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Choice Hotels' News

Choice Hotels International Reports a 10% Increase In Second Quarter Diluted Earnings Per Share
Second Quarter Domestic RevPAR Increases 4.3%
PR Newswire
ROCKVILLE, Md.

ROCKVILLE, Md., Aug. 2, 2016 /PRNewswire/ -- Choice Hotels International, Inc. (NYSE: CHH) today reported the following highlights for the second quarter 2016:

    --  Net income and diluted earnings per share ("EPS") for the three months
        ended June 30, 2016, totaled $38.8 million and $0.68 per share,
        respectively. Adjusted net income and adjusted diluted EPS for the three
        months ended June 30, 2016, which exclude certain special items as
        described below, increased 12 percent and 15 percent, respectively, over
        the prior year period.
    --  Adjusted earnings before interest, taxes, depreciation and amortization
        ("EBITDA") from hotel franchising activities, excluding special items,
        for the three months ended June 30, 2016 totaled $75.1 million, an
        increase of 7 percent over the prior year period.
    --  Revenues for the three months ended June 30, 2016 totaled $241.8
        million, an increase of 4 percent from the same period of 2015.
    --  Franchising revenues for the three months ended June 30, 2016 totaled
        $105.9 million, an increase of 7 percent from the same period of 2015.
    --  Domestic royalty fees for the three months ended June 30, 2016, totaled
        $81.1 million, an increase of 7 percent from the same period of 2015.
    --  Domestic system-wide revenue per available room ("RevPAR") increased 4.3
        percent in the second quarter of 2016, as occupancy and average daily
        rates increased 80 basis points and 3 percent, respectively from the
        same period of 2015.
    --  Domestic RevPAR performance for the second quarter of 2016 exceeded
        total industry results by 80 basis points and also exceeded growth
        reported by Smith Travel Research for the primary chain scale segments
        in which the company competes.
    --  Effective domestic royalty rate for the three months ended June 30, 2016
        was 4.40 percent, an increase of 12 basis points from the same period of
        2015.
    --  Domestic hotel executed franchise agreements totaled 147 for the three
        months ended June 30, 2016, an increase of 6 percent from the same
        period of 2015.
    --  Executed 9 new domestic franchise agreements during the three months
        ended June 30, 2016 for the Cambria hotels & suites brand including
        projects in Boston, MA, Los Angeles, CA and Seattle, WA.
    --  Domestic relicensing and contract renewal transactions totaled 107 for
        the three months ended June 30, 2016, an increase of 26 percent from the
        same period of 2015.
    --  The company's domestic pipeline of hotels awaiting conversion, under
        construction or approved for development as of June 30, 2016 increased
        14 percent from June 30, 2015. The domestic pipeline for the company's
        Cambria brand as of June 30, 2016 totaled 53 hotels, a 112 percent
        increase from June 30, 2015.
    --  The company purchased 0.4 million shares of common stock under its share
        repurchase program during the three months ended June 30, 2016 at a
        total cost of approximately $19.4 million.

"We are pleased with our results for the second quarter, which were highlighted by a 15 percent increase in adjusted diluted earnings per share," said Stephen P. Joyce, chief executive officer, Choice Hotels. "In addition, we delivered strong RevPAR gains to our domestic franchise system which continue to exceed the growth levels experienced by the overall industry and primary chain scale segments in which we compete. Demand for our brands remains strong and we will continue to invest in programs designed to drive more reservations through our central channels, improve guest loyalty and improve the value of our brands in an effort to drive incremental business to our franchisees."

http://photos.prnewswire.com/prnvar/20140807/134515

Special Item

During the three and six months ended June 30, 2016, the company recorded an executive termination benefit charge of approximately $2.2 million. This special item impacted diluted EPS by $0.03 and $0.02 per share for the three and six months ended June 30, 2016, respectively. The company evaluates certain non-GAAP measures that exclude executive termination benefits because those non-GAAP measures allow for period-over-period comparison of on-going core operations before the impact of these charges. These non-GAAP measures, which are reconciled to the comparable GAAP measures in Exhibit 8, include adjusted net income, adjusted diluted EPS, adjusted hotel franchising selling, general and administrative expenses, adjusted EBITDA and adjusted hotel franchising margins.

Adoption of New Accounting Standard

On April 1, 2016, the company adopted Accounting Standards Update ("ASU") Compensation--Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting ("ASU No. 2016-09"), which requires that excess tax benefits and deficiencies related to stock compensation be recognized as income tax expense or benefit in the company's income statement. Adoption of the standard required that the company retrospectively apply the requirement to the beginning of the year of adoption, January 1, 2016. As a result, the company has reduced is previously reported income tax expense for the first quarter of 2016 by $1.6 million.

Use of Cash Flows

Dividends

During the six months ended June 30, 2016, the company paid cash dividends totaling approximately $23 million. Based on the current quarterly dividend rate of $0.205 per common share, the company expects to pay dividends of approximately $46 million during 2016.

Share Repurchases

The company repurchased 0.5 million shares of common stock under its share repurchase program during the six months ended June 30, 2016, at a total cost of approximately $23 million. The company currently has authorization to purchase up to 1.1 million additional shares under this program.

Hotel Development & Financing

Pursuant to its program to encourage acceleration of the growth of our upscale select-service Cambria hotels & suites brand, the company advanced approximately $67 million in support of the Cambria brand during the six months ended June 30, 2016. The company also recycled approximately $18 million of investments in support of Cambria resulting in net advances of $49 million for the current year. These advances are primarily in the form of joint venture investments, forgivable key money loans, senior and mezzanine lending and site acquisitions. At June 30, 2016, the company had approximately $176 million reflected in its consolidated balance sheet pursuant to these financial support activities. With respect to lending and joint venture investments, the company generally expects to recycle these loans and investments within a five year period.

Outlook

The company's consolidated 2016 outlook reflects the following assumptions:

Hotel Franchising

    --  Adjusted EBITDA from franchising activities for full-year 2016 are
        expected to range between $270 million and $274 million;
    --  Net domestic unit growth for 2016 is expected to be between 2% and 3%;
    --  RevPAR is expected to increase between 3.5% and 4.0% for third quarter
        and range between 3.5% and 4.0% for full-year 2016; and
    --  The effective royalty rate is expected to increase between 7 and 9 basis
        points for full-year 2016 as compared to full-year 2015.

Non-Hotel Franchising Activities

    --  Net reductions in full-year 2016 EBITDA relating to our non-hotel
        franchising operations, which primarily relate to SkyTouch and vacation
        rental activities are expected to range between approximately $16
        million and $19 million.

Other Items

    --  The effective tax rate is expected to be approximately 32.5% and 31.7%
        for the third quarter and full-year 2016.
    --  Adjusted EBITDA and adjusted EPS estimates exclude executive termination
        benefits incurred in the second quarter of 2016 as discussed above under
        Special Item.
    --  Diluted EPS estimates are based on the current number of shares
        outstanding and thus do not factor in any changes that may occur due to
        new equity grants or any further repurchases of common stock under the
        company's share repurchase program.

Consolidated Outlook

The company's third quarter 2016 diluted EPS is expected to be at least $0.78. The company expects full-year 2016 adjusted diluted EPS to range between $2.38 and $2.43 and full year 2016 adjusted EBITDA to range between $252 million and $256 million. The adjusted EPS and adjusted consolidated EBITDA estimates assume that we incur net reductions in EBITDA related to non-hotel franchising activities at the midpoint of the range for these investments.

Conference Call

Choice will conduct a conference call on Tuesday, August 2, 2016 at 10:00 a.m. EDT to discuss the company's second quarter 2016 results. The dial-in number to listen to the call domestically is 1-855-638-5678 and the number for international participants is 1-404-537-3406. The conference call also will be webcast simultaneously via the company's website, www.choicehotels.com. Interested investors and other parties wishing to access the call via the webcast should go to the website and click on the Investor Info link. The Investor page will feature a conference call microphone icon to access the call.

The call will be recorded and available for replay beginning at 1:00 p.m. EDT on Tuesday, August 2, 2016 by calling 1-855-859-2056 (domestic) or 1-404-537-3406 (international) and entering access code 50406350. In addition, the call will be archived and available on choicehotels.com via the Investor Info link.

About Choice Hotels

 

Choice Hotels International, Inc. (NYSE: CHH) is one of the world's largest lodging companies. With more than 6,400 hotels franchised in more than 40 countries and territories, Choice Hotels International® represents more than 500,000 rooms around the globe. As of June 30, 2016, 673 hotels were in our development pipeline. Our company's Ascend Hotel Collection®, Cambria® hotels & suites, Comfort Inn®, Comfort Suites®, Sleep Inn®, Quality®, Clarion®, MainStay Suites®, Suburban Extended Stay Hotel®, Econo Lodge®, Rodeway Inn®, and Vacation Rentals by Choice Hotels(TM) brands provide a spectrum of lodging choices to meet guests' needs. With more than 27 million members and counting, our Choice Privileges® rewards program enhances every trip a guest takes, with benefits ranging from instant, every day rewards to exceptional experiences, starting right when they join. All hotels and vacation rentals are independently owned and operated. Visit us at www.choicehotels.com for more information.

SkyTouch Technology® is a business division of Choice Hotels that develops and markets cloud-based technology products, including inventory management, pricing and connectivity to third party channels, to hoteliers not under franchise agreements with the company.

 

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," "should," "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, repurchases of common stock 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; foreign currency fluctuations; 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 marketing and reservations systems and other operating systems; our ability to grow our franchise system; exposure to risks related to development activities; fluctuations in the supply and demand for hotels rooms; our ability to realize anticipated benefits from acquired businesses; the level of acceptance of alternative growth strategies we may implement; operating risks associated with our international operations; the outcome of litigation; and our ability to manage our indebtedness. These and other risk factors are discussed in detail in the company's filings with the Securities and Exchange Commission including our annual reports on Form 10-K 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 this Press Release

Adjusted EBITDA, franchising revenues, adjusted hotel franchising SG&A, Adjusted EBITDA from hotel franchising activities and adjusted hotel franchising margins are non-GAAP financial measurements. These measures should not be considered as an alternative to any measure of performance or liquidity as promulgated under or authorized by generally accepted accounting principles in the United States ("GAAP"), such as net 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 items to the most comparable GAAP financial measures. We discuss management's reasons for reporting these non-GAAP measures below.

