Delaware | 001-13393 | 52-1209792 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification Number) |
1 Choice Hotels Circle, Suite 400, Rockville, Maryland | 20850 | |
(Address of principal executive offices) | (Zip Code) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. | Results of Operations and Financial Condition. |
Item 9.01. | Financial Statements and Exhibits. |
Date: | August 2, 2016 | /s/ Scott E. Oaksmith | ||||
Scott E. Oaksmith | ||||||
Senior Vice President, Finance & Chief Accounting Officer |
• | Net income and diluted earnings per share (“EPS”) for the three months ended June 30, 2016, totaled $38.8 million and $0.68 per share, respectively. Adjusted net income and adjusted diluted EPS for the three months ended June 30, 2016, which exclude certain special items as described below, increased 12 percent and 15 percent, respectively, over the prior year period. |
• | Adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) from hotel franchising activities, excluding special items, for the three months ended June 30, 2016 totaled $75.1 million, an increase of 7 percent over the prior year period. |
• | Revenues for the three months ended June 30, 2016 totaled $241.8 million, an increase of 4 percent from the same period of 2015. |
• | Franchising revenues for the three months ended June 30, 2016 totaled $105.9 million, an increase of 7 percent from the same period of 2015. |
• | Domestic royalty fees for the three months ended June 30, 2016, totaled $81.1 million, an increase of 7 percent from the same period of 2015. |
• | Domestic system-wide revenue per available room (“RevPAR”) increased 4.3 percent in the second quarter of 2016, as occupancy and average daily rates increased 80 basis points and 3 percent, respectively from the same period of 2015. |
• | Domestic RevPAR performance for the second quarter of 2016 exceeded total industry results by 80 basis points and also exceeded growth reported by Smith Travel Research for the primary chain scale segments in which the company competes. |
• | Effective domestic royalty rate for the three months ended June 30, 2016 was 4.40 percent, an increase of 12 basis points from the same period of 2015. |
• | Domestic hotel executed franchise agreements totaled 147 for the three months ended June 30, 2016, an increase of 6 percent from the same period of 2015. |
• | Executed 9 new domestic franchise agreements during the three months ended June 30, 2016 for the Cambria hotels & suites brand including projects in Boston, MA, Los Angeles, CA and Seattle, WA. |
• | Domestic relicensing and contract renewal transactions totaled 107 for the three months ended June 30, 2016, an increase of 26 percent from the same period of 2015. |
• | The company’s domestic pipeline of hotels awaiting conversion, under construction or approved for development as of June 30, 2016 increased 14 percent from June 30, 2015. The domestic pipeline for the company’s Cambria brand as of June 30, 2016 totaled 53 hotels, a 112 percent increase from June 30, 2015. |
• | The company purchased 0.4 million shares of common stock under its share repurchase program during the three months ended June 30, 2016 at a total cost of approximately $19.4 million. |
• | Adjusted EBITDA from franchising activities for full-year 2016 are expected to range between $270 million and $274 million; |
• | Net domestic unit growth for 2016 is expected to be between 2% and 3%; |
