EX-99.1 3 dex991.htm EXHIBIT 99.1 EXHIBIT 99.1

Exhibit 99.1

 

LOGO

 

Contact: John Hawkins

   Joseph M. Squeri

Vice President,

   Senior Vice President,

Corporate Communications

   Development, and Chief Financial Officer

Tel: (301) 592-5075

   Tel: (301) 592-5006

john_hawkins@choicehotels.com

    

 

For Immediate Release

 

CHOICE HOTELS REPORTS FIRST QUARTER DILUTED EARNINGS PER

SHARE OF $0.30; DILUTED EPS GAIN OF 15%

 

Company Also Reports Year Over Year Domestic Royalty Revenue Growth of 12%; Initial

and Relicensing Fees Up 31%

 

SILVER SPRING, Md. (April 21, 2004)—Choice Hotels International, Inc. (NYSE:CHH) today reported first quarter 2004 diluted earnings per share (EPS) of $0.30, an increase of 15% compared to first quarter 2003 diluted earnings per share of $0.26. First quarter 2004 net income was $10.6 million, which increased 9% over net income of $9.7 million reported for the first quarter 2003.

 

The company also announced that its operating income increased to $18.9 million for first quarter 2004, a 10% gain over the $17.2 million reported at the end of first quarter 2003. Cash flow from operating activities increased to $22.5 million from $15.7 million, an increase of 43%.

 

“Our business is off to a very strong start for 2004,” said Charles A. Ledsinger, Jr., president and chief executive officer. “We are seeing clear evidence of an improving economy and greater demand in travel, given the 12% growth in domestic royalty revenue and 31% growth in initial and relicensing fees.”

 

He added, “The momentum from our record franchise development in 2003 has carried over into the first quarter of this year. Demand by hotel developers for our brands remains very strong and there is increased interest in our new construction brands.”

 

First Quarter Performance

 

The company reported total revenues of $87.2 million for first quarter 2004, compared to $81.6 million for the same period in 2003, an increase of 7%. Franchising revenues, which include royalty fees, initial and relicensing fees, partner services income and other income, for the first quarter of 2004 were $37.1 million, an increase of 11% from the $33.4 million reported in the same period a year ago. Domestic royalty revenues increased 12% to $28.4 million for first quarter 2004, compared to $25.4 million for the same period a year ago. Initial franchising and relicensing fees increased 31%, from $2.6 million in first quarter 2003 to $3.4 million for the same period this year.

 

System-wide domestic revenue per available room (RevPAR) was $27.04 in first quarter 2004, compared to $25.78 for the first quarter of 2003, an increase of 5%.

 

2004 Unit Growth

 

Choice executed 81 new domestic hotel franchise contracts representing 6,893 rooms in first quarter 2004, compared to 71 new contracts representing 7,607 rooms for the same period a year ago.

 

The total number of domestic Choice hotels on-line grew by 5% to 3,688 as of March 31, 2004 from 3,516 as of the same period a year ago. Net domestic property additions in the first quarter of 2004 were 52, compared to 34 net domestic property additions in the same period of 2003.

 

In the first quarter 2004, 27 contracts for new construction hotels, representing 1,910 rooms were executed, compared to 20 contracts, representing 1,444 rooms for the same period a year ago. At the end of first quarter 2004, Choice had 372 hotels under development in its domestic hotel system, representing 28,671 rooms.

As of March 31, 2004, the total number of Choice hotels worldwide grew 4% to 4,854 from 4,678 as of the same date a year ago. This growth represents an increase of 5% in the number of rooms open to 394,238 from 375,859. At the end of first quarter 2004, Choice had 454 hotels under development worldwide, representing 36,392 rooms.

 

Second Quarter & 2004 Full-Year Estimates

 

The company’s second quarter 2004 earnings are expected to be in the range of $0.50 to $0.52. Full year 2004 diluted EPS is expected to be between $2.04 and $2.07 assuming the existing share count.

