EX-99.1 2 dex991.htm EXHIBIT 99.1 Exhibit 99.1

 

Exhibit 99.1

LOGO

For Immediate Release

CHOICE HOTELS REPORTS THIRD QUARTER 2010 DILUTED EPS OF

$0.68, DOMESTIC REVPAR GROWTH OF 7.4%

SILVER SPRING, MD. (October 27, 2010) – Choice Hotels International, Inc., (NYSE:CHH) today reported the following highlights for third quarter 2010:

 

   

Adjusted diluted earnings per share (“EPS”) for third quarter 2010 were $0.68 compared to $0.56 for the same period of the prior year. Diluted EPS were $0.68 for third quarter 2010 compared to $0.55 for third quarter 2009. Adjusted diluted EPS for third quarter 2009 exclude certain special items, as described below, totaling $0.01.

 

   

Excluding special items, adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) were $57.3 million for the three months ended September 30, 2010, compared to $51.7 million for the same period of 2009. Operating income for the three months ended September 30, 2010 and 2009 was $54.9 million and $48.1 million, respectively.

 

   

Franchising revenues increased 7% from $74.6 million for the three months ended September 30, 2009 to $79.9 million for the same period of 2010. Total revenues for the three months ended September 30, 2010 increased 11% compared to the same period of 2009.

 

   

Domestic unit and room growth increased 1.2% and 0.7%, respectively, from September 30, 2009.

 

   

Domestic system-wide revenue per available room (“RevPAR”) increased 7.4% for the third quarter of 2010 compared to the same period of 2009 primarily as a result of occupancy rates increasing 420 basis points.

 

   

The effective royalty rate increased 7 basis points to 4.30% for the three months ended September 30, 2010 compared to 4.23% for the same period of the prior year.

 

   

The company executed 79 new domestic hotel franchise contracts for both the three months ended September 30, 2010 and 2009.

 

   

The number of domestic hotels under construction, awaiting conversion or approved for development declined 27% from September 30, 2009 to 545 hotels representing 44,627 rooms; the worldwide pipeline declined 26% from September 30, 2009 to 638 hotels representing 52,723 rooms.

 

   

On August 25, 2010, the company completed and issued unsecured senior notes in an aggregate principal amount of $250 million, in an underwritten, registered public offering. The notes will mature in August 2020 and bear a coupon rate of interest of 5.7%. Considering bond issuance and related interest rate hedging costs, the company’s effective interest cost is approximately 6.2%. The proceeds from these senior notes were utilized to repay other outstanding indebtedness under the company’s unsecured revolving credit facility.

 

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The effective income tax rate for the three months ended September 30, 2010 was 26.4% compared to 35.0% for the same period of the prior year. Excluding discrete items, totaling $3.8 million (approximately $0.06 diluted earnings per share), recorded during the three months ended September 30, 2010, the company’s effective income tax rate was approximately 34.7%.

“During the third quarter, we were pleased to see strong gains in RevPAR domestically across every brand in the Choice family, enabling us to post positive year-to-date domestic RevPAR performance,” said Stephen P. Joyce, president and chief executive officer. “While the hotel transaction environment and lack of access to financing continues to impact our franchise sales results, our recently launched incentive program for the Quality, Clarion, and Econo Lodge brands has been well-received by developers. With our roster of strong, well-known brands and proven ability to deliver reservations to our franchisees’ hotels, we are well-positioned for growth as the hotel development environment improves.”

Special Items

During the three and nine months ended September 30, 2010, the company recorded employee termination benefits charges of approximately $0.3 million and $0.5 million, respectively. These special items did not have an impact on diluted EPS for the three and nine months ended September 30, 2010.

During the three and nine months ended September 30, 2009, the company recorded employee termination benefits of approximately $1.5 million and $2.3 million, respectively. During the nine months ended September 30, 2009, the company also recorded a $1.5 million charge related to the sublease of a portion of its office space. These special items represent diluted EPS of $0.01 and $0.03 for the three and nine months ended September 30, 2009.

Outlook for 2010

The company’s fourth quarter 2010 adjusted diluted EPS is expected to be $0.38. The company expects full-year 2010 adjusted diluted EPS to be between $1.77 and $1.79. Adjusted EBITDA for full-year 2010 are expected to be between $168.5 million and $170.5 million. These estimates include the following assumptions:

 

   

The company expects net domestic unit growth of approximately 1% in 2010;

 

   

RevPAR is expected to increase approximately 7% to 8% for fourth quarter of 2010 and increase approximately 2% for full-year 2010;

 

   

The effective royalty rate is expected to increase 6 basis points for full-year 2010;

 

   

All figures assume the existing share count and an effective tax rate of 34.7% for the fourth quarter and 32.3% for full-year 2010.

