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8-K - FORM 8-K - CHOICE HOTELS INTERNATIONAL INC /DEd616557d8k.htm

Exhibit 99.1

 

LOGO

For Immediate Release

CHOICE HOTELS INTERNATIONAL REPORTS THIRD QUARTER 2013 DILUTED EPS OF $0.70 PER SHARE

New Domestic Hotel Franchise Contracts Rise 45%

Franchising Operating Income Increases 6%

ROCKVILLE, MD. (October 24, 2013) – Choice Hotels International, Inc., (NYSE:CHH) today reported the following highlights for the third quarter of 2013:

 

    Franchising revenues increased 6% to $95.5 million for the three months ending September 30, 2013 from $90.1 million for the same period in 2012. Total revenues increased 6% to $223.2 million for the three months ending September 30, 2013 compared to the same period in 2012.

 

    Operating income from franchising activities totaled $69.5 million for the three months ending September 30, 2013, a 6% increase compared to the same period in 2012. Total operating income increased 2% to $66.5 million for the three months ending September 30, 2013 compared to the same period in 2012.

 

    Domestic system-wide revenue per available room (“RevPAR”) increased 3.0% for the three months ending September 30, 2013 compared to the same period in 2012 as occupancy and average daily rates increased 70 basis points and 1.9%, respectively.

 

    Domestic unit and room growth increased 2.0% and 0.7% from September 30, 2012, respectively.

 

    Domestic royalty fees for the three months ending September 30, 2013 increased 3% to $76.7 million from $74.3 million for the three months ending September 30, 2012.

 

    Initial and relicensing fees for the three months ending September 30, 2013 increased $1.4 million or 43% to $4.7 million from the same period in 2012.

 

    The company executed 129 new domestic hotel franchise contracts for the three months ending September 30, 2013 compared to 89 new domestic hotel franchise contracts for the same period in 2012, a 45% increase.

 

    Domestic relicensing and contract renewal transactions increased from 62 contracts during the three months ending September 30, 2012 to 72 in the current period, a 16% increase.

 

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    The number of worldwide hotels under construction, awaiting conversion or approved for development as of September 30, 2013 was 455 hotels representing 37,077 rooms, an increase of 4.6% and 2.6%, respectively, from September 30, 2012.

 

    Franchising SG&A expenses increased 6% from $22.5 million for the three months ending September 30, 2012 to $23.8 million for the same period in 2012. Excluding variable expenses related to the company’s non-qualified retirement plan deferred compensation, franchising SG&A expense increased 3.6% from $22.2 million in the prior year quarter to $23.0 million in the three months ending September 30, 2013. Selling, general and administrative (“SG&A”) expenses increased $3.8 million to $27.0 million for the three months ended September 30, 2013 compared to the same period in 2012.

“Our franchising business continues to outperform our expectations. We are particularly pleased with recent activities on the development side of the business highlighted by a 45% increase in new domestic franchise contracts. The increase was driven by a 130% improvement in contracts for our flagship Comfort brands,” said Stephen P. Joyce, president and chief executive officer, Choice Hotels International. “The Ascend Hotel Collection continues its rapid growth. This quarter we expanded in Europe and added another Ascend hotel in Australia. The Ascend Hotel Collection now has more than 115 worldwide locations, and we are excited about the future growth prospects of this brand as well as our family of brands.”

Use of Free Cash Flow

The company has historically used its free cash flow (cash flow from operations less cash flow from investing activities) to return value to shareholders, primarily through share repurchases and dividends.

Dividends

The company’s current quarterly dividend rate per common share is $0.185, subject to declaration by our board of directors. During the nine months ending September 30, 2013 and 2012, the company paid $22.0 million and $632.8 million in cash dividends to shareholders, respectively. The cash dividends paid during the nine months ending September 2013 reflect the company’s decision to pay the first quarter of 2013 quarterly cash dividend in December 2012. In addition, cash dividends paid during the nine months ending September 30, 2012 include a special cash dividend in the amount of $10.41 per share or approximately $600.7 million paid on August 23, 2012.

As a result of the payment of the special cash dividend, earnings per share for the nine months ending September 30, 2013 include $15.5 million of additional interest expense compared to the prior year reflecting the financing transactions entered into during the second and third quarters of 2012.

