EX-99.1 2 exhibit991-063017.htm EXHIBIT 99.1 Exhibit


Exhibit 99.1

choicea03.jpg


For Immediate Release


CHOICE HOTELS INTERNATIONAL REPORTS A 16-PERCENT INCREASE IN SECOND QUARTER DILUTED EARNINGS PER SHARE

176 New Domestic Franchise Agreements Executed

ROCKVILLE, MD. (August 2, 2017) - Choice Hotels International, Inc. (NYSE:CHH), one of the world's largest hotel companies, today reported its results for the three months ended June 30, 2017. Net income for the 2017 second quarter was $45.0 million, or $0.79 per diluted share, compared to $38.8 million, or $0.68 per diluted share for the 2016 second quarter, representing a 16-percent increase. Second quarter adjusted earnings before income taxes, depreciation and amortization (EBITDA) was $81.1 million compared to $70.4 million in the prior-year second quarter, a 15-percent increase.

“Choice Hotels’ overall strategy to successfully focus on franchisee profitability has led to our robust development pipeline and continues to deliver strong financial results,” said Stephen P. Joyce, chief executive officer, Choice Hotels. “For second quarter of 2017, 176 new domestic franchise agreements were executed, a 20-percent increase when compared to second quarter of 2016. In fact, we have experienced one of the strongest January through June development periods in our company’s history, as new franchise agreements increased 30-percent and new construction agreements increased 65-percent, versus the first six months of 2016.”

“Our midscale and upscale brands continue to be core areas of strength and expansion,” said Patrick Pacious, Choice Hotel’s president, chief operating officer and incoming chief executive officer. “The brands in our midscale segment, including Comfort, Quality and Sleep Inn, are experiencing continued growth in both RevPAR and our development pipeline. In addition, our upscale brands - Cambria Hotels and The Ascend Hotel Collection - are aggressively expanding. These results reinforce that we have very effective distribution channels and a high-performing franchisee business model.”

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

Overall Results

•
Diluted earnings per share (EPS) for the second quarter was $0.79, a 16-percent increase from the second quarter of the prior year; Diluted EPS increased 11-percent compared to our adjusted diluted EPS for the second quarter of 2016, which excluded executive termination benefits incurred in 2016.

•
Total revenues and hotel franchising revenues for the second quarter increased 14 percent and 10 percent, respectively, from the second quarter of the prior year.

•
Adjusted EBITDA totaled $81.1 million for the second quarter, a 15-percent increase from the second quarter of the prior year.

•
Adjusted EBITDA from hotel franchising activities for the second quarter increased 11 percent from the prior year second quarter to $84.0 million.


1


•
Adjusted hotel franchising margins for the second quarter increased 100 basis points from the prior year second quarter to 70.5 percent.

Royalties

•
Domestic royalty fees for second quarter totaled $87.0 million, a 7.2-percent increase from the second quarter of the prior year.

•
Domestic system-wide revenue per available room (RevPAR) increased 2.0 percent for the second quarter compared to the prior year second quarter. Occupancy and average daily rates increased 30 basis points and 1.5 percent, respectively, in the second quarter compared to the same period of 2016.

•
The Comfort brands extended their consecutive months of RevPAR index gains, compared to their focused competition, to 33 months.

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

•
Domestic franchised hotels, as of June 30, 2017, increased 2.6 percent from June 30, 2016.

•
Cambria Hotels surpassed 30 open hotels with three new Cambria Hotels opening during the second quarter, including our first Los Angeles property and our second hotel in Chicago.

•
Domestic and international rooms, as of June 30, 2017, increased 2.2 percent and 1.8 percent, respectively, from June 30, 2016.

Development

•
New, executed franchised hotel development contracts totaled 176 in the second quarter, a 20-percent increase from the comparable period of the prior year.

•
New construction and conversion franchise agreements increased 33 percent and 14 percent, respectively, in the second quarter of 2017, compared to the second quarter of the prior year.

