CHH
$77.35
Choice Hotels International
$.20
.26%
Earnings Details
3rd Quarter September 2017
Monday, November 06, 2017 8:00:00 AM
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Summary

Choice Hotels Guides In-line for the Fourth Quarter

Choice Hotels International (CHH) reported 3rd Quarter September 2017 earnings of $0.95 per share on revenue of $295.1 million. The consensus earnings estimate was $0.92 per share on revenue of $290.1 million. Revenue grew 10.3% on a year-over-year basis.

The company said it expects fourth quarter earnings of $0.60 to $0.62 per share. The current consensus earnings estimate is $0.62 per share for the quarter ending December 31, 2017.

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
$0.95
Earnings Whisper
-
Consensus Estimate
$0.92
Reported Revenue
$295.1 Mil
Revenue Estimate
$290.1 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Choice Hotels International Reports Third Quarter Financial Results

Choice Hotels International, Inc. (CHH), one of the world’s largest hotel companies, today reported its results for the three months ended September 30, 2017. Net income for the 2017 third quarter was $47.6 million, or $0.84 per diluted share, compared to $47.6 million or $0.84 per diluted share for the 2016 third quarter. Third quarter adjusted diluted earnings per share (EPS) was $0.95, a 13 percent increase from the 2016 third quarter. Third quarter adjusted earnings before income taxes, depreciation and amortization (EBITDA) was $92.5 million, compared to $82.0 million in the prior-year third quarter, a 13 percent increase from the 2016 third quarter.

https://mma.prnewswire.com/media/596742/Choice_Hotels_International_Chain_Logo.jpg

"Choice Hotels is uniquely positioned in the industry as a company at the intersection of hospitality, franchising and technology. Our strong brands, focus on the guest experience and franchisee profitability, and industry-leading technology solutions and tools continue to drive positive results," said Patrick Pacious, president and chief executive officer, Choice Hotels. "In the third quarter, our impressive performance was highlighted by a 13 percent increase in adjusted diluted earnings per share and a nearly 3 percent increase in our domestic unit growth."

Highlights of the company’s third quarter 2017 results are as follows:

Overall Results

Adjusted diluted EPS for the third quarter was $0.95, a 13 percent increase from the third quarter of the prior year.

Adjusted EBITDA totaled $92.5 million for the third quarter, a 13 percent increase from the third quarter of the prior year.

Adjusted EBITDA from hotel franchising activities for the third quarter increased 9 percent from the third quarter of the prior year to $94.0 million.

Total revenues and hotel franchising revenues for the third quarter both increased 10 percent from the third quarter of the prior year.

Royalties

Domestic royalty fees for the third quarter totaled $98.3 million, an 8.4 percent increase from the third quarter of the prior year.

Domestic system-wide revenue per available room (RevPAR) increased 2.1 percent for the third quarter compared to the third quarter of the prior year. Occupancy and average daily rates increased 70 basis points and 1.2 percent, respectively, in the third quarter compared to the same period of 2016.

Effective royalty rate increased 19 basis points for the third quarter of 2017, compared to the third quarter of the prior year.

Domestic franchised hotels, as of September 30, 2017, increased 2.8 percent from September 30, 2016.

Quality Inn surpassed 1,500 open domestic hotels during the third quarter, and the number of domestic hotels under this brand increased over 7 percent from September 30, 2016.

Domestic and international rooms, as of September 30, 2017, increased 2.1 percent and 2.3 percent, respectively, from September 30, 2016.

Development

New, executed domestic franchised hotel development contracts totaled 133 in the third quarter. Executed domestic franchised hotel development for the nine months ended September 30, 2017, totaled 415, a 10 percent increase from the same period of the prior year.

The company executed 24 new domestic franchise agreements during the third quarter for its upscale brands, Cambria Hotels and the Ascend Hotel Collection, a 71 percent increase from the same period of the prior year. The domestic pipeline for the company’s upscale brands now exceeds 135 hotels.

Domestic relicensing and contract renewal transactions totaled 121 for the three months ended September 30, 2017, a 6 percent increase from the same period of 2016.

The company’s total domestic pipeline of hotels awaiting conversion, under construction or approved for development, as of September 30, 2017, increased 16 percent to 751 hotels from September 30, 2016.

