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)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). | |
Emerging growth company o | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o |
Item 2.02. | Results of Operations and Financial Condition. |
Item 9.01. | Financial Statements and Exhibits. |
Date: | November 6, 2017 | /s/ Dominic E. Dragisich | ||||
Dominic E. Dragisich | ||||||
Chief Financial Officer |
• | Adjusted diluted EPS for the third quarter was $0.95, a 13 percent increase from the third quarter of the prior year. |
• | Adjusted EBITDA totaled $92.5 million for the third quarter, a 13 percent increase from the third quarter of the prior year. |
• | Adjusted EBITDA from hotel franchising activities for the third quarter increased 9 percent from the third quarter of the prior year to $94.0 million. |
• | Total revenues and hotel franchising revenues for the third quarter both increased 10 percent from the third quarter of the prior year. |
• | Domestic royalty fees for the third quarter totaled $98.3 million, an 8.4 percent increase from the third quarter of the prior year. |
• | Domestic system-wide revenue per available room (RevPAR) increased 2.1 percent for the third quarter compared to the third quarter of the prior year. Occupancy and average daily rates increased 70 basis points and 1.2 percent, respectively, in the third quarter compared to the same period of 2016. |
• | Effective royalty rate increased 19 basis points for the third quarter of 2017, compared to the third quarter of the prior year. |
• | Domestic franchised hotels, as of September 30, 2017, increased 2.8 percent from September 30, 2016. |
• | Quality Inn surpassed 1,500 open domestic hotels during the third quarter, and the number of domestic hotels under this brand increased over 7 percent from September 30, 2016. |
• | Domestic and international rooms, as of September 30, 2017, increased 2.1 percent and 2.3 percent, respectively, from September 30, 2016. |
• | New, executed domestic franchised hotel development contracts totaled 133 in the third quarter. Executed domestic franchised hotel development for the nine months ended September 30, 2017, totaled 415, a 10 percent increase from the same period of the prior year. |
• | The company executed 24 new domestic franchise agreements during the third quarter for its upscale brands, Cambria Hotels and the Ascend Hotel Collection, a 71 percent increase from the same period of the prior year. The domestic pipeline for the company’s upscale brands now exceeds 135 hotels. |
• | Domestic relicensing and contract renewal transactions totaled 121 for the three months ended September 30, 2017, a 6 percent increase from the same period of 2016. |
• | The company’s total domestic pipeline of hotels awaiting conversion, under construction or approved for development, as of September 30, 2017, increased 16 percent to 751 hotels from September 30, 2016. |
• | The new construction domestic pipeline totaled 530 hotels at September 30, 2017, a 26 percent increase from September 30, 2016. |
• | Adjusted EBITDA for full-year 2017 is expected to range between $294 million and $298 million. |
• | The company’s fourth-quarter 2017 adjusted diluted EPS is expected to range between $0.60 and $0.62. |