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization: Adjusted EBITDA reflects net income excluding the impact of interest expense, interest income, provision for income taxes, depreciation and amortization, other (gains) and losses, equity in net income of unconsolidated affiliates and executive termination benefits. We consider adjusted 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 adjusted 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. Adjusted 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, Adjusted Hotel Franchising EBITDA, Adjusted Hotel Franchising SG&A and Margins: The company reports franchising revenues, adjusted hotel franchising EBITDA, adjusted franchising hotel SG&A and margins which exclude marketing and reservation revenues; the SkyTouch Technology division; recently acquired operations that provide Software as a Service ("SaaS") technology solutions to vacation rental management companies; revenue generated from the ownership of an office building that is leased to a third-party and executive termination benefits. These non-GAAP measures are a commonly used measure of performance in our industry and facilitate comparisons between the company and its competitors. Marketing and reservation activities are excluded since the company is required by its franchise agreements to use the fees collected for marketing and reservation activities; as such, no income or loss to the company is generated. Cumulative marketing and reservation system fees not expended are recorded as a liability in 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 fees collected for marketing and reservation activities are deferred and recorded as an asset in the company's financial statements and recovered in future periods. SkyTouch Technology is a division of the company that develops and markets cloud-based technology products, including inventory management, pricing and connectivity to third party channels, to hoteliers not under franchise agreements with the company. The operations for SkyTouch Technology and our vacation rental technology solutions provider are excluded since they do not reflect the company's core franchising business but are adjacent, complementary lines of business.

© 2016 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

                                                                2016     2015                                 $  %           2016*                 2015                  $     %
                                                                ----     ----                               --- ---           ----                 ----                ---    ---

    (In thousands, except per share
     amounts)


    REVENUES:


    Royalty fees                                             $86,195  $81,183                            $5,012           6%         $151,054    $143,614             $7,440             5%

    Initial franchise and relicensing
     fees                                                      5,706    5,816                             (110)        (2%)           10,862      11,533              (671)          (6%)

    Procurement services                                      10,308    8,589                             1,719          20%           16,104      13,396              2,708            20%

    Marketing and reservation system                         133,814  133,122                               692           1%          260,175     231,835             28,340            12%

    Other                                                      5,728    3,446                             2,282          66%           10,674       7,023              3,651            52%
                                                               -----    -----                             -----          ---            ------       -----              -----            ---

          Total revenues                                     241,751  232,156                             9,595           4%          448,869     407,401             41,468            10%


    OPERATING EXPENSES:


    Selling, general and
     administrative                                           40,039   33,122                             6,917          21%           75,158      65,560              9,598            15%

    Depreciation and amortization                              2,956    2,995                              (39)        (1%)            5,721       5,685                 36             1%

    Marketing and reservation system                         133,814  133,122                               692           1%          260,175     231,835             28,340            12%
                                                             -------  -------                               ---          ---           -------     -------             ------            ---

    Total operating expenses                                 176,809  169,239                             7,570           4%          341,054     303,080             37,974            13%


    Operating income                                          64,942   62,917                             2,025           3%          107,815     104,321              3,494             3%


    OTHER INCOME AND EXPENSES, NET:

    Interest expense                                          11,224   11,057                               167           2%           22,316      21,236              1,080             5%

    Interest income                                            (827)   (277)                            (550)        199%          (1,666)      (623)           (1,043)          167%

    Other gains                                                (321) (1,173)                              852        (73%)            (259)    (1,641)             1,382          (84%)

    Equity in net (income) loss of
     affiliates                                                (744)     431                           (1,175)      (273%)            1,436       1,436                  -            0%

    Total other income and expenses,
     net                                                       9,332   10,038                             (706)        (7%)           21,827      20,408              1,419             7%
                                                               -----   ------                              ----          ---            ------      ------              -----            ---


    Income before income taxes                                55,610   52,879                             2,731           5%           85,988      83,913              2,075             2%

    Income taxes                                              16,788   17,066                             (278)        (2%)           26,003      26,506              (503)          (2%)
                                                              ------   ------                              ----          ---            ------      ------               ----            ---

    Net income                                               $38,822  $35,813                            $3,009           8%          $59,985     $57,407             $2,578             4%
                                                             =======  =======                            ======          ===           =======     =======             ======            ===



    Basic earnings per share                                   $0.69    $0.62                             $0.07          11%            $1.06       $1.00              $0.06             6%
                                                               =====    =====                             =====          ===             =====       =====              =====            ===



    Diluted earnings per share                                 $0.68    $0.62                             $0.06          10%            $1.06       $0.99              $0.07             7%
                                                               =====    =====                             =====          ===             =====       =====              =====            ===



    * Year to date results for June 30,
     2016 reflect the adoption of
     Accounting Standards Update
     Compensation-Stock Compensation
     (Topic 718): Improvements to
     Employee Share-Based Payment
     Accounting ("ASU No. 2016-09"),
     which requires companies to
     recognize excess tax benefits and
     deficiencies as income tax expense
     or benefit in the income statement.
     Adoption of the standard required
     that the company retrospectively
     apply the requirement to the
     beginning of the year of adoption,
     January 1, 2016.  As a result, the
     company has reduced its previously
     reported income tax expense for the
     first quarter of 2016 by $1.6
     million.

 

 


    Choice Hotels International, Inc.

                                                                                           Exhibit 2

    Consolidated Balance Sheets



    (In thousands, except per share amounts)                           June 30,                      December 31,

                                                                                      2016                               2015
                                                                                      ----                               ----

                                                                     (Unaudited)


    ASSETS


    Cash and cash equivalents                                                  $207,888                           $193,441

    Accounts receivable, net                                                    126,689                             89,352

    Other current assets                                                         43,466                             28,160
                                                                                 ------                             ------

                                Total current assets                               378,043                            310,953


    Fixed assets and intangibles, net                                           178,089                            179,433

    Notes receivable, net of allowances                                          92,195                             82,572

    Investments in unconsolidated entities                                       78,801                             67,037

    Investments, employee benefit plans, at fair value                           16,516                             17,674

    Other assets                                                                  99,746                             59,341
                                                                                  ------                             ------


                                Total assets                                      $843,390                           $717,010
                                                                                  --------                           --------




    LIABILITIES AND SHAREHOLDERS' DEFICIT


    Accounts payable                                                            $74,925                            $64,431

    Accrued expenses and other current liabilities                               69,776                             70,807

    Deferred revenue                                                            113,763                             71,587

    Current portion of long-term debt                                               833                              1,191

                                 Total current
                                 liabilities                                       259,297                            208,016


    Long-term debt                                                              901,352                            812,945

    Deferred compensation & retirement plan obligations                          20,873                             22,859

    Other liabilities                                                            35,696                             69,089
                                                                                 ------                             ------


                                Total liabilities                                1,217,218                          1,112,909



                                 Total shareholders'
                                 deficit                                         (373,828)                         (395,899)



                                 Total liabilities and shareholders'
                                 deficit                                          $843,390                           $717,010
                                                                                  --------                           --------

 

 


    Choice Hotels International, Inc.

                                                                               Exhibit 3

    Consolidated Statements of Cash Flows

    (Unaudited)




    (In
     thousands)                                Six Months Ended June 30,
                                               -------------------------


                                                        2016             2015*
                                                        ----             ----

    CASH FLOWS FROM OPERATING ACTIVITIES:


    Net income                                       $59,985                      $57,407


    Adjustments to reconcile net income to net
     cash provided

     by operating activities:

      Depreciation
       and
       amortization                                    5,721                        5,685

      (Gain) loss
       on sale of
       assets                                              7                      (1,595)

      Provision
       for bad
       debts, net                                        962                        1,197

      Non-cash
       stock
       compensation
       and other
       charges                                         7,966                        5,399

      Excess tax
       benefits
       from stock-
       based
       compensation                                    1,404                        4,613

      Non-cash
       interest
       and other
       (income)
       loss                                              958                        1,340

      Deferred
       income
       taxes                                           4,030                      (2,095)

      Equity
       (earnings)
       losses from
       unconsolidated
       joint
       ventures,
       net of
       distributions
       received                                        2,193                        2,781


    Changes in assets and liabilities:

      Receivables                                   (39,058)                    (28,856)

      Advances to/
       from
       marketing
       and
       reservation
       activities,
       net                                          (42,671)                       3,724

      Forgivable
       notes
       receivable,
       net                                          (13,174)                    (19,186)

      Accounts
       payable                                        10,567                       16,990

      Accrued
       expenses
       and other
       current
       liabilities                                   (8,842)                     (6,969)

      Income taxes
       payable/
       receivable                                      9,059                        2,450

      Deferred
       revenue                                        42,164                        4,041

      Other assets                                  (10,834)                     (5,152)

      Other
       liabilities                                   (2,576)                         769
                                                      ------                          ---


     NET CASH
      PROVIDED BY
      OPERATING
      ACTIVITIES                                      27,861                       42,543
                                                      ------                       ------


    CASH FLOWS FROM INVESTING ACTIVITIES:


    Investment
     in property
     and
     equipment                                      (10,912)                    (14,554)

    Proceeds
     from sales
     of assets                                         1,700                        6,283

    Acquisitions
     of real
     estate                                         (25,389)                           -

     Contributions
     to equity
     method
     investments                                    (19,688)                     (2,446)

     Distributions
     from equity
     method
     investments                                       3,619                          270

    Purchases of
     investments,
     employee
     benefit
     plans                                           (1,140)                     (1,736)

    Proceeds
     from sales
     of
     investments,
     employee
     benefit
     plans                                             1,136                        1,087

    Issuance of
     mezzanine
     and other
     notes
     receivable                                     (13,048)                     (1,500)

    Collections
     of
     mezzanine
     and other
     notes
     receivable                                       10,158                        3,567

    Other items,
     net                                               (311)                       (261)
                                                        ----                         ----


     NET CASH
      USED BY
      INVESTING
      ACTIVITIES                                    (53,875)                     (9,290)
                                                     -------                       ------


    CASH FLOWS FROM FINANCING ACTIVITIES:


    Net
     borrowings
     pursuant to
     revolving
     credit
     facilities                                       87,950                       13,000

    Principal
     payments on
     long-term
     debt                                              (623)                     (6,169)

    Purchases of
     treasury
     stock                                          (28,278)                     (6,244)

    Dividends
     paid                                           (23,193)                    (22,940)

    Proceeds
     from
     exercise of
     stock
     options                                           4,234                        5,696
                                                       -----                        -----


     NET CASH
      PROVIDED
      (USED) BY
      FINANCING
      ACTIVITIES                                      40,090                     (16,657)
                                                      ------                      -------


    Net change
     in cash and
     cash
     equivalents                                      14,076                       16,596

    Effect of
     foreign
     exchange
     rate
     changes on
     cash and
     cash
     equivalents                                         371                        (825)

    Cash and
     cash
     equivalents
     at
     beginning
     of period                                       193,441                      214,879
                                                     -------                      -------


    CASH AND
     CASH
     EQUIVALENTS
     AT END OF
     PERIOD                                         $207,888                     $230,650
                                                    ========                     ========



    * Year to date results for June 30,
     2015 reflect the adoption of ASU
     No. 2016-09, which requires
     companies to recognize excess tax
     benefits related to the exercise of
     share based awards as operating
     activities in the statement of cash
     flows.  The company has elected to
     apply the ASU retrospectively and
     as a result excess tax benefits
     totaling $4.6 million for the six
     months ended June 30, 2015 have
     been reclassified from cash flows
     from financing activities to cash
     flows from operating activities.