The new construction domestic pipeline totaled 530 hotels at September 30, 2017, a 26 percent increase from September 30, 2016.

Use of Cash Flows

Dividends During the nine months ended September 30, 2017, the company paid cash dividends totaling approximately $36 million. Based on the current quarterly dividend rate of $0.215 per common share, the company expects to pay dividends of approximately $49 million during 2017.

Share Repurchases During the nine months ended September 30, 2017, the company repurchased $9 million of common stock under its share repurchase program as well as repurchases from employees in connection with tax withholding and option exercises relating to awards under the company’s equity incentive plans. The company currently has authorization to purchase up to 4.0 million additional shares under its share repurchase program.

Hotel Development & Financing Pursuant to its program to encourage acceleration of the growth of the upscale Cambria Hotels brand, the company advanced approximately $75 million in support of the brand’s development during the nine months ended September 30, 2017. The company also recycled approximately $29 million of prior investments in Cambria Hotels development projects, resulting in net advances of $46 million for the current year. Advances under this program are primarily in the form of joint venture investments, forgivable key money loans, senior mortgage loans, development loans, mezzanine lending, and through the operation of a land-banking program. On September 30, 2017, the company had approximately $244 million reflected in its consolidated balance sheet pursuant to these financial support activities. With respect to lending and joint venture investments, the company generally expects to recycle these loans and investments within a five-year period.

Special Items

During the three and nine months ended September 30, 2017, the company accelerated certain compensation expenses totaling $12.0 million in conjunction with the company’s chief executive officer succession plan. In addition, the company recognized an impairment on a below market lease intangible recorded in conjunction with the company’s acquisition of an office building leased to a third-party in 2014. The impairment of this below market lease intangible resulted in a reduction to the company’s selling, general and administrative expenses totaling $1.2 million during the three and nine months ended September 30, 2017. These special items impacted diluted EPS by $0.11 per share for the three and nine months ended September 30, 2017.

During the nine months ended September 30, 2016, the company recorded an executive termination benefit charge of approximately $2.2 million. This special item impacted diluted EPS by $0.02 per share for the nine months ended September 30, 2016.

The company evaluates the non-GAAP measures presented herein that exclude executive termination benefits, impairment of below market lease costs and acceleration of the company’s executive succession plan because those non-GAAP measures allow for period-over-period comparison of ongoing core operations before the impact of these charges. These non-GAAP measures, which are reconciled to the comparable GAAP measures in Exhibit 6, include adjusted net income, adjusted diluted EPS, adjusted hotel franchising selling, general and administrative expenses, adjusted EBITDA, adjusted hotel franchising EBITDA and adjusted hotel franchising margins.

Outlook

The company’s consolidated 2017 outlook reflects the following assumptions:

Consolidated Outlook

Adjusted EBITDA for full-year 2017 is expected to range between $294 million and $298 million.

The company’s fourth-quarter 2017 adjusted diluted EPS is expected to range between $0.60 and $0.62.

The company expects full-year 2017 adjusted diluted EPS to range between $2.84 and $2.88.

The effective tax rate is expected to be approximately 33 percent for the fourth quarter and 32 percent for full-year 2017.

All estimates for 2017 exclude costs associated with the company’s executive succession plan and impairment of lease acquisition costs.

Adjusted diluted EPS estimates are based on the current number of shares outstanding, and thus do not factor in any changes that may occur due to new equity grants or any further repurchases of common stock under the company’s share repurchase program.

The adjusted diluted EPS and consolidated adjusted EBITDA estimates assume that the company incurs net reductions in adjusted EBITDA related to non-hotel franchising activities at the midpoint of the range for these investments.

Hotel Franchising

Adjusted EBITDA from hotel franchising activities for full-year 2017 is expected to range between $301 million and $305 million.

Net domestic unit growth for 2017 is expected to range between approximately 2.5 percent and 3 percent.

RevPAR is expected to increase between 1 percent and 3 percent for the fourth quarter and range between 2 percent and 3 percent for full-year 2017.

The effective royalty rate is expected to increase between 17 and 19 basis points for full-year 2017 as compared to full-year 2016.

