SILVER SPRING, Md., Feb. 21, 2011 /PRNewswire-FirstCall/ -- Choice Hotels International, Inc., today reported the following highlights for fourth quarter and full year 2010:
Full Year Results -- Adjusted diluted earnings per share ("EPS") for full year 2010 were $1.82 compared to $1.71 for full year 2009. Diluted EPS were $1.80 for 2010 compared to $1.63 for 2009. Adjusted diluted EPS for full year 2010 and 2009 exclude certain special items, as described below, totaling $0.02 and $0.08, respectively. -- Excluding special items, adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA") increased 4% to $170.8 million for the year ended December 31, 2010, compared to $163.7 million for the year ended December 31, 2009. Operating income for the year ended December 31, 2010 was $160.8 million compared to $148.1 million for the same period of 2009. -- Franchising revenues increased 3% from $254.7 million for the year ended December 31, 2009 to $262.8 million for the same period of 2010. Total revenues increased $31.9 million or 6% to $596.1 million for the year ended December 31, 2010 compared to the same period of 2009. -- Adjusted selling, general and administrative ("SG&A") expense for full year 2010 totaled $92.8 million which represented a 1% increase from the same period of the prior year. Adjusted SG&A costs exclude special items totaling $1.7 million and $7.3 million for the years ended December 31, 2010 and 2009, respectively. -- Interest and other investment income for the year ended December 31, 2010 declined by approximately $3.0 million from the same period of the prior year primarily due to less appreciation in the fair value of investments held in the company's non-qualified employee benefit plans compared to the prior year. -- The effective income tax rate for the year ended December 31, 2010 was 32.1% compared to 34.8% for the same period of the prior year. Excluding certain items, totaling $3.2 million (approximately $0.05 diluted earnings per share), recorded during the year ended December 31, 2010, the company's effective income tax rate was approximately 34.1%. -- Domestic unit and room growth increased 1.8% and 1.3%, respectively, from December 31, 2009. -- Domestic system-wide revenue per available room ("RevPAR") increased 2.8% for full year 2010 compared to the same period of 2009 primarily as a result of occupancy rates increasing 190 basis points. -- The effective royalty rate increased 4 basis points to 4.29% for the year ended December 31, 2010 compared to 4.25% for the same period of the prior year. -- The company executed 357 new domestic hotel franchise contracts representing 30,305 rooms for the year ended December 31, 2010 compared to 369 new domestic hotel franchise contracts representing 30,156 rooms in the prior year. -- The number of domestic hotels under construction, awaiting conversion or approved for development declined 29% from December 31, 2009 to 516 hotels representing 41,682 rooms; the worldwide pipeline declined 26% from December 31, 2009 to 621 hotels representing 50,787 rooms. Fourth Quarter Results -- Adjusted diluted earnings per share ("EPS") for fourth quarter 2010 were $0.42 compared to $0.43 for the same period of the prior year. Diluted EPS were $0.40 for both fourth quarter 2010 and 2009. Adjusted diluted EPS for fourth quarter 2010 and 2009 exclude certain special items, as described below, totaling $0.02 and $0.03, respectively. -- Excluding special items, adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA") were $41.5 million for the three months ended December 31, 2010, compared to $39.7 million for the same period of 2009. Operating income for the three months ended December 31, 2010 and 2009 was $38.4 million and $34.1 million, respectively. -- Franchising revenues increased 7% from $62.2 million for the three months ended December 31, 2009 to $66.9 million for the same period of 2010. Total revenues for the three months ended December 31, 2010 increased 10% compared to the same period of 2009. -- Domestic system-wide revenue per available room ("RevPAR") increased 9.7% for the fourth quarter of 2010 compared to the same period of 2009 as a result of occupancy rates increasing 420 basis points and average daily rates increasing 0.6%. -- The effective royalty rate increased 3 basis points to 4.31% for the three months ended December 31, 2010 compared to 4.28% for the same period of the prior year. -- The company executed 161 new domestic hotel franchise contracts for the three months ended December 31, 2010 an increase of 44% over the prior year period. The increase in franchise sales was primarily driven by our Quality, Clarion and Econo Lodge conversion brands. -- Interest expense for the three months ended December 31, 2010 increased $2.8 million to $3.5 million from the same period of the prior year primarily as a result of the company's issuance of $250 million in unsecured senior notes on August 25, 2010 which carry an effective interest rate of approximately 6.2%. The proceeds from these senior notes were utilized to repay other outstanding indebtedness under the company's unsecured revolving credit facility.
"We are extremely pleased with our fourth quarter performance, with strong gains in domestic RevPAR and a significant year-over-year increase in new domestic hotel franchise agreements," said Stephen P. Joyce, president and chief executive officer. "We fully anticipate that 2011 will be an even better year for our industry and our company. With a mix of well-segmented brands for both consumers and developers, powerful global distribution capabilities and a rapidly growing global loyalty program, we are poised to take advantage of a better operating environment."
Special Items
During the three months and year ended December 31, 2010, the company recorded employee termination benefit charges of approximately $1.2 million and $1.7 million, respectively. These special items represent diluted EPS of $0.02 for both the three months and year ended December 31, 2010.
During the three months and year ended December 31, 2009, the company recorded employee termination benefits of approximately $2.3 million and $4.6 million, respectively. The company also incurred a curtailment loss related to freezing the benefits payable under its Supplemental Executive Retirement Plan totaling $1.2 million for the three months and year ended December 31, 2009. In addition, during the year ended December 31, 2009, the company recorded a $1.5 million charge related to the sublease of a portion of its office space. These special items represent diluted EPS of $0.03 and $0.08 for the three months and year ended December 31, 2009, respectively.