• | The company expects full-year 2017 adjusted diluted EPS to range between $2.84 and $2.88. |
• | The effective tax rate is expected to be approximately 33 percent for the fourth quarter and 32 percent for full-year 2017. |
• | All estimates for 2017 exclude costs associated with the company’s executive succession plan and impairment of lease acquisition costs. |
• | Adjusted diluted EPS estimates are based on the current number of shares outstanding, and thus do not factor in any changes that may occur due to new equity grants or any further repurchases of common stock under the company’s share repurchase program. |
• | The adjusted diluted EPS and consolidated adjusted EBITDA estimates assume that the company incurs net reductions in adjusted EBITDA related to non-hotel franchising activities at the midpoint of the range for these investments. |
• | Adjusted EBITDA from hotel franchising activities for full-year 2017 is expected to range between $301 million and $305 million. |
• | Net domestic unit growth for 2017 is expected to range between approximately 2.5 percent and 3 percent. |
• | RevPAR is expected to increase between 1 percent and 3 percent for the fourth quarter and range between 2 percent and 3 percent for full-year 2017. |
• | The effective royalty rate is expected to increase between 17 and 19 basis points for full-year 2017 as compared to full-year 2016. |
• | Net reductions in full-year 2017 adjusted EBITDA, relating to the company’s non-hotel franchising operations are expected to be approximately $7 million. |
Choice Hotels International, Inc. and Subsidiaries | Exhibit 1 | |||||||||||||||||||||||||||||
Consolidated Statements of Income | ||||||||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||
Variance | Variance | |||||||||||||||||||||||||||||
2017 | 2016 | $ | % | 2017 | 2016 | $ | % | |||||||||||||||||||||||
(In thousands, except per share amounts) | ||||||||||||||||||||||||||||||
REVENUES: | ||||||||||||||||||||||||||||||
Royalty fees | $ | 104,252 | $ | 96,114 | $ | 8,138 | 8 | % | $ | 265,727 | $ | 247,168 | $ | 18,559 | 8 | % | ||||||||||||||
Initial franchise and relicensing fees | 6,403 | 6,284 | 119 | 2 | % | 18,390 | 17,146 | 1,244 | 7 | % | ||||||||||||||||||||
Procurement services | 8,103 | 7,615 | 488 | 6 | % | 25,647 | 23,719 | 1,928 | 8 | % | ||||||||||||||||||||
Marketing and reservation system | 167,763 | 152,018 | 15,745 | 10 | % | 435,273 | 412,193 | 23,080 | 6 | % | ||||||||||||||||||||
Other | 8,567 | 5,546 | 3,021 | 54 | % | 24,748 | 16,220 | 8,528 | 53 | % | ||||||||||||||||||||
Total revenues | 295,088 | 267,577 | 27,511 | 10 | % | 769,785 | 716,446 | 53,339 | 7 | % | ||||||||||||||||||||
OPERATING EXPENSES: | ||||||||||||||||||||||||||||||
Selling, general and administrative | 46,364 | 34,357 | 12,007 | 35 | % | 117,418 | 109,515 | 7,903 | 7 | % | ||||||||||||||||||||
Depreciation and amortization | 3,095 | 2,986 | 109 | 4 | % | 9,215 | 8,707 | 508 | 6 | % | ||||||||||||||||||||
Marketing and reservation system | 167,763 | 152,018 | 15,745 | 10 | % | 435,273 | 412,193 | 23,080 | 6 | % | ||||||||||||||||||||
Total operating expenses | 217,222 | 189,361 | 27,861 | 15 | % | 561,906 | 530,415 | 31,491 | 6 | % | ||||||||||||||||||||