Non-Hotel Franchising Activities

Net reductions in full-year 2017 adjusted EBITDA, relating to the company’s non-hotel franchising operations are expected to be approximately $7 million.

Conference Call Choice will conduct a conference call on Monday, November 6, 2017, at 10:00 a.m. ET to discuss the company’s 2017 third quarter results. The dial-in number to listen to the call domestically is 1-855-638-5678 and the number for international participants is 1-920-663-6286. The conference call will be webcast simultaneously via the company’s website, www.choicehotels.com. Interested investors and other parties wishing to access the call via the webcast should go to the website and click on the Investor Info link. The Investor page will feature a conference call microphone icon to access the call.

The call will be recorded and available for replay beginning at 1:00 p.m. ET on Monday, November 6, 2017, by calling 1-855-859-2056 (domestic) or 1-404-537-3406 (international) and entering access code 88756097. In addition, the call will be archived and available on choicehotels.com via the Investor Info link.

About Choice Hotels Choice Hotels International, Inc. (CHH) is one of the world’s largest hotel companies. With over 6,500 hotels franchised in more than 40 countries and territories, Choice Hotels International represents more than 500,000 rooms around the globe. As of September 30, 2017, over 800 hotels were in our development pipeline. Our company’s Ascend Hotel Collection?, Cambria? Hotels, Comfort Inn?, Comfort Suites?, Sleep Inn?, Quality?, Clarion?, MainStay Suites?, Suburban Extended Stay Hotel?, Econo Lodge?, Rodeway Inn?, and Vacation Rentals by Choice Hotels(TM) brands provide a spectrum of lodging choices to meet guests’ needs. With more than 33 million members, our Choice Privileges? rewards program enhances every trip a guest takes, with benefits ranging from instant, every day rewards to exceptional experiences, starting right when they join. All hotels and vacation rentals are independently owned and operated. Visit us at www.choicehotels.com for more information.

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

Several factors could cause actual results, performance or achievements of the company to differ materially from those expressed in or contemplated by the forward-looking statements. Such risks include, but are not limited to, changes to general, domestic and foreign economic conditions; foreign currency fluctuations; operating risks common in the lodging and franchising industries; changes to the desirability of our brands as viewed by hotel operators and customers; changes to the terms or termination of our contracts with franchisees; our ability to keep pace with improvements in technology utilized for marketing and reservations systems and other operating systems; our ability to grow our franchise system; exposure to risks related to our hotel development 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 for 2016 and our quarterly reports filed on Form 10-Q. Except as may be required by law, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Statement Concerning Non-GAAP Financial Measurements Presented in this Press Release Adjusted EBITDA, hotel franchising revenues, adjusted hotel franchising SG&A, Adjusted EBITDA from hotel franchising activities, adjusted hotel franchising margins and adjusted diluted EPS are non-GAAP financial measurements. These measures should not be considered as an alternative to any measure of performance or liquidity as promulgated under or authorized by generally accepted accounting principles in the United States ("GAAP"), such as net income, total revenues and operating margins. The company’s calculation of these measurements may be different from the calculations used by other companies and therefore comparability may be limited. The company has included an exhibit accompanying this release that reconciles these items to the most comparable GAAP financial measures. We discuss management’s reasons for reporting these non-GAAP measures below.

Adjusted Net Income and Adjusted Diluted Earnings Per Share: Adjusted net income and diluted EPS excludes the impact of executive termination benefits, impairment of lease acquisition costs and the acceleration of the company’s executive succession plan. We exclude these items because they occur infrequently and can vary considerably from period to period without reference to the company’s operating performance. We consider adjusted net income and diluted EPS to be an indicator of operating performance because excluding these items allows for period-over period comparisons of our ongoing operations.