Share Repurchases

The company did not repurchase any shares of common stock under the share repurchase program during the three and nine months ending September 30, 2013 but has authorization to purchase up to an additional 1.4 million shares under this program. We expect we will make repurchases from time to time under our share repurchase program in the open market and through privately negotiated transactions, subject to market and other conditions. There is no time limit on this authorization and no minimum number of share repurchases has been fixed. Since Choice announced its stock repurchase program on June 25, 1998 through September 30, 2013, the company has repurchased 45.3 million shares of its common stock for a total cost of $1.1 billion. Considering the effect of a two-for-one stock split in October 2005, the company has repurchased 78.3 million shares through September 30, 2013 under the share repurchase program at an average price of $13.89 per share.

 

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Other

Our board of directors previously authorized us to enter into a program which permits us to offer financing, investment and guaranty support to qualified franchisees as well as to acquire and resell real estate to incent franchise development for certain brands in strategic markets. Over the next several years, we expect to continue to opportunistically deploy capital pursuant to this program to promote growth of our emerging brands. Our current expectation is that our annual investment in this program will range between $20 million and $40 million per year and we generally expect to recycle these investments over a 5 year period. However, the amount and timing of the investment in this program will be dependent on market and other conditions. Notwithstanding this program, the company expects to continue to return value to its shareholders through a combination of share repurchases and dividends, subject to market and other conditions.

Balance Sheet

As of September 30, 2013, the company had total debt (long-term plus current portion) of $825 million and cash and cash equivalents totaling $161 million resulting in net debt of $664 million. At December 31, 2012, the company had total debt of $855 million and cash equivalents totaling $134 million resulting in net debt of $721 million.

As of September 30, 2013 and December 31, 2012, the company had outstanding mezzanine financing, real estate investments and sliver equity investments totaling $71 million and $68 million, respectively, pursuant to its program to offer financing and investment support to incent franchise development for emerging brands in strategic markets. These investments are reported in other current assets and other assets on the company’s consolidated balance sheet.

Outlook

The company’s fourth quarter 2013 diluted EPS is expected to range between $0.44 and $0.46. The company expects full-year 2013 diluted EPS to range between $1.89 and $1.91. Earnings before interest, taxes, depreciation and amortization (“EBITDA”) for full-year 2013 are expected to range between $203.5 million and $205.5 million. These estimates include the following assumptions:

 

    The company expects net domestic unit growth to increase by approximately 2% in 2013;

 

    RevPAR is expected to increase approximately 2% and 3.25% for the fourth quarter and full-year of 2013, respectively;

 

    The effective royalty rate is expected to increase 1 basis point for full-year 2013;

 

    All figures assume the existing share count;

 

    The effective tax rate is expected to be 29.0% and 28.5% for the fourth quarter and full-year 2013, respectively; and

 

    Our EBITDA outlook for the full year includes expenses related to the company’s SkyTouch Technology division ranging between $12 million and $14 million for investment in the infrastructure of this division including business development, sales and marketing and other costs as well as continued software development expenditures related to the division’s technology related products and services.

Conference Call

Choice will conduct a conference call on Thursday, October 24, 2013 at 9:30 a.m. EDT to discuss the company’s third quarter 2013 results. The dial-in number to listen to the call is 1-800-901-5213, and the access code is 73582897. International callers should dial 1-617-786-2962 and enter the access code 73582897. The conference call also will be Webcast simultaneously via the company’s Web site, www.choicehotels.com. Interested investors and other parties wishing to access the call via the Webcast should go to the Web site and click on the Investor Info link. The Investor Information page will feature a conference call microphone icon to access the call.

 

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The call will be recorded and available for replay beginning at 1:30 p.m. EDT on Thursday October 24, 2013 through Thursday, October 31, 2013 by calling 1-888-286-8010 and entering access code 43130503. The international dial-in number for the replay is 1-617-801-6888, access code 43130503. In addition, the call will be archived for approximately one-year and available on www.choicehotels.com via the Investor Info link.

About Choice Hotels

Choice Hotels International, Inc. franchises more than 6,300 hotels, representing more than 500,000 rooms, in the United States and more than 30 other countries and territories. As of September 30, 2013, 371 hotels, representing more than 29,000 rooms, were under construction, awaiting conversion or approved for development in the United States. Additionally, 84 hotels, representing approximately 7,200 rooms, were under construction, awaiting conversion or approved for development in more than 15 other countries and territories. The company’s Comfort Inn, Comfort Suites, Quality, Sleep Inn, Clarion, Cambria Suites, MainStay Suites, Suburban Extended Stay Hotel, Econo Lodge and Rodeway Inn brands, as well as its Ascend Hotel Collection membership program, serve guests worldwide.