Gain (loss) on sale of assets, net | (32 | ) | 402 | (434 | ) | (108%) | (32 | ) | 402 | (434 | ) | (108%) | ||||||||||||||||||
Operating income | 77,834 | 78,618 | (784 | ) | (1 | )% | 207,847 | 186,433 | 21,414 | 11 | % | |||||||||||||||||||
OTHER INCOME AND EXPENSES, NET: | ||||||||||||||||||||||||||||||
Interest expense | 11,399 | 11,150 | 249 | 2 | % | 33,884 | 33,466 | 418 | 1 | % | ||||||||||||||||||||
Interest income | (1,575 | ) | (836 | ) | (739 | ) | 88 | % | (4,277 | ) | (2,502 | ) | (1,775 | ) | 71 | % | ||||||||||||||
Other gains | (778 | ) | (746 | ) | (32 | ) | 4 | % | (2,251 | ) | (1,005 | ) | (1,246 | ) | 124 | % | ||||||||||||||
Equity in net (income) loss of affiliates | 274 | (1,150 | ) | 1,424 | (124 | )% | 3,213 | 286 | 2,927 | 1023 | % | |||||||||||||||||||
Total other income and expenses, net | 9,320 | 8,418 | 902 | 11 | % | 30,569 | 30,245 | 324 | 1 | % | ||||||||||||||||||||
Income before income taxes | 68,514 | 70,200 | (1,686 | ) | (2 | )% | 177,278 | 156,188 | 21,090 | 14 | % | |||||||||||||||||||
Income taxes | 20,919 | 22,635 | (1,716 | ) | (8 | )% | 55,944 | 48,638 | 7,306 | 15 | % | |||||||||||||||||||
Net income | $ | 47,595 | $ | 47,565 | $ | 30 | 0 | % | $ | 121,334 | $ | 107,550 | $ | 13,784 | 13 | % | ||||||||||||||
Basic earnings per share | $ | 0.84 | $ | 0.85 | $ | (0.01 | ) | (1 | )% | $ | 2.15 | $ | 1.91 | $ | 0.24 | 13 | % | |||||||||||||
Diluted earnings per share | $ | 0.84 | $ | 0.84 | $ | — | 0 | % | $ | 2.14 | $ | 1.90 | $ | 0.24 | 13 | % | ||||||||||||||
Choice Hotels International, Inc. and Subsidiaries | Exhibit 2 | ||||||||||
Consolidated Balance Sheets | |||||||||||
(In thousands, except per share amounts) | September 30, | December 31, | |||||||||
2017 | 2016 | ||||||||||
(Unaudited) | |||||||||||
ASSETS | |||||||||||
Cash and cash equivalents | $ | 238,848 | $ | 202,463 | |||||||
Accounts receivable, net | 151,672 | 107,336 | |||||||||
Other current assets | 64,803 | 35,074 | |||||||||
Total current assets | 455,323 | 344,873 | |||||||||
Fixed assets and intangibles, net | 178,879 | 178,704 | |||||||||
Notes receivable, net of allowances | 139,803 | 110,608 | |||||||||
Investments in unconsolidated entities | 131,128 | 94,839 | |||||||||
Investments, employee benefit plans, at fair value | 19,749 | 16,975 | |||||||||
Other assets | 36,310 | 106,469 | |||||||||
Total assets | $ | 961,192 | $ | 852,468 | |||||||
LIABILITIES AND SHAREHOLDERS' DEFICIT | |||||||||||
Accounts payable | $ | 68,261 | $ | 48,071 | |||||||
Accrued expenses and other current liabilities | 66,515 | 81,184 | |||||||||
Deferred revenue | 136,956 | 133,218 | |||||||||
Current portion of long-term debt | 1,302 | 1,195 | |||||||||
Total current liabilities | 273,034 | 263,668 | |||||||||
Long-term debt | 800,001 | 839,409 | |||||||||
Deferred compensation & retirement plan obligations | 24,355 | 21,595 | |||||||||
Other liabilities | 64,182 | 39,145 | |||||||||
Total liabilities | 1,161,572 | 1,163,817 | |||||||||
Total shareholders' deficit | (200,380 | ) | (311,349 | ) | |||||||
Total liabilities and shareholders' deficit | $ | 961,192 | $ | 852,468 | |||||||
Choice Hotels International, Inc. and Subsidiaries | Exhibit 3 | ||||||
Consolidated Statements of Cash Flows | |||||||
(Unaudited) | |||||||