• | RevPAR is expected to increase between 3.5% and 4.0% for third quarter and range between 3.5% and 4.0% for full-year 2016; and |
• | The effective royalty rate is expected to increase between 7 and 9 basis points for full-year 2016 as compared to full-year 2015. |
• | Net reductions in full-year 2016 EBITDA relating to our non-hotel franchising operations, which primarily relate to SkyTouch and vacation rental activities are expected to range between approximately $16 million and $19 million. |
• | The effective tax rate is expected to be approximately 32.5% and 31.7% for the third quarter and full-year 2016. |
• | Adjusted EBITDA and adjusted EPS estimates exclude executive termination benefits incurred in the second quarter of 2016 as discussed above under Special Item. |
• | 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. |
Choice Hotels International, Inc. | Exhibit 1 | |||||||||||||||||||||||||||||
Consolidated Statements of Income | ||||||||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||
Variance | Variance | |||||||||||||||||||||||||||||
2016 | 2015 | $ | % | 2016* | 2015 | $ | % | |||||||||||||||||||||||
(In thousands, except per share amounts) | ||||||||||||||||||||||||||||||
REVENUES: | ||||||||||||||||||||||||||||||
Royalty fees | $ | 86,195 | $ | 81,183 | $ | 5,012 | 6 | % | $ | 151,054 | $ | 143,614 | $ | 7,440 | 5 | % | ||||||||||||||
Initial franchise and relicensing fees | 5,706 | 5,816 | (110 | ) | (2 | )% | 10,862 | 11,533 | (671 | ) | (6 | )% | ||||||||||||||||||
Procurement services | 10,308 | 8,589 | 1,719 | 20 | % | 16,104 | 13,396 | 2,708 | 20 | % | ||||||||||||||||||||
Marketing and reservation system | 133,814 | 133,122 | 692 | 1 | % | 260,175 | 231,835 | 28,340 | 12 | % | ||||||||||||||||||||
Other | 5,728 | 3,446 | 2,282 | 66 | % | 10,674 | 7,023 | 3,651 | 52 | % | ||||||||||||||||||||
Total revenues | 241,751 | 232,156 | 9,595 | 4 | % | 448,869 | 407,401 | 41,468 | 10 | % | ||||||||||||||||||||
OPERATING EXPENSES: | ||||||||||||||||||||||||||||||
Selling, general and administrative | 40,039 | 33,122 | 6,917 | 21 | % | 75,158 | 65,560 | 9,598 | 15 | % | ||||||||||||||||||||
Depreciation and amortization | 2,956 | 2,995 | (39 | ) | (1 | )% | 5,721 | 5,685 | 36 | 1 | % | |||||||||||||||||||
Marketing and reservation system | 133,814 | 133,122 | 692 | 1 | % | 260,175 | 231,835 | 28,340 | 12 | % | ||||||||||||||||||||
Total operating expenses | 176,809 | 169,239 | 7,570 | 4 | % | 341,054 | 303,080 | 37,974 | 13 | % | ||||||||||||||||||||
Operating income | 64,942 | 62,917 | 2,025 | 3 | % | 107,815 | 104,321 | 3,494 | 3 | % | ||||||||||||||||||||
OTHER INCOME AND EXPENSES, NET: | ||||||||||||||||||||||||||||||
Interest expense | 11,224 | 11,057 | 167 | 2 | % | 22,316 | 21,236 | 1,080 | 5 | % | ||||||||||||||||||||
Interest income | (827 | ) | (277 | ) | (550 | ) | 199 | % | (1,666 | ) | (623 | ) | (1,043 | ) | 167 | % | ||||||||||||||
Other gains | (321 | ) | (1,173 | ) | 852 | (73 | )% | (259 | ) | (1,641 | ) | 1,382 | (84 | )% | ||||||||||||||||
Equity in net (income) loss of affiliates | (744 | ) | 431 | (1,175 | ) | (273 | )% | 1,436 | 1,436 | — | — | % | ||||||||||||||||||
Total other income and expenses, net | 9,332 | 10,038 | (706 | ) | (7 | )% | 21,827 | 20,408 | 1,419 | 7 | % | |||||||||||||||||||
Income before income taxes | 55,610 | 52,879 | 2,731 | 5 | % | 85,988 | 83,913 | 2,075 | 2 | % | ||||||||||||||||||||
Income taxes | 16,788 | 17,066 | (278 | ) | (2 | )% | 26,003 | 26,506 | (503 | ) | (2 | )% | ||||||||||||||||||
