 847,150
Deferred compensation & retirement plan obligations 20,114 20,399
Other liabilities 23,700 15,990
------ ------
Total
liabilities 1,082,733 1,059,676
Common stock, $0.01 par value 585 582
Additional paid-in-capital 111,580 110,246
Accumulated other comprehensive loss (6,097) (4,216)
Treasury stock, at cost (920,355) (927,776)
Retained earnings 294,266 272,260
------- -------
Total
shareholders'
deficit (520,021) (548,904)
Total
liabilities
and
shareholders'
deficit $562,712 $510,772
-------- --------
Choice Hotels International, Inc. Exhibit 3
Consolidated Statements of Cash
Flows
(Unaudited)
(In thousands) Six Months
Ended June 30,
---------------
2013 2012
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
(1):
Net income $43,757 $51,859
Adjustments to reconcile net income
to net cash provided
by operating activities:
Depreciation and
amortization 4,695 3,994
Provision for
bad debts, net 1,420 1,236
Non-cash stock
compensation
and other
charges 5,581 4,868
Non-cash
interest and
other (income)
loss 967 (820)
Deferred income
taxes 4,169 (194)
Dividends
received from
equity method
investments 535 399
Equity in net
(income) loss
of affiliates 81 183
Changes in assets and liabilities:
Receivables (21,156) (12,258)
Receivable -
marketing and
reservation
fees, net (2,945) (2,389)
Accounts payable 9,893 6,330
Accrued expenses (18,463) (17,659)
Income taxes
payable/
receivable 1,729 11,808
Deferred revenue (3,318) (4,404)
Other assets (1,664) (4,331)
Other
liabilities 7,271 (820)
----- ----
NET CASH
PROVIDED BY
OPERATING
ACTIVITIES (1) 32,552 37,802
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES
(1):
Investment in
property and
equipment (21,005) (6,236)
Equity method
investments (1,851) (6,315)
Purchases of
investments,
employee
benefit plans (1,580) (969)
Proceeds from
sales of
investments,
employee
benefit plans 3,934 8,969
Issuance of
notes
receivable (3,641) (5,820)
Collections of
notes
receivable 247 210
Other items, net (304) (226)
---- ----
NET CASH USED IN
INVESTING
ACTIVITIES (1) (24,200) (10,387)
------- -------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net borrowings
pursuant to
revolving
credit
facilities 15,200 -
Principal
payments on
long-term debt (4,095) (333)
Proceeds from
the issuance of
long-term debt - 393,444
Purchase of
treasury stock (3,651) (22,173)
Dividends paid (11,261) (21,396)
Excess tax
benefits from
stock-based
compensation 1,146 641
Debt issuance
costs - (153)
Proceeds from
exercise of
stock options 5,973 445
----- ---
NET CASH
PROVIDED BY
FINANCING
ACTIVITIES 3,312 350,475
----- -------
Net change in
cash and cash
equivalents 11,664 377,890
Effect of
foreign
exchange rate
changes on cash
and cash
equivalents (2,051) 443
Cash and cash
equivalents at
beginning of
period 134,177 107,057
------- -------
CASH AND CASH
EQUIVALENTS AT
END OF PERIOD $143,790 $485,390
======== ========
(1) The company is currently reviewing, in
consultation with its independent registered public
accounting firm, its accounting policies regarding
the presentation of its cash flows related to certain
of its development advances and collections presented
under the captions "Issuance and Collections of Notes
Receivable." The company's statements of cash flows
contained in this press release have been prepared in
accordance with the company's existing accounting
policy which is to present these items as cash flows
from investing activities, which is consistent with
Exhibit 4
CHOICE HOTELS INTERNATIONAL, INC.
SUPPLEMENTAL OPERATING INFORMATION
DOMESTIC HOTEL SYSTEM
(UNAUDITED)
For the Six Months Ended June 30, For the Six Months Ended June
2013* 30, 2012* Change
---------------------------------- ------------------------------ ------
Average Daily Average Daily Average Daily
Rate Occupancy RevPAR Rate Occupancy RevPAR Rate Occupancy RevPAR
---- --------- ------ ---- --------- ------ ---- -------- ------
Comfort Inn $79.42 54.2% $43.08 $77.48 53.6% $41.52 2.5% 60 bps 3.8%
Comfort Suites 85.00 58.3% 50.01 83.15 57.6% 47.92 2.2% 70 bps 4.4%
Sleep 72.06 54.5% 39.29 69.90 52.0% 36.32 3.1% 250 bps 8.2%
Quality 67.16 48.4% 32.49 66.29 46.8% 31.03 1.3% 160 bps 4.7%
Clarion 72.04 46.7% 33.65 71.85 44.6% 32.07 0.3% 210 bps 4.9%
Econo Lodge 53.60 44.1% 23.64 52.48 44.0% 23.09 2.1% 10 bps 2.4%
Rodeway 50.43 47.0% 23.70 49.36 46.2% 22.81 2.2% 80 bps 3.9%
MainStay 70.33 63.6% 44.74 67.02 67.4% 45.16 4.9% (380) bps (0.9%)
Suburban 42.15 68.8% 29.01 40.48 67.3% 27.24 4.1% 150 bps 6.5%
Ascend Collection 120.34 60.6% 72.90 109.96 59.4% 65.28 9.4% 120 bps 11.7%
------ ---- ----- ------ ---- ----- --- --- --- ----
Total $71.81 51.7% $37.10 $70.38 50.7% $35.66 2.0% 100 bps 4.0%
====== ==== ====== ====== ==== ====== === === === ===