Outlook for 2011
The company's first quarter 2011 diluted EPS is expected to be $0.25. The company expects full-year 2011 diluted EPS to range between $1.71 and $1.75. EBITDA for full-year 2011 are expected to range between $180 million and $183 million. These estimates include the following assumptions:
-- The company expects net domestic unit growth of approximately 1% in 2011; -- RevPAR is expected to increase approximately 5% for first quarter of 2011 and increase approximately 4% for full-year 2011; -- The effective royalty rate is expected to increase 3 basis points for full-year 2011; -- All figures assume the existing share count and an effective tax rate of 35% for the first quarter and full-year 2011. Use of Free Cash Flow
The company has historically used its free cash flow (cash flow from operations less capital expenditures) to return value to shareholders, primarily through share repurchases and dividends.
For the year ended December 31, 2010 the company paid $43.8 million of cash dividends to shareholders. The current quarterly dividend rate per common share is $0.185, subject to declaration by our board of directors.
During the year ended December 31, 2010, the company purchased approximately 0.3 million shares of its common stock at an average price of $32.36 for a total cost of $8.7 million under the share repurchase program and has authorization to purchase up to an additional 3.6 million shares under this program. We expect to continue making repurchases in the open market and through privately negotiated transactions, subject to market and other conditions. No minimum number of share repurchases has been fixed. Since Choice announced its stock repurchase program on June 25, 1998, the company has repurchased 43.2 million shares of its common stock for a total cost of $1 billion through December 31, 2010. Considering the effect of a two-for-one stock split in October 2005, the company had repurchased 76.2 million shares through December 31, 2010 under the share repurchase program at an average price of $13.35 per share.
Our board of directors previously authorized us to enter into programs which permit 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 top markets. Recent market conditions have resulted in an increase in opportunities to incent development under these programs. As a result, during the year ended December 31, 2010, the company has advanced approximately $21.7 million pursuant to these programs (of which $5 million has been repaid to the company).
Over the next several years, we expect to continue to opportunistically deploy capital pursuant to these programs to promote growth of our emerging brands. The amount and timing of the investment in these programs will be dependent on market and other conditions. Our current expectation is that our annual investment in these programs will range between $20 million to $40 million. Notwithstanding these programs, the company expects to continue to return value to its shareholders through a combination of share repurchases and dividends, subject to market and other conditions.
Conference Call
Choice will conduct a conference call on Tuesday, February 22, 2011 at 10:00 a.m. EST to discuss the company's fourth quarter and full-year 2010 results. The dial-in number to listen to the call is 1-800-638-5495, and the access code is 25896514. International callers should dial 1-617-614-3946 and enter the access code 25896514. The conference call also will be Webcast simultaneously via the company's Web site, http://www.choicehotels.com/. Interested investors and other parties wishing to access the call via the Webcast should go to the Web site and click on the Investor Info link. The Investor Information page will feature a conference call microphone icon to access the call.
The call will be recorded and available for replay beginning at 1:00 p.m. EST on February 22, 2011 through March 22, 2011 by calling 1-888-286-8010 and entering access code 90493436. The international dial-in number for the replay is 617-801-6888, access code 90493436. In addition, the call will be archived and available on http://www.choicehotels.com/ via the Investor Info link.
About Choice Hotels
Choice Hotels International, Inc. franchises more than 6,000 hotels, representing more than 495,000 rooms, in the United States and more than 30 other countries and territories. As of December 31, 2010, more than 500 hotels were under construction, awaiting conversion or approved for development in the United States, representing more than 40,000 rooms, and more than 100 hotels, representing approximately 9,000 rooms, were under construction, awaiting conversion or approved for development in 18 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 serve guests worldwide. In addition, via its Ascend Collection membership program, travelers in the United States, Canada and the Caribbean have upscale lodging options at historic, boutique and unique hotels.
Additional corporate information may be found on the Choice Hotels International, Inc. web site, which may be accessed at http://www.choicehotels.com/.
Forward-Looking Statements
Certain matters discussed in this press release constitute forward-looking statements within the meaning of the federal securities law. Generally, our use of words such as "expect," "estimate," "believe," "anticipate," "will," "forecast," "plan," " project," "assume" or similar words of futurity identify statements that are forward-looking and that we intend to be included within the Safe Harbor protections provided by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements are based on management's current beliefs, assumptions and expectations regarding future events, which in turn are based on information currently available to management. Such statements may relate to projections of the company's revenue, earnings and other financial and operational measures, company debt levels, payment of stock 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, 2009, filed with the Securities and Exchange Commission on March 1, 2010. 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
Adjusted diluted EPS, adjusted EBITDA, adjusted SG&A, franchising revenues and adjusted franchising margins are non-GAAP financial measurements. 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 diluted earnings per share, operating income, total revenues and operating margins. The company's calculation of these measurements may be different from the calculations used by other companies and therefore comparability may be limited. The company has included an exhibit accompanying this release that reconciles these measures to the comparable GAAP measurement. We discuss management's reasons for reporting these non-GAAP measures below.
Earnings Before Interest, Taxes, Depreciation and Amortization: EBITDA reflects earnings excluding the impact of interest expense, tax expense, depreciation and amortization. Our management considers EBITDA to be an indicator of operating performance because it can be used to measure our ability to service debt, fund capital expenditures, and expand our business. EBITDA is a commonly used measure of performance in our industry. In addition, it is used by analysts, lenders, investors and others, as well as by us, to facilitate comparisons between the company and its competitors because it excludes certain items that can vary widely across different industries or among companies within the same industry.