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization: Adjusted EBITDA reflects net income excluding the impact of interest expense, interest income, provision for income taxes, depreciation and amortization, other (gains) and losses, equity in net income of unconsolidated affiliates, mark to market adjustments on non-qualified retirement plan investments, executive termination benefits, impairment of lease acquisition costs and acceleration of the company’s executive succession plan. We consider adjusted EBITDA to be an indicator of operating performance because we use it to measure our ability to service debt, fund capital expenditures, and expand our business. We also use adjusted EBITDA, as do analysts, lenders, investors and others, to evaluate companies because it excludes certain items that can vary widely across different industries or among companies within the same industry. For example, interest expense can be dependent on a company’s capital structure, debt levels and credit ratings. Accordingly, the impact of interest expense on earnings can vary significantly among companies. The tax positions of companies can also vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the jurisdictions in which they operate. As a result, effective tax rates and provision for income taxes can vary considerably among companies. Adjusted EBITDA also excludes depreciation and amortization because companies utilize productive assets of different ages and use different methods of both acquiring and depreciating productive assets. These differences can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies. 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. These amounts are excluded from EBITDA as they can vary widely across reporting periods based on the performance of the investments and are not an indicator of the operating performance of the company.

Hotel Franchising Revenues, Adjusted Hotel Franchising EBITDA, Adjusted Hotel Franchising SG&A and Margins: The company reports hotel franchising revenues, adjusted hotel franchising EBITDA, adjusted franchising hotel SG&A and margins which exclude marketing and reservation system revenues; the SkyTouch Technology division; vacation rental activities including operations that provide Software as a Service ("SaaS") technology solutions to vacation rental management companies; and revenue generated from the ownership of an office building that is leased to a third-party. These non-GAAP measures are a commonly used measure of performance in our industry and facilitate comparisons between the company and its competitors. Marketing and reservation system activities are excluded from these measures since the company is required by its franchise agreements to use the fees collected for marketing and reservation activities; as such, no income or loss to the company is generated. Cumulative marketing and reservation system fees not expended are recorded as a liability in the company’s financial statements and are carried over to the next year and expended in accordance with the franchise agreements. Cumulative marketing and reservation expenditures in excess of fees collected for marketing and reservation activities are deferred and recorded as an asset in the company’s financial statements and recovered in future periods. SkyTouch Technology is a division of the company that develops and markets cloud-based technology products, including inventory management, pricing and connectivity to third party channels, to hoteliers not under franchise agreements with the company. The operations for SkyTouch Technology and our vacation rental activities are excluded since they do not reflect the company’s core franchising business but are adjacent, complementary lines of business.

? 2017 Choice Hotels International, Inc. All rights reserved.