* Operating statistics represent hotel operations from December through May
For the Three Months Ended June For the Three Months Ended June
30, 2013* 30, 2012* Change
-------------------------------- ------------------------------- ------
Average Daily Average Daily Average Daily
Rate Occupancy RevPAR Rate Occupancy RevPAR Rate Occupancy RevPAR
---- --------- ------ ---- --------- ------ ---- -------- ------
Comfort Inn $81.77 60.8% $49.67 $79.87 60.2% $48.05 2.4% 60 bps 3.4%
Comfort Suites 87.52 64.9% 56.82 85.71 64.2% 55.01 2.1% 70 bps 3.3%
Sleep 74.30 61.3% 45.54 72.52 58.7% 42.56 2.5% 260 bps 7.0%
Quality 69.35 54.2% 37.61 68.43 52.5% 35.95 1.3% 170 bps 4.6%
Clarion 74.43 52.0% 38.68 74.71 50.2% 37.53 (0.4%) 180 bps 3.1%
Econo Lodge 55.06 49.4% 27.19 54.14 49.2% 26.62 1.7% 20 bps 2.1%
Rodeway 52.32 51.5% 26.93 51.10 50.4% 25.76 2.4% 110 bps 4.5%
MainStay 71.71 70.0% 50.23 69.06 72.9% 50.32 3.8% (290) bps (0.2%)
Suburban 43.16 73.9% 31.90 41.58 71.9% 29.89 3.8% 200 bps 6.7%
Ascend Collection 124.77 64.1% 79.99 114.40 66.4% 75.94 9.1% (230) bps 5.3%
------ ---- ----- ------ ---- ----- --- ---- --- ---
Total $74.02 57.5% $42.60 $72.69 56.6% $41.16 1.8% 90 bps 3.5%
====== ==== ====== ====== ==== ====== === === === ===
* Operating statistics represent hotel operations from March through May
For the Quarter Ended For the Six Months
Ended
--------------------- ------------------
6/30/2013 6/30/2012 6/30/2013 6/30/2012
System-wide effective royalty rate 4.35% 4.32% 4.36% 4.33%
CHOICE HOTELS INTERNATIONAL, INC. Exhibit 5
SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA
(UNAUDITED)
June 30, 2013 June 30,
2012 Variance
------------- --------- --------
Hotels Rooms Hotels Rooms Hotels Rooms % %
------ ----- ------ ----- ------ ----- --- ---
Comfort Inn 1,311 102,882 1,379 107,895 (68) (5,013) (4.9%) (4.6%)
Comfort Suites 587 45,339 608 46,903 (21) (1,564) (3.5%) (3.3%)
Sleep 379 27,478 391 28,327 (12) (849) (3.1%) (3.0%)
Quality 1,192 99,761 1,082 93,655 110 6,106 10.2% 6.5%
Clarion 191 27,184 189 27,534 2 (350) 1.1% (1.3%)
Econo Lodge 817 49,608 801 49,114 16 494 2.0% 1.0%
Rodeway 427 24,782 401 22,671 26 2,111 6.5% 9.3%
MainStay 43 3,332 40 3,083 3 249 7.5% 8.1%
Suburban 63 7,241 62 7,260 1 (19) 1.6% (0.3%)
Ascend
Collection 90 7,521 52 4,652 38 2,869 73.1% 61.7%
Cambria Suites 18 2,094 19 2,221 (1) (127) (5.3%) (5.7%)
--- ----- --- ----- --- ---- ----- -----
Domestic
Franchises 5,118 397,222 5,024 393,315 94 3,907 1.9% 1.0%
International
Franchises 1,169 104,701 1,175 104,522 (6) 179 (0.5%) 0.2%
----- ------- ----- ------- --- --- ----- ---
Total Franchises 6,287 501,923 6,199 497,837 88 4,086 1.4% 0.8%
===== ======= ===== ======= === ===== === ===
Exhibit 6
CHOICE HOTELS INTERNATIONAL, INC.
SUPPLEMENTAL INFORMATION BY BRAND
DEVELOPMENT RESULTS -- DOMESTIC NEW HOTEL CONTRACTS
(UNAUDITED)
For the Six Months Ended For the Six Months
June 30, 2013 Ended June 30, 2012 % Change
------------------------- ------------------- --------
New New New
Construction Conversion Total Construction Conversion Total Construction Conversion Total
------------ ---------- ----- ------------ ---------- ----- ------------ ---------- -----
Comfort Inn 5 18 23 6 12 18 (17%) 50% 28%
Comfort Suites 5 2 7 7 4 11 (29%) (50%) (36%)
Sleep 5 - 5 11 1 12 (55%) (100%) (58%)
Quality 1 44 45 - 63 63 NM (30%) (29%)
Clarion - 7 7 - 7 7 NM 0% 0%
Econo Lodge - 31 31 - 18 18 NM 72% 72%
Rodeway - 24 24 - 31 31 NM (23%) (23%)
MainStay 4 - 4 1 1 2 300% (100%) 100%
Suburban - 1 1 - 1 1 NM 0% 0%
Ascend Collection 3 36 39 1 4 5 200% 800% 680%
Cambria Suites 1 - 1 2 - 2 (50%) NM (50%)
--- --- --- --- --- --- ---- --- ----
Total Domestic System 24 163 187 28 142 170 (14%) 15% 10%
=== === === === === === ==== === ===
For the Three Months Ended For the Three Months
June 30, 2013 Ended June 30, 2012 % Change
-------------------------- -------------------- --------
New New New
Construction Conversion Total Construction Conversion Total Construction Conversion Total
------------ ---------- ----- ------------ ---------- ----- ------------ ---------- -----
Comfort Inn 2 13 15 5 4 9 (60%) 225% 67%
Comfort Suites 3 - 3 6 2 8 (50%) (100%) (63%)
Sleep 4 - 4 8 1 9 (50%) (100%) (56%)
Quality 1 25 26 - 36 36 NM (31%) (28%)
Clarion - 4 4 - 5 5 NM (20%) (20%)
Econo Lodge - 23 23 - 14 14 NM 64% 64%
Rodeway - 15 15 - 19 19 NM (21%) (21%)
MainStay 3 - 3 1 1 2 200% (100%) 50%
Suburban - - - - 1 1 NM (100%) (100%)
Ascend Collection 1 10 11 - 2 2 NM 400% 450%
Cambria Suites - - - 1 - 1 (100%) NM (100%)
--- --- --- --- --- --- ----- --- ------
Total Domestic System 14 90 104 21 85 106 (33%) 6% (2%)
=== === === === === === ==== === ===
Exhibit 7
CHOICE HOTELS INTERNATIONAL, INC.
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.