•
The company executed 11 Cambria Hotels new construction franchise agreements in the second quarter of 2017, a 22-percent increase compared to the second quarter of the prior year. The domestic new construction pipeline for the Cambria Hotels brand now totals nearly 70 hotels.

•
Domestic relicensing and contract renewal transactions totaled 127 for the three months ended June 30, 2017, a 19-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 June 30, 2017, increased 22 percent to 721 hotels from June 30, 2016.

•
The new construction and conversion domestic pipelines totaled 523 and 198 hotels, respectively at June 30, 2017, representing increases of 30 percent and 5 percent from June 30, 2016.


Use of Cash Flows

Dividends
During the six months ended June 30, 2017, the company paid cash dividends totaling approximately $24 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.

2



Share Repurchases
The company did not repurchase shares of common stock under its share repurchase program during the six months ended June 30, 2017. The company currently has authorization to purchase up to 4.0 million additional shares under this program.

Hotel Development & Financing
Pursuant to its program to encourage acceleration of the growth of our upscale Cambria Hotels brand, the company advanced approximately $64 million in support of the brand’s development during the six months ended June 30, 2017. The company also recycled approximately $2 million of prior investments in Cambria development projects, resulting in net advances of $62 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 June 30, 2017, the company had approximately $261 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 Item

During the three and six months ended June 30, 2016, the company recorded an executive termination benefit charge of approximately $2.2 million. This special item impacted diluted EPS by $0.03 and $0.02 per share for the three and six months ended June 30, 2016, respectively. The company evaluates the non-GAAP measures presented herein that exclude executive termination benefits 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
•
Net income for full-year 2017 is expected to range between $160 million and $163 million.
•
Adjusted EBITDA for full-year 2017 is expected to range between $293 million and $297 million.
•
The company’s third-quarter 2017 adjusted diluted EPS is expected to range between $0.90 and $0.92.
•
The company expects full-year 2017 adjusted diluted EPS to range between $2.81 and $2.86.
•
The effective tax rate is expected to be approximately 33 percent for both the third quarter and full-year 2017.
•
All estimates for 2017 exclude any potential costs associated with the company’s recently announced executive succession plan.
•
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 we incur 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 $299 million and $303 million.
•
Net domestic unit growth for 2017 is expected to range between approximately 2 percent and 3 percent.

3


•
RevPAR is expected to increase between 1 percent and 2 percent for the third 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 our non-hotel franchising operations, which primarily relate to SkyTouch and vacation rental activities, are expected to range between approximately $5 million and $7 million.


Conference Call
Choice will conduct a conference call on Wednesday, August 2, 2017, at 10:00 a.m. ET to discuss the company’s 2017 second 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 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 1:00 p.m. ET on Wednesday, August 2, 2017, by calling 1-855-859-2056 (domestic) or 1-404-537-3406 (international) and entering access code 43105678. In addition, the call will be archived and available on choicehotels.com via the Investor Info link.
About Choice Hotels
Choice Hotels International, Inc. (NYSE: 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 June 30, 2017, 792 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 HotelsTM brands provide a spectrum of lodging choices to meet guests' needs. With more than 32 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

4


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 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 and executive termination benefits. 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

5


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.


Contacts
Scott Oaksmith, SVP, Finance & Chief Accounting Officer
(301) 592-6659
Scott Carman, Director, Public Relations
(301) 592-6361




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



6


Choice Hotels International, Inc. and Subsidiaries
 
 
 
 
 
 
 
 
 
 
 
Exhibit 1
 
Consolidated Statements of Income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
 
 
 
 
Variance
 
 
 
 
 
Variance
 
 
2017
 
2016
 
$
 
%
 
2017
 
2016
 
$
 
%
(In thousands, except per share amounts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
REVENUES:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
         Royalty fees
 