 

   

Adjusted EBITDA and adjusted diluted EPS for the fourth quarter and full year 2010 exclude $1.0 million and $1.5 million, respectively of operating expenses related to employee termination benefits which represent approximately $0.01 diluted EPS for both periods.

 

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Use of Free Cash Flow

The company has historically used its free cash flow (cash flow from operations less capital expenditures) to return value to shareholders, primarily through share repurchases and dividends.

For the nine months ended September 30, 2010 the company paid $32.9 million of cash dividends to shareholders. The current quarterly dividend rate per common share is $0.185, subject to declaration by our board of directors.

During the nine months ended September 30, 2010, the company purchased approximately 0.3 million shares of its common stock at an average price of $32.36 for a total cost of $8.7 million under the share repurchase program and has authorization to purchase up to an additional 3.6 million shares under this program. During the three months ended September 30, 2010 the Company purchased approximately 0.1 million shares of its common stock for a total cost of $1.9 million at an average price of $34.85. We expect to continue making repurchases in the open market and through privately negotiated transactions, subject to market and other conditions. No minimum number of share repurchases has been fixed. Since Choice announced its stock repurchase program on June 25, 1998, the company has repurchased 43.2 million shares of its common stock for a total cost of $1 billion through September 30, 2010. Considering the effect of a two-for-one stock split in October 2005, the company had repurchased 76.2 million shares through September 30, 2010 under the share repurchase program at an average price of $13.35 per share.

Our Board previously authorized us to enter into programs which permit us to offer financing, investment and guaranty support to qualified franchisees as well as to acquire and resell real estate to incent franchise development for certain brands in top markets. Recent market conditions have resulted in an increase in opportunities to incent development under these programs. As a result, during the nine months ended September 30, 2010, the Company has advanced approximately $18.9 million pursuant to these programs (of which $5 million has been repaid to the Company).

Over the next several years, we expect to continue to opportunistically deploy capital pursuant to these programs to promote growth of our emerging brands. The amount and timing of the investment in these programs will be dependent on market and other conditions. Our current expectation is that our annual investment in these programs will range between $20 million to $40 million. Notwithstanding these programs, the company expects to continue to return value to its shareholders through a combination of share repurchases and dividends, subject to market and other conditions.

Conference Call

Choice will conduct a conference call on Thursday, October 28, 2010 at 10:15 a.m. EDT to discuss the company’s third quarter 2010 results. The dial-in number to listen to the call is 1-866-314-5232, and the access code is 99130444. International callers should dial 1-617-213-8052 and enter the access code 99130444. The conference call also will be Webcast simultaneously via the company’s Web site, www.choicehotels.com. Interested investors and other parties wishing to access the call via the Webcast should go to the Web site and click on the Investor Info link. The Investor Information page will feature a conference call microphone icon to access the call.

The call will be recorded and available for replay beginning at 1:15 p.m. EDT on October 28, 2010 through November 28, 2010 by calling 1-888-286-8010 and entering access code 42827909. The international dial-in number for the replay is 617-801-6888, access code 42827909. In addition, the call will be archived and available on www.choicehotels.com via the Investor Info link.

 

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About Choice Hotels

Choice Hotels International, Inc. franchises more than 6,000 hotels, representing more than 490,000 rooms, in the United States and more than 35 other countries and territories. As of September 30, 2010, more than 540 hotels are under construction, awaiting conversion or approved for development in the United States, representing more than 44,000 rooms, and approximately 90 hotels, representing approximately 8,000 rooms, are under construction, awaiting conversion or approved for development in 20 other countries and territories. The company’s Comfort Inn, Comfort Suites, Quality, Sleep Inn, Clarion, Cambria Suites, MainStay Suites, Suburban Extended Stay Hotel, Econo Lodge and Rodeway Inn brands serve guests worldwide. In addition, via its Ascend Collection membership program, travelers in the United States, Canada and the Caribbean have upscale lodging options at historic, boutique and unique hotels.

Additional corporate information may 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 federal securities law. Generally, our use of words such as “expect,” “estimate,” “believe,” “anticipate,” “will,” “forecast,” “plan”,” project,” “assume” or similar words of futurity identify statements that are forward-looking and that we intend to be included within the Safe Harbor protections provided by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such 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, payment of stock dividends, 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; 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 reservations systems and other operating systems; fluctuations in the supply and demand for hotels rooms; and our ability to manage effectively our indebtedness. These and other risk factors are discussed in detail in the Risk Factors section of the company’s Form 10-K for the year ended December 31, 2009, filed with the Securities and Exchange Commission on March 1, 2010. 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

Adjusted diluted EPS, adjusted EBITDA, adjusted SG&A, franchising revenues and adjusted franchising margins are non-GAAP financial measurements. 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 diluted earnings per share, 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 these measures to the comparable GAAP measurement. We discuss management’s reasons for reporting these non-GAAP measures below.