Variance
--------
June 30, 2013 June 30, 2012
Units Units Conversion New
Construction Total
----- ----- ---------- ------------ -----
Conversion New Construction Total Conversion New Construction Total Units % Units % Units %
---------- ---------------- ----- ---------- ---------------- ----- ----- --- ----- --- ----- ---
Comfort Inn 34 46 80 25 40 65 9 36% 6 15% 15 23%
Comfort Suites 2 61 63 2 82 84 - 0% (21) (26%) (21) (25%)
Sleep Inn - 44 44 1 40 41 (1) (100%) 4 10% 3 7%
Quality 34 3 37 39 3 42 (5) (13%) - 0% (5) (12%)
Clarion 8 - 8 14 1 15 (6) (43%) (1) (100%) (7) (47%)
Econo Lodge 26 - 26 20 1 21 6 30% (1) (100%) 5 24%
Rodeway 24 - 24 31 1 32 (7) (23%) (1) (100%) (8) (25%)
MainStay - 26 26 1 22 23 (1) (100%) 4 18% 3 13%
Suburban 3 12 15 2 14 16 1 50% (2) (14%) (1) (6%)
Ascend Collection 14 8 22 8 5 13 6 75% 3 60% 9 69%
Cambria Suites - 20 20 - 26 26 - NM (6) (23%) (6) (23%)
--- --- --- --- --- --- --- --- --- ---- --- -----
145 220 365 143 235 378 2 1% (15) (6%) (13) (3%)
=== === === === === === === === === === === ===
CHOICE HOTELS INTERNATIONAL, INC. Exhibit 8
SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION
(UNAUDITED)
CALCULATION OF FRANCHISING REVENUES AND FRANCHISING MARGINS
(dollar amounts in thousands) Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2013 2012 2013 2012
---- ---- ---- ----
Franchising Revenues:
Total Revenues $183,578 $173,621 $320,450 $302,790
Adjustments:
Marketing and reservation revenues (99,645) (94,633) (176,085) (165,562)
Hotel operations (1,334) (1,224) (2,290) (2,202)
Franchising Revenues $82,599 $77,764 $142,075 $135,026
------- ------- -------- --------
Franchising Margins:
Operating Margin:
Total Revenues $183,578 $173,621 $320,450 $302,790
Operating Income $50,322 $51,590 $80,788 $82,655
Operating Margin 27.4% 29.7% 25.2% 27.3%
---- ---- ---- ----
Franchising Margin:
Franchising Revenues $82,599 $77,764 $142,075 $135,026
Operating Income $50,322 $51,590 $80,788 $82,655
SkyTouch Division 3,159 831 5,401 1,338
Hotel operations (423) (357) (504) (526)
$53,058 $52,064 $85,685 $83,467
------- ------- ------- -------
Franchising Margins 64.2% 67.0% 60.3% 61.8%
---- ---- ---- ----
EBITDA Reconciliation
(in thousands)
Q2 2013 Actuals Q2 2012 Actuals Six Months Ended Six Months Ended Full-Year 2013
Outlook Range
June 30, 2013 June 30, 2012
Actuals Actuals
------- -------
Operating Income (per GAAP) $50,322 $51,590 $80,788 $82,655 $193,900 $196,900
Depreciation and amortization $2,520 $1,977 $4,695 $3,994 9,600 9,600
----- -----
Earnings before interest, taxes, depreciation & amortization $52,842 $53,567 $85,483 $86,649 $203,500 $206,500
(non-GAAP)
SOURCE Choice Hotels International, Inc.
SOURCE: Choice Hotels International, Inc.
PR Newswire
ROCKVILLE, Md., July 26, 2013
ROCKVILLE, Md., July 26, 2013 /PRNewswire/ -- Choice Hotels International, Inc., (NYSE:CHH) today reported the following highlights for the second quarter of 2013:
"We are excited about the growth prospects for our core franchising business. We are seeing particularly strong RevPAR performance for our upscale Ascend Collection, Suburban Extended Stay Hotel brand and our Sleep Inn brand which delivered impressive results as more of our franchisees upgrade their hotels to our new Design to Dream proto-type," said Stephen P. Joyce, president and chief executive officer. "On the development side of the business, conversion franchise sales for our flagship Comfort brand and our Ascend Collection continued to outpace last year's results demonstrating that Choice remains a top option for hotel developers."
"We are also excited to report that we debuted SkyTouch Technology's cloud based technology products to the hospitality industry in June at the Hospitality Financial and Technology Professional's HITEC conference and are pleased with the level of interest we received," said Stephen P. Joyce, president and chief executive officer. "We have executed our first customer contracts for this division and are excited that our new customers will experience the benefits that our cloud based technology products will deliver to their hotels."
Use of Free Cash Flow
The company has historically used its free cash flow (cash flow from operations less cash flow from investing activities) to return value to shareholders, primarily through share repurchases and dividends.
Dividends
During the six months ended June 30, 2013, the company paid $11.3 million of cash dividends to shareholders. The company's current quarterly dividend rate per common share is $0.185, subject to declaration by our board of directors. The company's regular dividend for the first quarter was paid in December 2012.
Share Repurchases
The company did not repurchase any shares of common stock under the share repurchase program during the three and six months ended June 30, 2013 but has authorization to purchase up to an additional 1.4 million shares under this program. We expect we will make repurchases from time to time under our share repurchase program in the open market and through privately negotiated transactions, subject to market and other conditions. No minimum number of share repurchases has been fixed. Since Choice announced its stock repurchase program on June 25, 1998, the company has repurchased 45.3 million shares of its common stock for a total cost of $1.1 billion through June 30, 2013. Considering the effect of a two-for-one stock split in October 2005, the company has repurchased 78.3 million shares through June 30, 2013 under the share repurchase program at an average price of $13.89 per share.
Other
Our board of directors previously authorized us to enter into a program which permits us to offer financing, investment and guaranty support to qualified franchisees as well as to acquire and resell real estate to incent franchise development for certain brands in strategic markets. Over the next several years, we expect to continue to opportunistically deploy capital pursuant to this program to promote growth of our emerging brands. Our current expectation is that our annual investment in this program will range between $20 million and $40 million per year and we generally expect to recycle these investments over a 5 year period. However, the amount and timing of the investment in this program will be dependent on market and other conditions. Notwithstanding this program, 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.
Balance Sheet
At June 30, 2013, the company had gross debt of $866.5 million and cash and cash equivalents totaling $143.8 million resulting in net debt of $722.7 million. At December 31, 2012, the company had gross debt of $855.3 million and cash equivalents totaling $134.2 million resulting in net debt of $721.1 million.
At June 30, 2013 and December 31, 2012, the company had outstanding mezzanine financing, real estate investments and sliver equity investments totaling $69 million and $68 million, respectively pursuant to its program to offer financing and investment support to incent franchise development for the Cambria Suites brand in strategic markets. These investments are reported in other current assets and other assets on the company's consolidated balance sheet.
Outlook
The company's third quarter 2013 diluted EPS is expected to be $0.66. The company expects full-year 2013 diluted EPS to range between $1.84 and $1.87. Earnings before interest, taxes and depreciation ("EBITDA") for full-year 2013 are expected to range between $203.5 million and $206.5 million. These estimates include the following assumptions:
Conference Call
Choice will conduct a conference call on Friday, July 26, 2013 at 10:00 a.m. EDT to discuss the company's second quarter 2013 results. The dial-in number to listen to the call is 1-877-280-4959, and the access code is 31314907. International callers should dial 1-857-244-7316 and enter the access code 31314907. The conference call also will be Webcast simultaneously via the company's Web site, www.choicehotels.com. Interested investors and other parties wishing to access the call via the Webcast 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 call will be recorded and available for replay beginning at 12:00 p.m. EDT on Friday, July 26, 2013 through Friday, August 2, 2013 by calling 1-888-286-8010 and entering access code 26118362. The international dial-in number for the replay is 1-617-801-6888, access code 26118362. In addition, the call will be archived and available on www.choicehotels.com via the Investor Info link.
