CHH
$54.15
Choice Hotels International
($1.47)
(2.64%)
Earnings Details
Quarter December 2019
Tuesday, February 18, 2020 8:12:00 AM
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Summary

Choice Hotels International Beats but Guides Lower

Choice Hotels International (CHH) reported Quarter December 2019 earnings of $0.92 per share on revenue of $268.1 million. The consensus earnings estimate was $0.84 per share on revenue of $257.8 million. The Earnings Whisper number was $0.89 per share. Revenue grew 9.4% on a year-over-year basis.

The company said it expects first quarter earnings of $0.80 to $0.84 per share and 2020 earnings of $4.22 to $4.33 per share. The current consensus earnings estimate is $0.81 per share for the quarter ending March 31, 2020 and $4.36 per share for the year ending December 31, 2020.

Choice Hotels International Inc and its subsidiaries, operates as hotel franchisors. The Company operates in two reportable segments encompassing its hotel franchising business and its SkyTouch Technology ("SkyTouch") division.

Results
Reported Earnings
$0.92
Earnings Whisper
$0.89
Consensus Estimate
$0.84
Reported Revenue
$268.1 Mil
Revenue Estimate
$257.8 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Choice Hotels International Exceeds Top End Of Full Year Guidance For EPS And Expands Domestic Upscale Room Portfolio By Over 40%

ROCKVILLE, Md., Feb. 18, 2020 /PRNewswire/ -- Choice Hotels International, Inc. (NYSE: CHH), one of the world's largest lodging franchisors, today reported its results for the three months and year ended December 31, 2019. Highlights include:

Choice Hotels International. (PRNewsFoto/Choice Hotels International) (PRNewsfoto/CHOICE HOTELS INTERNATIONAL)

  • Net income was $42.2 million for the fourth quarter 2019 and $222.9 million for the full year, representing diluted earnings per share (EPS) of $0.75 and $3.98, respectively.
  • Full year adjusted net income, excluding certain items described in Exhibit 6, increased 9% over the prior full year period to $242.0 million.
  • Full year adjusted EPS increased 11% over the prior full year period to $4.32, while fourth quarter adjusted EPS increased 5% over the prior year fourth quarter to $0.92.
  • The company exceeded the top end of its full year 2019 adjusted EPS guidance by $0.05 per share and the top end of its fourth quarter adjusted EPS guidance by $0.06 per share.
  • Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the full year were $364.9 million, a 7% increase from the same period of 2018, achieving the top end of the company's full year 2019 adjusted EBITDA guidance. Adjusted EBITDA for the fourth quarter were $81 million, a 6% increase from the fourth quarter 2018.
  • The company's domestic upscale, midscale, and extended stay segments reported a 3.1% aggregate increase in units and a 4.3% growth in rooms since December 31, 2018.

Additionally, during 2019, the company continued to strengthen its presence in the higher growth and more revenue intense upscale, midscale and extended stay chain scale segments. In particular, the company:

  • Achieved a record 11 Cambria hotels opened in key markets and grew the number of rooms by 28%; the brand reached a milestone of 50 open hotels with 27 additional hotels under active construction as of year end 2019.
  • Expanded the number of domestic rooms in its upscale brands, Cambria Hotels and the Ascend Hotel Collection, to over 29,000 for full year 2019, representing a 44% increase from the prior year and inclusive of 17 properties associated with the company's strategic partnership with AMResorts, an Apple Leisure Group brand known for its portfolio of luxury, all-inclusive resorts.
  • Surpassed 400 domestic hotels in its extended stay portfolio at year end 2019, a 10% increase since December 31, 2018. The company also increased its extended stay domestic pipeline by 13% to 315 hotels over the same period. The WoodSpring Suites brand continued its expansion, achieving over 8% growth in the number of domestic hotels open and a 23% increase in the domestic pipeline of hotels awaiting conversion, under construction, or approved for development. In January 2020, the company further strengthened its extended stay presence by introducing Everhome Suites, an all-new construction midscale brand in the extended stay segment, with multiple developers having already committed to build 13 Everhome Suites hotels.
  • Continued its leadership in the midscale segment by opening an average of more than one Comfort hotel per week in 2019, the highest number of Comfort openings in eight years. Comfort's domestic pipeline reached 290 hotels, approximately 80% of which are new construction. The brand's domestic franchise agreements awarded for the full year increased by 20% over the prior year and are expected to generate higher revenues throughout the life of contracts, compared to the domestic franchise agreements awarded in 2018.

"In 2019, Choice Hotels drove impressive results in the revenue-intense segments where we operate – upscale, extended stay, and midscale – with proven brands supported by a strong value proposition for our franchisees. Growth in these higher value segments, the continued expansion of our platform business through key partnerships, new technology, and other key franchisee resources have enabled us to drive our top-line revenue and deliver tangible, value-added solutions to our hotel owners and customers," said Patrick Pacious, president and chief executive officer, Choice Hotels. "Our results are a testament to the success of our long-term growth strategy to invest in brands built for the customer of tomorrow."