 

 

 


                                                                                                                                               CHOICE HOTELS INTERNATIONAL, INC.                                                                                          Exhibit 4

                                                                                                                                              SUPPLEMENTAL OPERATING INFORMATION

                                                                                                                                                     DOMESTIC HOTEL SYSTEM

                                                                                                                                                          (UNAUDITED)





                                        For the Six Months Ended June 30, 2016    For the Six Months Ended June 30, 2015                             Change
                                        --------------------------------------    --------------------------------------                             ------


                                                     Average Daily                                                                                                            Average Daily                                                      Average Daily

                                                         Rate                              Occupancy                              RevPAR                                          Rate                   Occupancy               RevPAR               Rate              Occupancy                   RevPAR
                                                         ----                              ---------                              ------                                          ----                   ---------               ------               ----              ---------                   ------


    Comfort Inn                                                          $90.11                            64.0%                             $57.67                                              $87.35                   63.5%         $55.48                   3.2%                  50    bps              3.9%

    Comfort Suites                                                        95.51                            68.9%                              65.80                                               93.06                   68.2%          63.43                   2.6%                  70    bps              3.7%

    Sleep                                                                 81.13                            64.2%                              52.08                                               79.60                   64.0%          50.93                   1.9%                  20    bps              2.3%

    Quality                                                               75.79                            57.9%                              43.88                                               73.16                   57.5%          42.05                   3.6%                  40    bps              4.4%

    Clarion                                                               80.52                            56.3%                              45.35                                               78.25                   56.3%          44.07                   2.9%                   -   bps              2.9%

    Econo Lodge                                                           59.24                            52.4%                              31.03                                               57.47                   52.4%          30.13                   3.1%                   -   bps              3.0%

    Rodeway                                                               60.72                            54.6%                              33.15                                               57.22                   55.8%          31.90                   6.1%               (120)   bps              3.9%

    MainStay                                                              75.80                            63.4%                              48.02                                               76.24                   68.5%          52.23                 (0.6%)               (510)   bps            (8.1%)

    Suburban                                                              49.67                            74.9%                              37.21                                               47.25                   76.5%          36.15                   5.1%               (160)   bps              2.9%

    Ascend Hotel Collection                                              125.21                            56.9%                              71.28                                              122.78                   59.8%          73.45                   2.0%               (290)   bps            (3.0%)
                                                                         ------                             ----                               -----                                              ------                    ----           -----                    ---                 ----    ---             -----


    Total                                                                $80.26                            60.3%                             $48.43                                              $78.08                   60.4%         $47.15                   2.8%                (10)   bps              2.7%
                                                                         ======                             ====                              ======                                              ======                    ====          ======                    ===                  ===    ===               ===





                                       For the Three Months Ended June 30, 2016 For the Three Months Ended June 30, 2015                             Change
                                       ---------------------------------------- ----------------------------------------                             ------


                                                     Average Daily                                                                                                            Average Daily                                                      Average Daily

                                                         Rate                              Occupancy                              RevPAR                                          Rate                   Occupancy               RevPAR               Rate              Occupancy                   RevPAR
                                                         ----                              ---------                              ------                                          ----                   ---------               ------               ----              ---------                   ------


    Comfort Inn                                                          $93.87                            70.1%                             $65.84                                              $90.92                   69.5%         $63.16                   3.2%                  60    bps              4.2%

    Comfort Suites                                                        98.19                            73.6%                              72.24                                               95.59                   71.8%          68.64                   2.7%                 180    bps              5.2%

    Sleep                                                                 83.93                            69.5%                              58.35                                               82.23                   68.3%          56.11                   2.1%                 120    bps              4.0%

    Quality                                                               78.61                            63.3%                              49.79                                               75.52                   62.0%          46.83                   4.1%                 130    bps              6.3%

    Clarion                                                               84.14                            62.3%                              52.46                                               80.54                   60.8%          48.95                   4.5%                 150    bps              7.2%

    Econo Lodge                                                           61.84                            57.3%                              35.46                                               59.86                   56.6%          33.87                   3.3%                  70    bps              4.7%

    Rodeway                                                               63.13                            57.9%                              36.56                                               59.92                   58.4%          35.01                   5.4%                (50)   bps              4.4%

    MainStay                                                              78.07                            68.4%                              53.40                                               78.53                   70.4%          55.32                 (0.6%)               (200)   bps            (3.5%)

    Suburban                                                              51.07                            76.9%                              39.27                                               47.96                   78.9%          37.86                   6.5%               (200)   bps              3.7%

    Ascend Hotel Collection                                              133.28                            60.0%                              79.94                                              129.04                   59.2%          76.41                   3.3%                  80    bps              4.6%
                                                                         ------                             ----                               -----                                              ------                    ----           -----                    ---                  ---    ---               ---


    Total                                                                $83.35                            65.5%                             $54.61                                              $80.89                   64.7%         $52.36                   3.0%                  80    bps              4.3%
                                                                         ======                             ====                              ======                                              ======                    ====          ======                    ===                  ===    ===               ===







                                                 For the Quarter Ended                                                   For the Six Months Ended
                                                 ---------------------                                                   ------------------------

                                                                      6/30/2016                       6/30/2015                                                                             6/30/2016              6/30/2015


    System-wide effective royalty rate                                    4.40%                           4.28%                                                                                 4.39%                  4.29%

 

 




                                                              CHOICE HOTELS INTERNATIONAL, INC.                                                    Exhibit 5

                                                           SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA

                                                                         (UNAUDITED)




                             June 30, 2016     June 30, 2015                                  Variance
                             -------------     -------------                                  --------


                                 Hotels            Rooms                                  Hotels          Rooms         Hotels      Rooms                     %            %
                                 ------            -----                                  ------          -----         ------      -----                    ---          ---


    Comfort Inn                          1,138               88,085                                 1,215        93,904        (77)       (5,819)                (6.3%)       (6.2%)

    Comfort Suites                         564               43,522                                   575        44,447        (11)         (925)                (1.9%)       (2.1%)

    Sleep                                  380               27,188                                   377        27,207           3           (19)                  0.8%       (0.1%)

    Quality                              1,395              110,952                                 1,311       105,761          84          5,191                   6.4%         4.9%

    Clarion                                168               23,033                                   175        24,587         (7)       (1,554)                (4.0%)       (6.3%)

    Econo Lodge                            847               52,385                                   853        52,835         (6)         (450)                (0.7%)       (0.9%)

    Rodeway                                528               29,771                                   481        26,544          47          3,227                   9.8%        12.2%

    MainStay                                54                4,020                                    47         3,629           7            391                  14.9%        10.8%

    Suburban                                58                6,471                                    62         6,959         (4)         (488)                (6.5%)       (7.0%)

    Ascend Hotel Collection                116                9,650                                   110         9,408           6            242                   5.5%         2.6%

    Cambria hotel & suites                  25                3,113                                    24         2,917           1            196                   4.2%         6.7%
                                           ---                -----                                   ---         -----         ---            ---                    ---           ---


    Domestic Franchises                  5,273              398,190                                 5,230       398,198          43            (8)                  0.8%       (0.0%)


    International Franchises             1,156              111,366                                 1,146       106,763          10          4,603                   0.9%         4.3%
                                         -----              -------                                 -----       -------         ---          -----                    ---           ---


    Total Franchises                     6,429              509,556                                 6,376       504,961          53          4,595                   0.8%         0.9%
                                         =====              =======                                 =====       =======         ===          =====                    ===           ===

 

 




                                                                                                                                                                                                                                                Exhibit 6

                                                                                                                                    CHOICE HOTELS INTERNATIONAL, INC.

                                                                                                                                    SUPPLEMENTAL INFORMATION BY BRAND

                                                                                                                           DEVELOPMENT RESULTS -- DOMESTIC NEW HOTEL CONTRACTS

                                                                                                                                          (UNAUDITED)





                             For the Six Months Ended June 30, 2016  For the Six Months Ended June 30, 2015      % Change
                             --------------------------------------  --------------------------------------      --------


                                               New                                                                                                    New                                                       New

                                          Construction                              Conversion               Total                               Construction                  Conversion      Total       Construction         Conversion                Total
                                          ------------                              ----------               -----                               ------------                  ----------      -----       ------------         ----------                -----


    Comfort Inn                                                   12                                      14            26                                              13                  20          33                 (8%)              (30%)                (21%)

    Comfort Suites                                                 8                                       1             9                                              13                   2          15                (38%)              (50%)                (40%)

    Sleep                                                         14                                       -           14                                               9                   -          9                  56%                 NM                  56%

    Quality                                                        -                                     73            73                                               3                  75          78               (100%)               (3%)                 (6%)

    Clarion                                                        3                                       9            12                                               -                  6           6                   NM                50%                 100%

    Econo Lodge                                                    1                                      29            30                                               -                 28          28                   NM                 4%                   7%

    Rodeway                                                        -                                     27            27                                               -                 35          35                   NM              (23%)                (23%)

    MainStay                                                       6                                       -            6                                               6                   -          6                   0%                 NM                   0%

    Suburban                                                       -                                      1             1                                               1                   3           4               (100%)              (67%)                (75%)

    Ascend Hotel Collection                                        2                                       6             8                                               1                  16          17                 100%              (63%)                (53%)

    Cambria hotel & suites                                        11                                       -           11                                               7                   -          7                  57%                 NM                  57%
                                                                 ---                                     ---          ---                                             ---                 ---        ---                  ---                 ---                  ---


