 ®
Deutsche Bank 2013 Leveraged
Finance Conference
Exhibit 99.1 |
 2
Investor Presentation
®
Disclaimer
Certain matters discussed throughout all of this presentation constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Generally, our use of words such as
“expect,” “estimate,”
“believe,”
“anticipate,”
"should,“
“will,”
“forecast,”
“plan,”
project,”
“assume”
or similar words of futurity
identify such forward-looking statements. These forward-looking statements
are based on management's current beliefs, assumption and expectations
regarding future events, which in turn are based on information currently
available to management. Such statements may relate to projections of the
company’s revenue, earnings and other financial
and
operational
measures,
company
debt
levels,
ability
to
repay
outstanding
indebtedness,
payment
of
dividends, 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; the level of acceptance of alternative growth strategies we may
implement; the outcome of litigation; and our ability to effectively manage
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, 2012, filed with the Securities and Exchange Commission on
February 28, 2013. We undertake no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information, future
events or otherwise, except as required by law.
|
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Investor Presentation
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Company overview |
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Investor Presentation
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Choice Hotels overview
Growing US hotel market share
–
9.7% share of branded US hotels (+50 basis points over
trailing 5 years)*
–
2
nd
largest U.S. hotelier*
Well-known, diversified brands
Global pipeline of 448 hotels
Stable, profitable, long-term growth throughout economic cycles
Cumulative free cash flows of ~$1.5 billion since 1997
–
$2.1 billion returned to shareholders through share
repurchases and quarterly and special cash dividends
Capital “light”
model generates strong after-tax returns on invested
capital
Strong, growing, global hotel franchising
business
Highly attractive business model with strong
financial returns
Chain scale mix -
rooms (Domestic Q2 2013)
Geographic property distribution -
rooms (Q2 2013)
Source: Choice Internal Data as of June 30, 2013
* Based on number of hotels as June 30, 2013 (Smith Travel Research)
|
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Investor Presentation
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Diversified global footprint*
Source: Choice internal data
*As of June 30, 2013. The Company includes its Caribbean properties within domestic
operating statistics. |
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Investor Presentation
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®
Portfolio overview
Brand
Number of properties
Number of rooms
Occupancy (%)
Average daily room
rate (ADR)
RevPAR
Upscale
90
7,521
64.6%
$118.22
$76.36
18
2,094
NA
NA
NA
Upper
Midscale
1,311
102,882
59.9%
82.49
49.37
587
45,339
62.4%
86.35
53.87
191
27,184
50.5%
74.99
37.86
Midscale
379
27,478
57.7%
73.38
42.31
1,192
99,761
52.3%
69.73
36.43
Extended Stay
43
3,332
68.4%
70.92
48.52
63
7,241
70.5%
42.42
29.91
Economy
817
49,608
48.6%
56.29
27.34
427
24,782
51.1%
53.72
27.46
Total / Average
5,118
397,222
56.0%
$74.23
$41.56
International
1,169
104,701
Total
6,287
501,923
Note: Number of properties and rooms are as of June 30, 2013; Operating
statistics are for the trailing twelve months ended June 30, 2013. Source:
Company’s public filings, management data |
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Investor Presentation
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Franchise portfolio growth
Worldwide hotels*
Domestic pipeline*
Worldwide unit growth has increased at a CAGR of
2.0% over the last 5 years
Executed a total of 490 new domestic hotel
franchise contracts during the trailing twelve
months ended June 30, 2013, a 30% increase over
the prior year
Current domestic pipeline consists of 365 hotels
representing 29,245 rooms
220 hotels under construction or awaiting
development
145 hotels awaiting conversion
* As of June 30, 2013
Source: Company’s public filings |
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Strategy for Choice’s brands, growth and shareholders
Improve and Grow Brands
–
Increase portfolio profitability of the Comfort brand family
–
Refresh Sleep Inn to improve long-term brand growth potential
–
Invest in and expand emerging brands/segments –
Cambria, Ascend, International
Capture Greater Share of Reservations Via Central Channels
–
Grow Choice Privileges loyalty program –
target 2.0 million new members in 2013
–
Continue to enhance ChoiceHotels.com to increase traffic and conversion
Allocate Free Cash Flows To “Best And Highest”
Use
–
Continue effective long-term capital allocation practices by optimizing
balance sheet leverage, share repurchase and dividend policy
–
Leverage financial capacity/strength to support expansion of emerging brands
–
Evaluate opportunities to enter new segments that leverage core competencies (i.e.