Choice Hotels International, Inc. and Subsidiaries
Exhibit 1
Consolidated Statements of Income
(Unaudited)
Three Months Ended September 30,
Nine Months Ended September 30,
Variance
Variance
2017
2016
$
%
2017
2016
$
%
(In thousands, except per share amounts)
REVENUES:
Royalty fees
$
104,252
$
96,114
$
8,138
8%
$
265,727
$
247,168
$
18,559
8%
Initial franchise and relicensing fees
6,403
6,284
119
2%
18,390
17,146
1,244
7%
Procurement services
8,103
7,615
488
6%
25,647
23,719
1,928
8%
Marketing and reservation system
167,763
152,018
15,745
10%
435,273
412,193
23,080
6%
Other
8,567
5,546
3,021
54%
24,748
16,220
8,528
53%
Total revenues
295,088
267,577
27,511
10%
769,785
716,446
53,339
7%
OPERATING EXPENSES:
Selling, general and administrative
46,364
34,357
12,007
35%
117,418
109,515
7,903
7%
Depreciation and amortization
3,095
2,986
109
4%
9,215
8,707
508
6%
Marketing and reservation system
167,763
152,018
15,745
10%
435,273
412,193
23,080
6%
Total operating expenses
217,222
189,361
27,861
15%
561,906
530,415
31,491
6%
Gain (loss) on sale of assets, net
(32)
402
(434)
(108%)
(32)
402
(434)
(108%)
Operating income
77,834
78,618
(784)
(1%)
207,847
186,433
21,414
11%
OTHER INCOME AND EXPENSES, NET:
Interest expense
11,399
11,150
249
2%
33,884
33,466
418
1%
Interest income
(1,575)
(836)
(739)
88%
(4,277)
(2,502)
(1,775)
71%
Other gains
(778)
(746)
(32)
4%
(2,251)
(1,005)
(1,246)
124%
Equity in net (income) loss of affiliates
274
(1,150)
1,424
(124%)
3,213
286
2,927
1023%
Total other income and expenses, net
9,320
8,418
902
11%
30,569
30,245
324
1%
Income before income taxes
68,514
70,200
(1,686)
(2%)
177,278
156,188
21,090
14%
Income taxes
20,919
22,635
(1,716)
(8%)
55,944
48,638
7,306
15%
Net income
$
47,595
$
47,565
$
30
0%
$
121,334
$
107,550
$
13,784
13%
Basic earnings per share
$
0.84
$
0.85
$
(0.01)
(1%)
$
2.15
$
1.91
$
0.24
13%
Diluted earnings per share
$
0.84
$
0.84
$
-
0%
$
2.14
$
1.90
$
0.24
13%
Choice Hotels International, Inc. and Subsidiaries
Exhibit 2
Consolidated Balance Sheets
(In thousands, except per share amounts)
September 30,
December 31,
2017
2016
(Unaudited)
ASSETS
Cash and cash equivalents
$
238,848
$
202,463
Accounts receivable, net
151,672
107,336
Other current assets
64,803
35,074
Total current assets
455,323
344,873
Fixed assets and intangibles, net
178,879
178,704
Notes receivable, net of allowances
139,803
110,608
Investments in unconsolidated entities
131,128
94,839
Investments, employee benefit plans, at fair value
19,749
16,975
Other assets
36,310
106,469
Total assets
$
961,192
$
852,468
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Accounts payable
$
68,261
$
48,071
Accrued expenses and other current liabilities
66,515
81,184
Deferred revenue
136,956
133,218
Current portion of long-term debt
1,302
1,195
Total current liabilities
273,034
263,668
Long-term debt
800,001
839,409
Deferred compensation & retirement plan obligations
24,355
21,595
Other liabilities
64,182
39,145
Total liabilities
1,161,572
1,163,817
Total shareholders’ deficit
(200,380)
(311,349)
Total liabilities and shareholders’ deficit $
961,192
$
852,468
Choice Hotels International, Inc. and Subsidiaries
Exhibit 3
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Nine Months Ended September 30,
2017
2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
$
121,334
$
107,550
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization
9,215
8,707
Loss (gain) on disposal of assets
32
(377)
Provision for bad debts, net
1,796
1,093
Non-cash stock compensation and other charges
20,369
11,037
Non-cash interest and other (income) loss