Additional details for the company's fourth quarter 2019 and full year results are as follows:

Revenues

  • Total revenues increased by 7% to $1.1 billion for full year 2019 and by 9% to $268.1 million for the fourth quarter from total revenues reported for the same periods of 2018.
  • Total revenues, excluding marketing and reservation system fees, grew 8% for the full year over the prior year to $537.4 million and increased 10% to $130.2 million for the fourth quarter over the prior year comparable period.
  • Full year domestic royalties totaled $366.6 million, a 3% increase from the same period of 2018 and reached $82.3 million for the fourth quarter, a 2.5% increase over the prior year comparable period.
  • Domestic systemwide revenue per available room (RevPAR) decreased 0.9% and 2.1% for full year and the fourth quarter 2019, respectively, compared to the same periods of the prior year. In the fourth quarter, Comfort hotels that completed renovations experienced the third consecutive quarter of RevPAR share gains versus their local competition.
  • The company's effective domestic royalty rate for the full year 2019 increased 11 basis points over the prior year to 4.86% and grew 10 basis points for the fourth quarter of 2019 over the prior year fourth quarter, the fourth consecutive year of double-digit basis-point growth.
  • Procurement services revenue grew 18% for the full year 2019 to $61.4 million and increased 9% in the fourth quarter of 2019 to $13.8 million, compared to the same periods of the prior year.

Development

  • The company awarded 307 domestic franchise agreements in the fourth quarter of 2019, a 7% increase compared to the same period of the prior year.
  • New domestic franchise agreements for the company's upscale brands totaled 94 for full year 2019, a 27% increase over 2018, 43 of which were awarded in the fourth quarter, a 30% increase over the same period of 2018. Additionally, the Ascend Hotel Collection executed 151 global contracts in 2019, the largest number in the brand's history.
  • The company's total domestic pipeline of hotels awaiting conversion, under construction, or approved for development, as of December 31, 2019, increased to over 1,050 hotels and nearly 85,000 rooms, representing the largest domestic pipeline in the company's history. Over 75% of the pipeline represents new construction projects.
  • The company's total international pipeline of hotels awaiting conversion, under construction, or approved for development totaled 83 as of December 31, 2019, a 48% increase from December 31, 2018.
  • International hotels and rooms as of December 31, 2019, increased 3.5% and 7.4%, respectively, from the comparable period of 2018.
  • The number of domestic hotels and rooms, as of December 31, 2019, increased 1.6% and 2.9%, respectively, from December 31, 2018.

Use of Cash Flows

Dividends
During full year 2019, the company paid cash dividends totaling approximately $48 million. During the fourth quarter of 2019, the company's board of directors announced a 5% increase to the annual dividend rate to $0.90 per common share outstanding. The company expects to pay dividends totaling approximately $50 million during 2020.

Stock Repurchases
During full year 2019, the company repurchased approximately 0.6 million shares of common stock for approximately $50.6 million under its stock repurchase program, as well as through repurchases from employees in connection with tax withholding and option exercises relating to awards under the company's equity incentive plans. As of December 31, 2019, the company had 3.9 million shares remaining under the current share repurchase authorization.

Hotel Development & Financing
The company has allocated up to $725 million to its program that encourages growth of the upscale Cambria Hotels brand. Investments under this program may include joint-venture investments, forgivable key-money loans, senior mortgage loans, development loans and mezzanine lending, as well as hotel development and ownership and the operation of a land-banking program. With respect to lending, hotel ownership and joint-venture investments, the company generally expects to recycle these investments within a five-year period.

As of December 31, 2019, the company had approximately $582 million reflected on its consolidated balance sheet pursuant to the Cambria Hotels financial support activities.

Outlook
The adjusted numbers in the company's outlook exclude the net surplus or deficit generated from the company's marketing and reservation system activities, as well as other items. See Exhibit 7 for the calculation of adjusted forecasted results and the reconciliation to the comparable GAAP measures.

  • Net income for full year 2020 is expected to range between $201 million and $208 million, or $3.57 to $3.69 per diluted share.
  • Adjusted diluted EPS for full year 2020 is expected to range between $4.22 to $4.33. The company's first quarter 2020 adjusted diluted EPS is expected to range between $0.80 to $0.84. The company expects full year 2020 adjusted net income to range between $237 million and $244 million.
  • Adjusted EBITDA for full year 2020 is expected to range between $378 million and $385 million.
  • The company's outlook for adjusted EBITDA and adjusted EPS is based on the current number of shares of common stock outstanding and, therefore, does not reflect any subsequent changes that may occur due to new equity grants or further repurchases of common stock under the company's stock repurchase program.
  • Net domestic unit growth for 2020 is expected to range between 1.5% and 2.5%.
  • Domestic RevPAR is expected to be between flat and a decline of 2% for the first quarter and full year 2020 versus the same periods of the prior year.
  • The company's domestic effective royalty rate is expected to increase between 4 and 8 basis points for full year 2020, as compared to full year 2019.
  • The recurring tax rate before discrete items is expected to be 22.5% for both the first quarter and full year 2020.

