CHOICE HOTELS INTERNATIONAL INC /DE - FORM 8-K - EX-99.1

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8-K - FORM 8-K - CHOICE HOTELS INTERNATIONAL INC /DE	d15882d8k.htm

Exhibit 99.1

LOGO

For Immediate Release

CHOICE HOTELS INTERNATIONAL REPORTS A 10% INCREASE IN THIRD

QUARTER EBITDA FROM FRANCHISING ACTIVITIES

New Executed Domestic Franchise Agreements Increase 14%

Company Repurchases 1 Million Shares of Stock During Third Quarter

ROCKVILLE, MD. (October 30, 2015) – Choice Hotels International, Inc. (NYSE:CHH) today reported the following highlights for the third quarter 2015:

•

Revenues for the three months ended September 30, 2015 totaled $241.5 million, an increase of 12 percent from the same period of 2014.

•

Earnings before interest, taxes, depreciation and amortization (“EBITDA”) from franchising activities for the three months ended September 30, 2015, totaled $81.1 million, an increase of 10 percent from the same period of 2014.

•

Franchising margins for the three months ended September 30, 2015, were 74.6 percent, an increase of 230 basis points from the same period of 2014.

•

Domestic royalty fees for the three months ended September 30, 2015, totaled $84.7 million, an increase of 6.5 percent from the same period of 2014.

•

Domestic system-wide revenue per available room (“RevPAR”) increased 5.8 percent in the third quarter of 2015, as occupancy and average daily rates increased 120 basis points and 4 percent, respectively from the same period of 2014.

•

Domestic units increased 0.2 percent from September 30, 2014.

•

Effective royalty rate for the three months ended September 30, 2015 increased 3 basis points to 4.27 percent from the same period of 2014.

•

Initial and relicensing fees for the three months ended September 30, 2015, totaled $6.2 million, an increase of 44 percent from the same period of 2014.

•

Domestic hotel executed franchise agreements totaled 129 for the three months ended September 30, 2015, an increase of 14 percent from the same period of 2014.

•

Executed 9 new domestic franchise agreements during the three months ended September 30, 2015 for the Cambria hotels & suites brand including 2 conversion projects in Chicago, Illinois and Atlanta, Georgia.

•

Domestic relicensing and contract renewal transactions totaled 119 for the three months ended September 30, 2015, an increase of 40 percent from the same period of 2014.

•

The company’s new construction domestic pipeline of hotels under construction or approved for development increased 29 percent from September 30, 2014, and the total pipeline increased 28 percent.

•

Diluted earnings per share (“EPS”) from continuing operations for the three months ended September 30, 2015, totaled $0.72, an increase of 7 percent from the same period of 2014.

•

The company purchased 1.0 million shares of common stock under its share repurchase program during the three months ended September 30, 2015, at a total cost of approximately $50 million.

“We are very pleased with our performance in the third quarter, with double-digit percentage growth in both total revenues and EBITDA. We were pleased with our year-over-year increase in domestic royalty revenue driven by growth in all 3 critical levers – RevPAR, system-size and effective royalty rate. We had a terrific quarter on the development front with improvements in domestic franchise contracts for both new construction and conversion hotels demonstrating that the demand for our brands is strong,” said Stephen P. Joyce, president and chief executive officer, Choice Hotels. “The fundamental strength of our operating model enables us to generate strong free cash flows, which allows us to return value to our shareholders through a disciplined and prudent capital allocation strategy.”

Discontinued Operations

During 2014, the company entered into and completed a plan to sell its three owned hotels operated under the MainStay Suites brand. The company determined that the sale of these hotels met the definition of a discontinued operation since the operations and cash flows of these components have been eliminated from the on-going operations of the company and the company does not have significant continuing involvement in the operations of the hotels after the transaction. As a result, the company’s consolidated statement of income for the three and nine months ended September 30, 2014, reflects these three company-owned hotels as discontinued operations.