(451)
807
Deferred income taxes
44,777
(4,329)
Equity in net losses from unconsolidated joint ventures less distributions received 4,278
1,654
Changes in assets and liabilities, net of acquisition:
Receivables
(47,520)
(42,426)
Advances to/from marketing and reservation activities, net
43,697
(25,783)
Forgivable notes receivable, net
(21,443)
(15,109)
Accounts payable
19,679
(3,532)
Accrued expenses and other current liabilities
(11,540)
(14,261)
Income taxes payable/receivable
(20,114)
21,368
Deferred revenue
3,650
49,976
Other assets
(1,162)
(9,958)
Other liabilities
(1,578)
1,992
NET CASH PROVIDED BY OPERATING ACTIVITIES
165,019
88,409
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in property and equipment
(17,514)
(17,584)
Investment in intangible assets
(2,376)
(482)
Contributions to equity method investments
(44,876)
(24,179)
Distributions from equity method investments
4,307
3,700
Purchases of investments, employee benefit plans
(2,140)
(1,430)
Proceeds from sales of investments, employee benefit plans
2,150
1,395
Issuance of mezzanine and other notes receivable
(18,565)
(20,281)
Collections of mezzanine and other notes receivable
630
11,040
Proceeds from sales of assets
-
8,360
Acquisitions of real estate
-
(25,263)
Business acquisition, net of cash acquired
-
(1,341)
Other items, net
109
60
NET CASH USED IN INVESTING ACTIVITIES
(78,275)
(66,005)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings pursuant to revolving credit facilities
(39,974)
52,814
Principal payments on long-term debt
(484)
(836)
Debt issuance costs
-
(284)
Purchases of treasury stock
(8,887)
(33,958)
Dividends paid
(36,483)
(34,690)
Proceeds from transfer of interest in notes receivable
24,237
-
Proceeds from exercise of stock options
9,799
6,802
NET CASH USED BY FINANCING ACTIVITIES
(51,792)
(10,152)
Net change in cash and cash equivalents
34,952
12,252
Effect of foreign exchange rate changes on cash and cash equivalents
1,433
260
Cash and cash equivalents at beginning of period
202,463
193,441
CASH AND CASH EQUIVALENTS AT END OF PERIOD
$
238,848
$
205,953
Exhibit 4
CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL OPERATING INFORMATION
DOMESTIC HOTEL SYSTEM
(UNAUDITED)
For the Nine Months Ended September 30, 2017
For the Nine Months Ended September 30, 2016
Change
Average Daily
Average Daily
Average Daily
Rate
Occupancy
RevPAR
Rate
Occupancy
RevPAR
Rate
Occupancy
RevPAR
Comfort Inn
$
95.42
67.8%
$
64.70
$
93.78
67.2%
$
63.00
1.7%
60
bps
2.7%
Comfort Suites
98.05
71.4%
70.01
97.44
70.8%
69.01
0.6%
60
bps
1.4%
Sleep
83.93
67.1%
56.34
83.09
66.4%
55.14
1.0%
70
bps
2.2%
Quality
80.46
61.5%
49.50
78.97
60.8%
48.00
1.9%
70
bps
3.1%
Clarion
85.09
61.7%
52.53
83.67
59.7%
49.95
1.7%
200
bps
5.2%
Econo Lodge
63.71
56.1%
35.74
62.33
55.3%
34.47
2.2%
80
bps
3.7%
Rodeway
65.73
57.9%
38.04
64.14
57.3%
36.74
2.5%
60
bps
3.5%
MainStay
76.65
69.7%
53.42
77.34
66.2%
51.18
(0.9%)
350
bps
4.4%
Suburban
51.99
77.1%
40.10
50.15
76.0%
38.11
3.7%
110
bps
5.2%
Cambria hotel & suites
136.93
75.1%
102.83
NA
NA
NA
NA
NA
NA
Ascend Hotel Collection
128.86
56.6%
72.87
130.34
59.0%
76.95
(1.1%)
(240) bps
(5.3%)
Total
(1)
$
84.98
63.9%
$
54.28
$
83.71
63.2%
$
52.91
1.5%
70
bps
2.6%
For the Three Months Ended September 30, 2017
For the Three Months Ended September 30, 2016
Change
Average Daily
Average Daily
Average Daily
Rate
Occupancy
RevPAR
Rate
Occupancy
RevPAR
Rate
Occupancy
RevPAR
Comfort Inn
$
101.25
73.9%
$
74.82
$
100.02
73.4%
$
73.41
1.2%
50
bps
1.9%
Comfort Suites
101.43
75.5%
76.55
100.95
74.6%
75.35
0.5%
90
bps
1.6%
Sleep
86.85
71.3%
61.88
86.59
70.6%
61.15