(In thousands) | Nine Months Ended September 30, | ||||||
2017 | 2016 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net income | $ | 121,334 | $ | 107,550 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 9,215 | 8,707 | |||||
Loss (gain) on disposal of assets | 32 | (377 | ) | ||||
Provision for bad debts, net | 1,796 | 1,093 | |||||
Non-cash stock compensation and other charges | 20,369 | 11,037 | |||||
Non-cash interest and other (income) loss | (451 | ) | 807 | ||||
Deferred income taxes | 44,777 | (4,329 | ) | ||||
Equity in net losses from unconsolidated joint ventures less distributions received | 4,278 | 1,654 | |||||
Changes in assets and liabilities, net of acquisition: | |||||||
Receivables | (47,520 | ) | (42,426 | ) | |||
Advances to/from marketing and reservation activities, net | 43,697 | (25,783 | ) | ||||
Forgivable notes receivable, net | (21,443 | ) | (15,109 | ) | |||
Accounts payable | 19,679 | (3,532 | ) | ||||
Accrued expenses and other current liabilities | (11,540 | ) | (14,261 | ) | |||
Income taxes payable/receivable | (20,114 | ) | 21,368 | ||||
Deferred revenue | 3,650 | 49,976 | |||||
Other assets | (1,162 | ) | (9,958 | ) | |||
Other liabilities | (1,578 | ) | 1,992 | ||||
NET CASH PROVIDED BY OPERATING ACTIVITIES | 165,019 | 88,409 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Investment in property and equipment | (17,514 | ) | (17,584 | ) | |||
Investment in intangible assets | (2,376 | ) | (482 | ) | |||
Contributions to equity method investments | (44,876 | ) | (24,179 | ) | |||
Distributions from equity method investments | 4,307 | 3,700 | |||||
Purchases of investments, employee benefit plans | (2,140 | ) | (1,430 | ) | |||
Proceeds from sales of investments, employee benefit plans | 2,150 | 1,395 | |||||
Issuance of mezzanine and other notes receivable | (18,565 | ) | (20,281 | ) | |||
Collections of mezzanine and other notes receivable | 630 | 11,040 | |||||
Proceeds from sales of assets | — | 8,360 | |||||
Acquisitions of real estate | — | (25,263 | ) | ||||
Business acquisition, net of cash acquired | — | (1,341 | ) | ||||
Other items, net | 109 | 60 | |||||
NET CASH USED IN INVESTING ACTIVITIES | (78,275 | ) | (66,005 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Net (repayments) borrowings pursuant to revolving credit facilities | (39,974 | ) | 52,814 | ||||
Principal payments on long-term debt | (484 | ) | (836 | ) | |||
Debt issuance costs | — | (284 | ) | ||||
Purchases of treasury stock | (8,887 | ) | (33,958 | ) | |||
Dividends paid | (36,483 | ) | (34,690 | ) | |||
Proceeds from transfer of interest in notes receivable | 24,237 | — | |||||
Proceeds from exercise of stock options | 9,799 | 6,802 | |||||
NET CASH USED BY FINANCING ACTIVITIES | (51,792 | ) | (10,152 | ) | |||
Net change in cash and cash equivalents | 34,952 | 12,252 | |||||
Effect of foreign exchange rate changes on cash and cash equivalents | 1,433 | 260 | |||||
Cash and cash equivalents at beginning of period | 202,463 | 193,441 | |||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 238,848 | $ | 205,953 | |||
CHOICE HOTELS INTERNATIONAL, INC AND SUBSIDIARIES | Exhibit 4 | |||||||||||||||||||||||||||||||
SUPPLEMENTAL OPERATING INFORMATION | ||||||||||||||||||||||||||||||||
