CHOICE HOTELS INTERNATIONAL INC /DE - FORM 8-K - EX-99.1

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8-K - FORM 8-K - CHOICE HOTELS INTERNATIONAL INC /DE	d547909d8k.htm

Investor Presentation

June 2013

Exhibit 99.1

Investor Presentation

Disclaimer

Certain matters discussed throughout all of this presentation 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, assumption and expectations regarding future events, which in turn are based on information currently

available to management. Such statements may relate to projections of the company’s revenue, earnings and other

financial and operational measures, company debt levels, ability

to repay outstanding indebtedness, payment of

dividends, and future operations, among other matters. We caution you not to place undue reliance on any such

forward-looking statements. Forward-looking statements do not guarantee future performance and involve known

and unknown risks, uncertainties and other factors.

Several factors could cause actual results, performance or achievements of the company to differ materially from

those expressed in or contemplated by the forward-looking statements. Such risks include, but are not limited to,

changes to general, domestic and foreign economic conditions; operating risks common in the lodging and

franchising industries; changes to the desirability of our brands as viewed by hotel operators and customers;

changes to the terms or termination of our contracts with franchisees; our ability to keep pace with improvements in

technology utilized for reservations systems and other operating

systems; fluctuations in the supply and demand for

hotels rooms; the outcome of litigation; and our ability to effectively manage our indebtedness. These and other risk

factors are discussed in detail in the Risk Factors section of the company’s Form 10-K for the year ended

December 31, 2012, filed with the Securities and Exchange Commission on February 28, 2013. We undertake no

obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future

events or otherwise, except as required by law.

Investor Presentation

Company overview

Investor Presentation

Choice Hotels overview

Growing US hotel market share

–

9.7% share of branded US hotels (+60 basis points over

trailing 5 years)*

–

2 largest U.S. hotelier*

Well-known, diversified brands

Global pipeline of 476 hotels

Stable, profitable, long-term growth throughout economic cycles

Cumulative free cash flows of ~$1.5 billion since 1997

–

$2.1 billion returned to shareholders through share

repurchases and quarterly and special cash dividends

Capital “light”

model generates strong after-tax returns on invested

capital

Strong, growing, global hotel franchising

business

Highly attractive business model with strong

financial returns

Chain scale mix by rooms (Domestic Q1 2013)

Geographic property distribution by rooms (Q1 2013)

Source: Choice Internal Data as of March 31, 2013

* Based on number of hotels as March 31, 2013 (Smith Travel Research)

Investor Presentation

Diversified global footprint*

Source: Choice internal data

*As of March 31, 2013. The Company includes its Caribbean properties within domestic operating statistics.

Investor Presentation

Portfolio overview

Brand

Number of properties

Number of rooms

Occupancy (%)

Average daily room rate

(ADR)

RevPAR

Upscale

5,481

65.2%

$115.20

$75.09

2,221

Upper

Midscale

1,332

104,159

59.7%

81.99

48.95

597

46,079

62.2%

85.88

53.43

190

27,268

50.1%

75.06

37.57

Midscale

382

27,685

57.0%

72.91

41.57

1,172

99,090

51.8%

69.51

36.00

Extended Stay

3,165

69.1%

70.22

48.52

7,241

70.0%

41.99

29.38

Economy

811

49,244

48.5%

56.05

27.19

421

24,269

50.9%

53.45

27.18

Total / Average

5,091

395,902

55.8%

$73.89

$41.19

International

1,173

104,474

Total

6,264

500,376

Note: Number of properties and rooms are as of March 31, 2013; Operating statistics are for the trailing twelve months ended March 31, 2013.