$
92,486

 
$
86,195

 
$
6,291

 
7
 %
 
$
161,475

 
$
151,054

 
$
10,421

 
7
 %
         Initial franchise and relicensing fees
 
6,981

 
5,706

 
1,275

 
22
 %
 
11,987

 
10,862

 
1,125

 
10
 %
         Procurement services
 
11,068

 
10,308

 
760

 
7
 %
 
17,544

 
16,104

 
1,440

 
9
 %
         Marketing and reservation system
 
158,035

 
133,814

 
24,221

 
18
 %
 
267,510

 
260,175

 
7,335

 
3
 %
         Other
 
8,229

 
5,728

 
2,501

 
44
 %
 
16,181

 
10,674

 
5,507

 
52
 %
                  Total revenues
 
276,799

 
241,751

 
35,048

 
14
 %
 
474,697

 
448,869

 
25,828

 
6
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OPERATING EXPENSES:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
         Selling, general and administrative
 
38,208

 
40,039

 
(1,831
)
 
(5
)%
 
71,054

 
75,158

 
(4,104
)
 
(5
)%
         Depreciation and amortization
 
3,050

 
2,956

 
94

 
3
 %
 
6,120

 
5,721

 
399

 
7
 %
         Marketing and reservation system
 
158,035

 
133,814

 
24,221

 
18
 %
 
267,510

 
260,175

 
7,335

 
3
 %
                   Total operating expenses
 
199,293

 
176,809

 
22,484

 
13
 %
 
344,684

 
341,054

 
3,630

 
1
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income
 
77,506

 
64,942

 
12,564

 
19
 %
 
130,013

 
107,815

 
22,198

 
21
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OTHER INCOME AND EXPENSES, NET:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
         Interest expense
 
11,280

 
11,224

 
56

 
—
 %
 
22,485

 
22,316

 
169

 
1
 %
         Interest income
 
(1,438
)
 
(827
)
 
(611
)
 
74
 %
 
(2,702
)
 
(1,666
)
 
(1,036
)
 
62
 %
         Other (gains) losses
 
(576
)
 
(321
)
 
(255
)
 
79
 %
 
(1,473
)
 
(259
)
 
(1,214
)
 
469
 %
         Equity in net (income) loss of affiliates
 
859

 
(744
)
 
1,603

 
(215
)%
 
2,939

 
1,436

 
1,503

 
105
 %
                  Total other income and expenses, net
 
10,125

 
9,332

 
793

 
8
 %
 
21,249

 
21,827

 
(578
)
 
(3
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income before income taxes
 
67,381

 
55,610

 
11,771

 
21
 %
 
108,764

 
85,988

 
22,776

 
26
 %
Income taxes
 
22,386

 
16,788

 
5,598

 
33
 %
 
35,025

 
26,003

 
9,022

 
35
 %
Net income
 
$
44,995

 
$
38,822

 
$
6,173

 
16
 %
 
$
73,739

 
$
59,985

 
$
13,754

 
23
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per share
 
$
0.80

 
$
0.69

 
$
0.11

 
16
 %
 
$
1.31

 
$
1.06

 
$
0.25

 
24
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted earnings per share
 
$
0.79

 
$
0.68

 
$
0.11

 
16
 %
 
$
1.30

 
$
1.06

 
$
0.24

 
23
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




Choice Hotels International, Inc. and Subsidiaries
 
 
Exhibit 2

Consolidated Balance Sheets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(In thousands, except per share amounts)
June 30,
 
 December 31,
 
 
 
 
 
2017
 
2016
 
 
 
 
 
(Unaudited)
 
 
 
 
 
 
 
 
 
 
ASSETS
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
 
$
197,957

 
$
202,463

Accounts receivable, net
146,653

 
107,336

Other current assets
 
 
35,617

 
35,074

 
Total current assets
 
 
380,227

 
344,873

 
 
 
 
 
 