Net income | $ | 38,822 | $ | 35,813 | $ | 3,009 | 8 | % | $ | 59,985 | $ | 57,407 | $ | 2,578 | 4 | % | ||||||||||||||
Basic earnings per share | $ | 0.69 | $ | 0.62 | $ | 0.07 | 11 | % | $ | 1.06 | $ | 1.00 | $ | 0.06 | 6 | % | ||||||||||||||
Diluted earnings per share | $ | 0.68 | $ | 0.62 | $ | 0.06 | 10 | % | $ | 1.06 | $ | 0.99 | $ | 0.07 | 7 | % | ||||||||||||||
* Year to date results for June 30, 2016 reflect the adoption of Accounting Standards Update Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting ("ASU No. 2016-09"), which requires companies to recognize excess tax benefits and deficiencies as income tax expense or benefit in the income statement. Adoption of the standard required that the company retrospectively apply the requirement to the beginning of the year of adoption, January 1, 2016. As a result, the company has reduced its previously reported income tax expense for the first quarter of 2016 by $1.6 million. |
Choice Hotels International, Inc. | Exhibit 2 | ||||||||||
Consolidated Balance Sheets | |||||||||||
(In thousands, except per share amounts) | June 30, | December 31, | |||||||||
2016 | 2015 | ||||||||||
(Unaudited) | |||||||||||
ASSETS | |||||||||||
Cash and cash equivalents | $ | 207,888 | $ | 193,441 | |||||||
Accounts receivable, net | 126,689 | 89,352 | |||||||||
Other current assets | 43,466 | 28,160 | |||||||||
Total current assets | 378,043 | 310,953 | |||||||||
Fixed assets and intangibles, net | 178,089 | 179,433 | |||||||||
Notes receivable, net of allowances | 92,195 | 82,572 | |||||||||
Investments in unconsolidated entities | 78,801 | 67,037 | |||||||||
Investments, employee benefit plans, at fair value | 16,516 | 17,674 | |||||||||
Other assets | 99,746 | 59,341 | |||||||||
Total assets | $ | 843,390 | $ | 717,010 | |||||||
LIABILITIES AND SHAREHOLDERS' DEFICIT | |||||||||||
Accounts payable | $ | 74,925 | $ | 64,431 | |||||||
Accrued expenses and other current liabilities | 69,776 | 70,807 | |||||||||
Deferred revenue | 113,763 | 71,587 | |||||||||
Current portion of long-term debt | 833 | 1,191 | |||||||||
Total current liabilities | 259,297 | 208,016 | |||||||||
Long-term debt | 901,352 | 812,945 | |||||||||
Deferred compensation & retirement plan obligations | 20,873 | 22,859 | |||||||||
Other liabilities | 35,696 | 69,089 | |||||||||
Total liabilities | 1,217,218 | 1,112,909 | |||||||||
Total shareholders' deficit | (373,828 | ) | (395,899 | ) | |||||||
Total liabilities and shareholders' deficit | $ | 843,390 | $ | 717,010 | |||||||
Choice Hotels International, Inc. | Exhibit 3 | ||||||
Consolidated Statements of Cash Flows | |||||||
(Unaudited) | |||||||
(In thousands) | Six Months Ended June 30, | ||||||
2016 | 2015* | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net income | $ | 59,985 | $ | 57,407 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 5,721 | 5,685 | |||||
(Gain) loss on sale of assets | 7 | (1,595 | ) | ||||
Provision for bad debts, net | 962 | 1,197 | |||||
Non-cash stock compensation and other charges | 7,966 | 5,399 | |||||
Excess tax benefits from stock-based compensation | 1,404 | 4,613 | |||||
Non-cash interest and other (income) loss | 958 | 1,340 | |||||
Deferred income taxes | 4,030 | (2,095 | ) | ||||
Equity (earnings) losses from unconsolidated joint ventures, net of distributions received | 2,193 | 2,781 | |||||
Changes in assets and liabilities: | |||||||
Receivables | (39,058 | ) | (28,856 | ) | |||
Advances to/from marketing and reservation activities, net | (42,671 | ) | 3,724 | ||||