Earnings Before Interest, Taxes, Depreciation and Amortization: EBITDA reflects earnings excluding the impact of interest expense, tax expense, depreciation and amortization. Our management considers EBITDA to

 

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be an indicator of operating performance because it can be used to measure our ability to service debt, fund capital expenditures, and expand our business. EBITDA is a commonly used measure of performance in our industry. In addition, it is used by analysts, lenders, investors and others, as well as by us, to facilitate comparisons between the company and its competitors because it excludes certain items that can vary widely across different industries or among companies within the same industry.

Franchising Revenues and Margins: The company reports franchising revenues and margins which exclude marketing and reservation revenues and hotel operations. Marketing and reservation activities are excluded from revenues and operating margins since the company is contractually required by its franchise agreements to use these fees collected for marketing and reservation activities. Cumulative reservation and marketing fees not expended are recorded as a payable on the company’s financial statements and are carried over to the next fiscal 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 recorded as a receivable on the company’s financial statements. In addition, the company has the contractual authority to require that the franchisees in the system at any given point repay the company for any deficits related to marketing and reservation activities. Hotel operations are excluded since they do not reflect the most accurate measure of the company’s core franchising business. These non-GAAP measures are a commonly used measure of performance in our industry and facilitate comparisons between the company and its competitors.

Adjusted Diluted EPS, Adjusted EBITDA, Adjusted SG&A and Adjusted Franchising Margins: The company’s management also uses adjusted diluted EPS, adjusted EBITDA, adjusted SG&A and adjusted franchising margins which exclude employee termination benefits for the three and nine months September 30, 2010 and 2009 as well as a loss on the sublease of a portion of the Company’s office space during the nine months ended September 30, 2009. The company utilizes these non-GAAP measures to enable investors to perform meaningful comparisons of past, present and future operating results and as a means to emphasize the results of on-going operations.

Contacts

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

(301) 592-5117

David Peikin, Senior Director, Corporate Communications

(301) 592-6361

Choice Hotels, Choice Hotels International, Comfort Inn, Comfort Suites, Quality, Sleep Inn, Clarion, Cambria Suites, MainStay Suites, Suburban Extended Stay Hotel, Econo Lodge, Rodeway Inn and Ascend Collection are proprietary trademarks and service marks of Choice Hotels International.

© 2010 Choice Hotels International, Inc. All rights reserved.

 

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Exhibit 1

Choice Hotels International, Inc.

Consolidated Statements of Income

(Unaudited)

 

     Three Months Ended September 30,      Nine Months Ended September 30,  
                   Variance                    Variance  
     2010      2009      $      %      2010      2009      $      %  
(In thousands, except per share amounts)                                                        

REVENUES:

                       

Royalty fees

   $ 72,565        $ 66,401        $ 6,164          9%        $ 171,029        $ 164,771        $ 6,258          4%    

Initial franchise and relicensing fees

     1,970          2,957          (987)         (33%)         6,537          9,599          (3,062)         (32%)   

Procurement services

     3,756          3,922          (166)         (4%)         13,612          14,084          (472)         (3%)   

Marketing and reservation

     102,867          90,465          12,402          14%          242,096          227,803          14,293          6%    

Hotel operations

     1,068          934          134          14%          3,044          3,231          (187)         (6%)   

Other

     1,575          1,297          278          21%          4,752          3,989          763          19%    
                                                                       

Total revenues

     183,801          165,976          17,825          11%          441,070          423,477          17,593          4%    

OPERATING EXPENSES:

                       

Selling, general and administrative

     23,156          24,517          (1,361)         (6%)         67,796          73,054          (5,258)         (7%)   

Depreciation and amortization

     2,078          2,105          (27)         (1%)         6,470          6,252          218          3%    

Marketing and reservation

     102,867          90,465          12,402          14%          242,096          227,803          14,293          6%    

Hotel operations

     823          764          59          8%          2,387          2,378                  0%    
                                                                       

Total operating expenses

     128,924          117,851          11,073          9%          318,749          309,487          9,262          3%    

Operating income

     54,877          48,125          6,752          14%          122,321          113,990          8,331          7%    

OTHER INCOME AND EXPENSES:

                       

Interest expense

     1,864          926          938          101%          3,160          3,731          (571)         (15%)   

Interest and other investment income

     (1,671)         (2,961)         1,290          (44%)         (1,645)         (5,302)         3,657          (69%)   