Fixed assets and intangibles, net
178,271

 
178,704

Notes receivable, net of allowances
132,004

 
110,608

Investments in unconsolidated entities
131,722

 
94,839

Investments, employee benefit plans, at fair value
19,451

 
16,975

Other assets
 
 
106,298

 
106,469

 
 
Total assets
 
$
947,973

 
$
852,468

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIABILITIES AND SHAREHOLDERS' DEFICIT
 
 
 
 
 
 
 
 
 
 
 
Accounts payable
 
 
$
67,736

 
$
48,071

Accrued expenses and other current liabilities
71,973

 
81,184

Deferred revenue
 
 
135,350

 
133,218

Current portion of long-term debt
 
1,302

 
1,195

 
Total current liabilities
 
276,361

 
263,668

 
 
 
 
 
 
 
 
Long-term debt
 
 
862,965

 
839,409

Deferred compensation & retirement plan obligations
23,927

 
21,595

Other liabilities
 
 
 
37,337

 
39,145

 
 
 
 
 
 
 
 
 
Total liabilities
 
 
1,200,590

 
1,163,817

 
 
 
 
 
 
 
 
 
Total shareholders' deficit
 
(252,617
)
 
(311,349
)
 
 
 
 
 
 
 
 
 
 
Total liabilities and shareholders' deficit
$
947,973

 
$
852,468

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




Choice Hotels International, Inc. and Subsidiaries
 
 
Exhibit 3

Consolidated Statements of Cash Flows
 
 
 
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
Six Months Ended June 30,
 
 
 
 
 
2017
 
2016
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
 
Net income
$
73,739

 
$
59,985

 
 
 
 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
  Depreciation and amortization
6,120

 
5,721

  Loss on disposal of assets
4

 
7

  Provision for bad debts, net
916

 
962

  Non-cash stock compensation and other charges
6,809

 
7,966

  Non-cash interest and other (income) loss
(274
)
 
958

  Deferred income taxes
(1,446
)
 
4,030

  Equity in net losses from unconsolidated joint ventures less distributions received
3,543

 
2,193

 
 
 
 
Changes in assets and liabilities, net of acquisition:
 
 
 
  Receivables
(40,673
)
 
(39,058
)
  Advances to/from marketing and reservation activities, net
17,407

 
(42,671
)
  Forgivable notes receivable, net
(14,108
)
 
(13,174
)
  Accounts payable
18,955

 
10,567

  Accrued expenses and other current liabilities
(11,286
)
 
(8,842
)
  Income taxes payable/receivable
5,629

 
10,463

  Deferred revenue
2,061

 
42,164

  Other assets
(1,764
)
 
(10,834
)
  Other liabilities
(1,524
)
 
(2,576
)
 
 
 
 
 NET CASH PROVIDED BY OPERATING ACTIVITIES
64,108

 
27,861

 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
 
 
 
Investment in property and equipment
(10,687
)
 
(10,912
)
Investment in intangible assets
(2,228
)
 
(322
)
Proceeds from sales of assets
—

 
1,700

Acquisitions of real estate
—

 
(25,389
)
Contributions to equity method investments
(42,127
)
 
(19,688
)
Distributions from equity method investments
1,696

 
3,619

Purchases of investments, employee benefit plans
(1,736
)
 
(1,140
)
Proceeds from sales of investments, employee benefit plans
2,094

 
1,136

Issuance of mezzanine and other notes receivable
(14,977
)
 
(13,048
)
Collections of mezzanine and other notes receivable
552

 
10,158

Other items, net
110

 
11

 
 
 
 
 NET CASH USED IN INVESTING ACTIVITIES
(67,303
)
 
(53,875
)
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
 
 
Net borrowings pursuant to revolving credit facilities
23,200

 
87,950

Principal payments on long-term debt
(309
)
 
(623
)
Purchases of treasury stock
(7,414
)
 
(28,278
)
Dividends paid
(24,333
)
 