About Choice Hotels
Choice Hotels International, Inc. franchises more than 6,200 hotels, representing more than 500,000 rooms, in the United States and more than 30 other countries and territories. As of June 30, 2013, 365 hotels, representing more than 29,000 rooms, were under construction, awaiting conversion or approved for development in the United States. Additionally, 83 hotels, representing approximately 7,200 rooms, were under construction, awaiting conversion or approved for development in more than 15 other 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, as well as its Ascend Hotel Collection membership program, serve guests worldwide.
SkyTouch Technology is an initiative of Choice Hotels International, Inc. that develops and markets cloud-based technology products to help industry-wide hoteliers improve their efficiency and profitability.
Additional corporate information can be found on the Choice Hotels International, Inc. 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 Private Securities Litigation Reform Act of 1995. Generally, our use of words such as "expect," "estimate," "believe," "anticipate," "will," "forecast," "plan"," project," "assume" or similar words of futurity identify such forward-looking statements. These 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 of the company's revenue, earnings and other financial and operational measures, company debt levels, ability to repay outstanding indebtedness, payment of dividends, and future operations, among other matters. We caution you not to place undue reliance on any such forward-looking statements. 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, 2012, filed with the Securities and Exchange Commission on February 28, 2013 and our quarterly reports filed on Form 10-Q. 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 Presented in Exhibit 8
EBITDA, franchising revenues and franchising margins are non-GAAP financial measurements. This information should not be considered as an alternative to any measure of performance as promulgated under generally accepted accounting principles in the United States ("GAAP"), such as operating income, total revenues and operating margins. The company's calculation of these measurements may be different from the calculations 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. We discuss management's reasons for reporting these non-GAAP measures below.
Earnings Before Interest, Taxes, Depreciation and Amortization: EBITDA reflects earnings excluding the impact of interest expense, interest income, provision for income taxes, depreciation and amortization, other (gains) and losses and equity in net income (loss) of unconsolidated affiliates. We consider EBITDA to be an indicator of operating performance because we use it to measure our ability to service debt, fund capital expenditures, and expand our business. We also use EBITDA, as do analysts, lenders, investors and others, to evaluate companies because it excludes certain items that can vary widely across different industries or among companies within the same industry. For example, interest expense can be dependent on a company's capital structure, debt levels and credit ratings. Accordingly, the impact of interest expense on earnings can vary significantly among companies. The tax positions of companies can also vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the jurisdictions in which they operate. As a result, effective tax rates and provision for income taxes can vary considerably among companies. EBITDA also excludes depreciation and amortization because companies utilize productive assets of different ages and use different methods of both acquiring and depreciating productive assets. These differences can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies.
Franchising Revenues and Margins: The company reports franchising revenues and margins which exclude marketing and reservation revenues, SkyTouch Technology and hotel operations. Marketing and reservation activities are excluded from revenues and operating margins since the company is required by its franchise agreements to use these fees collected for marketing and reservation activities. Cumulative reservation and marketing system fees not expended are recorded as a liability on the company's financial statements and are carried over to the next year and expended in accordance with the franchise agreements. Cumulative marketing and reservation expenditures in excess of system fees collected for marketing and reservation activities are recorded as a receivable on the company's financial statements. In addition, the company has the contractual authority to require that the franchisees in the system at any given point repay the company for any deficits related to marketing and reservation activities. Hotel operations reflect the company's ownership of three MainStay Suites hotels. SkyTouch Technology is a division of the company that develops and markets cloud-based technology products to help industry-wide hoteliers improve their efficiency and profitability. Hotel and SkyTouch Technology operations are excluded from franchising revenue and margins since they do not reflect the most accurate measure of the company's core franchising business but are adjacent, complimentary lines of business. These non-GAAP measures are a commonly used measure of performance in our industry and facilitate comparisons between the company and its competitors.