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:

Franchising

•

EBITDA from franchising activities for full-year 2015 are expected to range between $255 million and $257 million;

•

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

•

RevPAR is expected to increase approximately 5.5% and 7% for fourth quarter and full-year 2015, respectively; 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 be approximately $17 million.

Other Items

•

The effective tax rate for continuing operations is expected to be approximately 31% and 32% for the fourth quarter and full-year 2015, respectively; and

•

All figures assume no further repurchases of common stock under the company’s share repurchase program.

Consolidated Outlook

The company’s fourth quarter 2015 diluted EPS is expected to be at least $0.47. The company expects full-year 2015 diluted EPS to range between $2.18 and $2.20 and full year 2015 EBITDA to range between $237 million and $241 million.

Conference Call

Choice will conduct a conference call on Friday, October 30, 2015 at 10:00 a.m. EDT to discuss the company’s third quarter 2015 results. The dial-in number to listen to the call is 1-855-638-5678, and the access code is 52809803. International callers should dial 1-920-663-6286 and enter the access code 52809803. 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. EDT on Friday, October 30, 2015 through Friday, November 6, 2015 by calling 1-855-859-2056 and entering access code 52809803. The international dial-in number for the replay is 1-404-537-3406 and the access code is 52809803. In addition, the call will be archived and available on www.choicehotels.com via the Investor Info link.

About Choice Hotels

Choice Hotels International, Inc.^® (NYSE: CHH) is one of the world’s largest lodging companies. With more than 6,300 hotels franchised in more than 35 countries and territories, we represent more than 500,000 rooms around the globe. As of September 30, 2015, 638 hotels were in our development pipeline. Our company’s Ascend Hotel Collection^®, Cambria^® hotels & suites, Comfort Inn^®, Comfort Suites^®, Sleep Inn^®, Quality^®, Clarion^®, MainStay Suites^®, Suburban Extended Stay Hotel^®, Econo Lodge^® and Rodeway Inn^® brands provide a spectrum of lodging choices to meet guests’ needs. With more than 24 million members and counting, check out our Choice Privileges^® rewards program to see how you can reap the benefits of being a member of the Choice Hotels^® family. Visit us at www.choicehotels.com for more information.

SkyTouch Technology^® is a business division of Choice Hotels 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,” “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; or ability to grow our franchise system; exposure to risks related to development 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 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, EBITDA from franchising activities 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, the SkyTouch Technology division, recently acquired operations that provide 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. 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 and our vacation rental technology solutions provider are excluded since they do not reflect the company’s core franchising business but are adjacent, complimentary lines 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.

Contacts

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

(301) 592-5117

Scott Carman, Director, Public Relations

(301) 592-6361

Exhibit 1

Choice Hotels International, Inc.

Consolidated Statements of Income

(Unaudited)


	Three Months Ended September 30,												Nine Months Ended September 30,
							Variance												Variance
	2015			2014			$			%			2015			2014			$			%
(In thousands, except per share amounts)
REVENUES:
Royalty fees	$	89,929		$	86,091		$	3,838			4	%	$	233,543		$	222,301		$	11,242			5	%
Initial franchise and relicensing fees		6,170			4,299			1,871			44	%		17,703			12,761			4,942			39	%
Procurement services		6,271			5,495			776			14	%		19,667			18,293			1,374			8	%
Marketing and reservation		134,463			115,653			18,810			16	%		366,298			309,025			57,273			19	%
Other		4,693			3,630			1,063			29	%		11,716			10,188			1,528			15	%

Total revenues		241,526			215,168			26,358			12	%		648,927			572,568			76,359			13	%
OPERATING EXPENSES:
Selling, general and administrative		30,152			30,236			(84	)		(0	%)		95,712			88,329			7,383			8	%
Depreciation and amortization		3,108			2,293			815			36	%		8,793			6,903			1,890			27	%
Marketing and reservation		134,463			115,653			18,810			16	%		366,298			309,025			57,273			19	%