Franchising Revenues and Margins: The company reports franchising revenues and margins which exclude marketing and reservation revenues and hotel operations. Marketing and reservation activities are excluded from revenues and operating margins since the company is contractually required by its franchise agreements to use these fees collected for marketing and reservation activities. Cumulative reservation and marketing fees not expended are recorded as a payable on the company's financial statements and are carried over to the next fiscal 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 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 are excluded since they do not reflect the most accurate measure of the company's core franchising business. These non-GAAP measures are a commonly used measure of performance in our industry and facilitate comparisons between the company and its competitors.
Adjusted Diluted EPS, Adjusted EBITDA, Adjusted SG&A and Adjusted Franchising Margins: The company's management also uses adjusted diluted EPS, adjusted EBITDA, adjusted SG&A and adjusted franchising margins which exclude employee termination benefits for the periods ended December 31, 2010 and 2009 as well as a pension plan curtailment loss and a loss on the sublease of a portion of the company's office space during the periods ended December 31, 2009. The company utilizes these non-GAAP measures to enable investors to perform meaningful comparisons of past, present and future operating results and as a means to emphasize the results of on-going operations.
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 and Ascend Collection are proprietary trademarks and service marks of Choice Hotels International.
© 2011 Choice Hotels International, Inc. All rights reserved. Choice Hotels International, Inc. Exhibit 1 Consolidated Statements of Income (Unaudited) Three Months Ended December 31, ------------------------------- Variance 2010 2009 $ % ---- ---- --- --- (In thousands, except per share amounts) REVENUES: Royalty fees $59,067 $53,213 $5,854 11% Initial franchise and relicensing fees 2,758 3,317 (559) (17%) Procurement services 3,595 3,514 81 2% Marketing and reservation 87,150 77,576 9,574 12% Hotel operations 987 909 78 9% Other 1,449 2,172 (723) (33%) ----- ----- ---- ----- Total revenues 155,006 140,701 14,305 10% OPERATING EXPENSES: Selling, general and administrative 26,744 26,183 561 2% Depreciation and amortization 1,872 2,084 (212) (10%) Marketing and reservation 87,150 77,576 9,574 12% Hotel operations 799 775 24 3% --- --- Total operating expenses 116,565 106,618 9,947 9% Operating income 38,441 34,083 4,358 13% OTHER INCOME AND EXPENSES: Interest expense 3,520 683 2,837 415% Interest and other investment income (1,258) (560) (698) 125% Equity in net income of affiliates (336) (334) (2) 1% Total other income and expenses, net 1,926 (211) 2,137 (1013%) ----- ---- ----- ------- Income before income taxes 36,515 34,294 2,221 6% Income taxes 12,372 10,663 1,709 16% ------ ------ ----- --- Net income $24,143 $23,631 $512 2% ======= ======= ==== === Basic earnings per share $0.41 $0.40 $0.01 2% ===== ===== ===== === Diluted earnings per share $0.40 $0.40 $- 0% ===== ===== === === Year Ended December 31, ----------------------- Variance 2010 2009 $ % ---- ---- --- --- (In thousands, except per share amounts) REVENUES: Royalty fees $230,096 $217,984 $12,112 6% Initial franchise and relicensing fees 9,295 12,916 (3,621) (28%) Procurement services 17,207 17,598 (391) (2%) Marketing and reservation 329,246 305,379 23,867 8% Hotel operations 4,031 4,140 (109) (3%) Other 6,201 6,161 40 1% ----- ----- --- --- Total revenues 596,076 564,178 31,898 6% OPERATING EXPENSES: Selling, general and administrative 94,540 99,237 (4,697) (5%) Depreciation and amortization 8,342 8,336 6 0% Marketing and reservation 329,246 305,379 23,867 8% Hotel operations 3,186 3,153 33 1% ----- ----- --- --- Total operating expenses 435,314 416,105 19,209 5% Operating income 160,762 148,073 12,689 9% OTHER INCOME AND EXPENSES: Interest expense 6,680 4,414 2,266 51% Interest and other investment income (2,903) (5,862) 2,959 (50%) Equity in net income of affiliates (1,226) (1,113) (113) 10% Total other income and expenses, net 2,551 (2,561) 5,112 (200%) ----- ------ ----- ------ Income before income taxes 158,211 150,634 7,577 5% Income taxes 50,770 52,384 (1,614) (3%) ------ ------ ------ Net income $107,441 $98,250 $9,191 9% ======== ======= ====== === Basic earnings per share $1.80 $1.64 $0.16 10% ===== ===== ===== === Diluted earnings per share $1.80 $1.63 $0.17 10% ===== ===== ===== === Choice