Choice Hotels, Choice Hotels International, Comfort Inn, Comfort Suites, Quality, Sleep Inn, Clarion, Cambria Suites, MainStay Suites, Suburban Extended Stay Hotel, Econo Lodge, Rodeway Inn, Ascend Hotel Collection and SkyTouch Technology are proprietary trademarks and service marks of Choice Hotels International.
© 2013 Choice Hotels International, Inc. All rights reserved.
|
Choice Hotels International, Inc. |
Exhibit 1 |
||||||||||||||||||
|
Consolidated Statements of Income |
|||||||||||||||||||
|
(Unaudited) |
|||||||||||||||||||
|
Three Months Ended June 30, |
Six Months Ended June 30, |
||||||||||||||||||
|
Variance |
Variance |
||||||||||||||||||
|
2013 |
2012 |
$ |
% |
2013 |
2012 |
$ |
% |
||||||||||||
|
(In thousands, except per share amounts) |
|||||||||||||||||||
|
REVENUES: |
|||||||||||||||||||
|
Royalty fees |
$ 68,379 |
$ 66,064 |
$ 2,315 |
4% |
$ 118,115 |
$ 113,917 |
$ 4,198 |
4% |
|||||||||||
|
Initial franchise and relicensing fees |
4,416 |
3,178 |
1,238 |
39% |
8,193 |
5,706 |
2,487 |
44% |
|||||||||||
|
Procurement services |
7,546 |
6,836 |
710 |
10% |
11,496 |
10,151 |
1,345 |
13% |
|||||||||||
|
Marketing and reservation |
99,645 |
94,633 |
5,012 |
5% |
176,085 |
165,562 |
10,523 |
6% |
|||||||||||
|
Hotel operations |
1,334 |
1,224 |
110 |
9% |
2,290 |
2,202 |
88 |
4% |
|||||||||||
|
Other |
2,258 |
1,686 |
572 |
34% |
4,271 |
5,252 |
(981) |
(19%) |
|||||||||||
|
Total revenues |
183,578 |
173,621 |
9,957 |
6% |
320,450 |
302,790 |
17,660 |
6% |
|||||||||||
|
OPERATING EXPENSES: |
|||||||||||||||||||
|
Selling, general and administrative |
30,180 |
24,554 |
5,626 |
23% |
57,096 |
48,903 |
8,193 |
17% |
|||||||||||
|
Depreciation and amortization |
2,520 |
1,977 |
543 |
27% |
4,695 |
3,994 |
701 |
18% |
|||||||||||
|
Marketing and reservation |
99,645 |
94,633 |
5,012 |
5% |
176,085 |
165,562 |
10,523 |
6% |
|||||||||||
|
Hotel operations |
911 |
867 |
44 |
5% |
1,786 |
1,676 |
110 |
7% |
|||||||||||
|
Total operating expenses |
133,256 |
122,031 |
11,225 |
9% |
239,662 |
220,135 |
19,527 |
9% |
|||||||||||
|
Operating income |
50,322 |
51,590 |
(1,268) |
(2%) |
80,788 |
82,655 |
(1,867) |
(2%) |
|||||||||||
|
OTHER INCOME AND EXPENSES, NET: |
|||||||||||||||||||
|
Interest expense |
10,807 |
3,540 |
7,267 |
205% |
21,577 |
6,657 |
14,920 |
224% |
|||||||||||
|
Interest income |
(659) |
(394) |
(265) |
67% |
(1,303) |
(731) |
(572) |
78% |
|||||||||||
|
Other (gains) and losses |
147 |
377 |
(230) |
(61%) |
(563) |
(1,626) |
1,063 |
(65%) |
|||||||||||
|
Equity in net (income) loss of affiliates |
(60) |
128 |
(188) |
(147%) |
81 |
183 |
(102) |
(56%) |
|||||||||||
|
Total other income and expenses, net |
10,235 |
3,651 |
6,584 |
180% |
19,792 |
4,483 |
15,309 |
341% |
|||||||||||
|
Income before income taxes |
40,087 |
47,939 |
(7,852) |
(16%) |
60,996 |
78,172 |
(17,176) |
(22%) |
|||||||||||
|
Income taxes |
11,853 |
16,077 |
(4,224) |
(26%) |
17,239 |
26,313 |
(9,074) |
(34%) |
|||||||||||
|
Net income |
$ 28,234 |
$ 31,862 |
$ (3,628) |
(11%) |
$ 43,757 |
$ 51,859 |
$ (8,102) |
(16%) |
|||||||||||
|
Basic earnings per share |
$ 0.48 |
$ 0.55 |
$ (0.07) |
(13%) |
$ 0.75 |
$ 0.89 |
$ (0.14) |
(16%) |
|||||||||||
|
Diluted earnings per share |
$ 0.48 |
$ 0.55 |
$ (0.07) |
(13%) |
$ 0.74 |
$ 0.89 |
$ (0.15) |
(17%) |
|||||||||||
|
Choice Hotels International, Inc. |
Exhibit 2 |
||||||
|
Consolidated Balance Sheets |
|||||||
|
(In thousands, except per share amounts) |
June 30, |
December 31, |
|||||
|
2013 |
2012 |
||||||
|
(Unaudited) |
|||||||
|
ASSETS |
|||||||
|
Cash and cash equivalents |
$ 143,790 |
$ 134,177 |
|||||
|
Accounts receivable, net |
70,951 |
52,270 |
|||||
|
Investments, employee benefit plans, at fair value |
377 |
3,486 |
|||||
|
Other current assets |
40,586 |
43,537 |
|||||
|
Total current assets |
255,704 |
233,470 |
|||||
|
Fixed assets and intangibles, net |
147,034 |
130,937 |
|||||
|
Receivable -- marketing and reservation fees |
54,786 |
42,179 |
|||||
|
Investments, employee benefit plans, at fair value |
14,114 |
12,755 |
|||||
|
Other assets |
91,074 |
91,431 |
|||||
|
Total assets |
$ 562,712 |
$ 510,772 |
|||||
|
LIABILITIES AND SHAREHOLDERS' DEFICIT |
|||||||
|
Accounts payable and accrued expenses |
$ 102,291 |
$ 94,266 |
|||||
|
Deferred revenue |
67,757 |
71,154 |
|||||
|
Deferred compensation & retirement plan obligations |
2,393 |
2,522 |
|||||
|
Current portion of long-term debt |
8,205 |
8,195 |
|||||
|
Total current liabilities |
180,646 |
176,137 |
|||||
|
Long-term debt |
858,273 |
847,150 |
|||||
|
Deferred compensation & retirement plan obligations |
20,114 |
20,399 |
|||||
|
Other liabilities |
23,700 |
15,990 |
|||||
|
Total liabilities |
1,082,733 |
1,059,676 |
|||||
|
Common stock, $0.01 par value |
585 |
582 |
|||||
|
Additional paid-in-capital |
111,580 |
110,246 |
|||||
|
Accumulated other comprehensive loss |
(6,097) |
(4,216) |
|||||
|
Treasury stock, at cost |
(920,355) |
(927,776) |
|||||
|
Retained earnings |
294,266 |
272,260 |
|||||
|
Total shareholders' deficit |
(520,021) |
(548,904) |
|||||
|