SkyTouch Technology is an initiative of Choice Hotels International, Inc. that develops and markets cloud-based technology products to help industry-wide hoteliers improve their efficiency and profitability.

Additional corporate information can be found on the Choice Hotels International, Inc. web site, which may be accessed at www.choicehotels.com.

Forward-Looking Statements

Certain matters discussed in this press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Generally, our use of words such as “expect,” “estimate,” “believe,” “anticipate,” “will,” “forecast,” “plan”,” project,” “assume” or similar words of futurity identify such forward-looking statements. These forward-looking statements are based on management’s current beliefs, assumptions and expectations regarding future events, which in turn are based on information currently available to management. Such statements may relate to projections of the company’s revenue, earnings and other financial and operational measures, company debt levels, ability to repay outstanding indebtedness, payment of dividends, and future operations, among other matters. We caution you not to place undue reliance on any such forward-looking statements. Forward-looking statements do not guarantee future performance and involve known and unknown risks, uncertainties and other factors.

Several factors could cause actual results, performance or achievements of the company to differ materially from those expressed in or contemplated by the forward-looking statements. Such risks include, but are not limited to, changes to general, domestic and foreign economic conditions; operating risks common in the lodging and franchising industries; changes to the desirability of our brands as viewed by hotel operators and customers; changes to the terms or termination of our contracts with franchisees; our ability to keep pace with improvements in technology utilized for reservations systems and other operating systems; fluctuations in the supply and demand for hotels rooms; and our ability to manage effectively our indebtedness. These and other risk factors are discussed in detail in the Risk Factors section of the company’s Form 10-K for the year ended December 31, 2012, filed with the Securities and Exchange Commission on February 28, 2013 and our quarterly reports filed on Form 10-Q. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

 

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Statement Concerning Non-GAAP Financial Measurements Presented in this Press Release

EBITDA, franchising revenues, franchising SG&A, franchising margins and net debt 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 operating income, total revenues, operating margins and long-term debt. 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 EBITDA, franchising revenues, franchising SG&A and franchising margins to the most comparable GAAP financial measures. We discuss management’s reasons for reporting these non-GAAP measures below.

Earnings Before Interest, Taxes, Depreciation and Amortization: EBITDA reflects earnings excluding the impact of interest expense, loss on extinguishment of debt, interest income, provision for income taxes, depreciation and amortization, other (gains) and losses and equity in net income (loss) of unconsolidated affiliates. We consider EBITDA to be an indicator of operating performance because we use it to measure our ability to service debt, fund capital expenditures, and expand our business. We also use EBITDA, as do analysts, lenders, investors and others, to evaluate companies because it excludes certain items that can vary widely across different industries or among companies within the same industry. For example, interest expense can be dependent on a company’s capital structure, debt levels and credit ratings. Accordingly, the impact of interest expense on earnings can vary significantly among companies. The tax positions of companies can also vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the jurisdictions in which they operate. As a result, effective tax rates and provision for income taxes can vary considerably among companies. EBITDA also excludes depreciation and amortization because companies utilize productive assets of different ages and use different methods of both acquiring and depreciating productive assets. These differences can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies.

Franchising Revenues, Operating Income, SG&A and Margins: The company reports franchising revenues, operating income, SG&A and margins which exclude marketing and reservation revenues, SkyTouch Technology and hotel operations. Marketing and reservation activities are excluded from franchising revenues and operating margins since the company is required by its franchise agreements to use these fees collected for marketing and reservation activities. Cumulative reservation and marketing system fees not expended are recorded as a liability on the company’s financial statements and are carried over to the next year and expended in accordance with the franchise agreements. Cumulative marketing and reservation expenditures in excess of system fees collected for marketing and reservation activities are recorded as a receivable on the company’s financial statements. In addition, the company has the contractual authority to require that the franchisees in the system at any given point repay the company for any deficits related to marketing and reservation activities. Hotel operations reflect the company’s ownership of three MainStay Suites hotels. SkyTouch Technology is a division of the company that develops and markets cloud-based technology products to help industry-wide hoteliers improve their efficiency and profitability. Hotel and SkyTouch Technology operations are excluded from franchising revenue and margins since they do not reflect the company’s core franchising business but are adjacent, complimentary lines of business. These non-GAAP measures are a commonly used measure of performance in our industry and facilitate comparisons between the company and its competitors.