Forgivable notes receivable, net | (13,174 | ) | (19,186 | ) | |||
Accounts payable | 10,567 | 16,990 | |||||
Accrued expenses and other current liabilities | (8,842 | ) | (6,969 | ) | |||
Income taxes payable/receivable | 9,059 | 2,450 | |||||
Deferred revenue | 42,164 | 4,041 | |||||
Other assets | (10,834 | ) | (5,152 | ) | |||
Other liabilities | (2,576 | ) | 769 | ||||
NET CASH PROVIDED BY OPERATING ACTIVITIES | 27,861 | 42,543 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Investment in property and equipment | (10,912 | ) | (14,554 | ) | |||
Proceeds from sales of assets | 1,700 | 6,283 | |||||
Acquisitions of real estate | (25,389 | ) | — | ||||
Contributions to equity method investments | (19,688 | ) | (2,446 | ) | |||
Distributions from equity method investments | 3,619 | 270 | |||||
Purchases of investments, employee benefit plans | (1,140 | ) | (1,736 | ) | |||
Proceeds from sales of investments, employee benefit plans | 1,136 | 1,087 | |||||
Issuance of mezzanine and other notes receivable | (13,048 | ) | (1,500 | ) | |||
Collections of mezzanine and other notes receivable | 10,158 | 3,567 | |||||
Other items, net | (311 | ) | (261 | ) | |||
NET CASH USED BY INVESTING ACTIVITIES | (53,875 | ) | (9,290 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Net borrowings pursuant to revolving credit facilities | 87,950 | 13,000 | |||||
Principal payments on long-term debt | (623 | ) | (6,169 | ) | |||
Purchases of treasury stock | (28,278 | ) | (6,244 | ) | |||
Dividends paid | (23,193 | ) | (22,940 | ) | |||
Proceeds from exercise of stock options | 4,234 | 5,696 | |||||
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES | 40,090 | (16,657 | ) | ||||
Net change in cash and cash equivalents | 14,076 | 16,596 | |||||
Effect of foreign exchange rate changes on cash and cash equivalents | 371 | (825 | ) | ||||
Cash and cash equivalents at beginning of period | 193,441 | 214,879 | |||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 207,888 | $ | 230,650 | |||
* Year to date results for June 30, 2015 reflect the adoption of ASU No. 2016-09, which requires companies to recognize excess tax benefits related to the exercise of share based awards as operating activities in the statement of cash flows. The company has elected to apply the ASU retrospectively and as a result excess tax benefits totaling $4.6 million for the six months ended June 30, 2015 have been reclassified from cash flows from financing activities to cash flows from operating activities. |
CHOICE HOTELS INTERNATIONAL, INC. | Exhibit 4 | |||||||||||||||||||||||||||||||
SUPPLEMENTAL OPERATING INFORMATION | ||||||||||||||||||||||||||||||||
DOMESTIC HOTEL SYSTEM | ||||||||||||||||||||||||||||||||
(UNAUDITED) | ||||||||||||||||||||||||||||||||
For the Six Months Ended June 30, 2016 | For the Six Months Ended June 30, 2015 | Change | ||||||||||||||||||||||||||||||
Average Daily | Average Daily | Average Daily | ||||||||||||||||||||||||||||||
Rate | Occupancy | RevPAR | Rate | Occupancy | RevPAR | Rate | Occupancy | RevPAR | ||||||||||||||||||||||||
Comfort Inn | $ | 90.11 | 64.0 | % | $ | 57.67 | $ | 87.35 | 63.5 | % | $ | 55.48 | 3.2 | % | 50 | bps | 3.9 | % | ||||||||||||||
Comfort Suites | 95.51 | 68.9 | % | 65.80 | 93.06 | 68.2 | % | 63.43 | 2.6 | % | 70 | bps | 3.7 | % | ||||||||||||||||||
Sleep | 81.13 | 64.2 | % | 52.08 | 79.60 | 64.0 | % | 50.93 | 1.9 | % | 20 | bps | 2.3 | % | ||||||||||||||||||