    Total Domestic System                                         57                                     160           217                                              53                 185         238                   8%              (14%)                 (9%)
                                                                 ===                                     ===           ===                                             ===                 ===         ===                  ===                ====                   ===






                            For the Three Months Ended June 30, 2016   For the Three Months Ended June 30,
                                                                                       2015                       % Change
                            ----------------------------------------  ------------------------------------        --------


                                               New                                                                                                    New                                                       New

                                          Construction                              Conversion               Total                               Construction                  Conversion      Total       Construction         Conversion                Total
                                          ------------                              ----------               -----                               ------------                  ----------      -----       ------------         ----------                -----


    Comfort Inn                                                    6                                      10            16                                               9                  13          22                (33%)              (23%)                (27%)

    Comfort Suites                                                 6                                       1             7                                               8                   -          8                (25%)                 NM                (13%)

    Sleep                                                         12                                       -           12                                               4                   -          4                 200%                 NM                 200%

    Quality                                                        -                                     50            50                                               1                  46          47               (100%)                 9%                   6%

    Clarion                                                        2                                       6             8                                               -                  3           3                   NM               100%                 167%

    Econo Lodge                                                    1                                      15            16                                               -                 19          19                   NM              (21%)                (16%)

    Rodeway                                                        -                                     17            17                                               -                 21          21                   NM              (19%)                (19%)

    MainStay                                                       5                                       -            5                                               2                   -          2                 150%                 NM                 150%

    Suburban                                                       -                                      1             1                                               1                   1           2               (100%)                 0%                (50%)

    Ascend Hotel Collection                                        1                                       5             6                                               -                  6           6                   NM              (17%)                   0%

    Cambria hotel & suites                                         9                                       -            9                                               5                   -          5                  80%                 NM                  80%
                                                                 ---                                     ---          ---                                             ---                 ---        ---                  ---                 ---                  ---


    Total Domestic System                                         42                                     105           147                                              30                 109         139                  40%               (4%)                   6%
                                                                 ===                                     ===           ===                                             ===                 ===         ===                  ===                 ===                   ===

 

 


                                                                                                                                                                                                                                                                                                                   Exhibit 7

                                                                                                                                                                              CHOICE HOTELS INTERNATIONAL, INC.

                                                                                                                                               DOMESTIC 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, 2016                                      June 30, 2015

                                                             Units                                              Units          Conversion     New Construction                                    Total
                                                             -----                                              -----          ----------     ----------------                                    -----

                                                           Conversion                                     New Construction       Total           Conversion                                 New Construction                              Total      Units                %               Units        %                 Units          %
                                                           ----------                                     ----------------       -----           ----------                                 ----------------                              -----      -----               ---              -----       ---                -----         ---


    Comfort Inn                                                               34                                            80            114                        38                                               64                         102        (4)                    (11%)         16          25%                 12            12%

    Comfort Suites                                                             4                                            95             99                         3                                               76                          79          1                       33%         19          25%                 20            25%

    Sleep Inn                                                                  -                                           83             83                         1                                               65                          66        (1)                   (100%)         18          28%                 17            26%

    Quality                                                                   47                                             5             52                        54                                                5                          59        (7)                    (13%)          -          0%                (7)         (12%)

    Clarion                                                                    9                                             5             14                        11                                                2                          13        (2)                    (18%)          3         150%                  1             8%

    Econo Lodge                                                               26                                             3             29                        24                                                4                          28          2                        8%        (1)       (25%)                  1             4%

    Rodeway                                                                   29                                             2             31                        34                                                3                          37        (5)                    (15%)        (1)       (33%)                (6)         (16%)

    MainStay                                                                   -                                           57             57                         1                                               47                          48        (1)                   (100%)         10          21%                  9            19%

    Suburban                                                                   5                                             6             11                         6                                               12                          18        (1)                    (17%)        (6)       (50%)                (7)         (39%)

    Ascend Hotel Collection                                                   29                                            19             48                        25                                               18                          43          4                       16%          1           6%                  5            12%

    Cambria hotel & suites                                                     5                                            48             53                         -                                              25                          25          5               NM                  23          92%                 28           112%
                                                                             ---                                           ---            ---                       ---                                             ---                         ---        ---               ---                ---          ---                 ---            ---


                                                                             188                                           403            591                       197                                              321                         518        (9)                     (5%)         82          26%                 73            14%
                                                                             ===                                           ===            ===                       ===                                              ===                         ===        ===                       ===         ===          ===                 ===            ===

 

 


    CHOICE HOTELS INTERNATIONAL, INC.                                                                                                                                          Exhibit 8

    SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION

    (UNAUDITED)



    HOTEL FRANCHISING REVENUES AND ADJUSTED HOTEL FRANCHISING MARGINS


    (dollar amounts in thousands)                                                       Three Months Ended June 30,          Six Months Ended June 30,
                                                                                        ---------------------------          -------------------------


                                                                                                                      2016                                 2015         2016                    2015
                                                                                                                      ----                                 ----         ----                    ----

                  Hotel Franchising Revenues:


                  Total Revenues                                                                                    $241,751                             $232,156     $448,869                $407,401

                  Adjustments:

                       Marketing and reservation system revenues                                                   (133,814)                           (133,122)   (260,175)              (231,835)

                       Non-hotel franchising activities                                                              (2,068)                               (411)     (4,097)                (1,014)

                  Hotel Franchising Revenues                                                                        $105,869                              $98,623     $184,597                $174,552



                  Adjusted Hotel Franchising Margins:


                  Operating Margin:


                  Total Revenues                                                                                    $241,751                             $232,156     $448,869                $407,401

                  Operating Income                                                                                   $64,942                              $62,917     $107,815                $104,321

                       Operating Margin                                                                                26.9%                               27.1%       24.0%                  25.6%



                  Adjusted Hotel Franchising Margin:


                  Hotel Franchising Revenues                                                                        $105,869                              $98,623     $184,597                $174,552


                  Operating Income                                                                                   $64,942                              $62,917     $107,815                $104,321

                  Executive termination benefits                                                                       2,206                                    -       2,206                       -

                  Non-hotel franchising activities operating loss                                                      6,084                                4,699       11,740                  10,000

                                                                                                                   $73,232                              $67,616     $121,761                $114,321
                                                                                                                   -------                              -------     --------                --------


                       Adjusted Hotel Franchising Margins                                                              69.2%                               68.6%       66.0%                  65.5%







    ADJUSTED HOTEL FRANCHISING SELLING, GENERAL AND ADMINISTRATION EXPENSES


    (dollar amounts in thousands)                                                       Three Months Ended June 30,          Six Months Ended June 30,
                                                                                        ---------------------------          -------------------------


                                                                                                                      2016                                 2015         2016                    2015
                                                                                                                      ----                                 ----         ----                    ----


                  Total Selling, General and Administrative Expenses                                                 $40,039                              $33,122      $75,158                 $65,560

                  Executive termination benefits                                                                     (2,206)                                   -     (2,206)                      -

                  Non-hotel franchising activities                                                                   (7,045)                             (4,638)    (13,715)               (10,133)

                   Adjusted Hotel Franchising Selling, General and
                   Administration Expenses                                                                           $30,788                              $28,484      $59,237                 $55,427







    ADJUSTED EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION ("EBITDA")


    (dollar amounts in thousands)

                                                                                         Three Months Ended June 30,          Six Months Ended June 30,
                                                                                         ---------------------------          -------------------------


                                                                                                                      2016                                 2015         2016                    2015
                                                                                                                      ----                                 ----         ----                    ----


    Net income                                                                                                    $38,822                              $35,813      $59,985                 $57,407

                  Income taxes                                                                                        16,788                               17,066       26,003                  26,506

                  Interest expense                                                                                    11,224                               11,057       22,316                  21,236

                  Interest income                                                                                      (827)                               (277)     (1,666)                  (623)

                  Other gains                                                                                          (321)                             (1,173)       (259)                (1,641)

                  Equity in net (income) loss of affiliates                                                            (744)                                 431        1,436                   1,436

                  Depreciation and amortization                                                                        2,956                                2,995        5,721                   5,685

                  Executive termination benefits                                                                       2,206                                    -       2,206                       -

    Adjusted EBITDA                                                                                               $70,104                              $65,912     $115,742                $110,006
                                                                                                                  =======                              =======     ========                ========


    Hotel franchising                                                                                             $75,082                              $70,138     $125,361                $119,124

    Non-hotel franchising activities                                                                              (4,978)                             (4,226)     (9,619)                (9,118)

                                                                                                                   $70,104                              $65,912     $115,742                $110,006
                                                                                                                   =======                              =======     ========                ========





    ADJUSTED NET INCOME AND ADJUSTED DILUTED EARNINGS PER SHARE (EPS)


    (dollar amounts in thousands, except per share amounts)                             Three Months Ended June 30,          Six Months Ended June 30,
                                                                                        ---------------------------          -------------------------


                                                                                                                      2016                                 2015         2016                    2015
                                                                                                                      ----                                 ----         ----                    ----


    Net Income                                                                                                    $38,822                              $35,813      $59,985                 $57,407

    Adjustments:

    Executive termination benefits                                                                                  1,394                                    -       1,394                       -

    Adjusted Net Income                                                                                           $40,216                              $35,813      $61,379                 $57,407
                                                                                                                  =======                              =======      =======                 =======



    Diluted Earnings Per Share                                                                                      $0.68                                $0.62        $1.06                   $0.99

    Adjustments:

                  Executive termination benefits                                                                        0.03                                    -        0.02                       -

    Adjusted Diluted Earnings Per Share (EPS)                                                                       $0.71                                $0.62        $1.08                   $0.99
                                                                                                                    =====                                =====        =====                   =====




    ADJUSTED EBITDA AND DILUTED EPS FULL YEAR FORECAST


    (dollar amounts in thousands)

                                                                                                    Range
                                                                                                    -----

                                                                                          Estimated Adjusted EBITDA

                                                                                              Fiscal Year 2016
                                                                                              ----------------


    Net income                                                                                                   $133,500                             $136,300

                  Income taxes                                                                                        62,000                               63,200

                  Interest expense                                                                                    45,600                               45,600

                  Interest income                                                                                    (3,200)                             (3,200)

                  Other gains                                                                                          (600)                               (600)

                  Equity in net loss of affiliates                                                                       500                                  500

                  Depreciation and amortization                                                                       12,000                               12,000

                  Executive termination benefits                                                                       2,200                                2,200

    Adjusted EBITDA                                                                                              $252,000                             $256,000
                                                                                                                 ========                             ========


    Hotel franchising                                                                                            $269,500                             $273,500

    Non-hotel franchising activities                                                                             (17,500)                            (17,500)

                                                                                                                  $252,000                             $256,000
                                                                                                                  ========                             ========



                                                                                                    Range
                                                                                                    -----

                                                                                       Estimated Adjusted Diluted EPS

                                                                                              Fiscal Year 2016
                                                                                              ----------------


    Diluted EPS                                                                                                     $2.36                                $2.41

    Adjustments:

                  Executive termination benefits                                                                        0.02                                 0.02

    Adjusted Diluted EPS                                                                                            $2.38                                $2.43
                                                                                                                    =====                                =====

 

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SOURCE Choice Hotels International, Inc.

