EX-99.1 2 d875505dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

For Immediate Release

 

CHOICE HOTELS INTERNATIONAL REPORTS RECORD REVENUES, OPERATING

INCOME AND NET INCOME

FOURTH QUARTER FRANCHISING EBITDA INCREASES 15%

Fourth Quarter Franchising Revenues Increase 12%; Domestic RevPAR Increases 11%

ROCKVILLE, MD. (February 20, 2015) – Choice Hotels International, Inc. (NYSE:CHH) today reported the following highlights for the fourth quarter and full-year 2014:

Fourth Quarter Highlights

 

  •   Franchising revenues for the three months ended December 31, 2014, totaled $81.4 million, an increase of 12 percent from the same period of 2013.

 

  •   Earnings before interest, taxes, depreciation and amortization (“EBITDA”) from franchising activities for the three months ended December 31, 2014, totaled $52.7 million, an increase of 15 percent from the same period of 2013.

 

  •   Franchising margins for the three months ended December 31, 2014, were 62.1 percent, an increase of 150 basis points from the same period of 2013.

 

  •   Diluted earnings per share (“EPS”) from continuing operations for the three months ended December 31, 2014, totaled $0.43, an increase of 7 percent from the same period of 2013.

 

  •   Domestic royalty fees for the three months ended December 31, 2014, totaled $59.2 million, an increase of 11 percent from the same period of 2013.

 

  •   Domestic system-wide revenue per available room (“RevPAR”) increased 11.2 percent in the fourth quarter of 2014, as occupancy and average daily rates increased 370 basis points and 3.8 percent, respectively from the same period of 2013.

 

  •   Domestic hotel executed franchise agreements totaled 269 for the three months ended December 31, 2014, an increase of 25 percent from the same period of 2013.

 

  •   New construction domestic hotel executed franchise agreements totaled 80 for the three months ended December 31, 2014, an increase of 78 percent from the same period of 2013.

 

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  •   The company purchased 1.0 million shares of common stock under its share repurchase program during the three months ended December 31, 2014, at a total cost of approximately $54.2 million.

 

  •   The company’s board of directors authorized an increase in the number of shares for repurchase under the current share repurchase program to 3 million shares.

“Our fourth quarter results exceeded our expectations and we closed out a record year driven by strong RevPAR performance and franchise development results,” said Stephen P. Joyce, president and chief executive officer, Choice Hotels. “Domestic RevPAR gains in 2014 improved each quarter culminating with an 11% increase in the fourth quarter which outpaced the gains reported by Smith Travel Research in the chain scale segments in which we compete. Our efforts and initiatives to strengthen our brands and improve business delivery to our franchisees are illustrated by our RevPAR performance and doubling the number of new construction franchise agreements for our Comfort family of brands. We are optimistic that developers will continue to respond to our program to rejuvenate our iconic Comfort brand and are optimistic that RevPAR performance will continue to be strong in 2015.”

Full-Year Highlights

 

  •   EBITDA from franchising activities in 2014 totaled $240.0 million, an increase of $25.1 million or 12 percent from 2013.

 

  •   Franchising revenues in 2014 totaled $344.8 million, an increase of $27.8 million or 9 percent from 2013.

 

  •   Franchising SG&A expenses in 2014 totaled $104.8 million, an increase of 3 percent from 2013.

 

  •   Franchising margins for 2014 were 67.2 percent, an increase of 210 basis points from 2013.

 

  •   Diluted EPS from continuing operations in 2014 totaled $2.07, an increase of 8 percent from 2013.

 

  •   Domestic royalty fees in 2014 totaled $263.0 million, an increase of 8 percent from 2013.

 

  •   Domestic system-wide RevPAR increased 8.5 percent in 2014 as occupancy and average daily rates increased 310 basis points and 3.0 percent, respectively, from 2013.

 

  •   Domestic units increased 0.8 percent from December 31, 2013.

 

  •   New franchise contracts, executed in 2014 for domestic hotels, totaled 566, a 7 percent increase from 2013.

 

  •   Domestic relicensing and contract renewal transactions in 2014 totaled 336 contracts, an increase of 16 percent from 2013.

 

  •   The company’s domestic pipeline of hotels under construction, awaiting conversion or approved for development increased 21 percent from December 31, 2013.