(23,193
)
Proceeds from exercise of stock options
6,590

 
4,234

 
 
 
 
 NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES
(2,266
)
 
40,090




 


Net change in cash and cash equivalents
(5,461
)
 
14,076

Effect of foreign exchange rate changes on cash and cash equivalents
955

 
371

Cash and cash equivalents at beginning of period
202,463

 
193,441

 
 
 
 
CASH AND CASH EQUIVALENTS AT END OF PERIOD
$
197,957

 
$
207,888

 
 
 
 




CHOICE HOTELS INTERNATIONAL, INC AND SUBSIDIARIES
Exhibit 4
SUPPLEMENTAL OPERATING INFORMATION
 
 
DOMESTIC HOTEL SYSTEM
 
 
(UNAUDITED)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Six Months Ended June 30, 2017
 
For the Six Months Ended June 30, 2016
 
Change
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Daily
 
 
 
 
 
Average Daily
 
 
 
 
 
Average Daily
 
 
 
 
 
 
 
Rate
 
Occupancy
 
RevPAR
 
Rate
 
Occupancy
 
RevPAR
 
Rate
 
Occupancy
 
RevPAR
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Comfort Inn
 
$
92.00

 
64.7
%
 
$
59.48

 
$
90.11

 
64.0
%
 
$
57.67

 
2.1
 %
 
70

bps
 
3.1
 %
Comfort Suites
 
96.16

 
69.3
%
 
66.65

 
95.51

 
68.9
%
 
65.80

 
0.7
 %
 
40

bps
 
1.3
 %
Sleep
 
82.29

 
65.0
%
 
53.51

 
81.13

 
64.2
%
 
52.08

 
1.4
 %
 
80

bps
 
2.7
 %
Quality
 
77.45

 
58.5
%
 
45.32

 
75.79

 
57.9
%
 
43.88

 
2.2
 %
 
60

bps
 
3.3
 %
Clarion
 
82.30

 
58.9
%
 
48.45

 
80.52

 
56.3
%
 
45.35

 
2.2
 %
 
260

bps
 
6.8
 %
Econo Lodge
 
60.64

 
53.2
%
 
32.26

 
59.24

 
52.4
%
 
31.03

 
2.4
 %
 
80

bps
 
4.0
 %
Rodeway
 
62.61

 
55.1
%
 
34.51

 
60.72

 
54.6
%
 
33.15

 
3.1
 %
 
50

bps
 
4.1
 %
MainStay
 
74.51

 
67.1
%
 
49.99

 
75.80

 
63.4
%
 
48.02

 
(1.7
)%
 
370

bps
 
4.1
 %
Suburban
 
51.74

 
76.2
%
 
39.44

 
49.67

 
74.9
%
 
37.21

 
4.2
 %
 
130

bps
 
6.0
 %
Cambria hotel & suites
 
133.34

 
72.9
%
 
97.16

 
 NA

 
 NA

 
 NA

 
 NA

 
 NA

 
 
 NA

Ascend Hotel Collection
 
123.71

 
54.1
%
 
66.96

 
125.21

 
56.9
%
 
71.28

 
(1.2
)%
 
(280
)
bps
 
(6.1
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total (1)
 
$
82.16

 
61.1
%
 
$
50.22

 
$
80.77

 
60.5
%
 
$
48.84

 
1.7
 %
 
60

bps
 
2.8
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended June 30, 2017
 
For the Three Months Ended June 30, 2016
 
Change
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Daily
 
 
 
 
 
Average Daily
 
 
 
 
 
Average Daily
 
 
 
 
 
 
 