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SOURCE: Choice Hotels International, Inc.

 

Choice Hotels International Reports a 10% Increase In Second Quarter Diluted Earnings Per Share

Second Quarter Domestic RevPAR Increases 4.3%

PR Newswire

ROCKVILLE, Md., Aug. 2, 2016 /PRNewswire/ -- Choice Hotels International, Inc. (NYSE: CHH) today reported the following highlights for the second quarter 2016:

  • Net income and diluted earnings per share ("EPS") for the three months ended June 30, 2016, totaled $38.8 million and $0.68 per share, respectively. Adjusted net income and adjusted diluted EPS for the three months ended June 30, 2016, which exclude certain special items as described below, increased 12 percent and 15 percent, respectively, over the prior year period.
  • Adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA") from hotel franchising activities, excluding special items, for the three months ended June 30, 2016 totaled $75.1 million, an increase of 7 percent over the prior year period.
  • Revenues for the three months ended June 30, 2016 totaled $241.8 million, an increase of 4 percent from the same period of 2015.
  • Franchising revenues for the three months ended June 30, 2016 totaled $105.9 million, an increase of 7 percent from the same period of 2015.
  • Domestic royalty fees for the three months ended June 30, 2016, totaled $81.1 million, an increase of 7 percent from the same period of 2015.
  • Domestic system-wide revenue per available room ("RevPAR") increased 4.3 percent in the second quarter of 2016, as occupancy and average daily rates increased 80 basis points and 3 percent, respectively from the same period of 2015.
  • Domestic RevPAR performance for the second quarter of 2016 exceeded total industry results by 80 basis points and also exceeded growth reported by Smith Travel Research for the primary chain scale segments in which the company competes.
  • Effective domestic royalty rate for the three months ended June 30, 2016 was 4.40 percent, an increase of 12 basis points from the same period of 2015.
  • Domestic hotel executed franchise agreements totaled 147 for the three months ended June 30, 2016, an increase of 6 percent from the same period of 2015.
  • Executed 9 new domestic franchise agreements during the three months ended June 30, 2016 for the Cambria hotels & suites brand including projects in Boston, MA, Los Angeles, CA and Seattle, WA.
  • Domestic relicensing and contract renewal transactions totaled 107 for the three months ended June 30, 2016, an increase of 26 percent from the same period of 2015.
  • The company's domestic pipeline of hotels awaiting conversion, under construction or approved for development as of June 30, 2016 increased 14 percent from June 30, 2015. The domestic pipeline for the company's Cambria brand as of June 30, 2016 totaled 53 hotels, a 112 percent increase from June 30, 2015.
  • The company purchased 0.4 million shares of common stock under its share repurchase program during the three months ended June 30, 2016 at a total cost of approximately $19.4 million.

"We are pleased with our results for the second quarter, which were highlighted by a 15 percent increase in adjusted diluted earnings per share," said Stephen P. Joyce, chief executive officer, Choice Hotels. "In addition, we delivered strong RevPAR gains to our domestic franchise system which continue to exceed the growth levels experienced by the overall industry and primary chain scale segments in which we compete. Demand for our brands remains strong and we will continue to invest in programs designed to drive more reservations through our central channels, improve guest loyalty and improve the value of our brands in an effort to drive incremental business to our franchisees."

Special Item

During the three and six months ended June 30, 2016, the company recorded an executive termination benefit charge of approximately $2.2 million. This special item impacted diluted EPS by $0.03 and $0.02 per share for the three and six months ended June 30, 2016, respectively. The company evaluates certain non-GAAP measures that exclude executive termination benefits because those non-GAAP measures allow for period-over-period comparison of on-going core operations before the impact of these charges. These non-GAAP measures, which are reconciled to the comparable GAAP measures in Exhibit 8, include adjusted net income, adjusted diluted EPS, adjusted hotel franchising selling, general and administrative expenses, adjusted EBITDA and adjusted hotel franchising margins. 

Adoption of New Accounting Standard

On April 1, 2016, the company adopted Accounting Standards Update ("ASU") Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting ("ASU No. 2016-09"), which requires that excess tax benefits and deficiencies related to stock compensation be recognized as income tax expense or benefit in the company's income statement.  Adoption of the standard required that the company retrospectively apply the requirement to the beginning of the year of adoption, January 1, 2016.  As a result, the company has reduced is previously reported income tax expense for the first quarter of 2016 by $1.6 million.

Use of Cash Flows

Dividends

During the six months ended June 30, 2016, the company paid cash dividends totaling approximately $23 million. Based on the current quarterly dividend rate of $0.205 per common share, the company expects to pay dividends of approximately $46 million during 2016.

Share Repurchases

The company repurchased 0.5 million shares of common stock under its share repurchase program during the six months ended June 30, 2016, at a total cost of approximately $23 million. The company currently has authorization to purchase up to 1.1 million additional shares under this program. 

Hotel Development & Financing

Pursuant to its program to encourage acceleration of the growth of our upscale select-service Cambria hotels & suites brand, the company advanced approximately $67 million in support of the Cambria brand during the six months ended June 30, 2016. The company also recycled approximately $18 million of investments in support of Cambria resulting in net advances of $49 million for the current year. These advances are primarily in the form of joint venture investments, forgivable key money loans, senior and mezzanine lending and site acquisitions.  At June 30, 2016, the company had approximately $176 million reflected in its consolidated balance sheet pursuant to these financial support activities. With respect to lending and joint venture investments, the company generally expects to recycle these loans and investments within a five year period.

Outlook

The company's consolidated 2016 outlook reflects the following assumptions:

Hotel Franchising

  • Adjusted EBITDA from franchising activities for full-year 2016 are expected to range between $270 million and $274 million;
  • Net domestic unit growth for 2016 is expected to be between 2% and 3%;
  • RevPAR is expected to increase between 3.5% and 4.0% for third quarter and range between 3.5% and 4.0% for full-year 2016; and
  • The effective royalty rate is expected to increase between 7 and 9 basis points for full-year 2016 as compared to full-year 2015.

Non-Hotel Franchising Activities

  • Net reductions in full-year 2016 EBITDA relating to our non-hotel franchising operations, which primarily relate to SkyTouch and vacation rental activities are expected to range between approximately $16 million and $19 million.

Other Items

  • The effective tax rate is expected to be approximately 32.5% and 31.7% for the third quarter and full-year 2016.
  • Adjusted EBITDA and adjusted EPS estimates exclude executive termination benefits incurred in the second quarter of 2016 as discussed above under Special Item.
  • Diluted EPS estimates are based on the current number of shares outstanding and thus do not factor in any changes that may occur due to new equity grants or any further repurchases of common stock under the company's share repurchase program.

Consolidated Outlook

The company's third quarter 2016 diluted EPS is expected to be at least $0.78. The company expects full-year 2016 adjusted diluted EPS to range between $2.38 and $2.43 and full year 2016 adjusted EBITDA to range between $252 million and $256 million. The adjusted EPS and adjusted consolidated EBITDA estimates assume that we incur net reductions in EBITDA related to non-hotel franchising activities at the midpoint of the range for these investments.

Conference Call

Choice will conduct a conference call on Tuesday, August 2, 2016 at 10:00 a.m. EDT to discuss the company's second quarter 2016 results. The dial-in number to listen to the call domestically is 1-855-638-5678 and the number for international participants is 1-404-537-3406.  The conference call also will be webcast simultaneously via the company's website, www.choicehotels.com.  Interested investors and other parties wishing to access the call via the webcast should go to the website and click on the Investor Info link.  The Investor page will feature a conference call microphone icon to access the call.

The call will be recorded and available for replay beginning at 1:00 p.m. EDT on Tuesday, August 2, 2016 by calling 1-855-859-2056 (domestic) or 1-404-537-3406 (international) and entering access code 50406350. In addition, the call will be archived and available on choicehotels.com via the Investor Info link.

About Choice Hotels

 

Choice Hotels International, Inc. (NYSE: CHH) is one of the world's largest lodging companies. With more than 6,400 hotels franchised in more than 40 countries and territories, Choice Hotels International® represents more than 500,000 rooms around the globe.  As of June 30, 2016, 673 hotels were in our development pipeline. Our company's Ascend Hotel Collection®, Cambria® hotels & suites, Comfort Inn®, Comfort Suites®, Sleep Inn®, Quality®, Clarion®, MainStay Suites®, Suburban Extended Stay Hotel®, Econo Lodge®, Rodeway Inn®, and Vacation Rentals by Choice Hotels brands provide a spectrum of lodging choices to meet guests' needs. With more than 27 million members and counting, our Choice Privileges® rewards program enhances every trip a guest takes, with benefits ranging from instant, every day rewards to exceptional experiences, starting right when they join.  All hotels and vacation rentals are independently owned and operated. Visit us at www.choicehotels.com for more information.

SkyTouch Technology® is a business division of Choice Hotels that develops and markets cloud-based technology products, including inventory management, pricing and connectivity to third party channels, to hoteliers not under franchise agreements with the company.  

 

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," "should,"  "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, repurchases of common stock 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; foreign currency fluctuations; 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 marketing and reservations systems and other operating systems; our ability to grow our franchise system; exposure to risks related to development activities; fluctuations in the supply and demand for hotels rooms; our ability to realize anticipated benefits from acquired businesses; the level of acceptance of alternative growth strategies we may implement; operating risks associated with our international operations; the outcome of litigation; and our ability to manage our indebtedness.  These and other risk factors are discussed in detail in the company's filings with the Securities and Exchange Commission including our annual reports on Form 10-K 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 this Press Release

Adjusted EBITDA, franchising revenues, adjusted hotel franchising SG&A, Adjusted EBITDA from hotel franchising activities and adjusted hotel franchising margins are non-GAAP financial measurements.  These measures should not be considered as an alternative to any measure of performance or liquidity as promulgated under or authorized by generally accepted accounting principles in the United States ("GAAP"), such as net 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 items to the most comparable GAAP financial measures. We discuss management's reasons for reporting these non-GAAP measures below.