Total operating expenses		167,723			148,182			19,541			13	%		470,803			404,257			66,546			16	%
Operating income		73,803			66,986			6,817			10	%		178,124			168,311			9,813			6	%
OTHER INCOME AND EXPENSES, NET:
Interest expense		10,821			10,495			326			3	%		32,057			31,376			681			2	%
Interest income		(359	)		(355	)		(4	)		1	%		(982	)		(1,205	)		223			(19	%)
Other (gains) and losses		1,402			375			1,027			274	%		(239	)		(158	)		(81	)		51	%
Equity in net (income) loss of affiliates		(329	)		513			(842	)		(164	%)		1,107			578			529			92	%

Total other income and expenses, net		11,535			11,028			507			5	%		31,943			30,591			1,352			4	%

Income from continuing operations before income taxes		62,268			55,958			6,310			11	%		146,181			137,720			8,461			6	%
Income taxes		20,849			16,542			4,307			26	%		47,355			41,556			5,799			14	%

Income from continuing operations, net of income taxes		41,419			39,416			2,003			5	%		98,826			96,164			2,662			3	%
Income from discontinued operations, net of income taxes		—			(51	)		51			(100	%)		—			1,711			(1,711	)		(100	%)

Net income	$	41,419		$	39,365		$	2,054			5	%	$	98,826		$	97,875		$	951			1	%

Basic earnings per share
Continuing operations	$	0.72		$	0.67		$	0.05			7	%	$	1.72		$	1.65		$	0.07			4	%
Discontinued operations		—			—			—			NM			—			0.03			(0.03	)		(100	%)

	$	0.72		$	0.67		$	0.05			7	%	$	1.72		$	1.68		$	0.04			2	%

Diluted earnings per share
Continuing operations	$	0.72		$	0.67		$	0.05			7	%	$	1.71		$	1.63		$	0.08			5	%
Discontinued operations		—			—			—			NM			—			0.03			(0.03	)		(100	%)

	$	0.72		$	0.67		$	0.05			7	%	$	1.71		$	1.66		$	0.05			3	%

Exhibit 2

Choice Hotels International, Inc.

Consolidated Balance Sheets


(In thousands, except per share amounts)	September 30, 2015			December 31, 2014
	(Unaudited)
ASSETS
Cash and cash equivalents	$	199,261		$	214,879
Accounts receivable, net		114,623			91,681
Other current assets		45,649			42,729

Total current assets		359,533			349,289
Fixed assets and intangibles, net		178,462			152,034
Notes receivable, net of allowances		73,756			40,441
Investments, employee benefit plans, at fair value		17,102			17,539
Other assets		83,909			78,614

Total assets	$	712,762		$	637,917

LIABILITIES AND SHAREHOLDERS’ DEFICIT
Accounts payable	$	59,922		$	57,124
Accrued expenses and other current liabilities		61,051			64,243
Deferred revenue		68,439			66,382
Current portion of long-term debt		1,706			12,349

Total current liabilities		191,118			200,098
Long-term debt		815,858			772,729
Deferred compensation & retirement plan obligations		22,145			23,987
Other liabilities		84,284			69,904

Total liabilities		1,113,405			1,066,718

Total shareholders’ deficit		(400,643	)		(428,801	)

Total liabilities and shareholders’ deficit	$	712,762		$	637,917

Exhibit 3

Choice Hotels International, Inc.