0.3%
70
bps
1.2%
Quality
85.44
67.2%
57.43
84.31
66.4%
55.96
1.3%
80
bps
2.6%
Clarion
89.83
67.3%
60.46
88.98
66.4%
59.08
1.0%
90
bps
2.3%
Econo Lodge
68.87
61.7%
42.51
67.44
60.9%
41.08
2.1%
80
bps
3.5%
Rodeway
70.78
63.0%
44.56
69.72
62.3%
43.45
1.5%
70
bps
2.6%
MainStay
80.42
74.8%
60.17
79.91
71.5%
57.13
0.6%
330
bps
5.3%
Suburban
52.46
78.9%
41.39
51.09
78.2%
39.96
2.7%
70
bps
3.6%
Cambria hotel & suites
142.84
79.1%
112.95
NA
NA
NA
NA
NA
NA
Ascend Hotel Collection
137.02
60.9%
83.40
138.97
63.0%
87.50
(1.4%)
(210) bps
(4.7%)
Total
(1)
$
89.78
69.2%
$
62.08
$
88.74
68.5%
$
60.81
1.2%
70
bps
2.1%
For the Quarter Ended
For the Nine Months Ended
9/30/2017
9/30/2016
9/30/2017
9/30/2016
System-wide effective royalty rate
4.58%
4.39%
(1)
4.57%
4.39%
(1)
(1)Totals for the three and nine months ended September 30, 2016 have been revised from previous disclosures to include the operating statistics for the Cambria hotel & suites brand
Exhibit 5
CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA
(UNAUDITED)
September 30, 2017
September 30, 2016
Variance
Hotels
Rooms
Hotels
Rooms
Hotels
Rooms
%
%
Comfort Inn
1,083
84,427
1,126
87,346
(43)
(2,919)
(3.8%)
(3.3%)
Comfort Suites
566
43,857
565
43,610
1
247
0.2%
0.6%
Sleep
382
27,365
378
27,035
4
330
1.1%
1.2%
Quality
1,509
117,948
1,407
111,564
102
6,384
7.2%
5.7%
Clarion
160
21,267
164
22,456
(4)
(1,189)
(2.4%)
(5.3%)
Econo Lodge
839
51,322
853
52,773
(14)
(1,451)
(1.6%)
(2.7%)
Rodeway
595
34,331
526
30,058
69
4,273
13.1%
14.2%
MainStay
57
4,135
54
4,020
3
115
5.6%
2.9%
Suburban
59
6,578
58
6,471
1
107
1.7%
1.7%
Cambria hotel & suites
31
4,160
25
3,113
6
1,047
24.0%
33.6%
Ascend Hotel Collection
140
11,062
119
9,761
21
1,301
17.6%
13.3%
Domestic Franchises
5,421
406,452
5,275
398,207
146
8,245
2.8%
2.1%
International Franchises
1,136
113,542
1,144
110,945
(8)
2,597
(0.7%)
2.3%
Total Franchises
6,557
519,994
6,419
509,152
138
10,842
2.1%
2.1%
Exhibit 6
CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION
(UNAUDITED)
HOTEL FRANCHISING REVENUES AND ADJUSTED HOTEL FRANCHISING MARGINS
(dollar amounts in thousands)
Three Months Ended September 30,
Nine Months Ended September 30,
2017
2016
2017
2016
Hotel Franchising Revenues:
Total Revenues
$
295,088
$
267,577
$
769,785
$
716,446
Adjustments:
Marketing and reservation system revenues
(167,763)
(152,018)
(435,273)
(412,193)
Non-hotel franchising activities
(2,859)
(2,424)
(7,971)
(6,521)
Hotel Franchising Revenues
$
124,466
$
113,135
$
326,541
$
297,732
Adjusted Hotel Franchising Margins:
Operating Margin:
Total Revenues
$
295,088
$
267,577
$
769,785
$
716,446
Operating Income
$
77,834
$
78,618
$
207,847
$
186,433
Operating Margin
26.4%
29.4%
27.0%
26.0%
Adjusted Hotel Franchising Margin:
Hotel Franchising Revenues
$
124,466
$
113,135
$
326,541
$
297,732
Operating Income
$
77,834
$
78,618
$
207,847
$
186,433
Mark to market adjustments on non-qualified retirement plan investments 773
748
2,214
1,003
Executive termination benefits
-
-
-
2,206
Acceleration of executive succession plan
11,964
-
11,964
-
Impairment of lease acquisition costs, net
(1,185)
-
(1,185)
-
Non-hotel franchising activities operating loss
2,414
5,400
8,320
17,140
Adjusted Hotel Franchising Operating Income
$
91,800
$
84,766
$
229,160
$
206,782
Adjusted Hotel Franchising Margins
73.8%
74.9%
70.2%
69.5%
ADJUSTED HOTEL FRANCHISING SELLING, GENERAL AND ADMINISTRATION EXPENSES
(dollar amounts in thousands)
Three Months Ended September 30,
Nine Months Ended September 30,
2017
2016
2017
2016
Total Selling, General and Administrative Expenses
$
46,364
$
34,357
$
117,418
$