Source: Company’s public filings, management data

Investor Presentation

Franchise portfolio growth

Worldwide hotels*

Domestic pipeline*

Worldwide unit growth has increased at a CAGR of

2.2% over the last 5 years

Executed a total of 492 new domestic hotel

franchise contracts during the trailing twelve

months ended March 31, 2013, a 45% increase

over the prior year

Current domestic pipeline consists of 395 hotels

representing 30,984 rooms

232 hotels under construction or awaiting

development

163 hotels awaiting conversion

* As of March 31, 2013

Source: Company’s public filings

Investor Presentation

Strategy for Choice’s brands, growth and shareholders

Improve and Grow Brands

–

Increase portfolio profitability of the Comfort brand family

–

Refresh Sleep Inn to improve long-term brand growth potential

–

Invest

and

expand

emerging

brands/segments

–

Cambria,

Ascend,

International

Capture Greater Share of Reservations Via Central Channels

–

Grow

Choice

Privileges

loyalty

program

–

target

2.0

million

new

members

2013

–

Continue to enhance ChoiceHotels.com to increase traffic and conversion

Allocate Free Cash Flows To “Best And Highest”

Use

–

Continue effective long-term capital allocation practices by optimizing balance sheet leverage,

share repurchase and dividend policy

–

Leverage financial capacity/strength to support expansion of emerging brands

–

Evaluate opportunities to enter new segments that leverage core competencies (i.e. Sky Touch)

–

Invest in IT infrastructure to shore up value proposition for international properties

Investor Presentation

Investment highlights

Investor Presentation

Investment highlights

Investor Presentation

Established hotel franchising platform with global

scale

One of the largest hoteliers…

…

with a significant number of rooms in the portfolio

Source:

Various

public

companies’

filings

March

31,

2013,

except

for

Hilton,

Accor

and

Carlson

which

are

December

31,

2012.

Investor Presentation

Resilient fee-for-service business model with stable

cash flows

Source: Smith Travel Research, Management data, December 2012

Investor Presentation

Strong, growing loyalty program

Choice Privileges revenue as percent

of domestic gross room revenues*

Source: Management Data, December 31, 2012, Company’s public filings

* 2001-2008 Data Excludes Econo Lodge and Rodeway Inn brands

Comprehensive loyalty rewards program

16.5 million members worldwide –

contribute over ¼

of domestic

gross room revenues

2.4 million new members added in 2012

Delivers incremental business to all Choice

brand hotels

Important selling point for franchise sales

Loyalty program

Investor Presentation

Effective marketing and central reservation system

Consists of the telephone reservation system,

proprietary internet site, mobile phone applications,

global distribution systems and other internet

reservation sites

Central Reservation System (“CRS”) provides a data

link to the Company’s franchised properties and to

airline reservation systems

Offers rooms for sale on the Company’s own internet

site, as well as other travel companies

Expertise and innovation in on-line, targeted interactive

marketing to influence guest hotel stay decisions

Powerful advertising campaigns

Focus on driving guests to Choice central channels

Facilitate “one-stop”

shopping

Reservation agents can match each caller with a

Choice-branded hotel

$300-plus million in annual marketing and reservation

spending

Description

Size, scale and distribution

Domestic franchise system

gross room revenue source

Domestic Choice CRS

net room revenue

Source: Company’s public filings as of December 31, 2012, Management data

Investor Presentation

Strong pipeline expected to continue to grow as the

global economy improves

Historical international pipeline

Source: Company’s public filings, Management data as of December 31, 2012

Historical domestic pipeline

Investor Presentation

Asset light franchising model with strong returns on

investment

Capital light model generates strong after-tax returns on invested capital

Virtually 100% of the properties are franchised*

* The Company owns a limited number of hotels that it holds for strategic purposes. Source: Company’s public filings, Management data as of December 31, 2012

Investor Presentation

Strong and growing brand awareness

Source: Percentage of survey respondents. Millward Brown, December 2012.

* Econo Lodge, Rodeway Inn and Suburban Extended Stay measured among economy hotel users.