Rate
 
Occupancy
 
RevPAR
 
Rate
 
Occupancy
 
RevPAR
 
Rate
 
Occupancy
 
RevPAR
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Comfort Inn
 
$
95.96

 
70.6
%
 
$
67.76

 
$
93.87

 
70.1
%
 
$
65.84

 
2.2
 %
 
50

bps
 
2.9
 %
Comfort Suites
 
98.54

 
73.4
%
 
72.32

 
98.19

 
73.6
%
 
72.24

 
0.4
 %
 
(20
)
bps
 
0.1
 %
Sleep
 
84.84

 
69.9
%
 
59.27

 
83.93

 
69.5
%
 
58.35

 
1.1
 %
 
40

bps
 
1.6
 %
Quality
 
80.36

 
63.6
%
 
51.12

 
78.61

 
63.3
%
 
49.79

 
2.2
 %
 
30

bps
 
2.7
 %
Clarion
 
85.70

 
63.9
%
 
54.76

 
84.14

 
62.3
%
 
52.46

 
1.9
 %
 
160

bps
 
4.4
 %
Econo Lodge
 
63.31

 
57.6
%
 
36.48

 
61.84

 
57.3
%
 
35.46

 
2.4
 %
 
30

bps
 
2.9
 %
Rodeway
 
64.94

 
58.7
%
 
38.12

 
63.13

 
57.9
%
 
36.56

 
2.9
 %
 
80

bps
 
4.3
 %
MainStay
 
76.88

 
72.4
%
 
55.62

 
78.07

 
68.4
%
 
53.40

 
(1.5
)%
 
400

bps
 
4.2
 %
Suburban
 
52.42

 
78.2
%
 
41.00

 
51.07

 
76.9
%
 
39.27

 
2.6
 %
 
130

bps
 
4.4
 %
Cambria hotel & suites
 
142.23

 
77.2
%
 
109.78

 
 NA

 
 NA

 
 NA

 
 NA

 
 NA

bps
 
 NA

Ascend Hotel Collection
 
129.17

 
56.8
%
 
73.32

 
133.28

 
60.0
%
 
79.94

 
(3.1
)%
 
(320
)
bps
 
(8.3
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total  (1)
 
$
85.19

 
65.9
%
 
$
56.17

 
$
83.89

 
65.6
%
 
$
55.07

 
1.5
 %
 
30

bps
 
2.0
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Quarter Ended
 
 
 
For the Six Months Ended
 
 
 
 
 
 
 
 
 
 
 
6/30/2017
 
6/30/2016
 
 
 
6/30/2017
 
6/30/2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
System-wide effective royalty rate
 
 
 
4.58%
 
4.39%
(1) 
 
4.56%
 
4.39%
(1) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Totals for the three and six months ended June 30, 2016 have been revised from previous disclosures to include the operating statistics for the Cambria hotel & suites brand




 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES
 
Exhibit 5

SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA
 
 
(UNAUDITED)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 30, 2017
 
June 30, 2016
 
Variance
 
 
Hotels
 
Rooms
 
Hotels
 
Rooms
 
Hotels
 
Rooms
 
%
 
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Comfort Inn
 
1,093

 
84,956

 
1,138

 
88,085

 
(45
)
 
(3,129
)
 
(4.0
)%
 
(3.6
)%
Comfort Suites
 
565

 
43,721

 
564

 
43,522

 
1

 
199

 
0.2
 %
 
0.5
 %
Sleep
 
385

 
27,574

 
380

 
27,188

 
5

 
386

 
1.3
 %
 
1.4
 %
Quality
 
1,493

 
116,961

 
1,395

 
110,952

 
98

 
6,009

 
7.0
 %
 
5.4
 %
Clarion
 
163

 
22,159

 
168

 
23,033

 
(5
)
 
(874
)
 
(3.0
)%
 
(3.8
)%
Econo Lodge
 
843

 
51,757

 
847

 
52,385

 
(4
)
 
(628
)
 