 

Notable Events

 

Among the notable company events occurring since the previous earnings report:

 

• Since Choice announced its stock repurchase program on June 25, 1998, the company has purchased 30.7 million shares of common stock at an average price of $18.59 per share and a total cost of $570 million, as of April 20, 2004. During the first quarter of this year, the company purchased 0.9 million shares of common stock at a total cost of $39.1 million. The Company has remaining authorization to purchase up to 0.7 million shares. Total shares outstanding as of March 31, 2004, are 34.2 million.

 

• On February 10, 2004, Choice’s Board of Directors declared a cash dividend of $0.20 on outstanding shares of common stock payable on April 26, 2004 to holders of record on April 12, 2004.

 

• Choice announced the annual shareholder meeting date has been set for Tuesday, May 4, 2004 at 9:00 a.m. Eastern time at the Choice Hotels Learning Center, 10720 Columbia Pike, Silver Spring, Maryland.

 

• Choice’s Board of Directors elected David Goldberg as vice president, Corporate & Brand Strategy and Treasurer. In a related move, Thomas Hall was named vice president, Product Management & Development.

 

Non-GAAP Financial Measures

 

Franchising revenues are non-GAAP financial measurements. These financial measurements are presented as supplemental disclosures because they are used by management in reviewing and analyzing the company’s performance. This information should not be considered as an alternative to any measure of performance as promulgated under accounting principles generally accepted in the United States (GAAP), such as total revenues. The company’s calculation of franchising revenues may be different from the calculation used by other companies and therefore comparability may be limited. The company has included an exhibit accompanying this release which reconcile these measures to the comparable GAAP measurement.

 

Conference Call

 

Choice will conduct a conference call on Thursday, April 22, 2004 at 11 a.m. Eastern time to discuss the first quarter 2004 results. The call-in number to listen to the call is 1-800-450-0819. The conference call also will be Webcast simultaneously via the company’s Web site at www.choicehotels.com.

 

The audio of the call will be archived and available on the company’s Web site and also available for replay until May 22, 2004 by calling 1-800-475-6701. The access code for the replay is: 726066.

 

Choice Hotels International is the second-largest hotel franchisor in the world with 4,854 hotels open, representing 394,238 rooms, in the United States and 42 other countries and territories. As of March 31, 2004, 372 hotels are under development in the United States, representing 28,671 rooms, and an additional 82 hotels, representing 7,721 rooms, are under development in 17 other countries and territories. Its Comfort Inn, Comfort Suites, Quality, Clarion, Sleep Inn, Econo Lodge, Rodeway Inn and MainStay Suites brands serve guests worldwide.

 

# # #

 

Certain matters discussed in this press release may constitute forward-looking statements within the meaning of the federal securities law. Such statements are based on management’s beliefs, assumptions and expectations, which in turn are based on information currently available to management. Actual performance and results could differ from those expressed in or contemplated by the forward-looking statements due to a number of risks, uncertainties and other factors, many of which are beyond Choice’s ability to predict or control. For further information on factors that could impact Choice and the statements contained therein, we refer you to the filings made by Choice with the Securities and Exchange Commission, including its registration statement on Form S-4 and report on Form 10-K for the year ended December 31, 2003.

 

Additional corporate information may be found on the Choice Hotels’ Internet site, which may be accessed at www.choicehotels.com

 

Comfort Inn, Comfort Suites, Quality, Clarion, Sleep Inn, Econo Lodge, Rodeway Inn and MainStay Suites are registered trademarks, service marks and trade names of Choice Hotels International, Inc.

Exhibit 1

 

Choice Hotels International, Inc.

Consolidated Statements of Income

(Unaudited)

 

(In thousands, except per share amounts)    Three Months Ended
  
    

March 31,

2004

    

March 31,

2003

  

REVENUES:

     

Royalty fees

    $ 30,709     $ 27,251  

Initial franchise and relicensing fees

      3,388       2,607  

Partner services

      2,267       2,306  

Marketing and reservation

      49,311       47,353  

Hotel operations

      813       837  

Other

      747       1,202  
    
 

Total revenues

      87,235       81,556  

OPERATING EXPENSES:

                 

Selling, general and administrative

      15,801       13,486  

Depreciation and amortization

      2,534       2,759  

Marketing and reservation

      49,311       47,353  

Hotel operations

      690       726  
    
 