Net Debt: Net debt is long-term debt plus the current portion of long-term debt (i.e., long-term debt due within one year) less cash and cash equivalents. The company believes that net debt is an important measurement as many investors use net debt in making investment decisions, as it gives them an idea of a company’s financial health and its level of leverage compared to liquid assets. Some industries may have more net debt than others; therefore, investors often compare a company’s net debt to others in the same business.

 

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Contacts

David White, Senior Vice President, Chief Financial Officer & Treasurer

(301) 592-5117

Scott Carman, Director, Public Relations

(301) 592-6361

Choice Hotels, Choice Hotels International, Comfort Inn, Comfort Suites, Quality, Sleep Inn, Clarion, Cambria Suites, MainStay Suites, Suburban Extended Stay Hotel, Econo Lodge, Rodeway Inn, Ascend Hotel Collection and SkyTouch Technology are proprietary trademarks and service marks of Choice Hotels International.

© 2013 Choice Hotels International, Inc. All rights reserved.

 

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Choice Hotels International, Inc.   Exhibit 1
Consolidated Statements of Income  
(Unaudited)  

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
                 Variance                 Variance  
     2013     2012     $     %     2013     2012     $     %  
(In thousands, except per share amounts)                                                 

REVENUES:

                

Royalty fees

   $ 83,107      $ 80,845      $ 2,262        3   $ 201,222      $ 194,762      $ 6,460        3

Initial franchise and relicensing fees

     4,650        3,247        1,403        43     12,843        8,953        3,890        43

Procurement services

     4,708        3,839        869        23     16,204        13,990        2,214        16

Marketing and reservation

     126,296        119,062        7,234        6     302,381        284,624        17,757        6

Hotel operations

     1,310        1,238        72        6     3,600        3,440        160        5

Other

     3,091        2,182        909        42     7,362        7,434        (72     (1 %) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     223,162        210,413        12,749        6     543,612        513,203        30,409        6

OPERATING EXPENSES:

                

Selling, general and administrative

     26,982        23,170        3,812        16     84,078        72,073        12,005        17

Depreciation and amortization

     2,379        1,995        384        19     7,074        5,989        1,085        18

Marketing and reservation

     126,296        119,062        7,234        6     302,381        284,624        17,757        6

Hotel operations

     956        933        23        2     2,742        2,609        133        5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     156,613        145,160        11,453        8     396,275        365,295        30,980        8

Operating income

     66,549        65,253        1,296        2     147,337        147,908        (571     (0 %) 

OTHER INCOME AND EXPENSES, NET:

                

Interest expense

     10,757        10,166        591        6     32,334        16,823        15,511        92

Interest income

     (676     (425     (251     59     (1,979     (1,156     (823     71

Loss on extinguishment of debt

     —          526        (526     (100 %)      —          526        (526     (100 %) 

Other (gains) and losses

     (703     (511     (192     38     (1,266     (2,137     871        (41 %) 

Equity in net (income) loss of affiliates

     (421     (171     (250     146     (340     12        (352     (2933 %) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and expenses, net

     8,957        9,585        (628     (7 %)      28,749        14,068        14,681        104
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     57,592        55,668        1,924        3     118,588        133,840        (15,252     (11 %) 

Income taxes

     16,080        11,291        4,789        42     33,319        37,604        (4,285     (11 %) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 41,512      $ 44,377      $ (2,865     (6 %)    $ 85,269      $ 96,236      $ (10,967     (11 %) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic earnings per share

   $ 0.71      $ 0.77      $ (0.06     (8 %)    $ 1.46      $ 1.66      $ (0.20     (12 %) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings per share

   $ 0.70      $ 0.76      $ (0.06     (8 %)    $ 1.45      $ 1.65      $ (0.20     (12 %) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 


Choice Hotels International, Inc.   Exhibit 2
Consolidated Balance Sheets  

 

(In thousands, except per share amounts)    September 30,
2013
    December 31,
2012
 
     (Unaudited)        

ASSETS

    

Cash and cash equivalents

   $ 161,138      $ 134,177   

Accounts receivable, net

     62,605        52,270   

Investments, employee benefit plans, at fair value

     386        3,486   

Other current assets

     34,138        43,537   
  

 

 

   

 

 

 

Total current assets

     258,267        233,470   

Fixed assets and intangibles, net

     142,228        130,937   

Receivable - marketing and reservation fees

     32,564        42,179   

Investments, employee benefit plans, at fair value

     14,950        12,755   

Other assets

     107,700        91,431   
  

 