(0.5
)%
 
(1.2
)%
Rodeway
 
586

 
34,085

 
528

 
29,771

 
58

 
4,314

 
11.0
 %
 
14.5
 %
MainStay
 
56

 
4,074

 
54

 
4,020

 
2

 
54

 
3.7
 %
 
1.3
 %
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
 
135

 
10,877

 
116

 
9,650

 
19

 
1,227

 
16.4
 %
 
12.7
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Domestic Franchises
 
5,409

 
406,902

 
5,273

 
398,190

 
136

 
8,712

 
2.6
 %
 
2.2
 %
International Franchises
 
1,144

 
113,322

 
1,156

 
111,366

 
(12
)
 
1,956

 
(1.0
)%
 
1.8
 %
Total Franchises
 
6,553

 
520,224

 
6,429

 
509,556

 
124

 
10,668

 
1.9
 %
 
2.1
 %




CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES
Exhibit 6

SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION
 
(UNAUDITED)
 
 
 
 
 
 
 
 
 
 
 
 
HOTEL FRANCHISING REVENUES AND ADJUSTED HOTEL FRANCHISING MARGINS
 
 
 
 
 
 
 
 
 
 
 
(dollar amounts in thousands)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
 
 
2017
 
2016
 
2017
 
2016
 
 
Hotel Franchising Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Revenues
 
$
276,799

 
$
241,751

 
$
474,697

 
$
448,869

 
 
Adjustments:
 
 
 
 
 
 
 
 
 
 
     Marketing and reservation system revenues
 
(158,035
)
 
(133,814
)
 
(267,510
)
 
(260,175
)
 
 
     Non-hotel franchising activities
 
(2,557
)
 
(2,068
)
 
(5,112
)
 
(4,097
)
 
 
Hotel Franchising Revenues
 
$
116,207

 
$
105,869

 
$
202,075

 
$
184,597

 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted Hotel Franchising Margins:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Margin:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Revenues
 
$
276,799

 
$
241,751

 
$
474,697

 
$
448,869

 
 
Operating Income
 
$
77,506

 
$
64,942

 
$
130,013

 
$
107,815

 
 
     Operating Margin
 
28.0
%
 
26.9
%
 
27.4
%
 
24.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted Hotel Franchising Margin:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Hotel Franchising Revenues
 
$
116,207

 
$
105,869

 
$
202,075

 
$
184,597

 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Income
 
$
77,506

 
$
64,942

 
$
130,013

 
$
107,815

 
 
Mark to market adjustments on non-qualified retirement plan investments
 
$
590

 
$
315

 
$
1,441

 
$
255

 
 
Executive termination benefits
 
—

 
2,206

 
—

 
2,206

 
 
Non-hotel franchising activities operating loss
 
3,801

 
6,084

 
5,906

 
11,740

 
 
     Adjusted Hotel Franchising Operating Income
 
$
81,897

 
$
73,547

 
$
137,360

 
$
122,016

 
 
 
 
 
 
 
 
 
 
 
 
 
     Adjusted Hotel Franchising Margins
 
70.5
%
 
69.5
%
 
68.0
%
 
66.1
%
 
 
 
 
 
 
 
 
 
 
 
ADJUSTED HOTEL FRANCHISING SELLING, GENERAL AND ADMINISTRATION EXPENSES
 
 
 
 
 
 
 
 
 
 
 
(dollar amounts in thousands)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
 
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Selling, General and Administrative Expenses
 
$
38,208

 
$
40,039

 
$
71,054

 
$
75,158

 
 
Mark to market adjustments on non-qualified retirement plan investments
 
$
(590
)
 
$
(315
)
 
$
(1,441
)
 
$
(255
)
 
 
Executive termination benefits
 
—

 
(2,206
)
 
—

 
(2,206
)
 
 
Non-hotel franchising activities
 
(5,415
)
 
(7,045
)
 
(9,095
)
 
(13,715
)
 
 
Adjusted Hotel Franchising Selling, General and Administration Expenses
 
$
32,203

 
$
30,473

 
$
60,518

 
$
58,982

 
 
 
 
 
 
 
 
 
 