Investor Presentation

Financial overview

Investor Presentation

Choice’s franchise business model provides stable, growing cash flows, driven

primarily through unit expansion, RevPAR growth and effective royalty rate growth

Recent performance

LTM Revenue

LTM Adjusted EBITDA

Choice has experienced consistent revenue growth

over the past eight quarters

Revenues have increased by 14% since Q1 2011

EBITDA margins have increased by 210 bps since

Q1 2011

Domestic and international unit growth and

improvement in operating performance continues

to drive profitability

($ in millions)

Source: Company’s public filings

Investor Presentation

Historical operating metrics

RevPAR & occupancy

Total worldwide rooms

Source: Company’s public filings

Investor Presentation

Historical financial overview

Revenue*

Adjusted EBITDA

*Excludes marketing and reservation revenues

Source: Company’s public filings

($ in millions)

Investor Presentation

Questions and answers

Investor Presentation

DISCLAIMER

Adjusted earnings before interest, taxes depreciation and amortization (EBITDA),

return on average invested capital (ROIC) and free cash flows are non-GAAP

financial measurements. These financial measurements are presented as

supplemental disclosures because they are used by management in reviewing

and analyzing the company’s performance. This information should not be

considered as an alternative to any measure of performance as promulgated

under accounting principles generally accepted in the United States (GAAP), such

as operating income, net income, diluted earnings per share, total revenues or net

cash

provided

operating

activities.

The

calculation

these

non-GAAP

measures may be different from the calculation by other companies and therefore

comparability may be limited. The company has included the following appendix

which reconcile these measures to the comparable GAAP measurement.

Investor Presentation

FRANCHISING REVENUES

Source: Choice Internal Data, December 2012

($ amounts in thousands)

Year Ended

December 31,

2012

2011

2010

2009

2008

2007

2006

2005

Total Revenues

691,509

638,793

596,076

564,178

641,680

615,494

539,903

472,098

Adjustments:

Marketing and Reservation

(384,784)

(349,036)

(329,246)

(305,379)

(336,477)

(316,827)

(273,267)

(237,822)

Product Sales

Hotel Operations

(4,573)

(4,356)

(4,031)

(4,140)

(4,936)

(4,692)

(4,505)

(4,293)

Franchising Revenues

302,152

285,401

262,799

254,659

300,267

293,975

262,131

229,983

Investor Presentation

FRANCHISING REVENUES (Continued)

Source: Choice Internal Data, December 2012

($ amounts in thousands)

Year Ended

December 31,

2004

2003

2002

2001

2000

1999

1998

Total Revenues

428,208

385,866

365,562

341,428

352,841

324,203

165,474

Adjustments:

Marketing and Reservation

(220,732)

(195,219)

(190,145)

(168,170)

(185,367)

(162,603)

Product Sales

(3,871)

(20,748)

Hotel Operations

(3,729)

(3,565)

(3,331)

(3,215)

(1,249)

(1,098)

Franchising Revenues

203,747

187,082

172,086

170,043

166,225

157,729

143,628

Investor Presentation

RETURN ON INVESTED CAPITAL

(a) Operating income and tax rate for the year ended December 31, 2001 have been adjusted to exclude the effect of a $22.7 million impairment charge related

to the write-off of the company’s investment in Friendly Hotels.

Source: Choice Internal Data, December 2012

Year Ended

December 31,

($ in thousands)

2012

2011

2010

2009

2008

2007

2006

Operating Income (a)

$193.1

$171.9

$160.8

$148.1

$174.6

$185.2

$166.6

Tax Rate(a)

28.7%

30.1%

32.1%

34.8%

36.3%

36.0%

27.4%

After-Tax Operating Income

137.7

120.2

109.2

96.6

111.2

118.5

121.0

+ Depreciation & Amortization

8.2

8.0

8.3

8.2

8.6

9.7

- Maintenance CAPEX

8.2

8.0

8.3

8.2

8.6

9.7

Net Op. Profit After-tax (NOPAT)

$137.7

$120.2

$109.2

$96.6

$111.2

$118.5

$121.0

Total Assets

$510.8

$447.7

$411.7

$340.0

$328.2

$328.4

$303.3

- Current Liabilities

176.1

184.6

165.3

131.8

135.1

147.5

139.8

Invested Capital

$334.7

$263.1

$246.4

$208.2

$193.1

$180.9

$163.5

Return on Average Invested Capital

46.1%

47.2%

48.0%

48.1%

59.5%

68.8%

78.5%

Investor Presentation

RETURN ON INVESTED CAPITAL (Continued)

(a) Operating income and tax rate for the year ended December 31, 2001 have been adjusted to exclude the effect of a $22.7 million impairment charge related

to the write-off of the company’s investment in Friendly Hotels.