DOMESTIC HOTEL SYSTEM | ||||||||||||||||||||||||||||||||
(UNAUDITED) | ||||||||||||||||||||||||||||||||
For the Nine Months Ended September 30, 2017 | For the Nine Months Ended September 30, 2016 | Change | ||||||||||||||||||||||||||||||
Average Daily | Average Daily | Average Daily | ||||||||||||||||||||||||||||||
Rate | Occupancy | RevPAR | Rate | Occupancy | RevPAR | Rate | Occupancy | RevPAR | ||||||||||||||||||||||||
Comfort Inn | $ | 95.42 | 67.8 | % | $ | 64.70 | $ | 93.78 | 67.2 | % | $ | 63.00 | 1.7 | % | 60 | bps | 2.7 | % | ||||||||||||||
Comfort Suites | 98.05 | 71.4 | % | 70.01 | 97.44 | 70.8 | % | 69.01 | 0.6 | % | 60 | bps | 1.4 | % | ||||||||||||||||||
Sleep | 83.93 | 67.1 | % | 56.34 | 83.09 | 66.4 | % | 55.14 | 1.0 | % | 70 | bps | 2.2 | % | ||||||||||||||||||
Quality | 80.46 | 61.5 | % | 49.50 | 78.97 | 60.8 | % | 48.00 | 1.9 | % | 70 | bps | 3.1 | % | ||||||||||||||||||
Clarion | 85.09 | 61.7 | % | 52.53 | 83.67 | 59.7 | % | 49.95 | 1.7 | % | 200 | bps | 5.2 | % | ||||||||||||||||||
Econo Lodge | 63.71 | 56.1 | % | 35.74 | 62.33 | 55.3 | % | 34.47 | 2.2 | % | 80 | bps | 3.7 | % | ||||||||||||||||||
Rodeway | 65.73 | 57.9 | % | 38.04 | 64.14 | 57.3 | % | 36.74 | 2.5 | % | 60 | bps | 3.5 | % | ||||||||||||||||||
MainStay | 76.65 | 69.7 | % | 53.42 | 77.34 | 66.2 | % | 51.18 | (0.9 | )% | 350 | bps | 4.4 | % | ||||||||||||||||||
Suburban | 51.99 | 77.1 | % | 40.10 | 50.15 | 76.0 | % | 38.11 | 3.7 | % | 110 | bps | 5.2 | % | ||||||||||||||||||
Cambria hotel & suites | 136.93 | 75.1 | % | 102.83 | NA | NA | NA | NA | NA | NA | ||||||||||||||||||||||
Ascend Hotel Collection | 128.86 | 56.6 | % | 72.87 | 130.34 | 59.0 | % | 76.95 | (1.1 | )% | (240 | ) | bps | (5.3 | )% | |||||||||||||||||
Total (1) | $ | 84.98 | 63.9 | % | $ | 54.28 | $ | 83.71 | 63.2 | % | $ | 52.91 | 1.5 | % | 70 | bps | 2.6 | % | ||||||||||||||
For the Three Months Ended September 30, 2017 | For the Three Months Ended September 30, 2016 | Change | ||||||||||||||||||||||||||||||
Average Daily | Average Daily | Average Daily | ||||||||||||||||||||||||||||||
Rate | Occupancy | RevPAR | Rate | Occupancy | RevPAR | Rate | Occupancy | RevPAR | ||||||||||||||||||||||||
Comfort Inn | $ | 101.25 | 73.9 | % | $ | 74.82 | $ | 100.02 | 73.4 | % | $ | 73.41 | 1.2 | % | 50 | bps | 1.9 | % | ||||||||||||||
Comfort Suites | 101.43 | 75.5 | % | 76.55 | 100.95 | 74.6 | % | 75.35 | 0.5 | % | 90 | bps | 1.6 | % | ||||||||||||||||||
Sleep | 86.85 | 71.3 | % | 61.88 | 86.59 | 70.6 | % | 61.15 | 0.3 | % | 70 | bps | 1.2 | % | ||||||||||||||||||
Quality | 85.44 | 67.2 | % | 57.43 | 84.31 | 66.4 | % | 55.96 | 1.3 | % | 80 | bps | 2.6 | % | ||||||||||||||||||
Clarion | 89.83 | 67.3 | % | 60.46 | 88.98 | 66.4 | % | 59.08 | 1.0 | % | 90 | bps | 2.3 | % | ||||||||||||||||||
Econo Lodge | 68.87 | 61.7 | % | 42.51 | 67.44 | 60.9 | % | 41.08 | 2.1 | % | 80 | bps | 3.5 | % | ||||||||||||||||||
Rodeway | 70.78 | 63.0 | % | 44.56 | 69.72 | 62.3 | % | 43.45 | 1.5 | % | 70 | bps | 2.6 | % | ||||||||||||||||||
MainStay | 80.42 | 74.8 | % | 60.17 | 79.91 | 71.5 | % | 57.13 | 0.6 | % | 330 | bps | 5.3 | % | ||||||||||||||||||
Suburban | 52.46 | 78.9 | % | 41.39 | 51.09 | 78.2 | % | 39.96 | 2.7 | % | 70 | bps | 3.6 | % | ||||||||||||||||||