Quality | 75.79 | 57.9 | % | 43.88 | 73.16 | 57.5 | % | 42.05 | 3.6 | % | 40 | bps | 4.4 | % | ||||||||||||||||||
Clarion | 80.52 | 56.3 | % | 45.35 | 78.25 | 56.3 | % | 44.07 | 2.9 | % | — | bps | 2.9 | % | ||||||||||||||||||
Econo Lodge | 59.24 | 52.4 | % | 31.03 | 57.47 | 52.4 | % | 30.13 | 3.1 | % | — | bps | 3.0 | % | ||||||||||||||||||
Rodeway | 60.72 | 54.6 | % | 33.15 | 57.22 | 55.8 | % | 31.90 | 6.1 | % | (120 | ) | bps | 3.9 | % | |||||||||||||||||
MainStay | 75.80 | 63.4 | % | 48.02 | 76.24 | 68.5 | % | 52.23 | (0.6 | )% | (510 | ) | bps | (8.1 | )% | |||||||||||||||||
Suburban | 49.67 | 74.9 | % | 37.21 | 47.25 | 76.5 | % | 36.15 | 5.1 | % | (160 | ) | bps | 2.9 | % | |||||||||||||||||
Ascend Hotel Collection | 125.21 | 56.9 | % | 71.28 | 122.78 | 59.8 | % | 73.45 | 2.0 | % | (290 | ) | bps | (3.0 | )% | |||||||||||||||||
Total | $ | 80.26 | 60.3 | % | $ | 48.43 | $ | 78.08 | 60.4 | % | $ | 47.15 | 2.8 | % | (10 | ) | bps | 2.7 | % | |||||||||||||
For the Three Months Ended June 30, 2016 | For the Three Months Ended June 30, 2015 | Change | ||||||||||||||||||||||||||||||
Average Daily | Average Daily | Average Daily | ||||||||||||||||||||||||||||||
Rate | Occupancy | RevPAR | Rate | Occupancy | RevPAR | Rate | Occupancy | RevPAR | ||||||||||||||||||||||||
Comfort Inn | $ | 93.87 | 70.1 | % | $ | 65.84 | $ | 90.92 | 69.5 | % | $ | 63.16 | 3.2 | % | 60 | bps | 4.2 | % | ||||||||||||||
Comfort Suites | 98.19 | 73.6 | % | 72.24 | 95.59 | 71.8 | % | 68.64 | 2.7 | % | 180 | bps | 5.2 | % | ||||||||||||||||||
Sleep | 83.93 | 69.5 | % | 58.35 | 82.23 | 68.3 | % | 56.11 | 2.1 | % | 120 | bps | 4.0 | % | ||||||||||||||||||
Quality | 78.61 | 63.3 | % | 49.79 | 75.52 | 62.0 | % | 46.83 | 4.1 | % | 130 | bps | 6.3 | % | ||||||||||||||||||
Clarion | 84.14 | 62.3 | % | 52.46 | 80.54 | 60.8 | % | 48.95 | 4.5 | % | 150 | bps | 7.2 | % | ||||||||||||||||||
Econo Lodge | 61.84 | 57.3 | % | 35.46 | 59.86 | 56.6 | % | 33.87 | 3.3 | % | 70 | bps | 4.7 | % | ||||||||||||||||||
Rodeway | 63.13 | 57.9 | % | 36.56 | 59.92 | 58.4 | % | 35.01 | 5.4 | % | (50 | ) | bps | 4.4 | % | |||||||||||||||||
MainStay | 78.07 | 68.4 | % | 53.40 | 78.53 | 70.4 | % | 55.32 | (0.6 | )% | (200 | ) | bps | (3.5 | )% | |||||||||||||||||
Suburban | 51.07 | 76.9 | % | 39.27 | 47.96 | 78.9 | % | 37.86 | 6.5 | % | (200 | ) | bps | 3.7 | % | |||||||||||||||||
Ascend Hotel Collection | 133.28 | 60.0 | % | 79.94 | 129.04 | 59.2 | % | 76.41 | 3.3 | % | 80 | bps | 4.6 | % | ||||||||||||||||||
Total | $ | 83.35 | 65.5 | % | $ | 54.61 | $ | 80.89 | 64.7 | % | $ | 52.36 | 3.0 | % | 80 | bps | 4.3 | % | ||||||||||||||
For the Quarter Ended | For the Six Months Ended | |||||||||||||||||||||||||||||||
6/30/2016 | 6/30/2015 | 6/30/2016 | 6/30/2015 | |||||||||||||||||||||||||||||
System-wide effective royalty rate | 4.40% | 4.28% | 4.39% | 4.29% | ||||||||||||||||||||||||||||
CHOICE HOTELS INTERNATIONAL, INC. | Exhibit 5 | |||||||||||||||||||||||
SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA | ||||||||||||||||||||||||
(UNAUDITED) | ||||||||||||||||||||||||
June 30, 2016 | June 30, 2015 | Variance | ||||||||||||||||||||||
Hotels | Rooms | Hotels | Rooms | Hotels | Rooms | % | % | |||||||||||||||||
Comfort Inn | 1,138 | 88,085 | 1,215 | 93,904 | (77 | ) | (5,819 | ) | (6.3 | )% | (6.2 | )% | ||||||||||||
Comfort Suites | 564 | 43,522 | 575 | 44,447 | (11 | ) | (925 | ) | (1.9 | )% | (2.1 | )% | ||||||||||||
Sleep | 380 | 27,188 | 377 | 27,207 | 3 | (19 | ) | 0.8 | % | (0.1 | )% | |||||||||||||
Quality | 1,395 | 110,952 | 1,311 | 105,761 | 84 | 5,191 | 6.4 | % | 4.9 | % | ||||||||||||||