Hotels International, Inc. Exhibit 2 Consolidated Balance Sheets (In thousands, except per share amounts) December 31, December 31, 2010 2009 ---- ---- (Unaudited) ASSETS Cash and cash equivalents $91,259 $67,870 Accounts receivable, net 47,638 41,898 Deferred income taxes 429 7,980 Other current assets 24,256 10,114 ------ ------ Total current assets 163,582 127,862 Fixed assets and intangibles, net 142,528 133,999 Receivable --marketing and reservation fees 42,507 33,872 Investments, employee benefit plans, at fair value 23,365 20,931 Other assets 39,740 23,373 ------ ------ Total assets $411,722 $340,037 -------- -------- LIABILITIES AND SHAREHOLDERS' DEFICIT Accounts payable and accrued expenses $88,986 $70,933 Deferred revenue 67,322 51,765 Revolving credit facility 200 - Deferred compensation & retirement plan obligations 2,552 2,798 Current portion of long-term debt 420 - Income taxes payable 5,778 6,310 ----- ----- Total current liabilities 165,258 131,806 Long-term debt 251,554 277,700 Deferred compensation & retirement plan obligations 35,707 34,956 Other liabilities 17,274 9,787 ------ ----- Total liabilities 469,793 454,249 ------- ------- Common stock, $0.01 par value 596 595 Additional paid-in-capital 92,774 90,731 Accumulated other comprehensive income (loss) (7,192) 333 Treasury stock, at cost (872,306) (870,302) Retained earnings 728,057 664,431 ------- ------- Total shareholders' deficit (58,071) (114,212) ------- -------- Total liabilities and shareholders' deficit $411,722 $340,037 -------- -------- Choice Hotels International, Inc. Exhibit 3 Consolidated Statements of Cash Flows (Unaudited) Year Ended December (In thousands) 31, -------------------- 2010 2009 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $107,441 $98,250 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 8,342 8,336 Provision for bad debts 3,547 2,578 Non-cash stock compensation and other charges 9,304 13,761 Non-cash interest and other income (1,711) (5,403) Dividends received from equity method investments 1,155 1,337 Equity in net income of affiliates (1,226) (1,113) Changes in assets and liabilities: Receivables (9,229) (796) Receivable -marketing and reservation fees, net 4,654 (12,232) Accounts payable 5,744 (8,279) Accrued expenses 10,630 (1,289) Income taxes payable/receivable (1,417) 8,163 Deferred income taxes (2,381) 5,553 Deferred revenue 15,413 4,650 Other assets (12,705) 3,041 Other liabilities 7,374 (4,341) ----- ------ NET CASH PROVIDED BY OPERATING ACTIVITIES 144,935 112,216 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Investment in property and equipment (24,368) (11,135) Acquisitions, net of cash required (466) - Issuance of notes receivable (11,786) (1,995) Collections of notes receivable 5,083 324 Purchases of investments, employee benefit plans (1,948) (3,854) Proceeds from sales of investments, employee benefit plans 1,649 13,895 Other items, net (319) (584) ---- ---- NET CASH USED IN INVESTING ACTIVITIES (32,155) (3,349) ------- ------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from the issuance of long-term debt 247,733 - Net repayments pursuant to revolving credit facility (277,500) (6,700) Principal payments on long-term debt (25) - Settlement of forward starting interest rate swap agreement (8,663) - Debt issuance costs (800) - Purchase of treasury stock (11,212) (59,128) Excess tax benefits from stock-based compensation 625 5,834 Dividends paid (43,808) (44,274) Proceeds from exercise of stock options 2,457 9,158 ----- ----- NET CASH USED IN FINANCING ACTIVITIES (91,193) (95,110) ------- ------- Net change in cash and cash equivalents 21,587 13,757 Effect of foreign exchange rate changes on cash and cash equivalents 1,802 1,433 Cash and cash equivalents at beginning of period 67,870 52,680 ------ ------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $91,259 $67,870 ======= ======= CHOICE HOTELS INTERNATIONAL, INC. Exhibit 4 SUPPLEMENTAL OPERATING INFORMATION DOMESTIC HOTEL SYSTEM (UNAUDITED) For the Year Ended December 31, 2010* ------------------------------- Average Daily Rate Occupancy RevPAR ---- --------- ------ Comfort Inn $77.21 55.6% $42.93 Comfort Suites 82.48 55.2% 45.53 Sleep 68.82 51.6% 35.52 Midscale without Food & Beverage 77.37 54.9% 42.47 ----- ---- ----- Quality 66.81 48.1% 32.11 Clarion 75.15 43.7% 32.86 Midscale with Food & Beverage 68.53 47.1% 32.28 ----- ---- ----- Econo Lodge 54.10 45.8% 24.80 Rodeway 51.07 45.8% 23.38 ----- ---- ----- Economy 53.17 45.8% 24.36 ----- ---- ----- MainStay 65.60 63.6% 41.71 Suburban 39.23 63.8% 25.03 Extended Stay 46.65 63.7% 29.74 ----- ---- ----- Ascend Collection 112.50 57.6% $64.81 ------ ---- ------ Total $70.50 51.3% $36.18 ====== ==== ====== For the Year Ended December 31, 2009* ------------------------------- Average Daily Rate Occupancy RevPAR ---- --------- ------ Comfort Inn $77.10 54.1% $41.74 Comfort Suites 84.79 53.3% 45.17 Sleep 69.64 51.5% 35.86 Midscale without Food & Beverage 77.89 53.5% 41.69 ----- ---- ----- Quality 68.00 46.0% 31.31 Clarion 77.79 42.2% 32.86 Midscale with Food & Beverage 69.92 45.2% 31.63 ----- ---- ----- Econo Lodge 54.66 43.5% 23.78 Rodeway 52.48 43.0% 22.54 ----- ---- ----- Economy 54.02 43.3% 23.41 ----- ---- ----- MainStay 70.55 57.9% 40.82 Suburban 41.51 56.3% 23.35 Extended Stay 49.81 56.7% 28.24 ----- ---- ----- Ascend Collection 115.97 49.4% $57.24 ------ ---- ------ Total $71.24 49.4% $35.18 ====== ==== ====== Change ------ Average Daily Rate Occupancy RevPAR ---- --------- ------ Comfort Inn 0.1% 150 bps 2.9% Comfort Suites (2.7%) 190 bps 0.8% Sleep (1.2%) 10 bps (0.9%) ------ --- --- ------ Midscale without Food & Beverage (0.7%) 140 bps 1.9% ------ --- --- --- Quality (1.8%) 210 bps 2.6% Clarion (3.4%) 150 bps 0.0% ------ --- --- --- Midscale with Food & Beverage (2.0%) 190 bps 2.1% ------ --- --- --- Econo Lodge (1.0%) 230 bps 4.3% Rodeway (2.7%) 280 bps 3.7% ------ --- --- --- Economy (1.6%) 250 bps 4.1% ------ --- --- --- MainStay (7.0%) 570 bps 2.2% Suburban (5.5%) 750 bps 7.2% ------ --- --- --- Extended Stay (6.3%) 700 bps 5.3% ------ --- --- --- Ascend Collection (3.0%) 820 bps 13.2% ------ --- --- ---- Total (1.0%) 190 bps 2.8% ====== === === === * Operating statistics represent hotel operations from December through November For the Three Months Ended December 31, 2010* -------------------------- Average Daily Rate Occupancy RevPAR ---- --------- ------ Comfort Inn $77.36 56.3% $43.54 Comfort Suites 81.17 55.4% 44.96 Sleep 68.47 51.2% 35.04 Midscale without Food & Beverage 77.09 55.3% 42.61 ----- ---- ----- Quality 65.35 48.2% 31.52 Clarion 74.05 44.9% 33.23 Midscale with Food & Beverage 67.21 47.5% 31.91 ----- ---- ----- Econo Lodge 53.59 46.2% 24.77 Rodeway 50.00 45.2% 22.60 ----- ---- ----- Economy 52.50 45.9% 24.10 ----- ---- ----- MainStay 64.30 63.1% 40.56 Suburban 39.20 62.5% 24.50 Extended Stay 46.32 62.7% 29.03 ----- ---- ----- Ascend Collection 127.73 60.4% $77.12 ------ ---- ------ Total $70.09 51.6% $36.19 ====== ==== ====== For the Three Months Ended December 31, 2009* -------------------------- Average Daily Rate Occupancy RevPAR ---- --------- ------ Comfort Inn $75.92 52.5% $39.86 Comfort Suites 81.94 50.5% 41.40 Sleep 68.03 48.7% 33.12 Midscale without Food & Beverage 76.27 51.4% 39.23 ----- ---- ----- Quality 65.71 43.7% 28.68 Clarion 77.29 39.9% 30.84 Midscale with Food & Beverage 67.98 42.9% 29.14 ----- ---- ----- Econo Lodge 53.67 42.1% 22.62 Rodeway 50.11 40.4% 20.24 ----- ---- ----- Economy 52.62 41.6% 21.89 ----- ---- ----- MainStay 67.07 57.2% 38.33 Suburban 38.91 57.1% 22.21 Extended Stay 46.92 57.1% 26.79 ----- ---- ----- Ascend Collection 122.14 51.2% $62.58 ------ ---- ------ Total $69.65 47.4% $32.99 ====== ==== ====== Change ------ Average Daily Rate Occupancy RevPAR ---- --------- ------ Comfort Inn 1.9% 380 bps 9.2% Comfort Suites (0.9%) 490 bps 8.6% Sleep 0.6% 250 bps 5.8% Midscale without Food & Beverage 1.1% 390 bps 8.6% --- --- --- --- Quality (0.5%) 450 bps 9.9% Clarion (4.2%) 500 bps 7.7% Midscale with Food & Beverage (1.1%) 460 bps 9.5% ------ --- --- --- Econo Lodge (0.1%) 410 bps 9.5% Rodeway (0.2%) 480 bps 11.7% ------ --- --- ---- Economy (0.2%) 430 bps 10.1% ------ --- --- ---- MainStay (4.1%) 590 bps 5.8% Suburban 0.7% 540 bps 10.3% Extended Stay (1.3%) 560 bps 8.4% ------ --- --- --- Ascend Collection 4.6% 920 bps 23.2% --- --- --- ---- Total 0.6% 420 bps 9.7% === === === === * Operating statistics represent hotel operations from September through November For the Quarter Ended For the Year Ended --------------------- ------------------ 12/31/2010 12/31/2009 12/31/2010 12/31/2009 System-wide effective royalty rate 4.31% 4.28% 4.29% 4.25% CHOICE HOTELS INTERNATIONAL, INC. Exhibit 5 SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA (UNAUDITED) December 31, 2010 December 31, 2009 ----------------- ----------------- Hotels Rooms Hotels Rooms ------ ----- ------ ----- Comfort Inn 1,435 112,169 1,447 113,633 Comfort Suites 623 48,246 608 47,301 Sleep 398 28,957 392 28,599 Midscale without Food & Beverage 2,456 189,372 2,447 189,533 ----- ------- ----- ------- Quality 1,012 89,185 979 89,336 Clarion 192 28,711 172 24,636 Midscale with Food & Beverage 1,204 117,896 1,151 113,972 ----- ------- ----- ------- Econo Lodge 784 48,728 792 48,996 Rodeway 387 21,261 372 21,392 --- ------ --- ------ Economy 1,171 69,989 1,164 70,388 ----- ------ ----- ------ MainStay 37 2,868 37 2,866 Suburban 64 7,685 61 7,416 Extended Stay 101 10,553 98 10,282 --- ------ --- ------ Ascend Collection 38 3,025 28 2,346 Cambria Suites 23 2,700 18 2,073 --- ----- --- ----- Domestic Franchises 4,993 393,535 4,906 388,594 International Franchises 1,149 101,610 1,115 98,816 ----- ------- ----- ------ Total Franchises 6,142 495,145 6,021 487,410 ===== ======= ===== ======= Variance -------- Hotels Rooms % % ------ ----- --- --- Comfort Inn (12) (1,464) (0.8%) (1.3%) Comfort Suites 15 945 2.5% 2.0% Sleep 6 358 1.5% 1.3% Midscale without Food & Beverage 9 (161) 0.4% (0.1%) --- ---- --- ------ Quality 33 (151) 3.4% (0.2%) Clarion 20 4,075 11.6% 16.5% Midscale with Food & Beverage 53 3,924 4.6% 3.4% --- ----- --- --- Econo Lodge (8) (268) (1.0%) (0.5%) Rodeway 15 (131) 4.0% (0.6%) --- ---- --- Economy 7 (399) 0.6% (0.6%) --- ---- --- ------ MainStay - 2 0.0% 0.1% Suburban 3 269 4.9% 3.6% Extended Stay 3 271 3.1% 2.6% --- --- --- --- Ascend Collection 10 679 35.7% 28.9% Cambria Suites 5 627 27.8% 30.2% --- --- ---- ---- Domestic Franchises 87 4,941 1.8% 1.3% International Franchises 34 2,794 3.0% 2.8% --- ----- --- --- Total Franchises 121 7,735 2.0% 1.6% === ===== === === Exhibit 6 CHOICE HOTELS INTERNATIONAL, INC. SUPPLEMENTAL INFORMATION BY BRAND DEVELOPMENT RESULTS -- DOMESTIC NEW HOTEL CONTRACTS (UNAUDITED) For the Year Ended December 31, 2010 --------------------------- New Construction Conversion Total ------------ ---------- ----- Comfort Inn 7 32 39 Comfort Suites 21 2 23 Sleep 9 1 10 --- --- --- Midscale without Food & Beverage 37 35 72 --- --- --- Quality 1 104 105 Clarion - 37 37 --- --- --- Midscale with Food & Beverage 1 141 142 --- --- --- Econo Lodge - 67 67 Rodeway 1 39 40 --- --- --- Economy 1 106 107 --- --- --- MainStay 8 2 10 Suburban 5 1 6 --- --- --- Extended Stay 13 3 16 --- --- --- Ascend Collection 1 13 14 Cambria Suites 6 - 6 --- --- --- Total Domestic System 59 298 357 === === === For the Year Ended December 31, 2009 ------------------ New Construction Conversion Total ------------ ---------- ----- Comfort Inn 9 39 48 Comfort Suites 16 1 17 Sleep 12 2 14 --- --- --- Midscale without Food & Beverage 37 42 79 --- --- --- Quality 4 111 115 Clarion 1 31 32 --- --- --- Midscale with Food & Beverage 5 142 147 --- --- --- Econo Lodge - 68 68 Rodeway 1 48 49 --- --- --- Economy 1 116 117 --- --- --- MainStay 5 2 7 Suburban 3 2 5 --- --- --- Extended Stay 8 4 12 --- --- --- Ascend Collection 3 9 12 Cambria Suites 2 - 2 --- --- --- Total Domestic System 56 313 369 === === === % Change -------- New Construction Conversion Total ------------ ---------- ----- Comfort Inn (22%) (18%) (19%) Comfort Suites 31% 100% 35% Sleep (25%) (50%) (29%) ----- ----- ----- Midscale without Food & Beverage 0% (17%) (9%) --- ----- ---- Quality (75%) (6%) (9%) Clarion (100%) 19% 16% ------ --- --- Midscale with Food & Beverage (80%) (1%) (3%) ----- ---- ---- Econo Lodge NM (1%) (1%) Rodeway 0% (19%) (18%) --- ----- ----- Economy 0% (9%) (9%) --- ---- ---- MainStay 60% 0% 43% Suburban 67% (50%) 20% --- ----- --- Extended Stay 63% (25%) 33% --- ----- --- Ascend Collection (67%) 44% 17% Cambria Suites 200% NM 200% --- --- --- Total Domestic System 5% (5%) (3%) === ==== ==== For the Three Months Ended December 31, 2010 -------------------------- New Construction Conversion Total ------------ ---------- ----- Comfort Inn 3 10 13 Comfort Suites 8 1 9 Sleep 6 1 7 Midscale without Food & Beverage 17 12 29 --- --- --- Quality - 50 50 Clarion - 20 20 Midscale with Food & Beverage - 70 70 --- --- --- Econo Lodge - 29 29 Rodeway - 13 13 Economy - 42 42 --- --- --- MainStay 4 2 6 Suburban 4 1 5 Extended Stay 8 3 11 --- --- --- Ascend Collection - 8 8 Cambria Suites 1 - 1 --- --- --- Total Domestic System 26 135 161 === === === For the Three Months Ended December 31, 2009 -------------------------- New Construction Conversion Total ------------ ---------- ----- Comfort Inn 5 17 22 Comfort Suites 7 - 7 Sleep 1 - 1 Midscale without Food & Beverage 13 17 30 --- --- --- Quality 1 24 25 Clarion - 8 8 Midscale with Food & Beverage 1 32 33 --- --- --- Econo Lodge - 23 23 Rodeway - 12 12 Economy - 35 35 --- --- --- MainStay 4 1 5 Suburban 1 2 3 Extended Stay 5 3 8 --- --- --- Ascend Collection 2 4 6 Cambria Suites - - - --- --- --- Total Domestic System 21 91 112 === === === % Change -------- New Construction Conversion Total ------------ ---------- ----- Comfort Inn (40%) (41%) (41%) Comfort Suites 