Total operating expenses

      68,336       64,324  

Operating income

      18,899       17,232  

OTHER INCOME AND EXPENSES:

                 

Interest expense

      2,548       3,024  

Interest and other investment income

      (312 )     (1,354 )

Equity in net income of affiliates

      (186 )     —    
    
 

Total other income and expenses

      2,050       1,670  
    
 

Income before income taxes

      16,849       15,562  

Income taxes

      6,255       5,875  
    
 

Net income

    $ 10,594     $ 9,687  
    
 

Weighted average shares outstanding-basic

      34,273       36,772  
    
 

Weighted average shares outstanding-diluted

      35,639       37,513  
    
 

Basic earnings per share

    $ 0.31     $ 0.26  
    
 

Diluted earnings per share

    $ 0.30     $ 0.26  
    
 

Exhibit 2

 

Choice Hotels International, Inc.

Consolidated Statements of Income

(Unaudited)

 

(In thousands)    March 31,
2004
    

December 31,

2003

  

ASSETS

                 

Cash and cash equivalents

    $ 19,656     $ 20,031  

Accounts receivable, net

      33,399       33,631  

Deferred income taxes

      2,256       1,957  

Other current assets

      3,710       3,613  
    
 

Total current assets

      59,021       59,232  

Fixed assets and intangibles, net

      147,323       150,256  

Receivable—marketing and reservation fees

      31,550       32,368  

Other assets

      28,049       25,416  
    
 

Total assets

      265,943       267,272  
    
 

LIABILITIES AND SHAREHOLDERS’ DEFICIT

                 

Current portion of long-term debt

      23,288       23,829  

Other current liabilities

      79,276       78,382  
    
 

Total current liabilities

      102,564       102,211  

Long-term debt

      248,050       222,823  

Deferred income taxes

      22,019       21,562  

Other liabilities

      41,738       38,863  
    
 

Total liabilities

      414,371       385,459  
    
 

Total shareholders’ deficit

      (148,428 )     (118,187 )
    
 

Total liabilities and shareholders’ deficit

    $ 265,943     $ 267,272  
    
 

Exhibit 3

 

Choice Hotels International, Inc.

Consolidated Statements of Income

(Unaudited)

 

(In thousands)    Three Months Ended
  
    

March 31,

2004

    

March 31,

2003

  

CASH FLOWS FROM OPERATING ACTIVITIES:

                 

Net income

    $ 10,594     $ 9,687  

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

                 

Depreciation and amortization

      2,534       2,759  

Provision for bad debts

      119       448  

Non-cash stock compensation and other charges

      873       402  

Non-cash interest and other investment income

      (285 )     (88 )

Equity in net income of affiliates

      (186 )     —    

Changes in assets and liabilities:

                 

Receivables

      131       (675 )

Receivable—marketing and reservation fees, net

      3,366       (3,067 )

Current liabilities

      (1,803 )     4,575  

Income taxes payable/receivable and other assets

      4,035       (1,109 )

Deferred income taxes and other liabilities

      3,145       2,771  
    
 

NET CASH PROVIDED BY OPERATING ACTIVITIES

      22,523       15,703  
    
 

CASH FLOWS FROM INVESTING ACTIVITIES:

                 

Investment in property and equipment

      (1,617 )     (2,515 )

Acquisition of Flag

      —         (1,211 )

Issuance of notes receivable

      (612 )     (1,486 )

(Purchases) sales of investments, net

      (1,922 )     477  

Other items, net

      (279 )     (524 )
    
 

NET CASH USED IN INVESTING ACTIVITIES

      (4,430 )     (5,259 )
    
 

CASH FLOWS FROM FINANCING ACTIVITIES:

                 

Proceeds from long-term debt

      53,200       43,200  

Principal payments of long-term debt

      (28,530 )     (22,260 )

Purchase of treasury stock

      (39,095 )     (30,362 )

Dividends paid

      (6,861 )     —    

Proceeds from exercise of stock options

      2,818       1,576  
    
 

NET CASH USED IN FINANCING ACTIVITIES

      (18,468 )     (7,846 )
    
 