Consolidated Statements of Cash Flows

(Unaudited)


(In thousands)	Nine Months Ended September 30,
	2015			2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	98,826		$	97,875
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		8,793			6,903
Gain on sale of assets		(1,519	)		(2,809	)
Provision for bad debts, net		1,540			1,676
Non-cash stock compensation and other charges		8,929			8,093
Non-cash interest and other (income) loss		3,168			1,836
Deferred income taxes		(1,799	)		(19,216	)
Equity (earnings) losses from unconsolidated joint ventures, net of distributions received		2,917			1,679
Changes in assets and liabilities, net of acquisition:
Receivables		(24,532	)		(30,497	)
Advances to/from marketing and reservation activities, net		18,341			60,187
Forgivable notes receivable, net		(21,029	)		(8,776	)
Accounts payable		5,111			21,845
Accrued expenses and other current liabilities		(14,083	)		(11,082	)
Income taxes payable/receivable		11,066			7,981
Deferred revenue		2,122			4,751
Other assets		(4,826	)		(1,125	)
Other liabilities		5,748			(943	)

NET CASH PROVIDED BY OPERATING ACTIVITIES		98,773			138,378

CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in property and equipment		(21,810	)		(11,886	)
Proceeds from sales of assets		6,347			15,612
Acquisition, net of cash acquired		(13,269	)		—
Issuance of mezzanine and other notes receivable		(25,253	)		(3,340	)
Collections of mezzanine and other notes receivable		3,697			9,832
Contributions to equity method investments		(3,811	)		(14,362	)
Distributions from equity method investments		270			—
Purchases of investments, employee benefit plans		(2,977	)		(1,520	)
Proceeds from sales of investments, employee benefit plans		2,920			966
Other items, net		(9,212	)		(592	)

NET CASH USED BY INVESTING ACTIVITIES		(63,098	)		(5,290	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings pursuant to revolving credit facilities		162,032			—
Principal payments on long-term debt		(130,194	)		(7,110	)
Proceeds from the issuance of long-term debt		176			226
Debt issuance costs		(2,169	)		—
Purchase of treasury stock		(56,450	)		(23,757	)
Dividends paid		(34,173	)		(32,767	)
Excess tax benefits from stock-based compensation		4,885			2,297
Proceeds from exercise of stock options		6,381			4,984

NET CASH USED BY FINANCING ACTIVITIES		(49,512	)		(56,127	)

Net change in cash and cash equivalents		(13,837	)		76,961
Effect of foreign exchange rate changes on cash and cash equivalents		(1,781	)		(364	)
Cash and cash equivalents at beginning of period		214,879			167,795

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	199,261		$	244,392

Exhibit 4

CHOICE HOTELS INTERNATIONAL, INC.

SUPPLEMENTAL OPERATING INFORMATION

DOMESTIC HOTEL SYSTEM

(UNAUDITED)


	For the Nine Months Ended September 30, 2015								For the Nine Months Ended September 30, 2014								Change
	Average Daily Rate			Occupancy			RevPAR		Average Daily Rate			Occupancy			RevPAR		Average Daily Rate			Occupancy				RevPAR
Comfort Inn	$	90.65			66.8	%	$	60.52	$	86.92			64.9	%	$	56.43		4.3	%		190		bps		7.2	%
Comfort Suites		94.83			69.9	%		66.25		91.06			67.8	%		61.78		4.1	%		210		bps		7.2	%
Sleep		81.34			65.7	%		53.45		77.75			63.7	%		49.52		4.6	%		200		bps		7.9	%
Quality		76.02			60.2	%		45.75		72.87			57.7	%		42.05		4.3	%		250		bps		8.8	%
Clarion		80.93			58.9	%		47.68		78.05			55.9	%		43.59		3.7	%		300		bps		9.4	%
Econo Lodge		60.44			55.1	%		33.30		58.64			52.9	%		31.01		3.1	%		220		bps		7.4	%
Rodeway		60.56			58.5	%		35.44		57.46			56.5	%		32.48		5.4	%		200		bps		9.1	%
MainStay		78.03			69.7	%		54.35		75.52			72.9	%		55.03		3.3	%		(320	)	bps		(1.2	%)
Suburban		47.75			77.0	%		36.78		45.29			73.3	%		33.19		5.4	%		370		bps		10.8	%
Ascend Hotel Collection		127.38			59.9	%		76.34		120.64			59.8	%		72.10		5.6	%		10		bps		5.9	%