 

   

 

 

 

Total assets

   $ 555,709      $ 510,772   
  

 

 

   

 

 

 

LIABILITIES AND SHAREHOLDERS’ DEFICIT

    

Accounts payable and accrued expenses

   $ 84,233      $ 94,266   

Deferred revenue

     61,401        71,154   

Deferred compensation & retirement plan obligations

     2,439        2,522   

Current portion of long-term debt

     9,132        8,195   

Other current liabilities

     21,906        —     
  

 

 

   

 

 

 

Total current liabilities

     179,111        176,137   

Long-term debt

     815,957        847,150   

Deferred compensation & retirement plan obligations

     21,219        20,399   

Other liabilities

     24,146        15,990   
  

 

 

   

 

 

 

Total liabilities

     1,040,433        1,059,676   
  

 

 

   

 

 

 

Common stock, $0.01 par value

     586        582   

Additional paid-in-capital

     114,571        110,246   

Accumulated other comprehensive loss

     (5,370     (4,216

Treasury stock, at cost

     (919,516     (927,776

Retained earnings

     325,005        272,260   
  

 

 

   

 

 

 

Total shareholders’ deficit

     (484,724     (548,904
  

 

 

   

 

 

 

Total liabilities and shareholders’ deficit

   $ 555,709      $ 510,772   
  

 

 

   

 

 

 


Choice Hotels International, Inc.   Exhibit 3
Consolidated Statements of Cash Flows  
(Unaudited)  

 

(In thousands)    Nine Months Ended September 30,  
     2013     Revised(1)
2012
 

CASH FLOWS FROM OPERATING ACTIVITIES:

    

Net income

   $ 85,269      $ 96,236   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     7,074        5,989   

Provision for bad debts, net

     2,054        1,802   

Non-cash stock compensation and other charges

     8,638        7,306   

Non-cash interest and other (income) loss

     1,057        (633

Loss on extinguishment of debt

     —          526   

Deferred income taxes

     (4,118     (1,627

Dividends received from equity method investments

     1,109        855   

Equity in net (income) loss of affiliates

     (340     12   

Changes in assets and liabilities:

    

Receivables

     (13,699     (17,405

Receivable - marketing and reservation fees, net

     23,756        20,811   

Forgivable notes receivable, net

     (5,722     (2,853

Accounts payable

     1,280        5,980   

Accrued expenses

     (22,757     (10,309

Income taxes payable/receivable

     24,638        12,786   

Deferred revenue

     (9,686     8,018   

Other assets

     (2,395     (7,458

Other liabilities

     8,851        (1,613
  

 

 

   

 

 

 

NET CASH PROVIDED BY OPERATING ACTIVITIES

     105,009        118,423   
  

 

 

   

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

    

Investment in property and equipment

     (26,442     (12,525

Equity method investments

     (3,761     (9,454

Purchases of investments, employee benefit plans

     (1,845     (1,191

Proceeds from sales of investments, employee benefit plans

     4,052        10,909   

Issuance of mezzanine and other notes receivable

     —          (4,236

Collections of mezannine and other notes receivable

     224        110   

Other items, net

     (578     (322
  

 

 

   

 

 

 

NET CASH USED IN INVESTING ACTIVITIES

     (28,350     (16,709
  

 

 

   

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

    

Net borrowings (repayments) pursuant to revolving credit facilities

     (27,500     16,725   

Principal payments on long-term debt

     (6,158     (502

Proceeds from issuance of long-term debt

     3,360        543,500   

Purchase of treasury stock

     (3,684     (22,227

Dividends paid

     (22,026     (632,751

Excess tax benefits from stock-based compensation

     1,216        793   

Debt issuance costs

     —          (4,753

Proceeds from exercise of stock options

     6,677        4,695   
  

 

 

   

 

 

 

NET CASH USED IN FINANCING ACTIVITIES

     (48,115     (94,520
  

 

 

   

 

 

 

Net change in cash and cash equivalents

     28,544        7,194   

Effect of foreign exchange rate changes on cash and cash equivalents

     (1,583     813   

Cash and cash equivalents at beginning of period

     134,177        107,057   
  

 

 

   

 

 

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

   $ 161,138      $ 115,064   
  

 

 

   

 

 

 

 

(1) The presentation of the Company’s forgivable notes receivable for the nine months ended September 30, 2012 has been revised from prior year disclosures. See Note 1 to the Company’s Form 10-Q filed with the SEC on August 9, 2013 for additional information.