Conference Call
Choice Hotels International will conduct a conference call on Tuesday, February 18, 2020, at 10:00 a.m. Eastern Time to discuss the company's 2019 fourth quarter and full year earnings results. The dial-in number to listen to the call domestically is 1-888-349-0087 and the number for international participants is 1-412-317-5259. A live webcast will also be available on the company's investor relations website, http://investor.choicehotels.com/, and can be accessed via the Financial Performance and Presentations tab.

About Choice Hotels
Choice Hotels International, Inc. (NYSE: CHH) is one of the largest lodging franchisors in the world. With more than 7,000 hotels, representing over 590,000 rooms, in over 40 countries and territories as of December 31, 2019, the Choice® family of hotel brands provide business and leisure travelers with a range of high-quality lodging options from limited service to full-service hotels in the upscale, midscale, extended-stay and economy segments. The award-winning Choice Privileges® loyalty program offers members benefits ranging from everyday rewards to exceptional experiences. For more information, visit 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," "should," "will," "forecast," "plan," "project," "assume," or similar words of futurity identify such forward-looking statements. These forward-looking statements are based on management's current beliefs, assumptions, and expectations regarding future events, which, in turn, are based on information currently available to management. Such statements may relate to projections of the company's revenue, earnings, and other financial and operational measures, company debt levels, ability to repay outstanding indebtedness, payment of dividends, repurchases of common stock, and future operations, among other matters. We caution you not to place undue reliance on any such forward-looking statements. Forward-looking statements do not guarantee future performance and involve known and unknown risks, uncertainties, and other factors.

Several factors could cause actual results, performance, or achievements of the company to differ materially from those expressed in or contemplated by the forward-looking statements. Such risks include, but are not limited to, changes to general, domestic, and foreign economic conditions; foreign currency fluctuations; operating risks common in the lodging and franchising industries; impairments or losses relating to acquired businesses, changes to the desirability of our brands as viewed by hotel operators and customers; changes to the terms or termination of our contracts with franchisees; our ability to keep pace with improvements in technology utilized for marketing and reservations systems and other operating systems; our ability to grow our franchise system; exposure to risks related to our hotel-development, ownership and financing activities; fluctuations in the supply and demand for hotels rooms; our ability to realize anticipated benefits from acquired businesses; the level of acceptance of alternative growth strategies we may implement; operating risks associated with our international operations; the outcome of litigation; and our ability to manage our indebtedness. These and other risk factors are discussed in detail in the company's filings with the Securities and Exchange Commission, including our annual report on Form 10-K and our quarterly reports filed on Form 10-Q. Except as may be required by law, we undertake no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

Non-GAAP Financial Measurements
The company evaluates its operations utilizing the performance metrics of adjusted EBITDA, revenues excluding marketing and reservation system activities, adjusted SG&A, adjusted net income, and adjusted EPS, which are all non-GAAP financial measurements. These measures, which are reconciled to the comparable GAAP measures in Exhibit 6, should not be considered as an alternative to any measure of performance or liquidity as promulgated under or authorized by GAAP, such as net income, EPS, and total revenues. The company's calculation of these measurements may be different from the calculations used by other companies and comparability may therefore be limited.

We discuss management's reasons for reporting these non-GAAP measures and how each non-GAAP measure is calculated below.

In addition to the specific adjustments noted below with respect to each measure, the non-GAAP measures presented herein also exclude acquisition-related transition and transaction costs, restructuring of the company's international operations including employee severance benefit and legal costs, estimated one-time transition taxes on tax legislation enacted into law on December 22, 2017, debt-restructuring costs, federal tax credits related to the rehabilitation and re-use of historic buildings and gains and losses on sale and impairment of assets primarily related to the company's operations that provide Software as a Service ("SaaS") technology solutions to vacation-rental management companies and the sale of an equity stake in a joint venture to allow for period-over-period comparison of ongoing core operations before the impact of these discrete and infrequent charges.

Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization: Adjusted EBITDA reflects net income excluding the impact of interest expense, interest income, provision for income taxes, depreciation and amortization, franchise-agreement acquisition cost amortization, other (gains) and losses, equity in net income (loss) of unconsolidated affiliates, mark-to-market adjustments on non-qualified retirement plan investments, and surplus or deficits generated by marketing and reservation-system activities. We consider adjusted EBITDA to be an indicator of operating performance because it measures our ability to service debt, fund capital expenditures, and expand our business. We also use adjusted EBITDA, as do analysts, lenders, investors, and others, to evaluate companies because it excludes certain items that can vary widely across industries or among companies within the same industry. For example, interest expense can be dependent on a company's capital structure, debt levels, and credit ratings. Accordingly, the impact of interest expense on earnings can vary significantly among companies. The tax positions of companies can also vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the jurisdictions in which they operate. As a result, effective tax rates and provision for income taxes can vary considerably among companies. Adjusted EBITDA also excludes depreciation and amortization because companies utilize productive assets of different ages and use different methods of both acquiring and depreciating productive assets or amortizing franchise-agreement acquisition costs. These differences can result in considerable variability in the relative asset costs and estimated lives and, therefore, the depreciation and amortization expense among companies. Mark-to-market adjustments on non-qualified retirement-plan investments recorded in SG&A are excluded from EBITDA, as the company accounts for these investments in accordance with accounting for deferred-compensation arrangements when investments are held in a rabbi trust and invested. Changes in the fair value of the investments are recognized as both compensation expense in SG&A and other gains and losses. As a result, the changes in the fair value of the investments do not have a material impact on the company's net income. Surpluses and deficits generated from marketing and reservation activities are excluded, as the company's franchise agreements require the marketing and reservation-system revenues to be used exclusively for expenses associated with providing franchise services, such as central reservation and property-management systems, reservation delivery, and national marketing and media advertising. Franchisees are required to reimburse the company for any deficits generated from these marketing and reservation-system activities and the company is required to spend any surpluses generated in future periods. Since these activities will be managed to break-even over time, quarterly or annual surpluses and deficits have been excluded from the measurements utilized to assess the company's operating performance.

Adjusted Net Income and Adjusted Earnings Per Share: Adjusted net income and EPS exclude the impact of surpluses or deficits generated from marketing and reservation-system activities. Surpluses and deficits generated from marketing and reservation activities are excluded, as the company's franchise agreements require the marketing and reservation system revenues to be used exclusively for expenses associated with providing franchise services, such as central reservation and property-management systems, reservation delivery, and national marketing and media advertising. Franchisees are required to reimburse the company for any deficits generated from these marketing and reservation-system activities and the company is required to spend any surpluses generated in future periods. Since these activities will be managed to break-even over time, quarterly or annual surpluses and deficits have been excluded from the measurements utilized to assess the company's operating performance. We consider adjusted net income and adjusted EPS to be indicators of operating performance because excluding these items allow for period-over-period comparisons of our ongoing operations.

Revenues, Excluding Marketing and Reservation System Activities: The company reports revenues, excluding marketing and reservation-system activities. These non-GAAP measures we present are commonly used measures of performance in our industry and facilitate comparisons between the company and its competitors. Marketing and reservation-system activities are excluded, as the company's franchise agreements require the marketing and reservation-system revenues to be used exclusively for expenses associated with providing franchise services, such as central reservation and property-management systems, reservation delivery, and national marketing and media advertising. Franchisees are required to reimburse the company for any deficits generated from these marketing and reservation-system activities and the company is required to spend any surpluses generated in future periods. Since these activities will be managed to break-even over time, quarterly or annual surpluses and deficits have been excluded from the measurements utilized to assess the company's operating performance.

© 2020 Choice Hotels International, Inc. All rights reserved.

 

Choice Hotels International, Inc. and Subsidiaries














Exhibit 1

Condensed Consolidated Statements of Income
















(Unaudited)






































































Three Months Ended December 31,


Year Ended December 31,







Variance






Variance



2019


2018


$


%


2019


2018


$


%

(In thousands, except per share amounts)


































REVENUES


































Royalty fees


$              87,683


$              85,750


$     1,933


2%


$            388,151


$            376,676


$    11,475


3%

Initial franchise and relicensing fees


7,266


7,115


151


2%


27,489


26,072


1,417


5%

Procurement services


13,839


12,697


1,142


9%


61,429


52,088


9,341


18%

Marketing and reservation system


137,873


126,962


10,911


9%


577,426


543,677


33,749


6%

Owned hotels


11,572


-


11,572


NM


20,282


-


20,282


NM

Other


9,851


12,455


(2,604)


(21%)


40,043


42,791


(2,748)


(6%)

      Total revenues


268,084


244,979


23,105


9%


1,114,820


1,041,304


73,516


7%


















OPERATING EXPENSES


































Selling, general and administrative


44,031


44,702


(671)


(2%)


168,833


170,027


(1,194)


(1%)