Sky Touch) –
Invest in IT infrastructure to shore up value proposition for international
properties |
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Investment highlights |
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Investment highlights
® |
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Established hotel franchising platform with global
scale
One of the largest hoteliers…
…
with a significant number of rooms in the portfolio
Source:
Various
public
companies’
filings
as
of
June
30,
2013,
except
for
Hilton
which
is
as
of
December
31,
2012. |
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Investor Presentation
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Resilient fee-for-service business model with stable
cash flows
($ in millions)
Source: Smith Travel Research, Management data, December 2012
|
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Strong, growing loyalty program
Choice Privileges revenue as percent
of domestic gross room revenues*
Source: Management Data, December 31, 2012, Company’s public filings
* 2001-2008 Data Excludes Econo Lodge and Rodeway Inn brands
Comprehensive loyalty rewards program
16.5 million members worldwide –
contribute over ¼
of domestic
gross room revenues
2.4 million new members added in 2012
Delivers incremental business to all Choice
brand hotels
Important selling point for franchise sales
Loyalty program |
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Effective marketing and central reservation system
Consists of the telephone reservation system,
proprietary internet site, mobile phone applications,
global distribution systems and other internet
reservation sites
Central Reservation System (“CRS”) provides a data
link to the Company’s franchised properties and to
airline reservation systems
Offers rooms for sale on the Company’s own internet
site, as well as other travel companies
Expertise and innovation in on-line, targeted interactive
marketing to influence guest hotel stay decisions
Powerful advertising campaigns
Focus on driving guests to Choice central channels
Facilitate “one-stop”
shopping
Reservation agents can match each caller with a
Choice-branded hotel
Approximately $400 million in annual marketing and
reservation spending
Description
Size, scale and distribution
Domestic franchise system
gross room revenue source
Domestic Choice CRS
net room revenue
Source: Company’s public filings as of December 31, 2012, Management
data |
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®
Strong pipeline expected to continue to grow as the
global economy improves
Historical international pipeline
Source: Company’s public filings, Management data as of December 31,
2012 Historical domestic pipeline |
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Investor Presentation
Investor Presentation
®
Asset light franchising model with strong returns on
investment
Capital light model generates strong after-tax returns on invested capital
Virtually 100% of the properties are franchised*
* The Company owns a limited number of hotels that it holds for strategic purposes.
Source: Company’s public filings, Management data as of December 31, 2012 |
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Investor Presentation
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Strong and growing brand awareness
Source: Percentage of survey respondents. Millward Brown, December 2012.
* Econo Lodge, Rodeway Inn and Suburban Extended Stay measured among economy hotel
users. |
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Financial overview |
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Investor Presentation
Investor Presentation
®
Choice’s franchise business model provides stable, growing cash flows, driven
primarily through unit expansion, RevPAR growth and effective royalty rate
growth Recent performance
LTM Revenue
LTM Adjusted EBITDA
Choice has experienced consistent revenue growth
over the past eight quarters
Revenues have increased by 14% since Q2 2011
EBITDA margins have increased by 138 bps since
Q2 2011
Domestic and international unit growth and
improvement in operating performance continues
to drive profitability
($ in millions)
Source: Company’s public filings |
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Historical operating metrics
RevPAR & occupancy
Total worldwide rooms
Source: Company’s public filings |
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Historical financial overview
Revenue*
Adjusted EBITDA
*Excludes marketing and reservation revenues
Source: Company’s public filings
($ in millions) |
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Investor Presentation
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Historical capital expenditure overview
($ in millions)
*Capital expenditures reflect tenant improvements related to the
of its corporate offices in Rockville, MD during 2013.
Source: Company’s public filings
Company leasing extra space for a new technology center in Phoenix, AZ during 2010
and the relocation |
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Credit Metrics
($ in millions)
Captialization
As of
Mult LTM
6/30/2013
Adjusted EBITDA
Total cash and equivalents
$143.8
New revolver
$72.2
0.4x
Term Loan
$142.5
0.7x
Total secured debt
$214.7
1.1x
Senior Notes Due 2020
$250.0
1.2x
Senior Notes Due 2022
$400.0
2.0x
Other debt
$2.2
0.0x
Total debt
$866.9
4.3x
LTM Adjusted EBITDA
$202.5
Interest expense
$42.1
Capital expenditures
$30.2
Credit metrics
Total debt / Adjusted EBITDA
4.3x
Net debt / Adjusted EBITDA
3.6x
Adjusted EBITDA / int. exp.