 
ADJUSTED EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION ("EBITDA")
 
 
 
 
 
 
 
 
 
 
 
(dollar amounts in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
 
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
 
Net income
 
$
44,995

 
$
38,822

 
$
73,739

 
$
59,985

 
 
Income taxes
 
22,386

 
16,788

 
35,025

 
26,003

 
 
Interest expense
 
11,280

 
11,224

 
22,485

 
22,316

 
 
Interest income
 
(1,438
)
 
(827
)
 
(2,702
)
 
(1,666
)
 
 
Other (gains) losses
 
(576
)
 
(321
)
 
(1,473
)
 
(259
)
 
 
Equity in net (income) loss of affiliates
 
859

 
(744
)
 
2,939

 
1,436

 
 
Depreciation and amortization
 
3,050

 
2,956

 
6,120

 
5,721

 
 
Executive termination benefits
 
—

 
2,206

 
—

 
2,206

 
 
Mark to market adjustments on non-qualified retirement plan investments
 
590

 
315

 
1,441

 
255

Adjusted EBITDA
 
$
81,146

 
$
70,419

 
$
137,574

 
$
115,997

 
 
 
 
 
 
 
 
 
 
 
Hotel franchising
 
$
84,004

 
$
75,397

 
$
141,557

 
$
125,616

Non-hotel franchising activities
 
(2,858
)
 
(4,978
)
 
(3,983
)
 
(9,619
)
 
 
 
 
$
81,146

 
$
70,419

 
$
137,574

 
$
115,997

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



 
 
 
 
 
 
 
 
 
 
Exhibit 6

ADJUSTED NET INCOME AND ADJUSTED DILUTED EARNINGS PER SHARE (EPS)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(dollar amounts in thousands, except per share amounts)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
 
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
 
Net Income
 
$
44,995

 
$
38,822

 
$
73,739

 
$
59,985

Adjustments:
 
 
 
 
 
 
 
 
 
Executive termination benefits
 
—

 
1,394

 
—

 
1,394

Adjusted Net Income
 
$
44,995

 
$
40,216

 
$
73,739

 
$
61,379

 
 
 
 
 
 
 
 
 
 
 
Diluted Earnings Per Share
 
$
0.79

 
$
0.68

 
$
1.30

 
$
1.06

Adjustments:
 
 
 
 
 
 
 
 
 
Executive termination benefits
 
—

 
0.03

 
—

 
0.02

Adjusted Diluted Earnings Per Share (EPS)
 
$
0.79

 
$
0.71

 
$
1.30

 
$
1.08

 
 
 
 
 
 
 
 
 
 
 
ADJUSTED EBITDA FULL YEAR FORECAST
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(dollar amounts in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Range
 
 
 
 
 
 
 
 
Estimated Adjusted EBITDA
 
 
 
 
 
 
 
 
Fiscal Year 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
 
$
160,000

 
$
163,000

 
 
 
 
 
 
Income taxes
 
77,500

 
78,500

 
 
 
 
 
 
Interest expense
 
45,900

 
45,900

 
 
 
 
 
 
Interest income
 
(5,100
)
 
(5,100
)
 
 
 
 
 
 
Gain on sale of assets
 
—

 
—

 
 
 
 
 
 
Other gains
 
(1,500
)
 
(1,500
)
 
 
 
 
 
 
Equity in net loss of affiliates
 
1,600

 
1,600

 
 
 
 
 
 
Depreciation and amortization
 
13,100

 
13,100

 
 
 
 
 
 
Mark to market adjustments on non-qualified retirement plan investments
 
1,500

 
1,500

 
 
 
 
Adjusted EBITDA
 
$
293,000

 
$
297,000

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Hotel franchising
 
$
299,000

 
$
303,000

 
 
 
 
Non-hotel franchising activities
 
(6,000
)
 
(6,000
)
 
 
 
 
 
 
 
 
$
293,000

 
$
297,000