CHOICE HOTELS INTERNATIONAL, INC.      Exhibit 4   
SUPPLEMENTAL OPERATING INFORMATION   
DOMESTIC HOTEL SYSTEM   
(UNAUDITED)   

 

     For the Nine Months Ended
September 30, 2013*
     For the Nine Months Ended
September 30, 2012*
     Change  
     Average Daily
Rate
     Occupancy     RevPAR      Average Daily
Rate
     Occupancy     RevPAR      Average Daily
Rate
    Occupancy      RevPAR  

Comfort Inn

   $ 83.44         59.8   $ 49.92       $ 81.52         59.2   $ 48.24         2.4     60 bps         3.5

Comfort Suites

     87.41         63.0     55.05         85.62         61.8     52.92         2.1     120 bps         4.0

Sleep

     74.51         58.7     43.70         72.29         56.3     40.68         3.1     240 bps         7.4

Quality

     70.61         53.2     37.54         69.84         51.8     36.14         1.1     140 bps         3.9

Clarion

     75.66         51.1     38.64         74.98         49.4     37.00         0.9     170 bps         4.4

Econo Lodge

     56.94         48.9     27.86         55.76         48.7     27.13         2.1     20 bps         2.7

Rodeway

     54.63         51.8     28.29         53.59         51.3     27.48         1.9     50 bps         2.9

MainStay

     72.87         67.6     49.29         69.27         70.4     48.79         5.2     (280) bps         1.0

Suburban

     42.71         70.3     30.01         41.24         69.9     28.82         3.6     40 bps         4.1

Ascend Hotel Collection

     122.40         64.5     78.96         112.27         63.5     71.25         9.0     100 bps         10.8
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 75.10         56.4   $ 42.37       $ 73.65         55.5   $ 40.89         2.0     90 bps         3.6
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

* Operating statistics represent hotel operations from December through August

 

     For the Three Months Ended
September 30, 2013*
     For the Three Months Ended
September 30, 2012*
     Change  
     Average Daily
Rate
     Occupancy     RevPAR      Average Daily
Rate
     Occupancy     RevPAR      Average Daily
Rate
    Occupancy      RevPAR  

Comfort Inn

   $ 89.49         70.8   $ 63.35       $ 87.58         70.2   $ 61.46         2.2     60 bps         3.1

Comfort Suites

     91.36         71.2     65.05         89.69         70.2     62.93         1.9     100 bps         3.4

Sleep

     78.45         66.8     52.38         76.09         64.8     49.32         3.1     200 bps         6.2

Quality

     75.81         62.5     47.36         75.02         61.2     45.88         1.1     130 bps         3.2

Clarion

     81.27         59.7     48.50         79.73         58.7     46.82         1.9     100 bps         3.6

Econo Lodge

     61.76         58.1     35.88         60.60         57.7     34.97         1.9     40 bps         2.6

Rodeway

     60.78         60.8     36.97         59.62         60.8     36.23         1.9     —   bps         2.0

MainStay

     76.91         75.2     57.82         73.17         76.5     55.96         5.1     (130) bps         3.3

Suburban

     43.79         73.1     32.02         42.62         75.1     32.03         2.7     (200) bps         (0.0 %) 

Ascend Hotel Collection

     125.54         71.6     89.86         115.98         71.4     82.77         8.2     20 bps         8.6
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 80.14         65.7   $ 52.63       $ 78.63         65.0   $ 51.09         1.9     70 bps         3.0
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

* Operating statistics represent hotel operations from June through August

 

     For the Quarter Ended     For the Nine Months Ended  
     9/30/2013     9/30/2012     9/30/2013     9/30/2012  

System-wide effective royalty rate

     4.30 %      4.29     4.34 %      4.31


  CHOICE HOTELS INTERNATIONAL, INC.   Exhibit 5
  SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA  
  (UNAUDITED)  

 

     September 30, 2013      September 30, 2012      Variance  
     Hotels      Rooms      Hotels      Rooms      Hotels     Rooms     %     %  

Comfort Inn

     1,312         102,586         1,367         106,970         (55     (4,384     (4.0 %)      (4.1 %) 

Comfort Suites

     590         45,519         603         46,647         (13     (1,128     (2.2 %)      (2.4 %) 

Sleep

     378         27,351         390         28,232         (12     (881     (3.1 %)      (3.1 %) 