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization: Adjusted EBITDA reflects net income excluding the impact of interest expense, interest income, provision for income taxes, depreciation and amortization, other (gains) and losses, equity in net income of unconsolidated affiliates and executive termination benefits. We consider adjusted 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 adjusted 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. Adjusted 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, Adjusted Hotel Franchising EBITDA, Adjusted Hotel Franchising SG&A and Margins:  The company reports franchising revenues, adjusted hotel franchising EBITDA, adjusted franchising hotel SG&A and margins which exclude marketing and reservation revenues; the SkyTouch Technology division; recently acquired operations that provide Software as a Service ("SaaS") technology solutions to vacation rental management companies; revenue generated from the ownership of an office building that is leased to a third-party and executive termination benefits.  These non-GAAP measures are a commonly used measure of performance in our industry and facilitate comparisons between the company and its competitors. Marketing and reservation activities are excluded since the company is required by its franchise agreements to use the fees collected for marketing and reservation activities; as such, no income or loss to the company is generated. Cumulative marketing and reservation system fees not expended are recorded as a liability in 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 fees collected for marketing and reservation activities are deferred and recorded as an asset in the company's financial statements and recovered in future periods.  SkyTouch Technology is a division of the company that develops and markets cloud-based technology products, including inventory management, pricing and connectivity to third party channels, to hoteliers not under franchise agreements with the company. The operations for SkyTouch Technology and our vacation rental technology solutions provider are excluded since they do not reflect the company's core franchising business but are adjacent, complementary lines of business.

© 2016 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

   

2016

 

2015

 

$

 

%

 

2016*

 

2015

 

$

 

%

(In thousands, except per share amounts)

                               
                                 

REVENUES:

                               
                                 

Royalty fees

 

$              86,195

 

$              81,183

 

$     5,012

 

6%

 

$            151,054

 

$            143,614

 

$       7,440

 

5%

Initial franchise and relicensing fees

 

5,706

 

5,816

 

(110)

 

(2%)

 

10,862

 

11,533

 

(671)

 

(6%)

Procurement services

 

10,308

 

8,589

 

1,719

 

20%

 

16,104

 

13,396

 

2,708

 

20%

Marketing and reservation system

 

133,814

 

133,122

 

692

 

1%

 

260,175

 

231,835

 

28,340

 

12%

Other

 

5,728

 

3,446

 

2,282

 

66%

 

10,674

 

7,023

 

3,651

 

52%

      Total revenues

 

241,751

 

232,156

 

9,595

 

4%

 

448,869

 

407,401

 

41,468

 

10%

                                 

OPERATING EXPENSES:

                               
                                 

Selling, general and administrative

 

40,039

 

33,122

 

6,917

 

21%

 

75,158

 

65,560

 

9,598

 

15%

Depreciation and amortization

 

2,956

 

2,995

 

(39)

 

(1%)

 

5,721

 

5,685

 

36

 

1%

Marketing and reservation system

 

133,814

 

133,122

 

692

 

1%

 

260,175

 

231,835

 

28,340

 

12%

Total operating expenses

 

176,809

 

169,239

 

7,570

 

4%

 

341,054

 

303,080

 

37,974

 

13%

                                 

Operating income

 

64,942

 

62,917

 

2,025

 

3%

 

107,815

 

104,321

 

3,494

 

3%

                                 

OTHER INCOME AND EXPENSES, NET:

                               

Interest expense

 

11,224

 

11,057

 

167

 

2%

 

22,316

 

21,236

 

1,080

 

5%

Interest income

 

(827)

 

(277)

 

(550)

 

199%

 

(1,666)

 

(623)

 

(1,043)

 

167%

Other gains

 

(321)

 

(1,173)

 

852

 

(73%)

 

(259)

 

(1,641)

 

1,382

 

(84%)

Equity in net (income) loss of affiliates

 

(744)

 

431

 

(1,175)

 

(273%)

 

1,436

 

1,436

 

-

 

0%

Total other income and expenses, net

 

9,332

 

10,038

 

(706)

 

(7%)

 

21,827

 

20,408

 

1,419

 

7%

                                 

Income before income taxes

 

55,610

 

52,879

 

2,731

 

5%

 

85,988

 

83,913

 

2,075

 

2%

Income taxes

 

16,788

 

17,066

 

(278)

 

(2%)

 

26,003

 

26,506

 

(503)

 

(2%)

Net income

 

$              38,822

 

$              35,813

 

$     3,009

 

8%

 

$              59,985

 

$              57,407

 

$       2,578

 

4%

                                 
                                 

Basic earnings per share

 

$                 0.69

 

$                 0.62

 

$       0.07

 

11%

 

$                 1.06

 

$                 1.00

 

$        0.06

 

6%

                                 
                                 

Diluted earnings per share

 

$                 0.68

 

$                 0.62

 

$       0.06

 

10%

 

$                 1.06

 

$                 0.99

 

$        0.07

 

7%

 

* Year to date results for June 30, 2016 reflect the adoption of Accounting Standards Update Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting ("ASU No. 2016-09"), which requires companies to recognize excess tax benefits and deficiencies as income tax expense or benefit in the income statement.  Adoption of the standard required that the company retrospectively apply the requirement to the beginning of the year of adoption, January 1, 2016.  As a result, the company has reduced its previously reported income tax expense for the first quarter of 2016 by $1.6 million.

 

 

Choice Hotels International, Inc.

 

Exhibit 2

Consolidated Balance Sheets

   
             
             

(In thousands, except per share amounts)

 June 30, 

 

 December 31, 

       

2016

 

2015

       

(Unaudited)

   
             

ASSETS

         
             

Cash and cash equivalents

 

$           207,888

 

$          193,441

Accounts receivable, net

 

126,689

 

89,352

Other current assets

 

43,466

 

28,160

 

Total current assets

 

378,043

 

310,953

             

Fixed assets and intangibles, net

 

178,089

 

179,433

Notes receivable, net of allowances

 

92,195

 

82,572

Investments in unconsolidated entities

 

78,801

 

67,037

Investments, employee benefit plans, at fair value

 

16,516

 

17,674

Other assets

   

99,746

 

59,341

             
   

Total assets

 

$           843,390

 

$          717,010

             
             
             

LIABILITIES AND SHAREHOLDERS' DEFICIT

       
             

Accounts payable 

 

$              74,925

 

$            64,431

Accrued expenses and other current liabilities

 

69,776

 

70,807

Deferred revenue

 

113,763

 

71,587

Current portion of long-term debt

 

833

 

1,191

 

Total current liabilities

 

259,297

 

208,016

             

Long-term debt

 

901,352

 

812,945

Deferred compensation & retirement plan obligations  

 

20,873

 

22,859

Other liabilities

 

35,696

 

69,089

             
 

Total liabilities

 

1,217,218

 

1,112,909

             
 

Total shareholders' deficit

 

(373,828)

 

(395,899)

             
   

Total liabilities and shareholders' deficit

 

$           843,390

 

$          717,010

 

 

Choice Hotels International, Inc.

 

Exhibit 3

Consolidated Statements of Cash Flows

   

(Unaudited)

   
       
       
   

(In thousands)

Six Months Ended June 30,

       
 

2016

 

2015*

CASH FLOWS FROM OPERATING ACTIVITIES:

     
       

Net income

$       59,985

 

$       57,407

       

Adjustments to reconcile net income to net cash provided 

     

 by operating activities:

     

  Depreciation and amortization  

5,721

 

5,685

  (Gain) loss on sale of assets

7

 

(1,595)

  Provision for bad debts, net

962

 

1,197

  Non-cash stock compensation and other charges

7,966

 

5,399

  Excess tax benefits from stock-based compensation

1,404

 

4,613

  Non-cash interest and other (income) loss

958

 

1,340

  Deferred income taxes

4,030

 

(2,095)

  Equity (earnings) losses from unconsolidated joint ventures, net of distributions received

2,193

 

2,781

       

Changes in assets and liabilities:

     

  Receivables

(39,058)

 

(28,856)

  Advances to/from marketing and reservation activities, net

(42,671)

 

3,724

  Forgivable notes receivable, net

(13,174)

 

(19,186)

  Accounts payable

10,567

 

16,990

  Accrued expenses and other current liabilities

(8,842)

 

(6,969)

  Income taxes payable/receivable

9,059

 

2,450

  Deferred revenue

42,164

 

4,041

  Other assets

(10,834)

 

(5,152)

  Other liabilities

(2,576)

 

769

       

 NET CASH PROVIDED BY OPERATING ACTIVITIES 

27,861

 

42,543

       

CASH FLOWS FROM INVESTING ACTIVITIES:

     
       

Investment in property and equipment

(10,912)

 

(14,554)

Proceeds from sales of assets

1,700

 

6,283

Acquisitions of real estate

(25,389)

 

-

Contributions to equity method investments

(19,688)

 

(2,446)

Distributions from equity method investments

3,619

 

270

Purchases of investments, employee benefit plans

(1,140)

 

(1,736)

Proceeds from sales of investments, employee benefit plans

1,136

 

1,087

Issuance of mezzanine and other notes receivable

(13,048)

 

(1,500)

Collections of mezzanine and other notes receivable

10,158

 

3,567

Other items, net

(311)

 

(261)

       

 NET CASH USED BY INVESTING ACTIVITIES 

(53,875)

 

(9,290)

       

CASH FLOWS FROM FINANCING ACTIVITIES:

     
       

Net borrowings pursuant to revolving credit facilities

87,950

 

13,000

Principal payments on long-term debt

(623)

 

(6,169)

Purchases of treasury stock

(28,278)

 

(6,244)

Dividends paid

(23,193)

 

(22,940)

Proceeds from exercise of stock options

4,234

 

5,696

       

 NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES

40,090

 

(16,657)

       

Net change in cash and cash equivalents

14,076

 

16,596

Effect of foreign exchange rate changes on cash and cash equivalents

371

 

(825)

Cash and cash equivalents at beginning of period

193,441

 

214,879

       

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$     207,888

 

$     230,650

 

* Year to date results for June 30, 2015 reflect the adoption of ASU No. 2016-09, which requires companies to recognize excess tax benefits related to the exercise of share based awards as operating activities in the statement of cash flows.  The company has elected to apply the ASU retrospectively and as a result excess tax benefits totaling $4.6 million for the six months ended June 30, 2015 have been reclassified from cash flows from financing activities to cash flows from operating activities.