Cambria hotel & suites | 142.84 | 79.1 | % | 112.95 | NA | NA | NA | NA | NA | NA | ||||||||||||||||||||||
Ascend Hotel Collection | 137.02 | 60.9 | % | 83.40 | 138.97 | 63.0 | % | 87.50 | (1.4 | )% | (210 | ) | bps | (4.7 | )% | |||||||||||||||||
Total (1) | $ | 89.78 | 69.2 | % | $ | 62.08 | $ | 88.74 | 68.5 | % | $ | 60.81 | 1.2 | % | 70 | bps | 2.1 | % | ||||||||||||||
For the Quarter Ended | For the Nine Months Ended | |||||||||||||||||||||||||||||||
9/30/2017 | 9/30/2016 | 9/30/2017 | 9/30/2016 | |||||||||||||||||||||||||||||
System-wide effective royalty rate | 4.58% | 4.39% | (1) | 4.57% | 4.39% | (1) | ||||||||||||||||||||||||||
(1) Totals for the three and nine months ended September 30, 2016 have been revised from previous disclosures to include the operating statistics for the Cambria hotel & suites brand |
CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES | Exhibit 5 | |||||||||||||||||||||||
SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA | ||||||||||||||||||||||||
(UNAUDITED) | ||||||||||||||||||||||||
September 30, 2017 | September 30, 2016 | Variance | ||||||||||||||||||||||
Hotels | Rooms | Hotels | Rooms | Hotels | Rooms | % | % | |||||||||||||||||
Comfort Inn | 1,083 | 84,427 | 1,126 | 87,346 | (43 | ) | (2,919 | ) | (3.8 | )% | (3.3 | )% | ||||||||||||
Comfort Suites | 566 | 43,857 | 565 | 43,610 | 1 | 247 | 0.2 | % | 0.6 | % | ||||||||||||||
Sleep | 382 | 27,365 | 378 | 27,035 | 4 | 330 | 1.1 | % | 1.2 | % | ||||||||||||||
Quality | 1,509 | 117,948 | 1,407 | 111,564 | 102 | 6,384 | 7.2 | % | 5.7 | % | ||||||||||||||
Clarion | 160 | 21,267 | 164 | 22,456 | (4 | ) | (1,189 | ) | (2.4 | )% | (5.3 | )% | ||||||||||||
Econo Lodge | 839 | 51,322 | 853 | 52,773 | (14 | ) | (1,451 | ) | (1.6 | )% | (2.7 | )% | ||||||||||||
Rodeway | 595 | 34,331 | 526 | 30,058 | 69 | 4,273 | 13.1 | % | 14.2 | % | ||||||||||||||
MainStay | 57 | 4,135 | 54 | 4,020 | 3 | 115 | 5.6 | % | 2.9 | % | ||||||||||||||
Suburban | 59 | 6,578 | 58 | 6,471 | 1 | 107 | 1.7 | % | 1.7 | % | ||||||||||||||
Cambria hotel & suites | 31 | 4,160 | 25 | 3,113 | 6 | 1,047 | 24.0 | % | 33.6 | % | ||||||||||||||
Ascend Hotel Collection | 140 | 11,062 | 119 | 9,761 | 21 | 1,301 | 17.6 | % | 13.3 | % | ||||||||||||||
Domestic Franchises | 5,421 | 406,452 | 5,275 | 398,207 | 146 | 8,245 | 2.8 | % | 2.1 | % | ||||||||||||||
International Franchises | 1,136 | 113,542 | 1,144 | 110,945 | (8 | ) | 2,597 | (0.7 | )% | 2.3 | % | |||||||||||||
Total Franchises | 6,557 | 519,994 | 6,419 | 509,152 | 138 | 10,842 | 2.1 | % | 2.1 | % |
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 September 30, | Nine Months Ended September 30, | ||||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||
Hotel Franchising Revenues: | ||||||||||||||||||
Total Revenues | $ | 295,088 | $ | 267,577 | $ | 769,785 | $ | 716,446 | ||||||||||
Adjustments: | ||||||||||||||||||
Marketing and reservation system revenues | (167,763 | ) | (152,018 | ) | (435,273 | ) | (412,193 | ) | ||||||||||
Non-hotel franchising activities | (2,859 | ) | (2,424 | ) | (7,971 | ) | (6,521 | ) | ||||||||||
Hotel Franchising Revenues | $ | 124,466 | $ | 113,135 | $ | 326,541 | $ | 297,732 | ||||||||||
Adjusted Hotel Franchising Margins: | ||||||||||||||||||
Operating Margin: | ||||||||||||||||||