Clarion | 168 | 23,033 | 175 | 24,587 | (7 | ) | (1,554 | ) | (4.0 | )% | (6.3 | )% | ||||||||||||
Econo Lodge | 847 | 52,385 | 853 | 52,835 | (6 | ) | (450 | ) | (0.7 | )% | (0.9 | )% | ||||||||||||
Rodeway | 528 | 29,771 | 481 | 26,544 | 47 | 3,227 | 9.8 | % | 12.2 | % | ||||||||||||||
MainStay | 54 | 4,020 | 47 | 3,629 | 7 | 391 | 14.9 | % | 10.8 | % | ||||||||||||||
Suburban | 58 | 6,471 | 62 | 6,959 | (4 | ) | (488 | ) | (6.5 | )% | (7.0 | )% | ||||||||||||
Ascend Hotel Collection | 116 | 9,650 | 110 | 9,408 | 6 | 242 | 5.5 | % | 2.6 | % | ||||||||||||||
Cambria hotel & suites | 25 | 3,113 | 24 | 2,917 | 1 | 196 | 4.2 | % | 6.7 | % | ||||||||||||||
Domestic Franchises | 5,273 | 398,190 | 5,230 | 398,198 | 43 | (8 | ) | 0.8 | % | — | % | |||||||||||||
International Franchises | 1,156 | 111,366 | 1,146 | 106,763 | 10 | 4,603 | 0.9 | % | 4.3 | % | ||||||||||||||
Total Franchises | 6,429 | 509,556 | 6,376 | 504,961 | 53 | 4,595 | 0.8 | % | 0.9 | % |
Exhibit 6 | ||||||||||||||||||||||||
CHOICE HOTELS INTERNATIONAL, INC. | ||||||||||||||||||||||||
SUPPLEMENTAL INFORMATION BY BRAND | ||||||||||||||||||||||||
DEVELOPMENT RESULTS -- DOMESTIC NEW HOTEL CONTRACTS | ||||||||||||||||||||||||
(UNAUDITED) | ||||||||||||||||||||||||
For the Six Months Ended June 30, 2016 | For the Six Months Ended June 30, 2015 | % Change | ||||||||||||||||||||||
New Construction | Conversion | Total | New Construction | Conversion | Total | New Construction | Conversion | Total | ||||||||||||||||
Comfort Inn | 12 | 14 | 26 | 13 | 20 | 33 | (8)% | (30)% | (21)% | |||||||||||||||
Comfort Suites | 8 | 1 | 9 | 13 | 2 | 15 | (38)% | (50)% | (40)% | |||||||||||||||
Sleep | 14 | — | 14 | 9 | — | 9 | 56% | NM | 56% | |||||||||||||||
Quality | — | 73 | 73 | 3 | 75 | 78 | (100)% | (3)% | (6)% | |||||||||||||||
Clarion | 3 | 9 | 12 | — | 6 | 6 | NM | 50% | 100% | |||||||||||||||
Econo Lodge | 1 | 29 | 30 | — | 28 | 28 | NM | 4% | 7% | |||||||||||||||
Rodeway | — | 27 | 27 | — | 35 | 35 | NM | (23)% | (23)% | |||||||||||||||
MainStay | 6 | — | 6 | 6 | — | 6 | —% | NM | —% | |||||||||||||||
Suburban | — | 1 | 1 | 1 | 3 | 4 | (100)% | (67)% | (75)% | |||||||||||||||
Ascend Hotel Collection | 2 | 6 | 8 | 1 | 16 | 17 | 100% | (63)% | (53)% | |||||||||||||||
Cambria hotel & suites | 11 | — | 11 | 7 | — | 7 | 57% | NM | 57% | |||||||||||||||
Total Domestic System | 57 | 160 | 217 | 53 | 185 | 238 | 8% | (14)% | (9)% | |||||||||||||||
For the Three Months Ended June 30, 2016 | For the Three Months Ended June 30, 2015 | % Change | ||||||||||||||||||||||
New Construction | Conversion | Total | New Construction | Conversion | Total | New Construction | Conversion | Total | ||||||||||||||||
Comfort Inn | 6 | 10 | 16 | 9 | 13 | 22 | (33)% | (23)% | (27)% | |||||||||||||||
Comfort Suites | 6 | 1 | 7 | 8 | — | 8 | (25)% | NM | (13)% | |||||||||||||||
Sleep | 12 | — | 12 | 4 | — | 4 | 200% | NM | 200% | |||||||||||||||
Quality | — | 50 | 50 | 1 | 46 | 47 | (100%) | 9% | 6% | |||||||||||||||
Clarion | 2 | 6 | 8 | — | 3 | 3 | NM | 100% | 167% | |||||||||||||||
Econo Lodge | 1 | 15 | 16 | — | 19 | 19 | NM | (21)% | (16)% | |||||||||||||||
Rodeway | — | 17 | 17 | — | 21 | 21 | NM | (19)% | (19)% | |||||||||||||||
MainStay | 5 | — | 5 | 2 | — | 2 | 150% | NM | 150% | |||||||||||||||
Suburban | — | 1 | 1 | 1 | 1 | 2 | (100)% | —% | (50)% | |||||||||||||||
Ascend Hotel Collection | 1 | 5 | 6 | — | 6 | 6 | NM | (17)% | —% | |||||||||||||||