 

 

 

CHOICE HOTELS INTERNATIONAL, INC.

Exhibit 4

SUPPLEMENTAL OPERATING INFORMATION 

   

DOMESTIC HOTEL SYSTEM

   

(UNAUDITED)

     
                                       
                                       
                                       
                                       
   

For the Six Months Ended June 30, 2016

 

For the Six Months Ended June 30, 2015

 

Change

                                       
   

Average Daily

         

Average Daily

         

Average Daily

         
   

Rate

 

Occupancy

 

RevPAR

 

Rate

 

Occupancy

 

RevPAR

 

Rate

 

Occupancy

 

RevPAR

                                       

Comfort Inn

 

$            90.11

 

64.0%

 

$  57.67

 

$          87.35

 

63.5%

 

$  55.48

 

3.2%

 

50

bps

 

3.9%

Comfort Suites

 

95.51

 

68.9%

 

65.80

 

93.06

 

68.2%

 

63.43

 

2.6%

 

70

bps

 

3.7%

Sleep

 

81.13

 

64.2%

 

52.08

 

79.60

 

64.0%

 

50.93

 

1.9%

 

20

bps

 

2.3%

Quality

 

75.79

 

57.9%

 

43.88

 

73.16

 

57.5%

 

42.05

 

3.6%

 

40

bps

 

4.4%

Clarion

 

80.52

 

56.3%

 

45.35

 

78.25

 

56.3%

 

44.07

 

2.9%

 

-

bps

 

2.9%

Econo Lodge

 

59.24

 

52.4%

 

31.03

 

57.47

 

52.4%

 

30.13

 

3.1%

 

-

bps

 

3.0%

Rodeway

 

60.72

 

54.6%

 

33.15

 

57.22

 

55.8%

 

31.90

 

6.1%

 

(120)

bps

 

3.9%

MainStay

 

75.80

 

63.4%

 

48.02

 

76.24

 

68.5%

 

52.23

 

(0.6%)

 

(510)

bps

 

(8.1%)

Suburban

 

49.67

 

74.9%

 

37.21

 

47.25

 

76.5%

 

36.15

 

5.1%

 

(160)

bps

 

2.9%

Ascend Hotel Collection

 

125.21

 

56.9%

 

71.28

 

122.78

 

59.8%

 

73.45

 

2.0%

 

(290)

bps

 

(3.0%)

                                       

Total 

 

$            80.26

 

60.3%

 

$  48.43

 

$          78.08

 

60.4%

 

$  47.15

 

2.8%

 

(10)

bps

 

2.7%

                                       
                                       
                                       
                                       
   

For the Three Months Ended June 30, 2016

 

For the Three Months Ended June 30, 2015

 

Change

                                       
   

Average Daily

         

Average Daily

         

Average Daily

         
   

Rate

 

Occupancy

 

RevPAR

 

Rate

 

Occupancy

 

RevPAR

 

Rate

 

Occupancy

 

RevPAR

                                       

Comfort Inn

 

$            93.87

 

70.1%

 

$  65.84

 

$          90.92

 

69.5%

 

$  63.16

 

3.2%

 

60

bps

 

4.2%

Comfort Suites

 

98.19

 

73.6%

 

72.24

 

95.59

 

71.8%

 

68.64

 

2.7%

 

180

bps

 

5.2%

Sleep

 

83.93

 

69.5%

 

58.35

 

82.23

 

68.3%

 

56.11

 

2.1%

 

120

bps

 

4.0%

Quality

 

78.61

 

63.3%

 

49.79

 

75.52

 

62.0%

 

46.83

 

4.1%

 

130

bps

 

6.3%

Clarion

 

84.14

 

62.3%

 

52.46

 

80.54

 

60.8%

 

48.95

 

4.5%

 

150

bps

 

7.2%

Econo Lodge

 

61.84

 

57.3%

 

35.46

 

59.86

 

56.6%

 

33.87

 

3.3%

 

70

bps

 

4.7%

Rodeway

 

63.13

 

57.9%

 

36.56

 

59.92

 

58.4%

 

35.01

 

5.4%

 

(50)

bps

 

4.4%

MainStay

 

78.07

 

68.4%

 

53.40

 

78.53

 

70.4%

 

55.32

 

(0.6%)

 

(200)

bps

 

(3.5%)

Suburban

 

51.07

 

76.9%

 

39.27

 

47.96

 

78.9%

 

37.86

 

6.5%

 

(200)

bps

 

3.7%

Ascend Hotel Collection

 

133.28

 

60.0%

 

79.94

 

129.04

 

59.2%

 

76.41

 

3.3%

 

80

bps

 

4.6%

                                       

Total 

 

$            83.35

 

65.5%

 

$  54.61

 

$          80.89

 

64.7%

 

$  52.36

 

3.0%

 

80

bps

 

4.3%

                                       
                                       
                                       
                                       
                                       
                                       
   

For the Quarter Ended

     

For the Six Months Ended

                 
   

6/30/2016

 

6/30/2015

     

6/30/2016

 

6/30/2015

                 
                                       

System-wide effective royalty rate

 

4.40%

 

4.28%

     

4.39%

 

4.29%

                 

 

 

 

CHOICE HOTELS INTERNATIONAL, INC.

 

 

Exhibit 5

SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA

   

(UNAUDITED)

       
                                 
                                 
                                 
   

June 30, 2016

 

June 30, 2015

 

Variance

                                 
   

Hotels

 

Rooms

 

Hotels

 

Rooms

 

Hotels

 

Rooms

 

%

 

%

                                 

Comfort Inn

 

1,138

 

88,085

 

1,215

 

93,904

 

(77)

 

(5,819)

 

(6.3%)

 

(6.2%)

Comfort Suites

 

564

 

43,522

 

575

 

44,447

 

(11)

 

(925)

 

(1.9%)

 

(2.1%)

Sleep

 

380

 

27,188

 

377

 

27,207

 

3

 

(19)

 

0.8%

 

(0.1%)

Quality

 

1,395

 

110,952

 

1,311

 

105,761

 

84

 

5,191

 

6.4%

 

4.9%

Clarion

 

168

 

23,033

 

175

 

24,587

 

(7)

 

(1,554)

 

(4.0%)

 

(6.3%)

Econo Lodge

 

847

 

52,385

 

853

 

52,835

 

(6)

 

(450)

 

(0.7%)

 

(0.9%)

Rodeway

 

528

 

29,771

 

481

 

26,544

 

47

 

3,227

 

9.8%

 

12.2%

MainStay

 

54

 

4,020

 

47

 

3,629

 

7

 

391

 

14.9%

 

10.8%

Suburban

 

58

 

6,471

 

62

 

6,959

 

(4)

 

(488)

 

(6.5%)

 

(7.0%)

Ascend Hotel Collection

 

116

 

9,650

 

110

 

9,408

 

6

 

242

 

5.5%

 

2.6%

Cambria hotel & suites

 

25

 

3,113

 

24

 

2,917

 

1

 

196

 

4.2%

 

6.7%

                                 

Domestic Franchises

 

5,273

 

398,190

 

5,230

 

398,198

 

43

 

(8)

 

0.8%

 

(0.0%)

                                 

International Franchises

 

1,156

 

111,366

 

1,146

 

106,763

 

10

 

4,603

 

0.9%

 

4.3%

                                 

Total Franchises

 

6,429

 

509,556

 

6,376

 

504,961

 

53

 

4,595

 

0.8%

 

0.9%

 

 

                                 

 

Exhibit 6

CHOICE HOTELS INTERNATIONAL, INC.

SUPPLEMENTAL INFORMATION BY BRAND

DEVELOPMENT RESULTS -- DOMESTIC NEW HOTEL CONTRACTS

(UNAUDITED)

                                       
                                       
                                       
                                       
   

For the Six Months Ended June 30, 2016

 

For the Six Months Ended June 30, 2015

 

% Change

 
                                       
   

New

         

New

         

New

         
   

Construction

 

Conversion

 

Total

 

Construction

 

Conversion

 

Total

 

Construction

 

Conversion

 

Total

 
                                       

Comfort Inn

 

12

 

14

 

26

 

13

 

20

 

33

 

(8%)

 

(30%)

 

(21%)

 

Comfort Suites

 

8

 

1

 

9

 

13

 

2

 

15

 

(38%)

 

(50%)

 

(40%)

 

Sleep

 

14

 

-

 

14

 

9

 

-

 

9

 

56%

 

NM

 

56%

 

Quality

 

-

 

73

 

73

 

3

 

75

 

78

 

(100%)

 

(3%)

 

(6%)

 

Clarion

 

3

 

9

 

12

 

-

 

6

 

6

 

NM

 

50%

 

100%

 

Econo Lodge

 

1

 

29

 

30

 

-

 

28

 

28

 

NM

 

4%

 

7%

 

Rodeway

 

-

 

27

 

27

 

-

 

35

 

35

 

NM

 

(23%)

 

(23%)

 

MainStay

 

6

 

-

 

6

 

6

 

-

 

6

 

0%

 

NM

 

0%

 

Suburban

 

-

 

1

 

1

 

1

 

3

 

4

 

(100%)

 

(67%)

 

(75%)

 

Ascend Hotel Collection

 

2

 

6

 

8

 

1

 

16

 

17

 

100%

 

(63%)

 

(53%)

 

Cambria hotel & suites

 

11

 

-

 

11

 

7

 

-

 

7

 

57%

 

NM

 

57%

 
                                       

Total Domestic System

 

57

 

160

 

217

 

53

 

185

 

238

 

8%

 

(14%)

 

(9%)

 
                                       
                                       
                                       
                                       
                                       
   

For the Three Months Ended June 30, 2016

 

For the Three Months Ended June 30, 2015

 

% Change

 
                                       
   

New

         

New

         

New

         
   

Construction

 

Conversion

 

Total

 

Construction

 

Conversion

 

Total

 

Construction

 

Conversion

 

Total

 
                                       

Comfort Inn

 

6

 

10

 

16

 

9

 

13

 

22

 

(33%)

 

(23%)

 

(27%)

 

Comfort Suites

 

6

 

1

 

7

 

8

 

-

 

8

 

(25%)

 

NM

 

(13%)

 

Sleep

 

12

 

-

 

12

 

4

 

-

 

4

 

200%

 

NM

 

200%

 

Quality

 

-

 

50

 

50

 

1

 

46

 

47

 

(100%)

 

9%

 

6%

 

Clarion

 

2

 

6

 

8

 

-

 

3

 

3

 

NM

 

100%

 

167%

 

Econo Lodge

 

1

 

15

 

16

 

-

 

19

 

19

 

NM

 

(21%)

 

(16%)

 

Rodeway

 

-

 

17

 

17

 

-

 

21

 

21

 

NM

 

(19%)

 

(19%)

 

MainStay

 

5

 

-

 

5

 

2

 

-

 

2

 

150%

 

NM

 

150%

 

Suburban

 

-

 

1

 

1

 

1

 

1

 

2

 

(100%)

 

0%

 

(50%)

 

Ascend Hotel Collection

 

1

 

5

 

6

 

-

 

6

 

6

 

NM

 

(17%)

 

0%

 

Cambria hotel & suites

 

9

 

-

 

9

 

5

 

-

 

5

 

80%

 

NM

 

80%

 
                                       

Total Domestic System

 

42

 

105

 

147

 

30

 

109

 

139

 

40%

 

(4%)

 

6%

 

 

 

                                           

Exhibit 7

CHOICE HOTELS INTERNATIONAL, INC.