 

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Discontinued Operations

In the first quarter of 2014, the company entered into a plan to sell its three owned hotels operated under the MainStay Suites brand. The company determined that the disposal of these hotels met the definition of a discontinued operation since the operations and cash flows of these components will be eliminated from the on-going operations of the company and the company will not have significant continuing involvement in the operations of the hotels after the disposal transaction.

At December 31, 2014, the company had disposed of all three hotels and the new owners of each of those hotels had executed new franchise agreements with the company.

The company’s consolidated statement of income for the three months and year ended December 31, 2014 reflect these three company-owned hotels as discontinued operations. In addition, the company’s statement of income for the three months and year ended December 31, 2013 has been recast to account for these operations as discontinued. Summarized financial information related to these discontinued operations is presented in Exhibit 9 of this press release.

Outlook

The company’s consolidated 2015 outlook reflects the following assumptions:

 

  •   All figures assume no additional repurchases of common stock under the company’s share repurchase program; and

 

  •   The effective tax rate for continuing operations is expected to be 31.8% and 31.1% for the first quarter and full- year 2015, respectively.

Franchising

 

  •   EBITDA from franchising activities for full-year 2015 are expected to range between $254 million and $259 million;

 

  •   Net domestic unit growth for 2015 is expected to be approximately 1%;

 

  •   RevPAR is expected to increase approximately 11% for the first quarter and range between 6.5% and 8% for full-year 2015; and

 

  •   The effective royalty rate is expected to increase 2 basis points for full-year 2015 as compared to full-year 2014.

SkyTouch

 

  •   Net reductions in EBITDA relating to our investment in the SkyTouch division for full-year 2015 are expected to range between $15 million and $20 million.

Consolidated Outlook

The company’s first quarter 2015 diluted EPS is expected to be $0.37. The company expects full-year 2015 diluted EPS to range between $2.14 and $2.21. EBITDA for full-year 2015 are expected to range between $236 million and $241 million.

 

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Conference Call

Choice will conduct a conference call on Friday, February 20, 2015 at 10:00 a.m. eastern to discuss the company’s fourth quarter and full-year 2014 results. The dial-in number to listen to the call is 1-877-415-3182, and the access code is 30797718. International callers should dial 1-857-244-7325 and enter the access code 30797718. The conference call also 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 2:00 p.m. eastern on Friday, February 20, 2015 through Friday, February 27, 2015 by calling 1-888-286-8010 and entering access code 85674062. The international dial-in number for the replay is 1-617-801-6888, access code 8567402. In addition, the call will be archived for approximately one-year and available on www.choicehotels.com via the Investor Info link.

About Choice Hotels

Choice Hotels International, Inc. franchises more than 6,300 hotels, representing more than 500,000 rooms, in the United States and more than 35 other countries and territories. As of December 31, 2014, 510 hotels, representing more than 39,000 rooms, were under construction, awaiting conversion or approved for development in the United States. Additionally, 93 hotels, representing approximately 8,700 rooms, were under construction, awaiting conversion or approved for development in more than 15 other countries and territories. The company’s Comfort Inn, Comfort Suites, Quality, Sleep Inn, Clarion, Cambria hotels & suites, MainStay Suites, Suburban Extended Stay Hotel, Econo Lodge and Rodeway Inn brands, as well as its Ascend Hotel Collection membership program, serve guests worldwide.

SkyTouch Technology is a division of Choice Hotels International, Inc. 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.

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

Forward-Looking Statements

Certain matters discussed in this press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Generally, our use of words such as “expect,” “estimate,” “believe,” “anticipate,” “will,” “forecast,” “plan,” “project,” “assume” or similar words of futurity identify such forward-looking statements. These forward-looking statements are based on management’s current beliefs, assumptions and expectations regarding future events, which in turn are based on information currently available to management. Such statements may relate to projections of the company’s revenue, earnings and other financial and operational measures, company debt levels, ability to repay outstanding indebtedness, payment of dividends, 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

 

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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; or ability to grow our franchise system; 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 company’s filings with the Securities and Exchange Commission including our annual reports on Form 10-K and our quarterly reports filed on Form 10-Q. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

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

EBITDA, franchising revenues, franchising SG&A, franchising EBITDA and franchising margins are non-GAAP financial measurements. These measures should not be considered as an alternative to any measure of performance or liquidity as promulgated under or authorized by generally accepted accounting principles in the United States (“GAAP”), such as operating income, total revenues 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 EBITDA, franchising revenues, franchising SG&A and franchising margins to the most comparable GAAP financial measures. We discuss management’s reasons for reporting these non-GAAP measures below.