Total liabilities and shareholders' deficit |
$ 562,712 |
$ 510,772 |
|||||
|
Choice Hotels International, Inc. |
Exhibit 3 |
|||
|
Consolidated Statements of Cash Flows |
||||
|
(Unaudited) |
||||
|
(In thousands) |
Six Months Ended June 30, |
|||
|
2013 |
2012 |
|||
|
CASH FLOWS FROM OPERATING ACTIVITIES (1): |
||||
|
Net income |
$ 43,757 |
$ 51,859 |
||
|
Adjustments to reconcile net income to net cash provided |
||||
|
by operating activities: |
||||
|
Depreciation and amortization |
4,695 |
3,994 |
||
|
Provision for bad debts, net |
1,420 |
1,236 |
||
|
Non-cash stock compensation and other charges |
5,581 |
4,868 |
||
|
Non-cash interest and other (income) loss |
967 |
(820) |
||
|
Deferred income taxes |
4,169 |
(194) |
||
|
Dividends received from equity method investments |
535 |
399 |
||
|
Equity in net (income) loss of affiliates |
81 |
183 |
||
|
Changes in assets and liabilities: |
||||
|
Receivables |
(21,156) |
(12,258) |
||
|
Receivable - marketing and reservation fees, net |
(2,945) |
(2,389) |
||
|
Accounts payable |
9,893 |
6,330 |
||
|
Accrued expenses |
(18,463) |
(17,659) |
||
|
Income taxes payable/receivable |
1,729 |
11,808 |
||
|
Deferred revenue |
(3,318) |
(4,404) |
||
|
Other assets |
(1,664) |
(4,331) |
||
|
Other liabilities |
7,271 |
(820) |
||
|
NET CASH PROVIDED BY OPERATING ACTIVITIES (1) |
32,552 |
37,802 |
||
|
CASH FLOWS FROM INVESTING ACTIVITIES (1): |
||||
|
Investment in property and equipment |
(21,005) |
(6,236) |
||
|
Equity method investments |
(1,851) |
(6,315) |
||
|
Purchases of investments, employee benefit plans |
(1,580) |
(969) |
||
|
Proceeds from sales of investments, employee benefit plans |
3,934 |
8,969 |
||
|
Issuance of notes receivable |
(3,641) |
(5,820) |
||
|
Collections of notes receivable |
247 |
210 |
||
|
Other items, net |
(304) |
(226) |
||
|
NET CASH USED IN INVESTING ACTIVITIES (1) |
(24,200) |
(10,387) |
||
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||
|
Net borrowings pursuant to revolving credit facilities |
15,200 |
- |
||
|
Principal payments on long-term debt |
(4,095) |
(333) |
||
|
Proceeds from the issuance of long-term debt |
- |
393,444 |
||
|
Purchase of treasury stock |
(3,651) |
(22,173) |
||
|
Dividends paid |
(11,261) |
(21,396) |
||
|
Excess tax benefits from stock-based compensation |
1,146 |
641 |
||
|
Debt issuance costs |
- |
(153) |
||
|
Proceeds from exercise of stock options |
5,973 |
445 |
||
|
NET CASH PROVIDED BY FINANCING ACTIVITIES |
3,312 |
350,475 |
||
|
Net change in cash and cash equivalents |
11,664 |
377,890 |
||
|
Effect of foreign exchange rate changes on cash and cash equivalents |
(2,051) |
443 |
||
|
Cash and cash equivalents at beginning of period |
134,177 |
107,057 |
||
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD |
$ 143,790 |
$ 485,390 |
||
|
(1) The company is currently reviewing, in consultation with its independent registered public accounting firm, its accounting policies regarding the presentation of its cash flows related to certain of its development advances and collections presented under the captions "Issuance and Collections of Notes Receivable." The company's statements of cash flows contained in this press release have been prepared in accordance with the company's existing accounting policy which is to present these items as cash flows from investing activities, which is consistent with prior audited periods. However, our independent registered public accounting firm has recently questioned the appropriateness of classifying these items as cash flows from investing activities rather than as cash flows from operating activities. If the company determines that it is required to move these items from cash flows from investing activities to cash flows from operating activities in the current statements contained in this press release, its net cash provided by operating activities for the six months ended June 30, 2013 and 2012 will be reduced by $3.6 million and $1.5 million, respectively, with a corresponding adjustment to net cash used in investing activities. Until this review is complete, the company cannot determine if it will reclassify, restate or make other changes to its historical consolidated statements of cash flows, including the information contained in this press release. |
||||
|
Exhibit 4 |
||||||||||||||||||||
|
CHOICE HOTELS INTERNATIONAL, INC. |
||||||||||||||||||||
|
SUPPLEMENTAL OPERATING INFORMATION |
||||||||||||||||||||
|
DOMESTIC HOTEL SYSTEM |
||||||||||||||||||||
|
(UNAUDITED) |
||||||||||||||||||||
|
For the Six Months Ended June 30, 2013* |
For the Six Months Ended June 30, 2012* |
Change |
||||||||||||||||||
|
Average Daily |
Average Daily |
Average Daily |
||||||||||||||||||
|
Rate |
Occupancy |
RevPAR |
Rate |
Occupancy |
RevPAR |
Rate |
Occupancy |
RevPAR |
||||||||||||
|
Comfort Inn |
$ 79.42 |
54.2% |
$ 43.08 |
$ 77.48 |
53.6% |
$ 41.52 |
2.5% |
60 |
bps |
3.8% |
||||||||||
|
Comfort Suites |
85.00 |
58.3% |
50.01 |
83.15 |
57.6% |
47.92 |
2.2% |
70 |
bps |
4.4% |
||||||||||
|
Sleep |
72.06 |
54.5% |
39.29 |
69.90 |
52.0% |
36.32 |
3.1% |
250 |
bps |
8.2% |
||||||||||
|
Quality |
67.16 |
48.4% |
32.49 |
66.29 |
46.8% |
31.03 |
1.3% |
160 |
bps |
4.7% |
||||||||||
|
Clarion |
72.04 |
46.7% |
33.65 |
71.85 |
44.6% |
32.07 |