DOMESTIC 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, 2016

 

June 30, 2015

                       
   

Units

 

Units

 

Conversion

 

New Construction

 

Total

   

Conversion

 

New Construction

 

Total

 

Conversion

 

New Construction

 

Total

 

Units

 

%

 

Units

 

%

 

Units

 

%

                                                 

Comfort Inn

 

34

 

80

 

114

 

38

 

64

 

102

 

(4)

 

(11%)

 

16

 

25%

 

12

 

12%

Comfort Suites

 

4

 

95

 

99

 

3

 

76

 

79

 

1

 

33%

 

19

 

25%

 

20

 

25%

Sleep Inn

 

-

 

83

 

83

 

1

 

65

 

66

 

(1)

 

(100%)

 

18

 

28%

 

17

 

26%

Quality

 

47

 

5

 

52

 

54

 

5

 

59

 

(7)

 

(13%)

 

-

 

0%

 

(7)

 

(12%)

Clarion

 

9

 

5

 

14

 

11

 

2

 

13

 

(2)

 

(18%)

 

3

 

150%

 

1

 

8%

Econo Lodge

 

26

 

3

 

29

 

24

 

4

 

28

 

2

 

8%

 

(1)

 

(25%)

 

1

 

4%

Rodeway

 

29

 

2

 

31

 

34

 

3

 

37

 

(5)

 

(15%)

 

(1)

 

(33%)

 

(6)

 

(16%)

MainStay

 

-

 

57

 

57

 

1

 

47

 

48

 

(1)

 

(100%)

 

10

 

21%

 

9

 

19%

Suburban

 

5

 

6

 

11

 

6

 

12

 

18

 

(1)

 

(17%)

 

(6)

 

(50%)

 

(7)

 

(39%)

Ascend Hotel Collection

 

29

 

19

 

48

 

25

 

18

 

43

 

4

 

16%

 

1

 

6%

 

5

 

12%

Cambria hotel & suites

 

5

 

48

 

53

 

-

 

25

 

25

 

5

 

NM

 

23

 

92%

 

28

 

112%

                                                 
   

188

 

403

 

591

 

197

 

321

 

518

 

(9)

 

(5%)

 

82

 

26%

 

73

 

14%

 

 

CHOICE HOTELS INTERNATIONAL, INC.

 

Exhibit 8

SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION

   

(UNAUDITED)

   
                   
                   

HOTEL FRANCHISING REVENUES AND ADJUSTED HOTEL FRANCHISING MARGINS

           
                   

(dollar amounts in thousands)

 

Three Months Ended June 30, 

 

Six Months Ended June 30, 

                   
     

2016

 

2015

 

2016

 

2015

 

Hotel Franchising Revenues:

               
                   
 

Total Revenues

 

$         241,751

 

$         232,156

 

$     448,869

 

$     407,401

 

Adjustments:

               
 

     Marketing and reservation system revenues

 

(133,814)

 

(133,122)

 

(260,175)

 

(231,835)

 

     Non-hotel franchising activities

 

(2,068)

 

(411)

 

(4,097)

 

(1,014)

 

Hotel Franchising Revenues

 

$         105,869

 

$           98,623

 

$     184,597

 

$     174,552

                   
 

Adjusted Hotel Franchising Margins:

               
                   
 

Operating Margin:

               
                   
 

Total Revenues

 

$         241,751

 

$         232,156

 

$     448,869

 

$     407,401

 

Operating Income

 

$           64,942

 

$           62,917

 

$     107,815

 

$     104,321

 

     Operating Margin

 

26.9%

 

27.1%

 

24.0%

 

25.6%

                   
 

Adjusted Hotel Franchising Margin:

               
                   
 

Hotel Franchising Revenues

 

$         105,869

 

$           98,623

 

$     184,597

 

$     174,552

                   
 

Operating Income

 

$           64,942

 

$           62,917

 

$     107,815

 

$     104,321

 

Executive termination benefits

 

2,206

 

-

 

2,206

 

-

 

Non-hotel franchising activities operating loss

 

6,084

 

4,699

 

11,740

 

10,000

     

$           73,232

 

$           67,616

 

$     121,761

 

$     114,321

                   
 

     Adjusted Hotel Franchising Margins

 

69.2%

 

68.6%

 

66.0%

 

65.5%

                   
                   
                   
                   
                   

ADJUSTED HOTEL FRANCHISING SELLING, GENERAL AND ADMINISTRATION EXPENSES

       
                   

(dollar amounts in thousands)

 

Three Months Ended June 30, 

 

Six Months Ended June 30, 

                   
     

2016

 

2015

 

2016

 

2015

                   
 

Total Selling, General and Administrative Expenses

 

$           40,039

 

$           33,122

 

$       75,158

 

$       65,560

 

Executive termination benefits

 

(2,206)

 

-

 

(2,206)

 

-

 

Non-hotel franchising activities

 

(7,045)

 

(4,638)

 

(13,715)

 

(10,133)

 

Adjusted Hotel Franchising Selling, General and Administration Expenses

 

$           30,788

 

$           28,484

 

$       59,237

 

$       55,427

                   
                   
                   
                   
                   

ADJUSTED EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION ("EBITDA")

       
                   

(dollar amounts in thousands)

               
     

Three Months Ended June 30, 

 

Six Months Ended June 30, 

                   
     

2016

 

2015

 

2016

 

2015

                   

Net income

 

$           38,822

 

$           35,813

 

$       59,985

 

$       57,407

 

Income taxes

 

16,788

 

17,066

 

26,003

 

26,506

 

Interest expense

 

11,224

 

11,057

 

22,316

 

21,236

 

Interest income

 

(827)

 

(277)

 

(1,666)

 

(623)

 

Other gains

 

(321)

 

(1,173)

 

(259)

 

(1,641)

 

Equity in net (income) loss of affiliates

 

(744)

 

431

 

1,436

 

1,436

 

Depreciation and amortization

 

2,956

 

2,995

 

5,721

 

5,685

 

Executive termination benefits

 

2,206

 

-

 

2,206

 

-

Adjusted EBITDA

 

$           70,104

 

$           65,912

 

$     115,742

 

$     110,006

                   

Hotel franchising 

 

$           75,082

 

$           70,138

 

$     125,361

 

$     119,124

Non-hotel franchising activities

 

(4,978)

 

(4,226)

 

(9,619)

 

(9,118)

     

$           70,104

 

$           65,912

 

$     115,742

 

$     110,006

                   
                   
                   
                   

ADJUSTED NET INCOME AND ADJUSTED DILUTED EARNINGS PER SHARE (EPS)

       
                   

(dollar amounts in thousands, except per share amounts)

 

Three Months Ended June 30, 

 

Six Months Ended June 30, 

                   
     

2016

 

2015

 

2016

 

2015

                   

Net Income

 

$           38,822

 

$           35,813

 

$       59,985

 

$       57,407

Adjustments:

               

Executive termination benefits

 

1,394

 

-

 

1,394

 

-

Adjusted Net Income

 

$           40,216

 

$           35,813

 

$       61,379

 

$       57,407

                   
                   

Diluted Earnings Per Share

 

$               0.68

 

$               0.62

 

$           1.06

 

$          0.99

Adjustments:

               
 

Executive termination benefits

 

0.03

 

-

 

0.02

 

-

Adjusted Diluted Earnings Per Share (EPS)

 

$               0.71

 

$               0.62

 

$           1.08

 

$          0.99

                   
                   
                   

ADJUSTED EBITDA AND DILUTED EPS FULL YEAR FORECAST

               
                   

(dollar amounts in thousands)

               
     

Range

   
     

Estimated Adjusted EBITDA

       
     

Fiscal Year 2016

       
                   

Net income

 

$         133,500

 

$         136,300

       
 

Income taxes

 

62,000

 

63,200

       
 

Interest expense

 

45,600

 

45,600

       
 

Interest income

 

(3,200)

 

(3,200)

       
 

Other gains

 

(600)

 

(600)

       
 

Equity in net loss of affiliates

 

500

 

500

       
 

Depreciation and amortization

 

12,000

 

12,000

       
 

Executive termination benefits

 

2,200

 

2,200

       

Adjusted EBITDA

 

$         252,000

 

$         256,000

       
                   

Hotel franchising 

 

$         269,500

 

$         273,500

       

Non-hotel franchising activities

 

(17,500)

 

(17,500)

       
     

$         252,000

 

$         256,000

       
                   
                   
     

Range

       
     

Estimated Adjusted Diluted EPS

       
     

Fiscal Year 2016

       
                   

Diluted EPS

 

$               2.36

 

$               2.41

       

Adjustments:

               
 

Executive termination benefits

 

0.02

 

0.02

       

Adjusted Diluted EPS

 

$               2.38

 

$               2.43

       

 

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SOURCE Choice Hotels International, Inc.

CONTACT: Scott Oaksmith, Senior Vice President, Finance & Chief Accounting Officer, (301) 592-6659, or Scott Carman, Director, Public Relations, (301) 592-6361

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The Radisson brands, including Park Plaza, Country Inn & Suites, and Park Inn by Radisson, are owned in the Americas regions by Choice Hotels.
Outside of the Americas, the brands are owned by Radisson Hotel Group, an unaffiliated company headquartered in Belgium.