Owned hotels


8,434


-


8,434


NM


14,448


-


14,448


NM

Depreciation and amortization


6,239


3,793


2,446


64%


18,828


14,330


4,498


31%

Marketing and reservation system


140,749


140,154


595


0%


579,139


534,266


44,873


8%

Total operating expenses


199,453


188,649


10,804


6%


781,248


718,623


62,625


9%


















Gain (loss) on sale & impairment of assets, net


4


(4,289)


4,293


(100%)


(14,930)


(4,207)


(10,723)


255%


















Operating income


68,635


52,041


16,594


32%


318,642


318,474


168


0%


















OTHER INCOME AND EXPENSES, NET

















Interest expense


12,072


11,188


884


8%


46,807


45,908


899


2%

Interest income


(2,379)


(2,234)


(145)


6%


(9,996)


(7,452)


(2,544)


34%

Other (gains) losses


(1,643)


2,792


(4,435)


(159%)


(4,862)


1,437


(6,299)


(438%)

Loss on extinguishment of debt


7,188


-


7,188


NM


7,188


-


7,188


NM

Equity in net (income) loss of affiliates


25


(35)


60


(171%)


9,576


5,323


4,253


80%

Total other income and expenses, net


15,263


11,711


3,552


30%


48,713


45,216


3,497


8%


















Income before income taxes


53,372


40,330


13,042


32%


269,929


273,258


(3,329)


(1%)

Income taxes


11,203


8,859


2,344


26%


47,051


56,903


(9,852)


(17%)

Net income 


$              42,169


$              31,471


$    10,698


34%


$            222,878


$            216,355


$     6,523


3%



































Basic earnings per share


$                  0.76


$                  0.56


$       0.20


36%


$                  4.00


$                  3.83


$       0.17


4%



































Diluted earnings per share


$                  0.75


$                  0.56


$       0.19


34%


$                  3.98


$                  3.80


$       0.18


5%

 

 

Choice Hotels International, Inc. and Subsidiaries



Exhibit 2

Condensed Consolidated Balance Sheets




(Unaudited)















(In thousands, except per share amounts)

 December 31, 


 December 31, 






2019


2018















ASSETS















Cash and cash equivalents



$              33,766


$            26,642

Accounts receivable, net



141,566


138,018

Other current assets



61,257


79,124


Total current assets



236,589


243,784









Property and equipment, net


351,502


127,535

Intangible assets, net



290,421


271,188

Goodwill




159,196


168,996

Notes receivable, net of allowances


103,054


83,440

Investments in unconsolidated entities

78,655


109,016

Operating lease right-of-use-asset


24,088


-

Investments, employee benefit plans, at fair value

24,978


19,398

Other assets




118,189


115,013











Total assets


$        1,386,672


$      1,138,370

























LIABILITIES AND SHAREHOLDERS' DEFICIT












Accounts payable 



$              73,449


$            73,511

Accrued expenses and other current liabilities

90,364


92,651

Deferred revenue



71,594


67,614

Liability for guest loyalty program


82,970


83,566

Current portion of long-term debt


7,511


1,097


Total current liabilities


325,888


318,439









Long-term debt



844,102


753,514

Deferred revenue



112,662


110,278

Liability for guest loyalty program


46,698


52,327

Operating lease liabilities



21,270


-

Deferred compensation & retirement plan obligations  

29,949


24,212

Other liabilities




29,614


63,372










Total liabilities



1,410,183


1,322,142










Total shareholders' deficit


(23,511)


(183,772)











Total liabilities and shareholders' deficit

$        1,386,672


$      1,138,370

 

 

Choice Hotels International, Inc. and Subsidiaries



Exhibit 3

Condensed Consolidated Statements of Cash Flows




(Unaudited)














(In thousands)

Year Ended December 31,






2019


2018

CASH FLOWS FROM OPERATING ACTIVITIES:








Net income

$                  222,878


$            216,355





Adjustments to reconcile net income to net cash provided




 by operating activities:




Depreciation and amortization  

18,828


14,330

Depreciation and amortization - marketing and reservation system 

17,294


19,597

Franchise agreement acquisition cost amortization

7,992


9,239

Impairment of goodwill and long-lived assets

15,030


4,289

Loss on extinguishment of debt

7,188


-

Gain on disposal of assets, net

(2,103)


(56)

Provision for bad debts, net

8,240


10,542

Non-cash stock compensation and other charges

17,615


15,986

Non-cash interest and other (income) loss

(4,010)


3,695

Deferred income taxes

9,810


(3,510)

Equity in net losses from unconsolidated joint ventures, less distributions received

12,562


7,389

Franchise agreement acquisition costs, net of reimbursements

(38,944)


(52,929)

Change in working capital & other, net of acquisition

(21,824)


(2,031)





 NET CASH PROVIDED BY OPERATING ACTIVITIES 

270,556


242,896





CASH FLOWS FROM INVESTING ACTIVITIES:








Investment in property and equipment

(57,342)


(47,673)

Investment in intangible assets

(6,699)


(1,803)

Business acquisition, net of cash acquired

-


(231,317)

Asset acquisitions, net of cash acquired

(168,954)


(3,179)

Proceeds from sales of assets

10,585


3,053

Proceeds from sale of unconsolidated joint venture

8,937


-

Payment on business disposition, net

(10,783)


-

Contributions to equity method investments

(27,828)


(9,604)

Distributions from equity method investments

10,241


1,429

Purchases of investments, employee benefit plans

(3,175)


(2,895)

Proceeds from sales of investments, employee benefit plans

2,217


2,825

Issuance of notes receivable

(20,722)


(36,045)

Collections of notes receivable

14,231


4,997

Other items, net

(1,875)


(1,040)





 NET CASH USED IN INVESTING ACTIVITIES 

(251,167)


(321,252)





CASH FLOWS FROM FINANCING ACTIVITIES:








Net borrowings (repayments) pursuant to revolving credit facilities

(72,400)


20,600

Proceeds from the issuance of long-term debt

422,376


9,037

Principal payments on long-term debt, including premium on extinguishment

(256,809)


(603)

Debt issuance costs

(3,936)


(2,590)

Purchase of treasury stock

(50,638)


(148,679)

Dividends paid

(48,089)


(48,715)

(Payments on) proceeds from transfer of interest in notes receivable

(24,409)


173

Proceeds from exercise of stock options

21,410


41,360





 NET CASH USED IN FINANCING ACTIVITIES

(12,495)


(129,417)





Net change in cash and cash equivalents

6,894


(207,773)

Effect of foreign exchange rate changes on cash and cash equivalents

230


(921)

Cash and cash equivalents at beginning of period

26,642


235,336





CASH AND CASH EQUIVALENTS AT END OF PERIOD

$                    33,766


$              26,642

 

 

CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES

Exhibit 4

SUPPLEMENTAL OPERATING INFORMATION 


DOMESTIC HOTEL SYSTEM(1)


(UNAUDITED)




























































































For the Year Ended December 31, 2019


For the Year Ended December 31, 2018


Change



























Average Daily






Average Daily






Average Daily










Rate


Occupancy


RevPAR


Rate


Occupancy


RevPAR


Rate


Occupancy


RevPAR

























Comfort(2)


$               95.56


66.4%


$            63.46


$             95.79


66.7%


$       63.93


(0.2%)


(30)

bps


(0.7%)



Sleep


84.19


64.5%


54.34


84.71


65.2%


55.20


(0.6%)


(70)

bps


(1.6%)



Quality


79.51


59.8%


47.57


80.15


60.1%


48.20


(0.8%)


(30)

bps


(1.3%)



Clarion(3)


84.64


57.2%


48.40


84.45


57.9%


48.90


0.2%


(70)

bps


(1.0%)



Econo Lodge


63.09


54.8%


34.54


63.44


54.7%


34.68


(0.6%)


10

bps


(0.4%)



Rodeway


63.28


55.5%


35.15


64.26


56.4%


36.21


(1.5%)


(90)

bps


(2.9%)



WoodSpring(4)


47.10


79.0%


37.19


45.92


80.1%


36.77


2.6%


(110)

bps


1.1%



MainStay


84.11


68.4%


57.53


83.08


69.7%


57.89


1.2%


(130)

bps


(0.6%)



Suburban


56.61


73.3%


41.51


55.81


75.5%


42.16


1.4%


(220)

bps


(1.5%)



Cambria Hotels


144.25


71.6%


103.30


146.71


71.5%


104.84


(1.7%)


10

bps


(1.5%)



Ascend Hotel Collection


126.54


57.5%


72.69


126.86


58.0%


73.62


(0.3%)


(50)

bps


(1.3%)



Total


$               81.42


62.9%


$            51.19


$             81.64


63.3%


$       51.65


(0.3%)


(40)

bps


(0.9%)



















































































































For the Three Months Ended December 31, 2019


For the Three Months Ended December 31, 2019


Change



























Average Daily






Average Daily






Average Daily










Rate


Occupancy


RevPAR


Rate


Occupancy


RevPAR


Rate


Occupancy


RevPAR

























Comfort(2)


$               90.38


61.4%


$            55.52


$             90.56


62.1%


$       56.24


(0.2%)


(70)

bps


(1.3%)



Sleep


80.20


58.7%


47.11


81.14


60.8%


49.35


(1.2%)


(210)

bps


(4.5%)



Quality


74.76


54.3%


40.56


75.70


55.5%


41.98


(1.2%)


(120)

bps


(3.4%)



Clarion(3)