0.3% |
210 |
bps |
4.9% |
||||||||||
|
Econo Lodge |
53.60 |
44.1% |
23.64 |
52.48 |
44.0% |
23.09 |
2.1% |
10 |
bps |
2.4% |
||||||||||
|
Rodeway |
50.43 |
47.0% |
23.70 |
49.36 |
46.2% |
22.81 |
2.2% |
80 |
bps |
3.9% |
||||||||||
|
MainStay |
70.33 |
63.6% |
44.74 |
67.02 |
67.4% |
45.16 |
4.9% |
(380) |
bps |
(0.9%) |
||||||||||
|
Suburban |
42.15 |
68.8% |
29.01 |
40.48 |
67.3% |
27.24 |
4.1% |
150 |
bps |
6.5% |
||||||||||
|
Ascend Collection |
120.34 |
60.6% |
72.90 |
109.96 |
59.4% |
65.28 |
9.4% |
120 |
bps |
11.7% |
||||||||||
|
Total |
$ 71.81 |
51.7% |
$ 37.10 |
$ 70.38 |
50.7% |
$ 35.66 |
2.0% |
100 |
bps |
4.0% |
||||||||||
|
* Operating statistics represent hotel operations from December through May |
||||||||||||||||||||
|
For the Three Months Ended June 30, 2013* |
For the Three Months Ended June 30, 2012* |
Change |
||||||||||||||||||
|
Average Daily |
Average Daily |
Average Daily |
||||||||||||||||||
|
Rate |
Occupancy |
RevPAR |
Rate |
Occupancy |
RevPAR |
Rate |
Occupancy |
RevPAR |
||||||||||||
|
Comfort Inn |
$ 81.77 |
60.8% |
$ 49.67 |
$ 79.87 |
60.2% |
$ 48.05 |
2.4% |
60 |
bps |
3.4% |
||||||||||
|
Comfort Suites |
87.52 |
64.9% |
56.82 |
85.71 |
64.2% |
55.01 |
2.1% |
70 |
bps |
3.3% |
||||||||||
|
Sleep |
74.30 |
61.3% |
45.54 |
72.52 |
58.7% |
42.56 |
2.5% |
260 |
bps |
7.0% |
||||||||||
|
Quality |
69.35 |
54.2% |
37.61 |
68.43 |
52.5% |
35.95 |
1.3% |
170 |
bps |
4.6% |
||||||||||
|
Clarion |
74.43 |
52.0% |
38.68 |
74.71 |
50.2% |
37.53 |
(0.4%) |
180 |
bps |
3.1% |
||||||||||
|
Econo Lodge |
55.06 |
49.4% |
27.19 |
54.14 |
49.2% |
26.62 |
1.7% |
20 |
bps |
2.1% |
||||||||||
|
Rodeway |
52.32 |
51.5% |
26.93 |
51.10 |
50.4% |
25.76 |
2.4% |
110 |
bps |
4.5% |
||||||||||
|
MainStay |
71.71 |
70.0% |
50.23 |
69.06 |
72.9% |
50.32 |
3.8% |
(290) |
bps |
(0.2%) |
||||||||||
|
Suburban |
43.16 |
73.9% |
31.90 |
41.58 |
71.9% |
29.89 |
3.8% |
200 |
bps |
6.7% |
||||||||||
|
Ascend Collection |
124.77 |
64.1% |
79.99 |
114.40 |
66.4% |
75.94 |
9.1% |
(230) |
bps |
5.3% |
||||||||||
|
Total |
$ 74.02 |
57.5% |
$ 42.60 |
$ 72.69 |
56.6% |
$ 41.16 |
1.8% |
90 |
bps |
3.5% |
||||||||||
|
* Operating statistics represent hotel operations from March through May |
||||||||||||||||||||
|
For the Quarter Ended |
For the Six Months Ended |
|||||||||||||||||||
|
6/30/2013 |
6/30/2012 |
6/30/2013 |
6/30/2012 |
|||||||||||||||||
|
System-wide effective royalty rate |
4.35% |
4.32% |
4.36% |
4.33% |
||||||||||||||||
|
CHOICE HOTELS INTERNATIONAL, INC. |
Exhibit 5 |
||||||||||||||||
|
SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA |
|||||||||||||||||
|
(UNAUDITED) |
|||||||||||||||||
|
June 30, 2013 |
June 30, 2012 |
Variance |
|||||||||||||||
|
Hotels |
Rooms |
Hotels |
Rooms |
Hotels |
Rooms |
% |
% |
||||||||||
|
Comfort Inn |
1,311 |
102,882 |
1,379 |
107,895 |
(68) |
(5,013) |
(4.9%) |
(4.6%) |
|||||||||
|
Comfort Suites |
587 |
45,339 |
608 |
46,903 |
(21) |
(1,564) |
(3.5%) |
(3.3%) |
|||||||||
|
Sleep |
379 |
27,478 |
391 |
28,327 |
(12) |
(849) |
(3.1%) |
(3.0%) |
|||||||||
|
Quality |
1,192 |
99,761 |
1,082 |
93,655 |
110 |
6,106 |
10.2% |
6.5% |
|||||||||
|
Clarion |
191 |
27,184 |
189 |
27,534 |
2 |
(350) |
1.1% |
(1.3%) |
|||||||||
|
Econo Lodge |
817 |
49,608 |
801 |
49,114 |
16 |
494 |
2.0% |
1.0% |
|||||||||
|
Rodeway |
427 |
24,782 |
401 |
22,671 |
26 |
2,111 |
6.5% |
9.3% |
|||||||||
|
MainStay |
43 |
3,332 |
40 |
3,083 |
3 |
249 |
7.5% |
8.1% |
|||||||||
|
Suburban |
63 |
7,241 |
62 |
7,260 |
1 |
(19) |
1.6% |
(0.3%) |
|||||||||
|
Ascend Collection |
90 |
7,521 |
52 |
4,652 |
38 |
2,869 |
73.1% |
61.7% |
|||||||||
|
Cambria Suites |
18 |
2,094 |
19 |
2,221 |
(1) |
(127) |
(5.3%) |
(5.7%) |
|||||||||
|
Domestic Franchises |
5,118 |
397,222 |
5,024 |
393,315 |
94 |
3,907 |
1.9% |
1.0% |
|||||||||
|
International Franchises |
1,169 |
104,701 |
1,175 |
104,522 |
(6) |
179 |
(0.5%) |
0.2% |
|||||||||
|
Total Franchises |
6,287 |
501,923 |
6,199 |
497,837 |
88 |
4,086 |
1.4% |
0.8% |
|||||||||
|
Exhibit 6 |
|||||||||||||||||||
|
CHOICE HOTELS INTERNATIONAL, INC. |
|||||||||||||||||||
|
SUPPLEMENTAL INFORMATION BY BRAND |
|||||||||||||||||||
|
DEVELOPMENT RESULTS -- DOMESTIC NEW HOTEL CONTRACTS |
|||||||||||||||||||
|
(UNAUDITED) |
|||||||||||||||||||
|
For the Six Months Ended June 30, 2013 |
For the Six Months Ended June 30, 2012 |
% Change |
|||||||||||||||||
|
New |
New |
New |
|||||||||||||||||
|
Construction |
Conversion |
Total |
Construction |
Conversion |
Total |
Construction |
Conversion |
Total |
|||||||||||
|
Comfort Inn |
5 |
18 |
23 |
6 |
12 |
18 |
(17%) |
50% |
28% |
||||||||||
|
Comfort Suites |
5 |
2 |
7 |
7 |
4 |
11 |
(29%) |
(50%) |
(36%) |
||||||||||
|
Sleep |
5 |
- |
5 |
11 |
1 |
12 |
(55%) |
(100%) |
(58%) |
||||||||||
|
Quality |
1 |
44 |
45 |
- |
63 |
63 |
NM |
(30%) |
(29%) |
||||||||||
|
Clarion |
- |
7 |
7 |
- |
7 |
7 |
NM |
0% |
0% |
||||||||||
|
Econo Lodge |
- |
31 |
31 |
- |
18 |
18 |
NM |
72% |
72% |
||||||||||
|
Rodeway |
- |
24 |
24 |
- |
31 |
31 |
NM |
(23%) |
(23%) |
||||||||||
|
MainStay |
4 |
- |
4 |
1 |
1 |
2 |
300% |
(100%) |
100% |
||||||||||
|
Suburban |
- |
1 |
1 |
- |
1 |
1 |
NM |
0% |
0% |
||||||||||
|
Ascend Collection |
3 |
36 |
39 |
1 |
4 |
5 |
200% |
800% |
680% |
||||||||||
|
Cambria Suites |
1 |
- |
1 |
2 |