Source: Choice Internal Data, December 2012

Year Ended

December 31,

($ in thousands)

2005

2004

2003

2002

2001

2000

1999

1998

Operating Income (a)

$143.8

$125.0

$113.9

$104.7

$96.3

$92.4

$94.2

$85.2

Tax Rate(a)

33.0%

35.1%

36.1%

36.5%

35.0%

39.0%

39.5%

41.7%

After-Tax Operating Income

96.3

81.1

72.8

66.5

62.6

56.4

57.0

49.7

+ Depreciation & Amortization

9.1

9.9

11.2

11.3

12.5

11.6

7.7

6.7

- Maintenance CAPEX

9.1

9.9

11.2

11.3

12.5

11.6

7.7

6.7

Net Op. Profit After-tax (NOPAT)

$96.3

$81.1

$72.8

$66.5

$62.6

$56.4

$57.0

$49.7

Total Assets

$265.3

$263.4

$267.3

$316.8

$321.2

$484.1

$464.7

$398.2

- Current Liabilities

120.3

102.1

102.2

84.3

71.2

93.8

88.7

64.7

Invested Capital

$145.0

$161.3

$165.1

$232.5

$250.0

$390.3

$375.9

$333.6

Return on Average Invested Capital

62.9%

49.7%

36.7%

27.6%

19.5%

14.7%

16.1%

15.2%

Investor Presentation

FREE CASH FLOWS

Source: Choice Internal Data, March 31, 2013

Year to Date Ended

Year Ended

March 31,

December 31,

($ in thousands)

2013

2012

2011

2010

2009

2008

2007

2006

2005

Net Cash Provided by Operating Activities

1,874

161,020

134,844

144,935

112,216

104,399

145,666

153,680

133,588

Net Cash Provided (Used) by Investing Activities

(13,816)

(57,999)

(23,804)

(32,155)

(3,349)

(20,265)

(21,284)

(17,244)

(24,531)

Free Cash Flows

(11,942)

103,021

111,040

112,780

108,867

84,134

124,382

136,436

109,057

Investor Presentation

FREE CASH FLOWS (Continued)

Source: Choice Internal Data, March 31, 2013

Year Ended

December 31,

($ in thousands)

2004

2003

2002

2001

2000

1999

1998

Net Cash Provided by Operating Activities

108,908

115,304

99,018

101,712

53,879

65,040

38,952

Net Cash Provided (Used) by Investing Activities

(14,544)

27,784

(14,683)

87,738

(16,617)

(36,031)

(9,056)

Free Cash Flows

94,364

143,088

84,335

189,450

37,262

29,009

29,896

Investor Presentation

Source: Choice Internal Data, March 31, 2013

ADJUSTED EBITDA

LTM

Year Ended

($ in thousands)

March 31,

December 31,

2013

2012

2011

2010

2009

2008

Operating Income

192,543

193,142

171,863

160,762

148,073

174,596

Adjustments

Acceleration of Management Succession Plan

6,605

Loss on Sublease of Office Space

1,503

Executive Termination Benefits

491

4,444

1,730

4,604

3,537

Curtailment and Settlement of SERP

1,818

1,209

Loan Reserves Related to Impaired Notes Receivable

7,555

Product Sales

Impairment of Friendly investment

Depreciation and Amortization

8,384

8,226

8,024

8,342

8,336

8,184

Adjusted EBITDA

203,236

203,677

184,331

170,834

163,725

200,477

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