Equity in net income of affiliates

     (342)         (336)         (6)         2%          (890)         (779)         (111)         14%    
                                                                       

Total other income and expenses, net

     (149)         (2,371)         2,222          (94%)         625          (2,350)         2,975          (127%)   
                                                                       

Income before income taxes

     55,026          50,496          4,530          9%          121,696          116,340          5,356          5%    

Income taxes

     14,532          17,688          (3,156)         (18%)         38,398          41,721          (3,323)         (8%)   
                                                                       

Net income

   $ 40,494        $ 32,808        $ 7,686          23%        $ 83,298        $ 74,619        $ 8,679          12%    
                                                                       

Basic earnings per share

   $ 0.68        $ 0.55        $ 0.13          24%        $ 1.40        $ 1.24        $ 0.16          13%    
                                                                       

Diluted earnings per share

   $ 0.68        $ 0.55        $ 0.13          24%        $ 1.40        $ 1.24        $ 0.16          13%    
                                                                       


 

Exhibit 2

Choice Hotels International, Inc.

Consolidated Balance Sheets

 

(In thousands, except per share amounts)    September 30,
2010
    December 31,
2009
 
     (Unaudited)        

ASSETS

    

Cash and cash equivalents

   $ 79,548      $ 67,870   

Accounts receivable, net

     53,682        41,898   

Deferred income taxes

     7,980        7,980   

Other current assets

     23,980        10,114   
                

Total current assets

     165,190        127,862   

Fixed assets and intangibles, net

     140,657        133,999   

Receivable — marketing and reservation fees

     46,127        33,872   

Investments, employee benefit plans, at fair value

     22,370        20,931   

Other assets

     28,963        23,373   
                

Total assets

   $ 403,307      $ 340,037   
                

LIABILITIES AND SHAREHOLDERS’ DEFICIT

    

Accounts payable and accrued expenses

   $ 76,240      $ 70,933   

Deferred revenue

     71,296        51,765   

Revolving credit facility

     6,600        —     

Deferred compensation & retirement plan obligations

     2,510        2,798   

Current portion of long-term debt

     294        —     

Income taxes payable

     19,775        6,310   
                

Total current liabilities

     176,715        131,806   

Long-term debt

     251,613        277,700   

Deferred compensation & retirement plan obligations

     34,579        34,956   

Other liabilities

     15,894        9,787   
                

Total liabilities

     478,801        454,249   
                

Common stock, $0.01 par value

     596        595   

Additional paid-in-capital

     89,611        90,731   

Accumulated other comprehensive income (loss)

     (7,545     333   

Treasury stock, at cost

     (872,999     (870,302

Retained earnings

     714,843        664,431   
                

Total shareholders’ deficit

     (75,494     (114,212
                

Total liabilities and shareholders’ deficit

   $ 403,307      $ 340,037   
                


 

Exhibit 3

Choice Hotels International, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

 

(In thousands)    Nine Months Ended
September 30,
 
     2010     2009  

CASH FLOWS FROM OPERATING ACTIVITIES:

    

Net income

   $ 83,298      $ 74,619   

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

    

Depreciation and amortization

     6,470        6,252   

Provision for bad debts

     2,421        1,643   

Non-cash stock compensation and other charges

     6,969        8,796   

Non-cash interest and other income

     (987     (4,953

Dividends received from equity method investments

     618        819   

Equity in net income of affiliates

     (890     (779

Changes in assets and liabilities, net of acquisitions:

    

Receivables

     (14,511     (9,409

Receivable - marketing and reservation fees, net

     (2,594     (13,742

Accounts payable

     6,274        (2,061

Accrued expenses

     (1,210     (5,754

Income taxes payable/receivable

     11,940        22,314   

Deferred income taxes

     (2,704     —     

Deferred revenue

     19,443        5,349   

Other assets

     (11,755     2,087   

Other liabilities

     5,457        (5,215
                

NET CASH PROVIDED BY OPERATING ACTIVITIES

     108,239        79,966   
                

CASH FLOWS FROM INVESTING ACTIVITIES:

    

Investment in property and equipment

     (17,673     (7,539

Acquisitions, net of cash acquired

     (466     —     

Issuance of notes receivable

     (8,901     (1,731

Collections of notes receivable

     5,055        190   

Purchases of investments, employee benefit plans

     (1,396     (3,239

Proceeds from sales of investments, employee benefit plans

     1,018        13,839   

Other items, net

     (296     (447
                

NET CASH PROVIDED (USED) IN INVESTING ACTIVITIES

     (22,659     1,073   
                

CASH FLOWS FROM FINANCING ACTIVITIES:

    

Proceeds from the issuance of long-term debt

     247,733        —     

Net borrowings (repayments) pursuant to revolving credit facility

     (271,100     7,900   

Principal payments on long-term debt

     (20     —     

Settlement of forward starting interest rate swap agreement

     (8,663     —     

Debt issuance costs

     (804     —     

Purchase of treasury stock

     (11,171     (57,042

Excess tax benefits from stock-based compensation

     331        4,374   

Dividends paid

     (32,884     (33,335

Proceeds from exercise of stock options

     1,321        6,744   
                

NET CASH USED IN FINANCING ACTIVITIES

     (75,257     (71,359
                

Net change in cash and cash equivalents

     10,323        9,680   

Effect of foreign exchange rate changes on cash and cash equivalents

     1,355        1,285   

Cash and cash equivalents at beginning of period

     67,870        52,680   
                

CASH AND CASH EQUIVALENTS AT END OF PERIOD

   $ 79,548      $ 63,645   
                


 

Exhibit 4

CHOICE HOTELS INTERNATIONAL, INC.

SUPPLEMENTAL OPERATING INFORMATION

DOMESTIC HOTEL SYSTEM

(UNAUDITED)

 

     For the Nine Months Ended
September 30, 2010*
     For the Nine Months Ended
September 30, 2009*
     Change  
     Average Daily                    Average Daily                    Average Daily                
     Rate      Occupancy      RevPAR      Rate      Occupancy      RevPAR      Rate      Occupancy      RevPAR  

Comfort Inn

   $ 77.16         55.4%       $ 42.72       $ 77.48         54.7%       $ 42.36         (0.4%)         70 bps         0.8%    

Comfort Suites

     82.92         55.1%         45.72         85.72         54.2%         46.50         (3.3%)         90 bps         (1.7%)   

Sleep

     68.94         51.8%         35.69         70.16         52.5%         36.80         (1.7%)         (70) bps         (3.0%)   
                                                                                

Midscale without Food & Beverage

     77.47         54.8%         42.42         78.41         54.2%         42.53         (1.2%)         60 bps         (0.3%)   
                                                                                

Quality

     67.30         48.0%         32.31         68.73         46.9%         32.20         (2.1%)         110 bps         0.3%    

Clarion

     75.54         43.3%         32.73         77.95         43.0%         33.55         (3.1%)         30 bps         (2.4%)   
                                                                                

Midscale with Food & Beverage

     68.98         47.0%         32.40         70.54         46.1%         32.48         (2.2%)         90 bps         (0.2%)   
                                                                                

Econo Lodge

     54.26         45.7%         24.81         54.96         43.9%         24.15         (1.3%)         180 bps         2.7%    

Rodeway

     51.42         46.0%         23.64         53.24         43.9%         23.35         (3.4%)         210 bps         1.2%    
                                                                                

Economy

     53.39         45.8%         24.45         54.46         43.9%         23.92         (2.0%)         190 bps         2.2%    
                                                                                

MainStay

     66.03         63.8%         42.09         71.68         58.1%         41.65         (7.9%)         570 bps         1.1%    

Suburban

     39.24         64.2%         25.20         42.37         56.0%         23.72         (7.4%)         820 bps         6.2%    
                                                                                

Extended Stay

     46.76         64.1%         29.97         50.76         56.6%         28.71         (7.9%)         750 bps         4.4%    
                                                                                

Total

   $ 70.36         51.2%       $ 36.02       $ 71.59         50.1%       $ 35.85         (1.7%)         110 bps         0.5%    
                                                                                
* Operating statistics represent hotel operations from December through August

 

     For the Three Months Ended
September 30, 2010*
     For the Three Months Ended
September 30, 2009*
     Change  
     Average Daily                    Average Daily                    Average Daily                
     Rate      Occupancy      RevPAR      Rate      Occupancy      RevPAR      Rate      Occupancy      RevPAR  

Comfort Inn

   $ 82.46         66.7%       $ 54.99       $ 81.35         62.7%       $ 51.04         1.4%          400 bps         7.7%   

Comfort Suites

     85.78         64.2%         55.03         86.67         60.0%         52.02         (1.0%)         420 bps         5.8%   

Sleep

     72.03         60.4%         43.52         72.14         57.9%         41.74         (0.2%)         250 bps         4.3%   
                                                                                

Midscale without Food & Beverage

     81.84         65.1%         53.28         81.32         61.4%         49.89         0.6%          370 bps         6.8%   
                                                                                

Quality

     71.76         58.3%         41.84         72.71         53.7%         39.02         (1.3%)         460 bps         7.2%   