- |
2 |
(50%) |
NM |
(50%) |
||||||||||
|
Total Domestic System |
24 |
163 |
187 |
28 |
142 |
170 |
(14%) |
15% |
10% |
||||||||||
|
For the Three Months Ended June 30, 2013 |
For the Three Months Ended June 30, 2012 |
% Change |
|||||||||||||||||
|
New |
New |
New |
|||||||||||||||||
|
Construction |
Conversion |
Total |
Construction |
Conversion |
Total |
Construction |
Conversion |
Total |
|||||||||||
|
Comfort Inn |
2 |
13 |
15 |
5 |
4 |
9 |
(60%) |
225% |
67% |
||||||||||
|
Comfort Suites |
3 |
- |
3 |
6 |
2 |
8 |
(50%) |
(100%) |
(63%) |
||||||||||
|
Sleep |
4 |
- |
4 |
8 |
1 |
9 |
(50%) |
(100%) |
(56%) |
||||||||||
|
Quality |
1 |
25 |
26 |
- |
36 |
36 |
NM |
(31%) |
(28%) |
||||||||||
|
Clarion |
- |
4 |
4 |
- |
5 |
5 |
NM |
(20%) |
(20%) |
||||||||||
|
Econo Lodge |
- |
23 |
23 |
- |
14 |
14 |
NM |
64% |
64% |
||||||||||
|
Rodeway |
- |
15 |
15 |
- |
19 |
19 |
NM |
(21%) |
(21%) |
||||||||||
|
MainStay |
3 |
- |
3 |
1 |
1 |
2 |
200% |
(100%) |
50% |
||||||||||
|
Suburban |
- |
- |
- |
- |
1 |
1 |
NM |
(100%) |
(100%) |
||||||||||
|
Ascend Collection |
1 |
10 |
11 |
- |
2 |
2 |
NM |
400% |
450% |
||||||||||
|
Cambria Suites |
- |
- |
- |
1 |
- |
1 |
(100%) |
NM |
(100%) |
||||||||||
|
Total Domestic System |
14 |
90 |
104 |
21 |
85 |
106 |
(33%) |
6% |
(2%) |
||||||||||
|
Exhibit 7 |
||||||||||||||||||||||||
|
CHOICE HOTELS INTERNATIONAL, INC. |
||||||||||||||||||||||||
|
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. |
||||||||||||||||||||||||
|
Variance |
||||||||||||||||||||||||
|
June 30, 2013 |
June 30, 2012 |
|||||||||||||||||||||||
|
Units |
Units |
Conversion |
New Construction |
Total |
||||||||||||||||||||
|
Conversion |
New Construction |
Total |
Conversion |
New Construction |
Total |
Units |
% |
Units |
% |
Units |
% |
|||||||||||||
|
Comfort Inn |
34 |
46 |
80 |
25 |
40 |
65 |
9 |
36% |
6 |
15% |
15 |
23% |
||||||||||||
|
Comfort Suites |
2 |
61 |
63 |
2 |
82 |
84 |
- |
0% |
(21) |
(26%) |
(21) |
(25%) |
||||||||||||
|
Sleep Inn |
- |
44 |
44 |
1 |
40 |
41 |
(1) |
(100%) |
4 |
10% |
3 |
7% |
||||||||||||
|
Quality |
34 |
3 |
37 |
39 |
3 |
42 |
(5) |
(13%) |
- |
0% |
(5) |
(12%) |
||||||||||||
|
Clarion |
8 |
- |
8 |
14 |
1 |
15 |
(6) |
(43%) |
(1) |
(100%) |
(7) |
(47%) |
||||||||||||
|
Econo Lodge |
26 |
- |
26 |
20 |
1 |
21 |
6 |
30% |
(1) |
(100%) |
5 |
24% |
||||||||||||
|
Rodeway |
24 |
- |
24 |
31 |
1 |
32 |
(7) |
(23%) |
(1) |
(100%) |
(8) |
(25%) |
||||||||||||
|
MainStay |
- |
26 |
26 |
1 |
22 |
23 |
(1) |
(100%) |
4 |
18% |
3 |
13% |
||||||||||||
|
Suburban |
3 |
12 |
15 |
2 |
14 |
16 |
1 |
50% |
(2) |
(14%) |
(1) |
(6%) |
||||||||||||
|
Ascend Collection |
14 |
8 |
22 |
8 |
5 |
13 |
6 |
75% |
3 |
60% |
9 |
69% |
||||||||||||
|
Cambria Suites |
- |
20 |
20 |
- |
26 |
26 |
- |
NM |
(6) |
(23%) |
(6) |
(23%) |
||||||||||||
|
145 |
220 |
365 |
143 |
235 |
378 |
2 |
1% |
(15) |
(6%) |
(13) |
(3%) |
|||||||||||||
|
CHOICE HOTELS INTERNATIONAL, INC. |
Exhibit 8 |
||||||||||||
|
SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION |
|||||||||||||
|
(UNAUDITED) |
|||||||||||||
|
CALCULATION OF FRANCHISING REVENUES AND FRANCHISING MARGINS |
|||||||||||||
|
(dollar amounts in thousands) |
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||
|
2013 |
2012 |
2013 |
2012 |
||||||||||
|
Franchising Revenues: |
|||||||||||||
|
Total Revenues |
$ 183,578 |
$ 173,621 |
$ 320,450 |
$ 302,790 |
|||||||||
|
Adjustments: |
|||||||||||||
|
Marketing and reservation revenues |
(99,645) |
(94,633) |
(176,085) |
(165,562) |
|||||||||
|
Hotel operations |
(1,334) |
(1,224) |
(2,290) |
(2,202) |
|||||||||
|
Franchising Revenues |
$ 82,599 |
$ 77,764 |
$ 142,075 |
$ 135,026 |
|||||||||
|
Franchising Margins: |
|||||||||||||
|
Operating Margin: |
|||||||||||||
|
Total Revenues |
$ 183,578 |
$ 173,621 |
$ 320,450 |
$ 302,790 |
|||||||||
|
Operating Income |
$ 50,322 |
$ 51,590 |
$ 80,788 |
$ 82,655 |
|||||||||
|
Operating Margin |
27.4% |
29.7% |
25.2% |
27.3% |
|||||||||
|
Franchising Margin: |
|||||||||||||
|
Franchising Revenues |
$ 82,599 |
$ 77,764 |
$ 142,075 |
$ 135,026 |
|||||||||
|
Operating Income |
$ 50,322 |
$ 51,590 |
$ 80,788 |
$ 82,655 |
|||||||||
|
SkyTouch Division |
3,159 |
831 |
5,401 |
1,338 |
|||||||||
|
Hotel operations |
(423) |
(357) |
(504) |
(526) |
|||||||||
|
$ 53,058 |
$ 52,064 |
$ 85,685 |
$ 83,467 |
||||||||||
|
Franchising Margins |
64.2% |
67.0% |
60.3% |
61.8% |
|||||||||
|
EBITDA Reconciliation |
|||||||||||||
|
(in thousands) |
|||||||||||||
|
Q2 2013 Actuals |
Q2 2012 Actuals |
Six Months Ended June 30, 2013 Actuals |
Six Months Ended June 30, 2012 Actuals |
Full-Year 2013 Outlook Range |
|||||||||
|
Operating Income (per GAAP) |
$ 50,322 |
$ 51,590 |
$ 80,788 |
$ 82,655 |
$ 193,900 |
$ 196,900 |
|||||||
|
Depreciation and amortization |
$ 2,520 |
$ 1,977 |
$ 4,695 |
$ 3,994 |
9,600 |
9,600 |
|||||||
|
Earnings before interest, taxes, depreciation & amortization (non-GAAP) |
$ 52,842 |
$ 53,567 |
$ 85,483 |
$ 86,649 |
$ 203,500 |
$ 206,500 |
|||||||
SOURCE Choice Hotels International, Inc.
CONTACT: David White, Senior Vice President, Chief Financial Officer & Treasurer, (301) 592-5117, or Robin Pence, Vice President, Public Relations, (301) 592-5186
Web Site: http://www.choicehotels.com
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