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

Franchising Revenues, Operating Income, EBITDA, SG&A and Margins: The company reports franchising revenues, operating income, EBITDA, SG&A and margins which exclude marketing and reservation revenues and SkyTouch Technology operations. Marketing and reservation activities are excluded 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 are excluded since they do not reflect the company’s core franchising business but are an adjacent, complimentary line of business. These non-GAAP measures are a commonly used measure of performance in our industry and facilitate comparisons between the company and its competitors.

 

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Contacts

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

(301) 592-5117

Scott Carman, Director, Public Relations

(301) 592-6361

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

© 2015 Choice Hotels International, Inc. All rights reserved.

 

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

 

     Three Months Ended December 31,     Year Ended December 31,  
                 Variance                 Variance  
     2014     2013     $     %     2014     2013     $     %  
(In thousands, except per share amounts)                                                 

REVENUES:

                 

Royalty fees

    $ 65,237      $ 59,606      $ 5,631        9 %    $ 287,538      $ 267,812      $ 19,726        7 % 

Initial franchise and relicensing fees

      6,720        5,843        877        15 %      19,481        18,686        795        4 % 

Procurement services

      5,526        4,464        1,062        24 %      23,819        20,668        3,151        15 % 

Marketing and reservation

      103,594        96,429        7,165        7 %      412,619        407,633        4,986        1 % 

Other

      4,325        2,489        1,836        74 %      14,513        9,851        4,662        47 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total revenues

   185,402      168,831      16,571      10 %    757,970      724,650      33,320      5 % 

OPERATING EXPENSES:

Selling, general and administrative

   33,089      28,905      4,184      14 %    121,418      111,713      9,705      9 % 

Depreciation and amortization

   2,462      2,355      107      5 %    9,365      9,056      309      3 % 

Marketing and reservation

   103,594      96,429      7,165      7 %    412,619      407,633      4,986      1 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total operating expenses

   139,145      127,689      11,456      9 %    543,402      528,402      15,000      3 % 

Operating income

   46,257      41,142      5,115      12 %    214,568      196,248      18,320      9 % 

OTHER INCOME AND EXPENSES, NET:

Interest expense

   10,110      10,203      (93 )    (1 %)    41,486      42,537      (1,051 )    (2 %) 

Interest income

   (556 )    (568 )    12      (2 %)    (1,761 )    (2,547 )    786      (31 %) 

Other (gains) and losses

   585      (514 )    1,099      (214 %)    427      (1,780 )    2,207      (124 %) 

Equity in net (income) loss of affiliates

   80      (294 )    374      (127 %)    658      (634 )    1,292      (204 %) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total other income and expenses, net

   10,219      8,827      1,392      16 %    40,810      37,576      3,234      9 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Income from continuing operations before income taxes

   36,038      32,315      3,723      12 %    173,758      158,672      15,086      10 % 

Income taxes

   10,729      8,938      1,791      20 %    52,285      45,322      6,963      15 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Income from continuing operations, net of income taxes

   25,309      23,377      1,932      8 %    121,473      113,350      8,123      7 % 

Income (loss) from discontinued operations, net of income taxes

   (24 )    66      (90 )    (136 %)    1,687      359      1,328      370 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net income

 $ 25,285    $ 23,443    $ 1,842      8 %  $ 123,160    $ 113,709    $ 9,451      8 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Basic earnings per share

Continuing operations

 $ 0.44    $ 0.40    $ 0.04      10 %  $ 2.08    $ 1.94    $ 0.14      7 % 

Discontinued operations

   —        —        —        NM      0.03      —        0.03      NM   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
$ 0.44    $ 0.40    $ 0.04      10 %  $ 2.11    $ 1.94    $ 0.17      9 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Diluted earnings per share

Continuing operations

 $ 0.43    $ 0.40    $ 0.03      7 %  $ 2.07    $ 1.92    $ 0.15      8 % 

Discontinued operations

   —        —        —        NM      0.03      0.01      0.02      200 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
$ 0.43    $ 0.40    $ 0.03      7 %  $ 2.10    $ 1.93    $ 0.17      9 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Choice Hotels International, Inc.