78.40


52.4%


41.06


78.35


52.4%


41.02


0.1%


-

bps


0.1%



Econo Lodge


59.71


50.4%


30.08


60.79


50.6%


30.76


(1.8%)


(20)

bps


(2.2%)



Rodeway


59.98


50.9%


30.53


60.65


51.7%


31.33


(1.1%)


(80)

bps


(2.6%)



WoodSpring


46.34


74.7%


34.61


45.11


77.6%


35.00


2.7%


(290)

bps


(1.1%)



MainStay


79.40


62.6%


49.69


82.33


64.7%


53.30


(3.6%)


(210)

bps


(6.8%)



Suburban


52.94


67.9%


35.93


56.21


71.7%


40.29


(5.8%)


(380)

bps


(10.8%)



Cambria Hotels


145.50


66.1%


96.19


148.38


69.2%


102.61


(1.9%)


(310)

bps


(6.3%)



Ascend Hotel Collection


122.24


54.1%


66.12


119.78


56.2%


67.33


2.1%


(210)

bps


(1.8%)



Total


$               77.34


57.9%


$            44.77


$             77.67


58.9%


$       45.75


(0.4%)


(100)

bps


(2.1%)



























































































Effective Royalty Rate






































For the Quarter Ended


For the Year Ended
















12/31/2019


12/31/2018


12/31/2019


12/312018




































System-wide(2)


4.91%


4.81%


4.86%


4.75%


























































(1)Includes United States and Caribbean countries and territories



















(2)Includes Comfort family of brand extensions including Comfort and Comfort Suites


















(3)Includes Clarion family of brand extensions including Clarion and Clarion Pointe


















(4)WoodSpring was acquired on February 1, 2018, however, ADR, Occupancy, RevPAR and effective royalty rate reflect operating performance for the year ended December 31, 2018 








     as if the brand had been acquired on January 1, 2018




















 

 

CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES

Exhibit 5

SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA


(UNAUDITED)


























































December 31, 2019


December 31, 2018


Variance






















Hotels


Rooms


Hotels


Rooms


Hotels


Rooms


%


%




















Comfort(2)


1,616


127,000


1,627


127,282


(11)


(282)


(0.7%)


(0.2%)


Sleep


402


28,361


393


27,962


9


399


2.3%


1.4%


Quality


1,688


129,232


1,636


126,533


52


2,699


3.2%


2.1%


Clarion(3)


178


22,498


174


22,179


4


319


2.3%


1.4%


Econo Lodge


807


48,538


839


50,692


(32)


(2,154)


(3.8%)


(4.2%)


Rodeway


600


34,727


612


35,124


(12)


(397)


(2.0%)


(1.1%)


WoodSpring 


270


32,479


249


29,911


21


2,568


8.4%


8.6%


MainStay


73


4,636


63


4,268


10


368


15.9%


8.6%


Suburban


60


6,082


54


5,699


6


383


11.1%


6.7%


Cambria Hotels


50


7,277


40


5,685


10


1,592


25.0%


28.0%


Ascend Hotel Collection


211


22,143


176


14,693


35


7,450


19.9%


50.7%




















Domestic Franchises(1)


5,955


462,973


5,863


450,028


92


12,945


1.6%


2.9%




















International Franchises


1,198


127,924


1,158


119,080


40


8,844


3.5%


7.4%




















Total Franchises


7,153


590,897


7,021


569,108


132


21,789


1.9%


3.8%




























































































(1)Includes United States and Caribbean countries and territories
















(2)Includes Comfort family of brand extensions including Comfort and Comfort Suites














(3)Includes Clarion family of brand extensions including Clarion and Clarion Pointe














 

 


CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES





Exhibit 6


SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION







(UNAUDITED)




























REVENUES, EXCLUDING MARKETING AND RESERVATION ACTIVITIES





















(dollar amounts in thousands)


Three Months Ended December 31


Year Ended December 31
















2019


2018


2019


2018



Revenues, Excluding Marketing and Reservation Activities






















Total Revenues


$              268,084


$               244,979


$           1,114,820


$             1,041,304



Adjustments:











     Marketing and reservation system revenues


(137,873)


(126,962)


(577,426)


(543,677)



Revenues, excluding marketing and reservation activities


$              130,211


$               118,017


$              537,394


$               497,627



































ADJUSTED SELLING, GENERAL AND ADMINISTRATIVE EXPENSES





















(dollar amounts in thousands)


Three Months Ended December 31


Year Ended December 31
















2019


2018


2019


2018














Total Selling, General and Administrative Expenses


$                44,031


$                 44,702


$              168,833


$               170,027



Mark to market adjustments on non-qualified retirement plan investments


(1,646)


2,689


(4,798)


1,338



Impairment of notes receivable


-


(2,779)


-


(2,779)