Total	$	80.77			62.9	%	$	50.79	$	77.80			60.9	%	$	47.36		3.8	%		200		bps		7.2	%


	For the Three Months Ended September 30, 2015								For the Three Months Ended September 30, 2014								Change
	Average Daily Rate			Occupancy			RevPAR		Average Daily Rate			Occupancy			RevPAR		Average Daily Rate			Occupancy				RevPAR
Comfort Inn	$	96.35			73.2	%	$	70.54	$	92.33			72.0	%	$	66.44		4.4	%		120		bps		6.2	%
Comfort Suites		98.06			73.2	%		71.79		94.13			72.1	%		67.86		4.2	%		110		bps		5.8	%
Sleep		84.44			69.1	%		58.31		80.95			68.4	%		55.35		4.3	%		70		bps		5.3	%
Quality		80.80			65.3	%		52.79		77.05			63.3	%		48.78		4.9	%		200		bps		8.2	%
Clarion		85.46			63.9	%		54.61		83.40			61.8	%		51.49		2.5	%		210		bps		6.1	%
Econo Lodge		65.32			60.1	%		39.27		63.31			59.0	%		37.33		3.2	%		110		bps		5.2	%
Rodeway		66.00			63.7	%		42.02		62.71			62.8	%		39.35		5.2	%		90		bps		6.8	%
MainStay		81.26			71.8	%		58.36		78.58			77.3	%		60.70		3.4	%		(550	)	bps		(3.9	%)
Suburban		48.77			78.1	%		38.09		46.78			74.6	%		34.88		4.3	%		350		bps		9.2	%
Ascend Hotel Collection		134.88			60.1	%		81.07		127.43			61.0	%		77.68		5.8	%		(90	)	bps		4.4	%

Total	$	85.38			67.7	%	$	57.80	$	82.12			66.5	%	$	54.64		4.0	%		120		bps		5.8	%


	For the Three Months Ended								For the Nine Months Ended
	9/30/2015			9/30/2014					9/30/2015			9/30/2014
System-wide effective royalty rate		4.27	%		4.24	%				4.28	%		4.28	%

Exhibit 5

CHOICE HOTELS INTERNATIONAL, INC.

SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA

(UNAUDITED)


	September 30, 2015				September 30, 2014				Variance
	Hotels		Rooms		Hotels		Rooms		Hotels			Rooms			%			%
Comfort Inn		1,188		92,029		1,266		98,119		(78	)		(6,090	)		(6.2	%)		(6.2	%)
Comfort Suites		574		44,311		593		45,873		(19	)		(1,562	)		(3.2	%)		(3.4	%)
Sleep		374		26,913		374		27,065		—			(152	)		0.0	%		(0.6	%)
Quality		1,325		105,950		1,262		103,358		63			2,592			5.0	%		2.5	%
Clarion		176		24,626		183		26,182		(7	)		(1,556	)		(3.8	%)		(5.9	%)
Econo Lodge		854		52,963		846		52,304		8			659			0.9	%		1.3	%
Rodeway		488		27,095		460		25,235		28			1,860			6.1	%		7.4	%
MainStay		48		3,656		42		3,304		6			352			14.3	%		10.7	%
Suburban		63		7,065		64		7,164		(1	)		(99	)		(1.6	%)		(1.4	%)
Ascend Hotel Collection		112		9,407		107		9,271		5			136			4.7	%		1.5	%
Cambria hotel & suites		24		2,917		21		2,534		3			383			14.3	%		15.1	%

Domestic Franchises		5,226		396,932		5,218		400,409		8			(3,477	)		0.2	%		(0.9	%)
International Franchises		1,153		107,425		1,168		106,905		(15	)		520			(1.3	%)		0.5	%

Total Franchises		6,379		504,357		6,386		507,314		(7	)		(2,957	)		(0.1	%)		(0.6	%)

Exhibit 6

CHOICE HOTELS INTERNATIONAL, INC.