Consolidated Balance Sheets

 Exhibit 2

 

(In thousands, except per share amounts)    December 31
2014		     December 31,
2013		  
     (Unaudited)        

ASSETS

     

Cash and cash equivalents

    $ 214,879      $ 167,795   

Accounts receivable, net

      91,681        82,385   

Other current assets

      44,854        56,794   
  

 

 

    

 

 

  

Total current assets

   351,414      306,974   

Fixed assets and intangibles, net

   152,034      143,618   

Notes receivable, net of allowances

   40,441      31,872   

Advances, marketing and reservation activities

   —        5,844   

Investments, employee benefit plans, at fair value

   17,539      15,950   

Other assets

   85,842      52,164   
  

 

 

    

 

 

  

Total assets

 $ 647,270    $ 556,422   
  

 

 

    

 

 

  

LIABILITIES AND SHAREHOLDERS’ DEFICIT

Accounts payable and accrued expenses

 $ 120,654    $ 98,288   

Deferred revenue

   66,382      61,188   

Current portion of long-term debt

   12,349      10,088   

Other current liabilities

   713      4,774   
  

 

 

    

 

 

  

Total current liabilities

   200,098      174,338   

Long-term debt

   782,082      783,471   

Deferred compensation & retirement plan obligations

   23,987      22,527   

Other liabilities

   69,904      28,957   
  

 

 

    

 

 

  

Total liabilities

   1,076,071      1,009,293   
  

 

 

    

 

 

  

Common stock, $0.01 par value

   573      586   

Additional paid-in-capital

   127,661      117,768   

Accumulated other comprehensive loss

   (6,971 )    (6,217 ) 

Treasury stock, at cost

   (982,463 )    (918,031 ) 

Retained earnings

   432,399      353,023   
  

 

 

    

 

 

  

Total shareholders’ deficit

   (428,801 )    (452,871 ) 
  

 

 

    

 

 

  

Total liabilities and shareholders’ deficit

 $ 647,270    $ 556,422   
  

 

 

    

 

 

  

 

Choice Hotels International, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

 Exhibit 3

 

(In thousands)    Year Ended December 31,  
     2014     2013  

CASH FLOWS FROM OPERATING ACTIVITIES:

     

Net income

    $ 123,160      $ 113,709   

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

     

Depreciation and amortization

      9,365        9,582   

Gain on sale of assets

      (2,809 )      (151 ) 

Provision for bad debts, net

      2,775        2,743   

Non-cash stock compensation and other charges

      9,706        11,422   

Non-cash interest and other (income) loss

      3,174        1,545   

Deferred income taxes

      (22,899 )      (6,277 ) 

Equity (earnings) losses from unconsolidated ventures, net of distributions received

      2,220        811   

Changes in assets and liabilities, net of acquisitions:

     

Receivables

      (14,250 )      (7,899 ) 

Advances to/from marketing and reservation activities, net

      70,179        42,991   

Forgivable notes receivable, net

      (12,914 )      (8,347 ) 

Accounts payable

      9,636        2,304   

Accrued expenses

      6,678        (9,595 ) 

Income taxes payable/receivable

      (3,582 )      4,276   

Deferred revenue

      5,297        (9,861 ) 

Other assets

      (1,250 )      (3,197 ) 

Other liabilities

      (575 )      9,857   
  

 

 

    

 

 

  

NET CASH PROVIDED BY OPERATING ACTIVITIES

   183,891      153,913   
  

 

 

    

 

 

  

CASH FLOWS FROM INVESTING ACTIVITIES:

Investment in property and equipment

   (20,946 )    (33,397 ) 

Proceeds from sales of assets

   15,612      243   

Equity method investments

   (17,789 )    (5,685 ) 

Purchases of investments, employee benefit plans

   (2,794 )    (2,676 ) 