14% NM 29% Sleep 500% NM 600% Midscale without Food & Beverage 31% (29%) (3%) --- ----- ---- Quality (100%) 108% 100% Clarion NM 150% 150% Midscale with Food & Beverage (100%) 119% 112% ------ --- --- Econo Lodge NM 26% 26% Rodeway NM 8% 8% Economy NM 20% 20% --- --- --- MainStay 0% 100% 20% Suburban 300% (50%) 67% Extended Stay 60% 0% 38% --- --- --- Ascend Collection (100%) 100% 33% Cambria Suites NM NM NM --- --- --- Total Domestic System 24% 48% 44% === === === ' 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. December 31, 2010 Units ----- New Conversion Construction Total ---------- ------------- ----- Comfort Inn 30 62 92 Comfort Suites 1 122 123 Sleep Inn - 75 75 --- --- --- Midscale without Food & Beverage 31 259 290 --- --- --- Quality 33 8 41 Clarion 18 2 20 --- --- --- Midscale with Food & Beverage 51 10 61 --- --- --- Econo Lodge 35 2 37 Rodeway 12 2 14 --- --- --- Economy 47 4 51 --- --- --- MainStay 1 42 43 Suburban - 27 27 --- --- --- Extended Stay 1 69 70 --- --- --- Ascend Collection 6 4 10 Cambria Suites - 34 34 --- --- --- 136 380 516 === === === December 31, 2009 Units ----- Conversion New Total ---------- --- ----- Construction ------------ Comfort Inn 43 91 134 Comfort Suites - 181 181 Sleep Inn 1 122 123 --- --- --- Midscale without Food & Beverage 44 394 438 --- --- --- Quality 48 15 63 Clarion 19 6 25 --- --- --- Midscale with Food & Beverage 67 21 88 --- --- --- Econo Lodge 43 4 47 Rodeway 36 2 38 --- --- --- Economy 79 6 85 --- --- --- MainStay - 37 37 Suburban 2 30 32 --- --- --- Extended Stay 2 67 69 --- --- --- Ascend Collection 2 4 6 Cambria Suites - 41 41 --- --- --- 194 533 727 === === === Variance -------- Conversion New ---------- --- Construction ------------ Units % Units % ----- --- ----- --- Comfort Inn (13) (30%) (29) (32%) Comfort Suites 1 NM (59) (33%) Sleep Inn (1) (100%) (47) (39%) --- --- Midscale without Food & Beverage (13) (30%) (135) (34%) --- ----- ---- ----- Quality (15) (31%) (7) (47%) Clarion (1) (5%) (4) (67%) --- --- Midscale with Food & Beverage (16) (24%) (11) (52%) --- ----- --- ----- Econo Lodge (8) (19%) (2) (50%) Rodeway (24) (67%) - 0% --- --- Economy (32) (41%) (2) (33%) --- ----- --- ----- MainStay 1 NM 5 14% Suburban (2) (100%) (3) (10%) --- --- Extended Stay (1) (50%) 2 3% --- ----- --- --- Ascend Collection 4 200% - 0% Cambria Suites - NM (7) (17%) --- --- --- ----- (58) (30%) (153) (29%) === ===== ==== ===== Variance -------- Total ----- Units % ----- --- Comfort Inn (42) (31%) Comfort Suites (58) (32%) Sleep Inn (48) (39%) --- Midscale without Food & Beverage (148) (34%) ---- ----- Quality (22) (35%) Clarion (5) (20%) --- Midscale with Food & Beverage (27) (31%) --- ----- Econo Lodge (10) (21%) Rodeway (24) (63%) --- Economy (34) (40%) --- ----- MainStay 6 16% Suburban (5) (16%) --- Extended Stay 1 1% --- --- Ascend Collection 4 67% Cambria Suites (7) (17%) --- ----- (211) (29%) ==== ===== Exhibit 8 CHOICE HOTELS INTERNATIONAL, INC. SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION (UNAUDITED) CALCULATION OF FRANCHISING REVENUES AND ADJUSTED FRANCHISING MARGINS Three Months Ended (dollar amounts in thousands) December 31, ------------------- 2010 2009 ---- ---- Franchising Revenues: Total Revenues $155,006 $140,701 Adjustments: Marketing and reservation revenues (87,150) (77,576) Hotel operations (987) (909) Franchising Revenues $66,869 $62,216 ------- ------- Franchising Margins: Operating Margin: Total Revenues $155,006 $140,701 Operating Income $38,441 $34,083 Operating Margin 24.8% 24.2% ---- ---- Adjusted Franchising Margin: Franchising Revenues $66,869 $62,216 Operating Income $38,441 $34,083 Employee termination benefits 1,233 2,334 Curtailment loss related to the freezing of benefits under the Company's Supplemental Executive Retirement Plan - 1,209 Loss on sublease of office space - - Hotel operations (188) (134) $39,486 $37,492 ------- ------- Adjusted Franchising Margins 59.0% 60.3% ---- ---- CALCULATION OF FRANCHISING REVENUES AND ADJUSTED FRANCHISING MARGINS (dollar amounts in thousands) Year Ended December 31, ----------------------- 2010 2009 ---- ---- Franchising Revenues: Total Revenues $596,076 $564,178 Adjustments: Marketing and reservation revenues (329,246) (305,379) Hotel operations (4,031) (4,140) Franchising Revenues $262,799 $254,659 -------- -------- Franchising Margins: Operating Margin: Total Revenues $596,076 $564,178 Operating Income $160,762 $148,073 Operating Margin 27.0% 26.2% ---- ---- Adjusted Franchising Margin: Franchising Revenues $262,799 $254,659 Operating Income $160,762 $148,073 Employee termination benefits 1,730 4,604 Curtailment