4.8x
(Adjusted EBITDA -
capex) / int. exp
4.1x
Source: Company’s public filings |
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Questions and answers |
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Investor Presentation
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DISCLAIMER
Adjusted earnings before interest, taxes depreciation and amortization (EBITDA),
return on average invested capital (ROIC), franchising revenues and free
cash flows are non-GAAP financial measurements. These financial
measurements are presented as supplemental disclosures because they are used
by management in reviewing and analyzing the company’s performance.
This information should not be
considered
as
an
alternative
to
any
measure
of
performance
as
promulgated
under accounting principles generally accepted in the United States (GAAP), such
as operating income, total revenues or net cash provided by operating
activities. The calculation of these
non-GAAP measures may be different from the
calculation by other companies and therefore comparability may be limited. The
company has included the following appendix which reconcile these measures
to the comparable GAAP measurement. |
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Investor Presentation
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FRANCHISING REVENUES
Source: Choice Internal Data, December 2012
($ amounts in thousands)
Year Ended
Year Ended
Year Ended
Year Ended
Year Ended
Year Ended
Year Ended
Year Ended
December 31,
December 31,
December 31,
December 31,
December 31,
December 31,
December 31,
December 31,
2012
2011
2010
2009
2008
2007
2006
2005
Total Revenues
691,509
$
638,793
$
596,076
$
564,178
$
641,680
$
615,494
$
539,903
$
472,098
$
Adjustments:
Marketing and Reservation
(384,784)
(349,036)
(329,246)
(305,379)
(336,477)
(316,827)
(273,267)
(237,822)
Product Sales
-
-
-
-
-
-
-
-
Hotel Operations
(4,573)
(4,356)
(4,031)
(4,140)
(4,936)
(4,692)
(4,505)
(4,293)
Franchising Revenues
302,152
$
285,401
$
262,799
$
254,659
$
300,267
$
293,975
$
262,131
$
229,983
$ |
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Investor Presentation
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FRANCHISING REVENUES
(Continued)
Source: Choice Internal Data, December 2012
($ amounts in thousands)
Year Ended
Year Ended
Year Ended
Year Ended
Year Ended
Year Ended
Year Ended
December 31,
December 31,
December 31,
December 31,
December 31,
December 31,
December 31,
2004
2003
2002
2001
2000
1999
1998
Total Revenues
428,208
$
385,866
$
365,562
$
341,428
$
352,841
$
324,203
$
165,474
$
Adjustments:
Marketing and Reservation
(220,732)
(195,219)
(190,145)
(168,170)
(185,367)
(162,603)
-
Product Sales
-
-
-
-
-
(3,871)
(20,748)
Hotel Operations
(3,729)
(3,565)
(3,331)
(3,215)
(1,249)
-
(1,098)
Franchising Revenues
203,747
$
187,082
$
172,086
$
170,043
$
166,225
$
157,729
$
143,628
$ |
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Investor Presentation
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RETURN ON INVESTED CAPITAL
(a) Operating income and tax rate for the year ended December 31, 2001 have been
adjusted to exclude the effect of a $22.7 million impairment charge related
to the write-off of the company’s investment in Friendly Hotels.
Source: Choice Internal Data, December 2012
Year Ended
Year Ended
Year Ended
Year Ended
Year Ended
Year Ended
Year Ended
December 31,
December 31,
December 31,
December 31,
December 31,
December 31,
December 31,
($ in thousands)
2012
2011
2010
2009
2008
2007
2006
Operating Income (a)
$193.1
$171.9
$160.8
$148.1
$174.6
$185.2
$166.6
Tax Rate(a)
28.7%
30.1%
32.1%
34.8%
36.3%
36.0%
27.4%
After-Tax Operating Income
137.7
120.2
109.2
96.6
111.2
118.5
121.0
+ Depreciation & Amortization
8.2
8.0
8.3
8.3
8.2
8.6
9.7
- Maintenance CAPEX
8.2
8.0
8.3
8.3
8.2
8.6
9.7
Net Op. Profit After-tax (NOPAT)
$137.7
$120.2
$109.2
$96.6
$111.2
$118.5
$121.0
Total Assets
$510.8
$447.7
$411.7
$340.0
$328.2
$328.4
$303.3
- Current Liabilities
176.1
184.6
165.3
131.8
135.1
147.5
139.8
Invested Capital
$334.7
$263.1
$246.4
$208.2
$193.1
$180.9
$163.5
Return on Average Invested Capital
46.1%
47.2%
48.0%
48.1%
59.5%
68.8%
78.5% |
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Investor Presentation
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RETURN ON INVESTED CAPITAL
(Continued)
(a) Operating income and tax rate for the year ended December 31, 2001 have been
adjusted to exclude the effect of a $22.7 million impairment charge related
to the write-off of the company’s investment in Friendly Hotels.