Clarion

     80.18         51.5%         41.27         81.07         47.8%         38.75         (1.1%)         370 bps         6.5%   
                                                                                

Midscale with Food & Beverage

     73.44         56.8%         41.72         74.33         52.4%         38.97         (1.2%)         440 bps         7.1%   
                                                                                

Econo Lodge

     58.62         55.4%         32.47         58.54         51.2%         29.94         0.1%          420 bps         8.5%   

Rodeway

     57.40         56.0%         32.15         57.37         51.1%         29.30         0.1%          490 bps         9.7%   
                                                                                

Economy

     58.24         55.6%         32.37         58.19         51.1%         29.75         0.1%          450 bps         8.8%   
                                                                                

MainStay

     68.96         72.5%         49.98         73.01         63.6%         46.44         (5.5%)         890 bps         7.6%   

Suburban

     40.61         67.8%         27.52         41.68         60.1%         25.06         (2.6%)         770 bps         9.8%   
                                                                                

Extended Stay

     49.01         69.1%         33.87         50.88         61.1%         31.10         (3.7%)         800 bps         8.9%   
                                                                                

Total

   $ 74.79         61.1%       $ 45.71       $ 74.77         56.9%       $ 42.56         0.0%          420 bps         7.4%   
                                                                                

 

* Operating statistics represent hotel operations from June through August

 

     For the Quarter Ended      For the Nine Months Ended  
     9/30/2010      9/30/2009      9/30/2010      9/30/2009  

System-wide effective royalty rate

     4.30%         4.23%         4.32%         4.25%   


 

Exhibit 5

CHOICE HOTELS INTERNATIONAL, INC.

SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA

(UNAUDITED)

 

     September 30, 2010      September 30, 2009      Variance  
     Hotels      Rooms      Hotels      Rooms      Hotels      Rooms      %      %  

Comfort Inn

     1,450         113,952         1,457         114,377         (7)         (425)         (0.5%)         (0.4%)   

Comfort Suites

     624         48,411         601         46,853         23          1,558          3.8%          3.3%    

Sleep

     394         28,714         389         28,459                 255          1.3%          0.9%    
                                                                       

Midscale without Food & Beverage

     2,468         191,077         2,447         189,689         21          1,388          0.9%          0.7%    
                                                                       

Quality

     990         88,831         963         88,129         27          702          2.8%          0.8%    

Clarion

     176         25,208         167         24,063                 1,145          5.4%          4.8%    
                                                                       

Midscale with Food & Beverage

     1,166         114,039         1,130         112,192         36          1,847          3.2%          1.6%    
                                                                       

Econo Lodge

     774         48,022         795         49,504         (21)         (1,482)         (2.6%)         (3.0%)   

Rodeway

     387         21,522         374         21,834         13          (312)         3.5%          (1.4%)   
                                                                       

Economy

     1,161         69,544         1,169         71,338         (8)         (1,794)         (0.7%)         (2.5%)   
                                                                       

MainStay

     37         2,868         37         2,866         —                    0.0%          0.1%    

Suburban

     63         7,608         63         7,531         —            77          0.0%          1.0%    
                                                                       

Extended Stay

     100         10,476         100         10,397         —            79          0.0%          0.8%    
                                                                       

Ascend Collection

     34         2,821         26         1,941                 880          30.8%          45.3%    

Cambria Suites

     22         2,558         18         2,073                 485          22.2%          23.4%    
                                                                       

Domestic Franchises

     4,951         390,515         4,890         387,630         61          2,885          1.2%          0.7%    

International Franchises

     1,140         101,637         1,116         99,582         24          2,055          2.2%          2.1%    
                                                                       

Total Franchises

     6,091         492,152         6,006         487,212         85          4,940          1.4%          1.0%    
                                                                       


 

Exhibit 6

CHOICE HOTELS INTERNATIONAL, INC.

SUPPLEMENTAL INFORMATION BY BRAND

DEVELOPMENT RESULTS — DOMESTIC NEW HOTEL CONTRACTS

(UNAUDITED)

 

    For the Nine Months Ended
September 30, 2010
    For the Nine Months Ended
September 30, 2009
    % Change  
    New                 New                 New              
    Construction     Conversion     Total     Construction     Conversion     Total     Construction     Conversion     Total  

Comfort Inn

    4        22        26        4        22        26        0%         0%         0%    

Comfort Suites

    13        1        14        9        1        10        44%         0%         40%    

Sleep

    3        —          3        11        2        13        (73%)        (100%)        (77%)   
                                                                       

Midscale without Food & Beverage

    20        23        43        24        25        49        (17%)        (8%)        (12%)   
                                                                       

Quality

    1        54        55        3        87        90        (67%)        (38%)        (39%)   