Proceeds from sales of investments, employee benefit plans

   964      4,168   

Issuance of mezzanine and other notes receivable

   (3,340 )    (1,095 ) 

Collections of mezzanine and other notes receivable

   11,289      9,748   

Other items, net

   (642 )    (728 ) 
  

 

 

    

 

 

  

NET CASH USED IN INVESTING ACTIVITIES

   (17,646 )    (29,422 ) 
  

 

 

    

 

 

  

CASH FLOWS FROM FINANCING ACTIVITIES:

Net repayments pursuant to revolving credit facility

   —        (57,000 ) 

Principal payments on long-term debt

   (10,108 )    (8,204 ) 

Proceeds from the issuance of long-term debt

   250      3,360   

Purchase of treasury stock

   (77,972 )    (3,965 ) 

Dividends paid

   (43,529 )    (32,799 ) 

Excess tax benefits from stock-based compensation

   3,721      1,460   

Proceeds from exercise of stock options

   10,098      8,864   
  

 

 

    

 

 

  

NET CASH USED IN FINANCING ACTIVITIES

   (117,540 )    (88,284 ) 
  

 

 

    

 

 

  

Net change in cash and cash equivalents

   48,705      36,207   

Effect of foreign exchange rate changes on cash and cash equivalents

   (1,621 )    (2,589 ) 

Cash and cash equivalents at beginning of period

   167,795      134,177   
  

 

 

    

 

 

  

CASH AND CASH EQUIVALENTS AT END OF PERIOD

 $ 214,879    $ 167,795   
  

 

 

    

 

 

  

 

  

CHOICE HOTELS INTERNATIONAL, INC.

SUPPLEMENTAL OPERATING INFORMATION

DOMESTIC HOTEL SYSTEM

(UNAUDITED)

    Exhibit 4

 

    For the Year Ended December 31 2014     For the Year Ended December 31, 2013     Change  
    Average Daily
Rate		     Occupancy     RevPAR     Average Daily
Rate		     Occupancy     RevPAR     Average Daily
Rate		     Occupancy     RevPAR  

Comfort Inn

   $ 86.08        63.3 %    $ 54.50      $ 83.27        60.1 %    $ 50.05        3.4 %      320 bps        8.9 % 

Comfort Suites

     90.24        66.5 %      60.01        86.99        62.9 %      54.75        3.7 %      360 bps        9.6 % 

Sleep

     77.13        62.5 %      48.24        74.39        58.7 %      43.66        3.7 %      380 bps        10.5 % 

Quality

     71.98        56.1 %      40.39        70.22        53.1 %      37.27        2.5 %      300 bps        8.4 % 

Clarion

     77.65        54.5 %      42.34        75.15        51.2 %      38.46        3.3 %      330 bps        10.1 % 

Econo Lodge

     57.85        51.6 %      29.86        56.51        48.8 %      27.55        2.4 %      280 bps        8.4 % 

Rodeway

     56.68        55.1 %      31.25        54.28        51.9 %      28.14        4.4 %      320 bps        11.1 % 

MainStay

     74.82        71.4 %      53.40        72.44        68.1 %      49.36        3.3 %      330 bps        8.2 % 

Suburban

     45.25        71.8 %      32.51        42.67        70.2 %      29.96        6.0 %      160 bps        8.5 % 

Ascend Hotel Collection

     121.49        60.3 %      73.20        119.76        64.0 %      76.60        1.4 %      (370) bps        (4.4 %) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

 $ 77.03      59.5 %  $ 45.80    $ 74.76      56.4 %  $ 42.20      3.0 %    310 bps      8.5 % 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
    For the Three Months Ended
December 31, 2014		     For the Three Months Ended
December 31, 2013		     Change  
    Average Daily
Rate		     Occupancy     RevPAR     Average Daily
Rate		     Occupancy     RevPAR     Average Daily
Rate		     Occupancy     RevPAR  

Comfort Inn

   $ 83.22        58.4 %    $ 48.59      $ 80.24        54.7 %    $ 43.88        3.7 %      370 bps        10.7 % 

Comfort Suites

     87.51        62.4 %      54.65        83.94        57.9 %      48.61        4.3 %      450 bps        12.4 % 

Sleep

     75.09        59.0 %      44.30        72.17        53.8 %      38.83        4.0 %      520 bps        14.1 % 