109,515
Mark to market adjustments on non-qualified retirement plan investments (773)
(748)
(2,214)
(1,003)
Executive termination benefits
-
-
-
(2,206)
Acceleration of executive succession plan
(11,964)
-
(11,964)
-
Impairment of lease acquisition costs, net
1,185
-
1,185
-
Non-hotel franchising activities
(4,387)
(6,723)
(13,482)
(20,438)
Adjusted Hotel Franchising Selling, General and Administration Expenses $
30,425
$
26,886
$
90,943
$
85,868
ADJUSTED EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION ("EBITDA")
(dollar amounts in thousands)
Three Months Ended September 30,
Nine Months Ended September 30,
2017
2016
2017
2016
Net income
$
47,595
$
47,565
$
121,334
$
107,550
Income taxes
20,919
22,635
55,944
48,638
Interest expense
11,399
11,150
33,884
33,466
Interest income
(1,575)
(836)
(4,277)
(2,502)
Other (gains) losses
(778)
(746)
(2,251)
(1,005)
Equity in net (income) loss of affiliates
274
(1,150)
3,213
286
(Gain) loss on sale of assets
32
(402)
32
(402)
Depreciation and amortization
3,095
2,986
9,215
8,707
Executive termination benefits
-
-
-
2,206
Acceleration of executive succession plan
11,964
-
11,964
-
Impairment of lease acquisition costs, net
(1,185)
-
(1,185)
-
Mark to market adjustments on non-qualified retirement plan investments 773
748
2,214
1,003
Adjusted EBITDA
$
92,513
$
81,950
$
230,087
$
197,947
Hotel franchising
$
94,041
$
86,248
$
235,598
$
211,864
Non-hotel franchising activities
(1,528)
(4,298)
(5,511)
(13,917)
$
92,513
$
81,950
$
230,087
$
197,947
ADJUSTED NET INCOME AND ADJUSTED DILUTED EARNINGS PER SHARE (EPS)
(dollar amounts in thousands, except per share amounts)
Three Months Ended September 30,
Nine Months Ended September 30,
2017
2016
2017
2016
Net Income
$
47,595
$
47,565
$
121,334
$
107,550
Adjustments:
Executive termination benefits
-
-
-
1,394
Acceleration of executive succession plan
7,207
-
7,207
-
Impairment of lease acquisition costs, net
(747)
-
(747)
-
Adjusted Net Income
$
54,056
$
47,565
$
127,795
$
108,944
Diluted Earnings Per Share
$
0.84
$
0.84
$
2.14
$
1.90
Adjustments:
Executive termination benefits
-
-
-
0.02
Acceleration of executive succession plan
0.12
-
0.12
-
Impairment of lease acquisition costs, net
(0.01)
-
(0.01)
-
Adjusted Diluted Earnings Per Share (EPS)
$
0.95
$
0.84
$
2.25
$
1.92
ADJUSTED EBITDA FULL YEAR FORECAST
(dollar amounts in thousands)
Range
Estimated Adjusted EBITDA
Fiscal Year 2017
Net income
$
154,600
$
157,300
Income taxes
72,700
74,000
Interest expense
45,400
45,400
Interest income
(5,800)
(5,800)
Other gains
(2,200)
(2,200)
Equity in net loss of affiliates
3,200
3,200
Depreciation and amortization
13,100
13,100
Acceleration of management succession plan
12,000
12,000
Impairment of lease acquisition costs, net
(1,200)
(1,200)
Mark to market adjustments on non-qualified retirement plan investments 2,200
2,200
Adjusted EBITDA
$
294,000
$
298,000
Hotel franchising
$
301,000
$
305,000
Non-hotel franchising activities
(7,000)
(7,000)
$
294,000
$
298,000
ADJUSTED DILUTED EARNINGS PER SHARE (EPS) FULL YEAR FORECAST
(dollar amounts in thousands, except per share amounts)
Range
Fiscal Year 2017
Net Income
$
154,600
$
157,300
Adjustments:
Acceleration of executive succession plan
7,207
7,207
Impairment of lease acquisition costs, net
(747)
(747)
Adjusted Net Income
$
161,061
$
163,761
Diluted Earnings Per Share
$
2.73
$
2.77
Adjustments:
Acceleration of executive succession plan
0.12
0.12
Impairment of lease acquisition costs, net
(0.01)
(0.01)
Adjusted Diluted Earnings Per Share (EPS)
$
2.84
$
2.88

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