Total Revenues | $ | 295,088 | $ | 267,577 | $ | 769,785 | $ | 716,446 | ||||||||||
Operating Income | $ | 77,834 | $ | 78,618 | $ | 207,847 | $ | 186,433 | ||||||||||
Operating Margin | 26.4 | % | 29.4 | % | 27.0 | % | 26.0 | % | ||||||||||
Adjusted Hotel Franchising Margin: | ||||||||||||||||||
Hotel Franchising Revenues | $ | 124,466 | $ | 113,135 | $ | 326,541 | $ | 297,732 | ||||||||||
Operating Income | $ | 77,834 | $ | 78,618 | $ | 207,847 | $ | 186,433 | ||||||||||
Mark to market adjustments on non-qualified retirement plan investments | 773 | 748 | 2,214 | 1,003 | ||||||||||||||
Executive termination benefits | — | — | — | 2,206 | ||||||||||||||
Acceleration of executive succession plan | 11,964 | — | 11,964 | — | ||||||||||||||
Impairment of lease acquisition costs, net | (1,185 | ) | — | (1,185 | ) | — | ||||||||||||
Non-hotel franchising activities operating loss | 2,414 | 5,400 | 8,320 | 17,140 | ||||||||||||||
Adjusted Hotel Franchising Operating Income | $ | 91,800 | $ | 84,766 | $ | 229,160 | $ | 206,782 | ||||||||||
Adjusted Hotel Franchising Margins | 73.8 | % | 74.9 | % | 70.2 | % | 69.5 | % | ||||||||||
ADJUSTED HOTEL FRANCHISING SELLING, GENERAL AND ADMINISTRATION EXPENSES | ||||||||||||||||||
(dollar amounts in thousands) | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||
Total Selling, General and Administrative Expenses | $ | 46,364 | $ | 34,357 | $ | 117,418 | $ | 109,515 | ||||||||||
Mark to market adjustments on non-qualified retirement plan investments | (773 | ) | (748 | ) | (2,214 | ) | (1,003 | ) | ||||||||||
Executive termination benefits | — | — | — | (2,206 | ) | |||||||||||||
Acceleration of executive succession plan | (11,964 | ) | — | (11,964 | ) | — | ||||||||||||
Impairment of lease acquisition costs, net | 1,185 | — | 1,185 | — | ||||||||||||||
Non-hotel franchising activities | (4,387 | ) | (6,723 | ) | (13,482 | ) | (20,438 | ) | ||||||||||
Adjusted Hotel Franchising Selling, General and Administration Expenses | $ | 30,425 | $ | 26,886 | $ | 90,943 | $ | 85,868 | ||||||||||
ADJUSTED EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION ("EBITDA") | ||||||||||||||||||
(dollar amounts in thousands) | ||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||
Net income | $ | 47,595 | $ | 47,565 | $ | 121,334 | $ | 107,550 | ||||||||||
Income taxes | 20,919 | 22,635 | 55,944 | 48,638 | ||||||||||||||
Interest expense | 11,399 | 11,150 | 33,884 | 33,466 | ||||||||||||||
Interest income | (1,575 | ) | (836 | ) | (4,277 | ) | (2,502 | ) | ||||||||||
Other (gains) losses | (778 | ) | (746 | ) | (2,251 | ) | (1,005 | ) | ||||||||||
Equity in net (income) loss of affiliates | 274 | (1,150 | ) | 3,213 | 286 | |||||||||||||
(Gain) loss on sale of assets | 32 | (402 | ) | 32 | (402 | ) | ||||||||||||
Depreciation and amortization | 3,095 | 2,986 | 9,215 | 8,707 | ||||||||||||||
Executive termination benefits | — | — | — | 2,206 | ||||||||||||||
Acceleration of executive succession plan | 11,964 | — | 11,964 | — | ||||||||||||||
Impairment of lease acquisition costs, net | (1,185 | ) | — | (1,185 | ) | — | ||||||||||||
Mark to market adjustments on non-qualified retirement plan investments | 773 | 748 | 2,214 | 1,003 | ||||||||||||||
Adjusted EBITDA | $ | 92,513 | $ | 81,950 | $ | 230,087 | $ | 197,947 | ||||||||||