Quality

     68.96        51.3 %      35.37        66.92        47.9 %      32.07        3.0 %      340 bps        10.3 % 

Clarion

     76.21        50.3 %      38.29        71.56        46.8 %      33.49        6.5 %      350 bps        14.3 % 

Econo Lodge

     55.18        47.7 %      26.33        53.75        43.9 %      23.59        2.7 %      380 bps        11.6 % 

Rodeway

     54.01        50.9 %      27.47        50.86        47.5 %      24.18        6.2 %      340 bps        13.6 % 

MainStay

     72.56        67.0 %      48.59        69.91        64.3 %      44.97        3.8 %      270 bps        8.0 % 

Suburban

     45.11        67.5 %      30.45        41.89        66.3 %      27.77        7.7 %      120 bps        9.7 % 

Ascend Hotel Collection

     124.75        62.2 %      77.56        111.20        59.5 %      66.16        12.2 %      270 bps        17.2 % 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

 $ 74.42      55.1 %  $ 41.00    $ 71.71      51.4 %  $ 36.87      3.8 %    370 bps      11.2 % 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

     For the Quarter Ended    For the Year Ended  
     12/31/2014     12/31/2013          12/31/2014     12/31/2013  

System-wide effective royalty rate

      4.28 %      4.32 %         4.28 %      4.33 % 

Exhibit 5

CHOICE HOTELS INTERNATIONAL, INC.

SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA

(UNAUDITED)

 

     December 31, 2014      December 31, 2013      Variance  
     Hotels      Rooms      Hotels      Rooms      Hotels     Rooms     %     %  

Comfort Inn

      1,240         95,862         1,302         101,673         (62 )      (5,811 )      (4.8 %)      (5.7 %) 

Comfort Suites

      577         44,632         589         45,451         (12 )      (819 )      (2.0 %)      (1.8 %) 

Sleep

      371         26,811         382         27,623         (11 )      (812 )      (2.9 %)      (2.9 %) 

Quality

      1,284         104,454         1,223         101,143         61        3,311        5.0 %      3.3 % 

Clarion

      178         25,049         190         27,501         (12 )      (2,452 )      (6.3 %)      (8.9 %) 

Econo Lodge

      856         52,878         830         50,694         26        2,184        3.1 %      4.3 % 

Rodeway

      474         26,172         438         24,677         36        1,495        8.2 %      6.1 % 

MainStay

      45         3,568         43         3,331         2        237        4.7 %      7.1 % 

Suburban

      65         7,198         63         7,167         2        31        3.2 %      0.4 % 

Ascend Hotel Collection

      109         9,395         102         9,206         7        189        6.9 %      2.1 % 

Cambria

      22         2,642         18         2,119         4        523        22.2 %      24.7 % 
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

Domestic Franchises

   5,221      398,661      5,180      400,585      41      (1,924 )    0.8 %    (0.5 %) 

International Franchises

   1,158      106,617      1,160      105,473      (2 )    1,144      (0.2 %)    1.1 % 
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

Total Franchises

   6,379      505,278      6,340      506,058      39      (780 )    0.6 %    (0.2 %) 
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

Exhibit 6

CHOICE HOTELS INTERNATIONAL, INC.

SUPPLEMENTAL INFORMATION BY BRAND

DEVELOPMENT RESULTS — DOMESTIC NEW HOTEL CONTRACTS

(UNAUDITED)

 

     For the Year Ended December 31, 2014      For the Year Ended December 31, 2013      % Change  
     New
Construction		      Conversion      Total      New
Construction		      Conversion      Total      New
Construction		     Conversion     Total  

Comfort Inn

      31         24         55         18         54         72         72 %      (56 %)      (24 %) 

Comfort Suites

      39         1         40         16         9         25         144 %      (89 %)      60 % 

Sleep

      36         2         38         20         5         25         80 %      (60 %)      52 % 

Quality

      3         166         169         1         137         138         200 %      21 %      22 % 

Clarion

      1         28         29         1         21         22         0 %      33 %      32 % 

Econo Lodge

      3         79         82         2         87         89         50 %      (9 %)      (8 %) 

Rodeway

      3         76         79         1         70         71         200 %      9 %      11 % 