Quality

     1,193         98,788         1,101         95,469         92        3,319        8.4     3.5

Clarion

     188         26,885         187         26,943         1        (58     0.5     (0.2 %) 

Econo Lodge

     821         50,230         803         49,248         18        982        2.2     2.0

Rodeway

     434         24,660         409         23,336         25        1,324        6.1     5.7

MainStay

     43         3,331         39         2,997         4        334        10.3     11.1

Suburban

     63         7,213         60         6,978         3        235        5.0     3.4

Ascend Hotel Collection

     94         8,006         56         4,946         38        3,060        67.9     61.9

Cambria Suites

     18         2,094         19         2,221         (1     (127     (5.3 %)      (5.7 %) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Domestic Franchises

     5,134         396,663         5,034         393,987         100        2,676        2.0     0.7

International Franchises

     1,169         106,000         1,165         102,942         4        3,058        0.3     3.0
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total Franchises

     6,303         502,663         6,199         496,929         104        5,734        1.7     1.2
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 


Exhibit 6

CHOICE HOTELS INTERNATIONAL, INC.

SUPPLEMENTAL INFORMATION BY BRAND

DEVELOPMENT RESULTS — DOMESTIC NEW HOTEL CONTRACTS

(UNAUDITED)

 

    For the Nine Months Ended
September 30, 2013
    For the Nine Months Ended
September 30, 2012
    % Change  
    New
Construction
    Conversion     Total     New
Construction
    Conversion     Total     New
Construction
    Conversion     Total  

Comfort Inn

    12        35        47        10        17        27        20     106     74

Comfort Suites

    7        6        13        11        4        15        (36 %)      50     (13 %) 

Sleep

    9        1        10        17        1        18        (47 %)      0     (44 %) 

Quality

    1        76        77        —          88        88        NM        (14 %)      (13 %) 

Clarion

    1        12        13        —          14        14        NM        (14 %)      (7 %) 

Econo Lodge

    —          61        61        —          33        33        NM        85     85

Rodeway

    1        39        40        —          46        46        NM        (15 %)      (13 %) 

MainStay

    5        —          5        2        1        3        150     (100 %)      67

Suburban

    1        1        2        1        1        2        0     0     0

Ascend Hotel Collection

    5        40        45        1        8        9        400     400     400

Cambria Suites

    2        —          2        4        —          4        (50 %)      NM        (50 %) 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Domestic System

    44        271        315        46        213        259        (4 %)      27     22
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

    For the Three Months Ended
September 30, 2013
    For the Three Months Ended
September 30, 2012
    % Change  
    New
Construction
    Conversion     Total     New
Construction
    Conversion     Total     New
Construction
    Conversion     Total  

Comfort Inn

    7        17        24        4        5        9        75     240     167

Comfort Suites

    2        4        6        4        —          4        (50 %)      NM        50

Sleep

    4        1        5        6        —          6        (33 %)      NM        (17 %) 

Quality

    —          32        32        —          25        25        NM        28     28

Clarion

    1        5        6        —          7        7        NM        (29 %)      (14 %) 

Econo Lodge

    —          31        31        —          15        15        NM        107     107

Rodeway

    1        15        16        —          15        15        NM        0     7

MainStay

    1        —          1        1        —          1        0     NM        0

Suburban

    1        —          1        1        —          1        0     NM        0

Ascend Hotel Collection

    2        4        6        —          4        4        NM        0     50

Cambria Suites

    1        —          1        2        —          2        (50 %)      NM        (50 %) 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Domestic System

    20        109        129        18        71        89        11     54     45
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 


Exhibit 7

CHOICE HOTELS INTERNATIONAL, INC.

DOMESTIC HOTEL PIPELINE OF HOTELS UNDER CONSTRUCTION, AWAITING CONVERSION OR APPROVED FOR DEVELOPMENT

(UNAUDITED)

A hotel in the domestic pipeline does not always result in an open and operating hotel due to various factors.