Hotel franchising | $ | 94,041 | $ | 86,248 | $ | 235,598 | $ | 211,864 | ||||||||||
Non-hotel franchising activities | (1,528 | ) | (4,298 | ) | (5,511 | ) | (13,917 | ) | ||||||||||
$ | 92,513 | $ | 81,950 | $ | 230,087 | $ | 197,947 | |||||||||||
Exhibit 6 | ||||||||||||||||||
ADJUSTED NET INCOME AND ADJUSTED DILUTED EARNINGS PER SHARE (EPS) | ||||||||||||||||||
(dollar amounts in thousands, except per share amounts) | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||
Net Income | $ | 47,595 | $ | 47,565 | $ | 121,334 | $ | 107,550 | ||||||||||
Adjustments: | ||||||||||||||||||
Executive termination benefits | — | — | — | 1,394 | ||||||||||||||
Acceleration of executive succession plan | 7,207 | — | 7,207 | — | ||||||||||||||
Impairment of lease acquisition costs, net | (747 | ) | — | (747 | ) | — | ||||||||||||
Adjusted Net Income | $ | 54,056 | $ | 47,565 | $ | 127,795 | $ | 108,944 | ||||||||||
Diluted Earnings Per Share | $ | 0.84 | $ | 0.84 | $ | 2.14 | $ | 1.90 | ||||||||||
Adjustments: | ||||||||||||||||||
Executive termination benefits | — | — | — | 0.02 | ||||||||||||||
Acceleration of executive succession plan | 0.12 | — | 0.12 | — | ||||||||||||||
Impairment of lease acquisition costs, net | (0.01 | ) | — | (0.01 | ) | — | ||||||||||||
Adjusted Diluted Earnings Per Share (EPS) | $ | 0.95 | $ | 0.84 | $ | 2.25 | $ | 1.92 |
ADJUSTED EBITDA FULL YEAR FORECAST | ||||||||||||||
(dollar amounts in thousands) | ||||||||||||||
Range | ||||||||||||||
Estimated Adjusted EBITDA | ||||||||||||||
Fiscal Year 2017 | ||||||||||||||
Net income | $ | 154,600 | $ | 157,300 | ||||||||||
Income taxes | 72,700 | 74,000 | ||||||||||||
Interest expense | 45,400 | 45,400 | ||||||||||||
Interest income | (5,800 | ) | (5,800 | ) | ||||||||||
Other gains | (2,200 | ) | (2,200 | ) | ||||||||||
Equity in net loss of affiliates | 3,200 | 3,200 | ||||||||||||
Depreciation and amortization | 13,100 | 13,100 | ||||||||||||
Acceleration of management succession plan | 12,000 | 12,000 | ||||||||||||
Impairment of lease acquisition costs, net | (1,200 | ) | (1,200 | ) | ||||||||||
Mark to market adjustments on non-qualified retirement plan investments | 2,200 | 2,200 | ||||||||||||
Adjusted EBITDA | $ | 294,000 | $ | 298,000 | ||||||||||
Hotel franchising | $ | 301,000 | $ | 305,000 | ||||||||||
Non-hotel franchising activities | (7,000 | ) | (7,000 | ) | ||||||||||
$ | 294,000 | $ | 298,000 | |||||||||||
ADJUSTED DILUTED EARNINGS PER SHARE (EPS) FULL YEAR FORECAST | ||||||||||||||
(dollar amounts in thousands, except per share amounts) | Range | |||||||||||||
Fiscal Year 2017 | ||||||||||||||
Net Income | $ | 154,600 | $ | 157,300 | ||||||||||
Adjustments: | ||||||||||||||
Acceleration of executive succession plan | 7,207 | 7,207 | ||||||||||||
Impairment of lease acquisition costs, net | (747 | ) | (747 | ) | ||||||||||
Adjusted Net Income | $ | 161,061 | $ | 163,761 | ||||||||||
Diluted Earnings Per Share | $ | 2.73 | $ | 2.77 | ||||||||||
Adjustments: | ||||||||||||||
Acceleration of executive succession plan | 0.12 | 0.12 | ||||||||||||
Impairment of lease acquisition costs, net | (0.01 | ) | (0.01 | ) | ||||||||||
Adjusted Diluted Earnings Per Share (EPS) | $ | 2.84 | $ | 2.88 | ||||||||||