Cambria hotel & suites | 9 | — | 9 | 5 | — | 5 | 80% | NM | 80% | |||||||||||||||
Total Domestic System | 42 | 105 | 147 | 30 | 109 | 139 | 40% | (4)% | 6% | |||||||||||||||
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 | |||||||||||||||||||||||||||||||||
June 30, 2016 Units | June 30, 2015 Units | Conversion | New Construction | Total | |||||||||||||||||||||||||||||
Conversion | New Construction | Total | Conversion | New Construction | Total | Units | % | Units | % | Units | % | ||||||||||||||||||||||
Comfort Inn | 34 | 80 | 114 | 38 | 64 | 102 | (4 | ) | (11)% | 16 | 25% | 12 | 12% | ||||||||||||||||||||
Comfort Suites | 4 | 95 | 99 | 3 | 76 | 79 | 1 | 33% | 19 | 25% | 20 | 25% | |||||||||||||||||||||
Sleep Inn | — | 83 | 83 | 1 | 65 | 66 | (1 | ) | (100)% | 18 | 28% | 17 | 26% | ||||||||||||||||||||
Quality | 47 | 5 | 52 | 54 | 5 | 59 | (7 | ) | (13)% | — | —% | (7 | ) | (12)% | |||||||||||||||||||
Clarion | 9 | 5 | 14 | 11 | 2 | 13 | (2 | ) | (18)% | 3 | 150% | 1 | 8% | ||||||||||||||||||||
Econo Lodge | 26 | 3 | 29 | 24 | 4 | 28 | 2 | 8% | (1 | ) | (25)% | 1 | 4% | ||||||||||||||||||||
Rodeway | 29 | 2 | 31 | 34 | 3 | 37 | (5 | ) | (15)% | (1 | ) | (33)% | (6 | ) | (16)% | ||||||||||||||||||
MainStay | — | 57 | 57 | 1 | 47 | 48 | (1 | ) | (100)% | 10 | 21% | 9 | 19% | ||||||||||||||||||||
Suburban | 5 | 6 | 11 | 6 | 12 | 18 | (1 | ) | (17)% | (6 | ) | (50)% | (7 | ) | (39)% | ||||||||||||||||||
Ascend Hotel Collection | 29 | 19 | 48 | 25 | 18 | 43 | 4 | 16% | 1 | 6% | 5 | 12% | |||||||||||||||||||||
Cambria hotel & suites | 5 | 48 | 53 | — | 25 | 25 | 5 | NM | 23 | 92% | 28 | 112% | |||||||||||||||||||||
188 | 403 | 591 | 197 | 321 | 518 | (9 | ) | (5)% | 82 | 26% | 73 | 14% | |||||||||||||||||||||
CHOICE HOTELS INTERNATIONAL, INC. | Exhibit 8 | |||||||||||||||||
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, | ||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||
Hotel Franchising Revenues: | ||||||||||||||||||
Total Revenues | $ | 241,751 | $ | 232,156 | $ | 448,869 | $ | 407,401 | ||||||||||
Adjustments: | ||||||||||||||||||
Marketing and reservation system revenues | (133,814 | ) | (133,122 | ) | (260,175 | ) | (231,835 | ) | ||||||||||
Non-hotel franchising activities | (2,068 | ) | (411 | ) | (4,097 | ) | (1,014 | ) | ||||||||||
Hotel Franchising Revenues | $ | 105,869 | $ | 98,623 | $ | 184,597 | $ | 174,552 | ||||||||||
Adjusted Hotel Franchising Margins: | ||||||||||||||||||
Operating Margin: | ||||||||||||||||||
Total Revenues | $ | 241,751 | $ | 232,156 | $ | 448,869 | $ | 407,401 | ||||||||||
Operating Income | $ | 64,942 | $ | 62,917 | $ | 107,815 | $ | 104,321 | ||||||||||
Operating Margin | 26.9 | % | 27.1 | % | 24.0 | % | 25.6 | % | ||||||||||
Adjusted Hotel Franchising Margin: | ||||||||||||||||||
Hotel Franchising Revenues | $ | 105,869 | $ | 98,623 | $ | 184,597 | $ | 174,552 | ||||||||||
Operating Income | $ | 64,942 | $ | 62,917 | $ | 107,815 | $ | 104,321 | ||||||||||
Executive termination benefits | 2,206 | — | 2,206 | — | ||||||||||||||
Non-hotel franchising activities operating loss | 6,084 | 4,699 | 11,740 | 10,000 | ||||||||||||||
$ | 73,232 | $ | 67,616 | $ | 121,761 | $ | 114,321 | |||||||||||
Adjusted Hotel Franchising Margins | 69.2 | % | 68.6 | % | 66.0 | % | 65.5 | % | ||||||||||
ADJUSTED HOTEL FRANCHISING SELLING, GENERAL AND ADMINISTRATION EXPENSES | ||||||||||||||||||
(dollar amounts in thousands) | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||