Operational restructuring costs


(1,466)


-


(1,466)


-



Acquisition related transition and transaction costs


-


(1,334)


-


(6,864)



Adjusted Selling, General and Administrative Expenses


$                40,919


$                 43,278


$              162,569


$               161,722



































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

















(dollar amounts in thousands)













Three Months Ended December 31


Year Ended December 31
















2019


2018


2019


2018













Net income 


$                42,169


$                 31,471


$              222,878


$               216,355



Income taxes


11,203


8,859


47,051


56,903



Interest expense


12,072


11,188


46,807


45,908



Interest income


(2,379)


(2,234)


(9,996)


(7,452)



Other (gains) losses


(1,643)


2,792


(4,862)


1,437



Loss on extinguishment of debt


7,188


-


7,188


-



Equity in net (income) loss of affiliates


25


(35)


9,576


5,323



Depreciation and amortization


6,239


3,793


18,828


14,330



(Gain) loss on sale & impairment of assets, net


(4)


4,289


14,930


4,207



Impairment of notes receivable


-


2,779


-


2,779



Operational restructuring costs


1,466


-


1,466


-



Acquisition related transition and transaction costs


-


1,334


-


6,864



Marketing and reservation system reimbursable (surplus) deficit


2,876


13,192


1,713


(9,411)



Franchise agreement acquisition costs amortization


155


1,483


4,484


5,138



Mark to market adjustments on non-qualified retirement plan investments


1,646


(2,689)


4,798


(1,338)


Adjusted EBITDA


$                81,013


$                 76,222


$              364,861


$               341,043



































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



















(dollar amounts in thousands, except per share amounts)


Three Months Ended December 31


Year Ended December 31
















2019


2018


2019


2018













Net income 


$                42,169


$                 31,471


$              222,878


$               216,355


Adjustments:











Marketing and reservation system reimbursable (surplus) deficit


2,308


10,465


1,376


(7,482)



Loss on sale & impairment of assets, net


555


6,485


17,071


6,419



Owned hotels - rehabilitation and re-use of historic buildings federal tax credit


62


-


(5,973)


-



Operational restructuring costs


1,130


-


1,130


-



Debt restructuring costs


5,541


-


5,541


86



Transition costs on previously deferred foreign earnings and impact of tax
legislation on deferred tax balances


-


-


-


874



Acquisition related transition and transaction costs


-


993


-


5,224


Adjusted Net Income


$                51,765


$                 49,414


$              242,023


$               221,476
























Diluted Earnings Per Share


$                   0.75


$                     0.56


$                   3.98


$                     3.80


Adjustments:











Marketing and reservation system reimbursable (surplus) deficit


0.04


0.18


0.03


(0.13)



Loss on sale & impairment of assets, net


0.01


0.12


0.30


0.11



Owned hotels - rehabilitation and re-use of historic buildings federal tax credit


0.00


-


(0.11)


-



Operational restructuring costs


0.02


-


0.02


-



Debt restructuring costs


0.10


-


0.10


-



Transition costs on previously deferred foreign earnings and impact of tax
legislation on deferred tax balances


-


-


-


0.02



Acquisition related transition and transaction costs


-


0.02


-


0.09


Adjusted Diluted Earnings Per Share (EPS)


$                   0.92


$                     0.88


$                   4.32


$                     3.89


 

 

CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES

Exhibit 7

SUPPLEMENTAL INFORMATION - 2020 OUTLOOK


(UNAUDITED)


















Guidance represents the midpoint of the company's range of estimated outcomes for the year ended December 31, 2020


















ADJUSTED EBITDA FULL YEAR FORECAST







(dollar amounts in thousands)


Midpoint








2020 Guidance













Net income 


$           204,200






Income taxes


59,300






Interest expense


44,500






Interest income


(8,000)






Other (gains) losses


-






Depreciation and amortization


29,300






Franchise agreement acquisition costs amortization


7,000






Equity in net loss of affiliates


(1,400)






Marketing and reservation system reimbursable deficit


45,500






Operational restructuring costs


1,300






Mark to market adjustments on non-qualified retirement plan investments


-





Adjusted EBITDA


$           381,700





































ADJUSTED DILUTED EARNINGS PER SHARE (EPS) FULL YEAR FORECAST















(dollar amounts in thousands, except per share amounts)


























Midpoint








2020 Guidance













Net income 


$           204,200





Adjustments








Marketing and reservation system reimbursable deficit


35,263






Operational restructuring costs


1,008





Adjusted Net Income


$           240,471













Diluted Earnings Per Share 


$                3.63





Adjustments:








Marketing and reservation system reimbursable deficit


0.62






Operational restructuring costs


0.02





Adjusted Diluted Earnings Per Share (EPS)


$                4.27





 

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SOURCE Choice Hotels International, Inc.