loss related to the freezing of benefits under the Company's Supplemental Executive Retirement Plan - 1,209 Loss on sublease of office space - 1,503 Hotel operations (845) (987) $161,647 $154,402 -------- -------- Adjusted Franchising Margins 61.5% 60.6% ---- ---- CALCULATION OF ADJUSTED SELLING, GENERAL AND ADMINISTRATIVE COSTS Three Months Ended (dollar amounts in thousands) December 31, ------------------ 2010 2009 ---- ---- Selling, general and administrative expense $26,744 $26,183 Employee termination benefits (1,233) (2,334) Curtailment loss related to the freezing of benefits under the Company's Supplemental Executive Retirement Plan - (1,209) Loss on sublease of office space - - Adjusted Selling, General and Administrative Expense $25,511 $22,640 ======= ======= (dollar amounts in thousands) Year Ended December 31, ----------------------- 2010 2009 ---- ---- Selling, general and administrative expense $94,540 $99,237 Employee termination benefits (1,730) (4,604) Curtailment loss related to the freezing of benefits under the Company's Supplemental Executive Retirement Plan - (1,209) Loss on sublease of office space - (1,503) Adjusted Selling, General and Administrative Expense $92,810 $91,921 ======= ======= CALCULATION OF ADJUSTED NET INCOME AND ADJUSTED DILUTED EARNINGS PER SHARE (EPS) (In thousands, except per share amounts) Three Months Ended December 31, ------------------------------- 2010 2009 ---- ---- Net Income $24,143 $23,631 Adjustments: Employee termination benefits 772 1,461 Curtailment loss related to the freezing of benefits under the Company's Supplemental Executive Retirement Plan - 757 Loss on sublease of office space - - --- --- Adjusted Net Income $24,915 $25,849 ------- ------- Weighted average shares outstanding-diluted 59,706 59,658 Diluted Earnings Per Share $0.40 $0.40 Adjustments: Employee termination benefits 0.02 0.02 Curtailment loss related to the freezing of benefits under the Company's Supplemental Executive Retirement Plan - 0.01 Loss on sublease of office space - - --- --- Adjusted Diluted Earnings Per Share (EPS) $0.42 $0.43 ----- ----- (In thousands, except per share amounts) Year Ended December 31, ----------------------- 2010 2009 ---- ---- Net Income $107,441 $98,250 Adjustments: Employee termination benefits 1,083 2,882 Curtailment loss related to the freezing of benefits under the Company's Supplemental Executive Retirement Plan - 757 Loss on sublease of office space - 941 --- --- Adjusted Net Income $108,524 $102,830 -------- -------- Weighted average shares outstanding- diluted 59,656 60,224 Diluted Earnings Per Share $1.80 $1.63 Adjustments: Employee termination benefits 0.02 0.05 Curtailment loss related to the freezing of benefits under the Company's Supplemental Executive Retirement Plan - 0.01 Loss on sublease of office space - 0.02 --- ---- Adjusted Diluted Earnings Per Share (EPS) $1.82 $1.71 ----- ----- Adjusted EBITDA Reconciliation (in millions) Q4 2010 Q4 2009 Actuals Actuals -------- -------- Operating Income (per GAAP) $38.4 $34.1 Employee termination benefits 1.2 2.3 Curtailment loss related to the freezing of benefits under the Company's Supplemental Executive Retirement Plan - 1.2 Loss on sublease of office space - - Depreciation and amortization 1.9 2.1 Adjusted Earnings before interest, taxes, depreciation & amortization (non-GAAP) $41.5 $39.7 ===== ===== Adjusted EBITDA Reconciliation (in millions) Year Ended Year Ended December 31, December ------------- ----------- 2010 Actuals 31, 2009 Actuals ------------ ---------------- Operating Income (per GAAP) $160.8 $148.1 Employee termination benefits 1.7 4.6 Curtailment loss related to the freezing of benefits under the Company's Supplemental Executive Retirement Plan - 1.2 Loss on sublease of office space - 1.5 Depreciation and amortization 8.3 8.3 Adjusted Earnings before interest, taxes, depreciation & amortization (non-GAAP) $170.8 $163.7 ====== ====== Adjusted EBITDA Reconciliation (in millions) Full-Year 2011 -------------- Outlook ------- Operating Income (per GAAP) $171-$174 Employee termination benefits - Curtailment loss related to the freezing of benefits under the Company's Supplemental Executive Retirement Plan - Loss on sublease of office space - Depreciation and amortization 9.0 Adjusted Earnings before interest, taxes, depreciation & amortization (non-GAAP) $180-$183 =========
Choice Hotels International, Inc.
CONTACT: David White, Senior Vice President, Chief Financial Officer &
Treasurer, +1-301-592-5117, or David Peikin, Senior Director, Corporate
Communications, +1-301-592-6361
Web Site: http://www.choicehotels.com/