Total Selling, General and Administrative Expenses | $ | 40,039 | $ | 33,122 | $ | 75,158 | $ | 65,560 | ||||||||||
Executive termination benefits | (2,206 | ) | — | (2,206 | ) | — | ||||||||||||
Non-hotel franchising activities | (7,045 | ) | (4,638 | ) | (13,715 | ) | (10,133 | ) | ||||||||||
Adjusted Hotel Franchising Selling, General and Administration Expenses | $ | 30,788 | $ | 28,484 | $ | 59,237 | $ | 55,427 | ||||||||||
ADJUSTED EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION ("EBITDA") | ||||||||||||||||||
(dollar amounts in thousands) | ||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||
Net income | $ | 38,822 | $ | 35,813 | $ | 59,985 | $ | 57,407 | ||||||||||
Income taxes | 16,788 | 17,066 | 26,003 | 26,506 | ||||||||||||||
Interest expense | 11,224 | 11,057 | 22,316 | 21,236 | ||||||||||||||
Interest income | (827 | ) | (277 | ) | (1,666 | ) | (623 | ) | ||||||||||
Other gains | (321 | ) | (1,173 | ) | (259 | ) | (1,641 | ) | ||||||||||
Equity in net (income) loss of affiliates | (744 | ) | 431 | 1,436 | 1,436 | |||||||||||||
Depreciation and amortization | 2,956 | 2,995 | 5,721 | 5,685 | ||||||||||||||
Executive termination benefits | 2,206 | — | 2,206 | — | ||||||||||||||
Adjusted EBITDA | $ | 70,104 | $ | 65,912 | $ | 115,742 | $ | 110,006 | ||||||||||
Hotel franchising | $ | 75,082 | $ | 70,138 | $ | 125,361 | $ | 119,124 | ||||||||||
Non-hotel franchising activities | (4,978 | ) | (4,226 | ) | (9,619 | ) | (9,118 | ) | ||||||||||
$ | 70,104 | $ | 65,912 | $ | 115,742 | $ | 110,006 | |||||||||||
ADJUSTED NET INCOME AND ADJUSTED DILUTED EARNINGS PER SHARE (EPS) | ||||||||||||||||||
(In thousands, except per share amounts) | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||
Net Income | $ | 38,822 | $ | 35,813 | $ | 59,985 | $ | 57,407 | ||||||||||
Adjustments: | ||||||||||||||||||
Executive termination benefits | 1,394 | — | 1,394 | — | ||||||||||||||
Adjusted Net Income | $ | 40,216 | $ | 35,813 | $ | 61,379 | $ | 57,407 | ||||||||||
Diluted Earnings Per Share | $ | 0.68 | $ | 0.62 | $ | 1.06 | $ | 0.99 | ||||||||||
Adjustments: | ||||||||||||||||||
Executive termination benefits | 0.03 | — | 0.02 | — | ||||||||||||||
Adjusted Diluted Earnings Per Share (EPS) | $ | 0.71 | $ | 0.62 | $ | 1.08 | $ | 0.99 | ||||||||||
ADJUSTED EBITDA AND DILUTED EPS FULL YEAR FORECAST | ||||||||||||||||||
(dollar amounts in thousands) | ||||||||||||||||||
Range | ||||||||||||||||||
Estimated Adjusted EBITDA | ||||||||||||||||||
Fiscal Year 2016 | ||||||||||||||||||
Net income | $ | 133,500 | $ | 136,300 | ||||||||||||||
Income taxes | 62,000 | 63,200 | ||||||||||||||||
Interest expense | 45,600 | 45,600 | ||||||||||||||||
Interest income | (3,200 | ) | (3,200 | ) | ||||||||||||||
Other gains | (600 | ) | (600 | ) | ||||||||||||||
Equity in net loss of affiliates | 500 | 500 | ||||||||||||||||
Depreciation and amortization | 12,000 | 12,000 | ||||||||||||||||
Executive termination benefits | 2,200 | 2,200 | ||||||||||||||||
Adjusted EBITDA | $ | 252,000 | $ | 256,000 | ||||||||||||||
Hotel franchising | 269,500 | 273,500 | ||||||||||||||||
Non-hotel franchising activities | (17,500 | ) | (17,500 | ) | ||||||||||||||
$ | 252,000 | $ | 256,000 | |||||||||||||||
Range | ||||||||||||||||||
Estimated Adjusted Diluted EPS | ||||||||||||||||||
Fiscal Year 2016 | ||||||||||||||||||
Diluted EPS | $ | 2.36 | $ | 2.41 | ||||||||||||||
Adjustments: | ||||||||||||||||||
Executive termination benefits | 0.02 | 0.02 | ||||||||||||||||
Adjusted Diluted EPS | $ | 2.38 | $ | 2.43 | ||||||||||||||