 

                   Variance  
     September 30, 2013
Units
     September 30, 2012
Units
     Conversion     New Construction     Total  
     Conversion      New
Construction
     Total      Conversion      New
Construction
     Total      Units     %     Units     %     Units     %  

Comfort Inn

     36         50         86         23         39         62         13        57     11        28     24        39

Comfort Suites

     4         47         51         1         77         78         3        300     (30     (39 %)      (27     (35 %) 

Sleep Inn

     1         45         46         1         38         39         —          0     7        18     7        18

Quality

     33         3         36         37         3         40         (4     (11 %)      —          0     (4     (10 %) 

Clarion

     7         2         9         18         1         19         (11     (61 %)      1        100     (10     (53 %) 

Econo Lodge

     33         —           33         23         1         24         10        43     (1     (100 %)      9        38

Rodeway

     24         1         25         25         —           25         (1     (4 %)      1        NM        —          0

MainStay

     —           26         26         1         18         19         (1     (100 %)      8        44     7        37

Suburban

     3         12         15         2         14         16         1        50     (2     (14 %)      (1     (6 %) 

Ascend Hotel Collection

     13         10         23         9         4         13         4        44     6        150     10        77

Cambria Suites

     —           21         21         —           25         25         —          NM        (4     (16 %)      (4     (16 %) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     154         217         371         140         220         360         14        10     (3     (1 %)      11        3
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 


   CHOICE HOTELS INTERNATIONAL, INC.    Exhibit 8
   SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION   
   (UNAUDITED)   

CALCULATION OF FRANCHISING REVENUES AND FRANCHISING MARGINS

 

(dollar amounts in thousands)    Three Months Ended September 30,     Nine Months Ended September 30,  
     2013     2012     2013     2012  

Franchising Revenues:

        

Total Revenues

   $ 223,162      $ 210,413      $ 543,612      $ 513,203   

Adjustments:

        

Marketing and reservation revenues

     (126,296     (119,062     (302,381     (284,624

SkyTouch Division

     (13     —          (13     —     

Hotel operations

     (1,310     (1,238     (3,600     (3,440
  

 

 

   

 

 

   

 

 

   

 

 

 

Franchising Revenues

   $ 95,543      $ 90,113      $ 237,618      $ 225,139   
  

 

 

   

 

 

   

 

 

   

 

 

 

Franchising Margins:

        

Operating Margin:

        

Total Revenues

   $ 223,162      $ 210,413      $ 543,612      $ 513,203   

Operating Income

   $ 66,549      $ 65,253      $ 147,337      $ 147,908   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating Margin

     29.8     31.0     27.1     28.8
  

 

 

   

 

 

   

 

 

   

 

 

 

Franchising Margin:

        

Franchising Revenues

   $ 95,543      $ 90,113      $ 237,618      $ 225,139   

Operating Income

   $ 66,549      $ 65,253      $ 147,337      $ 147,908   

SkyTouch Division operating loss

     3,272        720        8,768        2,074   

Hotel operations operating income

     (354     (305     (858     (831
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating Income - Franchising

   $ 69,467      $ 65,668      $ 155,247      $ 149,151   
  

 

 

   

 

 

   

 

 

   

 

 

 
        
  

 

 

   

 

 

   

 

 

   

 

 

 

Franchising Margins

     72.7     72.9     65.3     66.2
  

 

 

   

 

 

   

 

 

   

 

 

 

CALCULATION OF FRANCHISING SELLING, GENERAL AND ADMINISTRATION EXPENSES

 

(dollar amounts in thousands)    Three Months Ended September 30,     Nine Months Ended September 30,  
     2013     2012     2013     2012  

Total Selling, General and Administrative Expenses

   $ 26,982      $ 23,170      $ 84,078      $ 72,073   

SkyTouch Division

     (3,189     (719     (8,590     (2,073
  

 

 

   

 

 

   

 

 

   

 

 

 

Franchising Selling, General and Administration Expenses

   $ 23,793      $ 22,451      $ 75,488      $ 70,000   
  

 

 

   

 

 

   

 

 

   

 

 

 

CALCULATION OF EBITDA

(dollar amounts in thousands)

 

     Q3 2013 Actuals     Q3 2012 Actuals     Nine Months Ended
September 30, 2013
Actuals
    Nine Months Ended
September 30, 2012
Actuals
 

Net income

   $ 41,512      $ 44,377      $ 85,269      $ 96,236   

Income taxes

     16,080        11,291        33,319        37,604   

Interest expense

     10,757        10,166        32,334        16,823   

Interest income

     (676     (425     (1,979     (1,156

Other (gains) and losses

     (703     (511     (1,266     (2,137

Loss on the extinguishment of debt

     —          526        —          526   

Equity in net (income) loss of affiliates

     (421     (171     (340     12   

Depreciation and amortization

     2,379        1,995        7,074        5,989   
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

   $ 68,928      $ 67,248      $ 154,411      $ 153,897