Clarion

    —          17        17        1        23        24        (100%)        (26%)        (29%)   
                                                                       

Midscale with Food & Beverage

    1        71        72        4        110        114        (75%)        (35%)        (37%)   
                                                                       

Econo Lodge

    —          38        38        —          45        45        NM            (16%)        (16%)   

Rodeway

    1        26        27        1        36        37        0%         (28%)        (27%)   
                                                                       

Economy

    1        64        65        1        81        82        0%         (21%)        (21%)   
                                                                       

MainStay

    4        —          4        1        1        2        300%        (100%)        100%    

Suburban

    1        —          1        2        —          2        (50%)        NM            (50%)   
                                                                       

Extended Stay

    5        —          5        3        1        4        67%         (100%)        25%    
                                                                       

Ascend Collection

    1        5        6        1        5        6        0%         0%         0%    

Cambria Suites

    5        —          5        2        —          2        150%         NM            150%    
                                                                       

Total Domestic System

    33        163        196        35        222        257        (6%)        (27%)        (24%)   
                                                                       
    For the Three Months Ended
September 30, 2010
    For the Three Months Ended
September 30, 2009
    % Change  
    New
Construction
    Conversion     Total     New
Construction
    Conversion     Total     New
Construction
    Conversion     Total  

Comfort Inn

    1        9        10        3        7        10        (67%)        29%         0%    

Comfort Suites

    5        —          5        3        —          3        67%         NM            67%    

Sleep

    1        —          1        4        —          4        (75%)        NM            (75%)   
                                                                       

Midscale without Food & Beverage

    7        9        16        10        7        17        (30%)        29%         (6%)   
                                                                       

Quality

    —          23        23        1        23        24        (100%)        0%         (4%)   

Clarion

    —          11        11        1        9        10        (100%)        22%         10%    
                                                                       

Midscale with Food & Beverage

    —          34        34        2        32        34        (100%)        6%         0%    
                                                                       

Econo Lodge

    —          16        16        —          16        16        NM            0%         0%    

Rodeway

    —          7        7        —          8        8        NM            (13%)        (13%)   
                                                                       

Economy

    —          23        23        —          24        24        NM            (4%)        (4%)   
                                                                       

MainStay

    1        —          1        —          —          —          NM            NM            NM       

Suburban

    —          —          —          —          —          —          NM            NM            NM       
                                                                       

Extended Stay

    1        —          1        —          —          —          NM            NM            NM       
                                                                       

Ascend Collection

    1        2        3        1        3        4        0%         (33%)        (25%)   

Cambria Suites

    2        —          2        —          —          —          NM            NM            NM       
                                                                       

Total Domestic System

    11        68        79        13        66        79        (15%)        3%         0%    
                                                                       


 

Exhibit 7

CHOICE HOTELS INTERNATIONAL, INC.

DOMESTIC HOTEL 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, 2010
Units
    September 30, 2009
Units
    Conversion     New Construction     Total  
    Conversion     New
Construction
    Total     Conversion     New
Construction
    Total     Units     %     Units     %     Units     %  

Comfort Inn

    35        64        99        37        97        134        (2)        (5%)        (33)        (34%)        (35)        (26%)   

Comfort Suites

    1        126        127        —          194        194               NM            (68)        (35%)        (67)        (35%)   

Sleep Inn

    1        81        82        1        129        130        —           0%         (48)        (37%)        (48)        (37%)   
                                                                                               

Midscale without Food & Beverage

    37        271        308        38        420        458        (1)        (3%)        (149)        (35%)        (150)        (33%)   
                                                                                               

Quality

    38        9        47        49        16        65        (11)        (22%)        (7)        (44%)        (18)        (28%)   

Clarion

    20        4        24        23        6        29        (3)        (13%)        (2)        (33%)        (5)        (17%)   
                                                                                               

Midscale with Food & Beverage

    58        13        71        72        22        94        (14)        (19%)        (9)        (41%)        (23)        (24%)   
                                                                                               

Econo Lodge

    37        2        39        40        4        44        (3)        (8%)        (2)        (50%)        (5)        (11%)   

Rodeway

    16        2        18        35        2        37        (19)        (54%)        —           0%         (19)        (51%)   
                                                                                               

Economy

    53        4        57        75        6        81        (22)        (29%)        (2)        (33%)        (24)        (30%)   
                                                                                               

MainStay

    —          40        40        —          34        34        —           NM                   18%                18%    

Suburban

    —          26        26        —          31        31        —           NM            (5)        (16%)        (5)        (16%)   
                                                                                               

Extended Stay

    —          66        66        —          65        65        —           NM                   2%                2%    
                                                                                               

Ascend Collection

    3        5        8        1        2        3               200%                150%                167%    

Cambria Suites

    —          35        35        —          43        43        —           NM            (8)        (19%)        (8)        (19%)   
                                                                                               
    151        394        545        186        558        744        (35)        (19%)        (164)        (29%)        (199)        (27%)   
                                                                                               


 

Exhibit 8

CHOICE HOTELS INTERNATIONAL, INC.

SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION

(UNAUDITED)

CALCULATION OF FRANCHISING REVENUES AND ADJUSTED FRANCHISING MARGINS

 

(dollar amounts in thousands)    Three Months Ended
September 30,
     Nine Months Ended
September 30,
 
     2010      2009      2010      2009  

Franchising Revenues:

           

Total Revenues

   $ 183,801           $ 165,976           $ 441,070           $ 423,477       

Adjustments:

           

Marketing and reservation revenues

     (102,867)            (90,465)            (242,096)            (227,803)      

Hotel operations

     (1,068)            (934)            (3,044)            (3,231)      
                                   

Franchising Revenues

   $ 79,866           $ 74,577           $ 195,930           $ 192,443       
                                   

Franchising Margins:

           

Operating Margin:

           

Total Revenues

   $ 183,801           $ 165,976           $ 441,070           $ 423,477       

Operating Income

   $ 54,877           $ 48,125           $ 122,321           $ 113,990       
                                   

Operating Margin

     29.9%          29.0%          27.7%          26.9%    
                                   

Adjusted Franchising Margin:

           

Franchising Revenues

   $ 79,866           $ 74,577           $ 195,930           $ 192,443       

Operating Income

   $ 54,877           $ 48,125           $ 122,321           $ 113,990       

Employee termination benefits

     263             1,496             497             2,270       

Loss on sublease of office space

     —               —               —               1,503       

Hotel operations

     (245)            (170)            (657)            (853)      
                                   
   $ 54,895           $ 49,451           $ 122,161           $ 116,910       
                                   

Adjusted Franchising Margins

     68.7%          66.3%          62.3%          60.8%    
                                   
CALCULATION OF ADJUSTED SELLING, GENERAL AND ADMINISTRATIVE COSTS   
(dollar amounts in thousands)    Three Months Ended
September 30,
     Nine Months Ended
September 30,
 
     2010      2009      2010      2009  

Selling, general and administrative costs

   $ 23,156        $ 24,517        $ 67,796        $ 73,054    

Employee termination benefits

     (263)         (1,496)         (497)         (2,270)   

Loss on sublease of office space

     —            —            —            (1,503)   
                                   

Adjusted Selling, General and Administrative Costs

   $ 22,893        $ 23,021        $ 67,299        $ 69,281    
                                   
CALCULATION OF ADJUSTED NET INCOME AND ADJUSTED DILUTED EARNINGS PER SHARE (EPS)   
(In thousands, except per share amounts)    Three Months Ended
September 30,
     Nine Months Ended
September 30,
 
     2010      2009      2010      2009  

Net Income

   $ 40,494       $ 32,808       $ 83,298       $ 74,619   

Adjustments:

           

Employee termination benefits

     165         936         311         1,421   

Loss on sublease of office space

     —           —           —           941   
                                   

Adjusted Net Income

   $ 40,659       $ 33,744       $ 83,609       $ 76,981   
                                   

Weighted average shares outstanding-diluted

     59,658         59,818         59,646         60,412   

Diluted Earnings Per Share

   $ 0.68       $ 0.55       $ 1.40       $ 1.24   

Adjustments:

           

Employee termination benefits

     —           0.01         —           0.02   

Loss on sublease of office space

     —           —           —           0.01   
                                   

Adjusted Diluted Earnings Per Share (EPS)

   $ 0.68       $ 0.56       $ 1.40       $ 1.27   
                                   

Adjusted EBITDA Reconciliation

 

(in millions)    Q3 2010 Actuals      Q3 2009 Actuals      Nine Months Ended
September 30, 2010
Actuals
     Nine Months Ended
September 30, 2009
Actuals
     Full-Year
2010 Outlook
 

Operating Income (per GAAP)

   $ 54.9       $ 48.1       $ 122.3       $ 114.0       $ 158.5 - $160.5   

Employee termination benefits

     0.3         1.5         0.5         2.3         1.5   

Loss on sublease of office space

     —           —           —           1.5         —     

Depreciation and amortization

     2.1         2.1         6.5         6.3         8.5   
                                            

Adjusted Earnings before interest, taxes, depreciation & amortization (non-GAAP)

   $ 57.3       $ 51.7       $ 129.3       $ 124.1       $ 168.5 - $170.5