Net change in cash and cash equivalents

      (375 )     2,598  

Cash and cash equivalents at beginning of period

      20,031       12,227  
    
 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

    $ 19,656     $ 14,825  
    
 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

                 

Cash payments during the period for:

                 

Income taxes, net of refunds

    $ 1,314     $ 7,005  

Interest

    $ 594     $ 1,567  

Non-cash financing activities:

                 

Declaration of dividend

    $ 6,833     $ —    

Non-cash financing activities related to employee stock options exercised:

                 

Income tax benefit realized

    $ 1,407     $ 387  

Treasury shares received for employee tax withholding obligations

    $ —       $ 98  

Exhibit 4

 

CHOICE HOTELS INTERNATIONAL

SUPPLEMENTAL OPERATING INFORMATION BY BRAND

DOMESTIC HOTEL SYSTEM

(UNAUDITED)

 

    

Three Months Ended

March 31,

  
     2004
     2003
  

COMFORT INN

                 

Hotels

      1,413       1,373  

Rooms

      111,133       108,019  

Avg. Daily Rate (ADR)

    $ 60.25     $ 59.65  

Occupancy %

      48.3 %     46.3 %

RevPAR

    $ 29.08     $ 27.59  

COMFORT SUITES

                 

Hotels

      370       352  

Rooms

      29,208       28,019  

Avg. Daily Rate (ADR)

    $ 70.67     $ 70.71  

Occupancy %

      54.0 %     51.7 %

RevPAR

    $ 38.17     $ 36.55  

QUALITY

                 

Hotels

      526       469  

Rooms

      54,562       49,406  

Avg. Daily Rate (ADR)

    $ 58.54     $ 59.15  

Occupancy %

      43.6 %     41.2 %

RevPAR

    $ 25.53     $ 24.35  

CLARION

                 

Hotels

      147       134  

Rooms

      22,054       20,183  

Avg. Daily Rate (ADR)

    $ 68.27     $ 69.27  

Occupancy %

      41.1 %     39.7 %

RevPAR

    $ 28.05     $ 27.53  

SLEEP

                 

Hotels

      307       301  

Rooms

      23,573       23,052  

Avg. Daily Rate (ADR)

    $ 54.87     $ 54.70  

Occupancy %

      48.6 %     45.8 %

RevPAR

    $ 26.68     $ 25.06  

MAINSTAY

                 

Hotels

      26       39  

Rooms

      2,063       3,376  

Avg. Daily Rate (ADR)

    $ 57.24     $ 60.33  

Occupancy %

      53.1 %     54.5 %

RevPAR

    $ 30.39     $ 32.90  

ECONO LODGE

                 

Hotels

      742       715  

Rooms

      45,887       44,401  

Avg. Daily Rate (ADR)

    $ 44.12     $ 43.10  

Occupancy %

      39.3 %     38.4 %

RevPAR

    $ 17.32     $ 16.57  

RODEWAY

                 

Hotels

      157       133  

Rooms

      10,879       8,501  

Avg. Daily Rate (ADR)

    $ 46.91     $ 44.51  

Occupancy %

      37.8 %     36.8 %

RevPAR

    $ 17.72     $ 16.37  

TOTAL CHOICE—DOMESTIC

                 

Hotels

      3,688       3,516  

Rooms

      299,359       284,957  

Avg. Daily Rate (ADR)

    $ 58.87     $ 58.47  

Occupancy %

      45.9 %     44.1 %

RevPAR

    $ 27.04     $ 25.78  

Effective Royalty Rate

      4.02 %     3.96 %

Exhibit 5

 

CHOICE HOTELS INTERNATIONAL

SUPPLEMENTAL INFORMATION

CALCULATION OF FRANCHISING REVENUES

(UNAUDITED)

 

(In thousands)    Three Months Ended
  
    

March 31,

2004

    

March 31,

2003

  

Franchising Revenues:

                 

Total Revenues

    $ 87,235     $ 81,556  

Adjustments:

                 

Marketing and reservation revenues

      (49,311 )     (47,353 )

Hotel Operations

      (813 )     (837 )
    
 

Franchising Revenues

    $ 37,111     $ 33,366