SUPPLEMENTAL INFORMATION BY BRAND

DEVELOPMENT RESULTS – DOMESTIC NEW HOTEL CONTRACTS

(UNAUDITED)


	For the Nine Months Ended September 30, 2015						For the Nine Months Ended September 30, 2014						% Change
	New Construction		Conversion		Total		New Construction		Conversion		Total		New Construction			Conversion			Total
Comfort Inn		17		28		45		16		11		27		6	%		155	%		67	%
Comfort Suites		18		3		21		11		—		11		64	%		NM			91	%
Sleep		19		—		19		21		1		22		(10	%)		(100	%)		(14	%)
Quality		3		114		117		3		82		85		0	%		39	%		38	%
Clarion		—		7		7		1		15		16		(100	%)		(53	%)		(56	%)
Econo Lodge		—		39		39		1		46		47		(100	%)		(15	%)		(17	%)
Rodeway		—		57		57		3		48		51		(100	%)		19	%		12	%
MainStay		16		—		16		10		1		11		60	%		(100	%)		45	%
Suburban		1		4		5		2		3		5		(50	%)		33	%		0	%
Ascend Hotel Collection		3		22		25		6		11		17		(50	%)		100	%		47	%
Cambria hotel & suites		14		2		16		5		—		5		180	%		NM			220	%

Total Domestic System		91		276		367		79		218		297		15	%		27	%		24	%


	For the Three Months Ended September 30, 2015						For the Three Months Ended September 30, 2014						% Change
	New Construction		Conversion		Total		New Construction		Conversion		Total		New Construction			Conversion			Total
Comfort Inn		4		8		12		6		3		9		(33	%)		167	%		33	%
Comfort Suites		5		1		6		4		—		4		25	%		NM			50	%
Sleep		10		—		10		7		—		7		43	%		NM			43	%
Quality		—		39		39		—		34		34		NM			15	%		15	%
Clarion		—		1		1		1		4		5		(100	%)		(75	%)		(80	%)
Econo Lodge		—		11		11		1		19		20		(100	%)		(42	%)		(45	%)
Rodeway		—		22		22		2		17		19		(100	%)		29	%		16	%
MainStay		10		—		10		5		—		5		100	%		NM			100	%
Suburban		—		1		1		1		—		1		(100	%)		NM			0	%
Ascend Hotel Collection		2		6		8		—		5		5		NM			20	%		60	%
Cambria hotel & suites		7		2		9		4		—		4		75	%		NM			125	%

Total Domestic System		38		91		129		31		82		113		23	%		11	%		14	%

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
	September 30, 2015 Units						September 30, 2014 Units						Conversion						New Construction						Total
	Conversion		New Construction		Total		Conversion		New Construction		Total		Units			%			Units			%			Units			%
Comfort Inn		39		63		102		33		51		84		6			18	%		12			24	%		18			21	%
Comfort Suites		1		75		76		—		47		47		1			NM			28			60	%		29			62	%
Sleep Inn		—		72		72		2		62		64		(2	)		(100	%)		10			16	%		8			13	%
Quality		56		5		61		34		6		40		22			65	%		(1	)		(17	%)		21			53	%
Clarion		9		2		11		9		3		12		—			0	%		(1	)		(33	%)		(1	)		(8	%)
Econo Lodge		26		4		30		36		3		39		(10	)		(28	%)		1			33	%		(9	)		(23	%)
Rodeway		44		2		46		31		4		35		13			42	%		(2	)		(50	%)		11			31	%
MainStay		1		54		55		2		39		41		(1	)		(50	%)		15			38	%		14			34	%
Suburban		4		10		14		6		11		17		(2	)		(33	%)		(1	)		(9	%)		(3	)		(18	%)
Ascend Hotel Collection		21		18		39		8		15		23		13			163	%		3			20	%		16			70	%
Cambria hotel & suites		2		32		34		—		20		20		2			NM			12			60	%		14			70	%

		203		337		540		161		261		422		42			26	%		76			29	%		118			28	%

Exhibit 8

CHOICE HOTELS INTERNATIONAL, INC.

SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION

(UNAUDITED)

CALCULATION OF FRANCHISING REVENUES AND FRANCHISING MARGINS


(dollar amounts in thousands)	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Franchising Revenues:
Total Revenues	$	241,526		$	215,168		$	648,927		$	572,568
Adjustments:
Marketing and reservation revenues		(134,463	)		(115,653	)		(366,298	)		(309,025	)
Non-franchising activities		(1,458	)		(92	)		(2,473	)		(213	)

Franchising Revenues	$	105,605		$	99,423		$	280,156		$	263,330

Franchising Margins:
Operating Margin:
Total Revenues	$	241,526		$	215,168		$	648,927		$	572,568
Operating Income	$	73,803		$	66,986		$	178,124		$	168,311

Operating Margin		30.6	%		31.1	%		27.4	%		29.4	%

Franchising Margin:
Franchising Revenues	$	105,605		$	99,423		$	280,156		$	263,330
Operating Income	$	73,803		$	66,986		$	178,124		$	168,311
Non-franchising activities operating loss		4,943			4,928			14,807			12,794

	$	78,746		$	71,914		$	192,931		$	181,105

Franchising Margins		74.6	%		72.3	%		68.9	%		68.8	%


CALCULATION OF FRANCHISING SELLING, GENERAL AND ADMINISTRATION EXPENSES

(dollar amounts in thousands)	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014

Total Selling, General and Administrative Expenses	$	30,152		$	30,236		$	95,712		$	88,329
Non-Franchising Activities		(5,632	)		(4,786	)		(15,630	)		(12,322	)

Franchising Selling, General and Administration Expenses	$	24,520		$	25,450		$	80,082		$	76,007


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

(dollar amounts in thousands)	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Income from continuing operations, net of income taxes	$	41,419		$	39,416		$	98,826		$	96,164
Income taxes		20,849			16,542			47,355			41,556
Interest expense		10,821			10,495			32,057			31,376
Interest income		(359	)		(355	)		(982	)		(1,205	)
Other (gains) and losses		1,402			375			(239	)		(158	)
Equity in net (income) loss of affiliates		(329	)		513			1,107			578
Depreciation and amortization		3,108			2,293			8,793			6,903

EBITDA	$	76,911		$	69,279		$	186,917		$	175,214

Franchising	$	81,085		$	73,973		$	200,074		$	187,323
Non-Franchising activities		(4,174	)		(4,694	)		(13,157	)		(12,109	)

	$	76,911		$	69,279		$	186,917		$	175,214

Exhibit 9

CHOICE HOTELS INTERNATIONAL, INC.

DISCONTINUED OPERATIONS

(UNAUDITED)


	Three Months Ended September 30,					Nine Months Ended September 30,
(In thousands)	2015		2014			2015		2014
REVENUES:
Hotel operations	$	—	$	—		$	—	$	801

Total revenues		—		—			—		801
OPERATING EXPENSES:
Hotel operations		—		52			—		884

Total operating expenses		—		52			—		884
Operating income (loss)		—		(52	)		—		(83	)
Gain (loss) on disposal of discontinued operations		—		(30	)		—		2,803

Income (loss) from discontinued operations before income taxes		—		(82	)		—		2,720
Income tax (benefit)		—		(31	)		—		1,009

Income (loss) from discontinued operations	$	—	$	(51	)	$	—	$	1,711

CHOICE HOTELS INTERNATIONAL INC /DE - FORM 8-K - EX-99.1 - October 30, 2015

Attached files

CHOICE HOTELS INTERNATIONAL INC /DE Reports