MainStay

      20         3         23         11         2         13         82 %      50 %      77 % 

Suburban

      4         5         9         9         5         14         (56 %)      0 %      (36 %) 

Ascend Hotel Collection

      11         23         34         5         51         56         120 %      (55 %)      (39 %) 

Cambria

      8         —           8         5         —           5         60 %      NM        60 % 
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

    

 

 

    

 

 

  

Total Domestic System

   159      407      566      89      441      530      79 %    (8 %)    7 % 
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

    

 

 

    

 

 

  
     For the Three Months Ended
December 31, 2014		      For the Three Months Ended
December 31, 2013		      % Change  
     New
Construction		      Conversion      Total      New
Construction		      Conversion      Total      New
Construction		     Conversion     Total  

Comfort Inn

      15         13         28         6         19         25         150 %      (32 %)      12 % 

Comfort Suites

      28         1         29         9         3         12         211 %      (67 %)      142 % 

Sleep

      15         1         16         11         4         15         36 %      (75 %)      7 % 

Quality

      —           84         84         —           61         61         NM        38 %      38 % 

Clarion

      —           13         13         —           9         9         NM        44 %      44 % 

Econo Lodge

      2         33         35         2         26         28         0 %      27 %      25 % 

Rodeway

      —           28         28         —           31         31         NM        (10 %)      (10 %) 

MainStay

      10         2         12         6         2         8         67 %      0 %      50 % 

Suburban

      2         2         4         8         4         12         (75 %)      (50 %)      (67 %) 

Ascend Hotel Collection

      5         12         17         —           11         11         NM        9 %      55 % 

Cambria

      3         —           3         3         —           3         0 %      NM        0 % 
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

    

 

 

    

 

 

  

Total Domestic System

   80      189      269      45      170      215      78 %    11 %    25 % 
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

    

 

 

    

 

 

  

Exhibit 7

CHOICE HOTELS INTERNATIONAL, INC.

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

(UNAUDITED)

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

 

                   Variance  
     December 31, 2014
Units		      December 31, 2013
Units		      Conversion     New Construction     Total  
     Conversion      New
Construction		      Total      Conversion      New
Construction		      Total      Units     %     Units     %     Units     %  

Comfort Inn

      36         64         100         44         53         97         (8 )      (18 %)      11        21 %      3        3 % 

Comfort Suites

      —           75         75         4         47         51         (4 )      (100 %)      28        60 %      24        47 % 

Sleep Inn

      2         72         74         1         49         50         1        100 %      23        47 %      24        48 % 

Quality

      52         5         57         48         3         51         4        8 %      2        67 %      6        12 % 

Clarion

      12         2         14         8         2         10         4        50 %      —          0 %      4        40 % 

Econo Lodge

      32         5         37         26         2         28         6        23 %      3        150 %      9        32 % 

Rodeway

      31         4         35         38         1         39         (7 )      (18 %)      3        300 %      (4 )      (10 %) 

MainStay

      1         46         47         2         31         33         (1 )      (50 %)      15        48 %      14        42 % 

Suburban

      4         12         16         6         16         22         (2 )      (33 %)      (4 )      (25 %)      (6 )      (27 %) 

Ascend Hotel Collection

      14         20         34         10         10         20         4        40 %      10        100 %      14        70 % 

Cambria

      —           21         21         —           21         21         —          NM        —          0 %      —          0 % 
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
  184      326      510      187      235      422      (3 )    (2 %)    91      39 %    88      21 % 
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

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

CALCULATION OF FRANCHISING REVENUES AND FRANCHISING MARGINS

 

(dollar amounts in thousands)    Three Months Ended December 31,     Year Ended December 31,  
     2014     2013     2014     2013  

Franchising Revenues:

         

Total Revenues

    $ 185,402      $ 168,831      $ 757,970      $ 724,650   

Adjustments:

         

Marketing and reservation revenues

      (103,594 )      (96,429 )      (412,619 )      (407,633 ) 

Other

      (387 )      (20 )      (600 )      (33 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Franchising Revenues

 $ 81,421    $ 72,382    $ 344,751    $ 316,984   
  

 

 

    

 

 

    

 

 

    

 

 

  

Franchising Margins:

Operating Margin:

Total Revenues

 $ 185,402    $ 168,831    $ 757,970    $ 724,650   

Operating Income

 $ 46,257    $ 41,142    $ 214,568    $ 196,248   
  

 

 

    

 

 

    

 

 

    

 

 

  

Operating Margin

   24.9 %    24.4 %    28.3 %    27.1 % 
  

 

 

    

 

 

    

 

 

    

 

 

  

Franchising Margin:

Franchising Revenues

 $ 81,421    $ 72,382    $ 344,751    $ 316,984   

Operating Income

 $ 46,257    $ 41,142    $ 214,568    $ 196,248   

SkyTouch Division operating loss

   4,271      2,687      17,065      9,994   
  

 

 

    

 

 

    

 

 

    

 

 

  
$ 50,528    $ 43,829    $ 231,633    $ 206,242   
  

 

 

    

 

 

    

 

 

    

 

 

  

  
  

 

 

    

 

 

    

 

 

    

 

 

  

Franchising Margins

   62.1 %    60.6 %    67.2 %    65.1 % 
  

 

 

    

 

 

    

 

 

    

 

 

  

CALCULATION OF FRANCHISING SELLING, GENERAL AND ADMINISTRATION EXPENSES

 

(dollar amounts in thousands)    Three Months Ended December 31,     Year Ended December 31,  
     2014     2013     2014     2013  

Total Selling, General and Administrative Expenses

    $ 33,089      $ 28,905      $ 121,418      $ 111,713   

SkyTouch Division

      (4,336 )      (2,519 )      (16,658 )      (9,629 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Franchising Selling, General and Administration Expenses

 $ 28,753    $ 26,386    $ 104,760    $ 102,084   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

CALCULATION OF EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION (“EBITDA”)

 

  

(dollar amounts in thousands)    Three Months Ended December 31,     Year Ended December 31,  
     2014     2013     2014     2013  

Income from continuing operations, net of income taxes

    $ 25,309      $ 23,377      $ 121,473      $ 113,350   

Income taxes

      10,729        8,938        52,285        45,322   

Interest expense

      10,110        10,203        41,486        42,537   

Interest income

      (556 )      (568 )      (1,761 )      (2,547 ) 

Other (gains) and losses

      585        (514 )      427        (1,780 ) 

Equity in net (income) loss of affiliates

      80        (294 )      658        (634 ) 

Depreciation and amortization

      2,462        2,355        9,365        9,056   
  

 

 

    

 

 

    

 

 

    

 

 

  

EBITDA

 $ 48,719    $ 43,497    $ 223,933    $ 205,304   
  

 

 

    

 

 

    

 

 

    

 

 

  

Franchising

 $ 52,668    $ 45,996    $ 239,991    $ 214,900   

SkyTouch

   (3,949 )    (2,499 )    (16,058 )    (9,596 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  
$ 48,719    $ 43,497    $ 223,933    $ 205,304   
  

 

 

    

 

 

    

 

 

    

 

 

  

CHOICE HOTELS INTERNATIONAL, INC.

DISCONTINUED OPERATIONS

(UNAUDITED)

 Exhibit 9

 

     Three Months Ended December 31,      Year Ended December 31,  
(In thousands)    2014     2013      2014     2013  

REVENUES:

          

Hotel operations

    $ —        $ 1,174       $ 801      $ 4,774   
  

 

 

    

 

 

     

 

 

    

 

 

  

Total revenues

   —        1,174      801      4,774   

OPERATING EXPENSES:

Hotel operations

   43      936      927      3,678   

Depreciation and amortization

   —        133      —        526   
  

 

 

    

 

 

     

 

 

    

 

 

  

Total operating expenses

   43      1,069      927      4,204   

Operating income (loss)

   (43 )    105      (126 )    570   

Gain (loss) on disposal of discontinued operations

   4      —        2,807      —     
  

 

 

    

 

 

     

 

 

    

 

 

  

Income (loss) from discontinued operations before income taxes

   (39 )    105      2,681      570   

Income tax (benefit)

   (15 )    39      994      211   
  

 

 

    

 

 

     

 

 

    

 

 

  

Income (loss) from discontinued operations

 $ (24 )  $ 66    $ 1,687    $ 359