Source: Choice Internal Data, December 2012
Year Ended
Year Ended
Year Ended
Year Ended
Year Ended
Year Ended
Year Ended
Year Ended
December 31,
December 31,
December 31,
December 31,
December 31,
December 31,
December 31,
December 31,
($ in thousands)
2005
2004
2003
2002
2001
2000
1999
1998
Operating Income (a)
$143.8
$125.0
$113.9
$104.7
$96.3
$92.4
$94.2
$85.2
Tax Rate(a)
33.0%
35.1%
36.1%
36.5%
35.0%
39.0%
39.5%
41.7%
After-Tax Operating Income
96.3
81.1
72.8
66.5
62.6
56.4
57.0
49.7
+ Depreciation & Amortization
9.1
9.9
11.2
11.3
12.5
11.6
7.7
6.7
- Maintenance CAPEX
9.1
9.9
11.2
11.3
12.5
11.6
7.7
6.7
Net Op. Profit After-tax (NOPAT)
$96.3
$81.1
$72.8
$66.5
$62.6
$56.4
$57.0
$49.7
Total Assets
$265.3
$263.4
$267.3
$316.8
$321.2
$484.1
$464.7
$398.2
- Current Liabilities
120.3
102.1
102.2
84.3
71.2
93.8
88.7
64.7
Invested Capital
$145.0
$161.3
$165.1
$232.5
$250.0
$390.3
$375.9
$333.6
Return on Average Invested Capital
62.9%
49.7%
36.7%
27.6%
19.5%
14.7%
16.1%
15.2% |
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Investor Presentation
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FREE CASH FLOWS
Source: Choice Internal Data, June 30, 2013
Year to Date Ended
Year Ended
Year Ended
Year Ended
Year Ended
Year Ended
Year Ended
Year Ended
Year Ended
June 30,
December 31,
December 31,
December 31,
December 31,
December 31,
December 31,
December 31,
December 31,
($ in thousands)
2013
2012
2011
2010
2009
2008
2007
2006
2005
Net Cash Provided by Operating Activities
28,957
$
150,122
$
131,369
$
143,815
$
112,216
$
104,399
$
145,666
$
153,680
$
133,588
$
Net Cash Provided (Used) by Investing Activities
(20,605)
(47,101)
(20,329)
(31,035)
(3,349)
(20,265)
(21,284)
(17,244)
(24,531)
Free Cash Flows
8,352
$
103,021
$
111,040
$
112,780
$
108,867
$
84,134
$
124,382
$
136,436
$
109,057
$ |
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Investor Presentation
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FREE CASH FLOWS
(Continued)
Source: Choice Internal Data, June 30, 2013
Year Ended
Year Ended
Year Ended
Year Ended
Year Ended
Year Ended
Year Ended
December 31,
December 31,
December 31,
December 31,
December 31,
December 31,
December 31,
($ in thousands)
2004
2003
2002
2001
2000
1999
1998
Net Cash Provided by Operating Activities
108,908
$
115,304
$
99,018
$
101,712
$
53,879
$
65,040
$
38,952
$
Net Cash Provided (Used) by Investing Activities
(14,544)
27,784
(14,683)
87,738
(16,617)
(36,031)
(9,056)
Free Cash Flows
94,364
$
143,088
$
84,335
$
189,450
$
37,262
$
29,009
$
29,896
$ |
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Investor Presentation
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Source: Choice Internal Data, June 30, 2013
ADJUSTED EBITDA
LTM
Year Ended
Year Ended
Year Ended
Year Ended
Year Ended
($ in thousands)
June 30,
December 31,
December 31,
December 31,
December 31,
December 31,
2013
2012
2011
2010
2009
2008
Operating Income
191,275
$
193,142
$
171,863
$
160,762
$
148,073
$
174,596
$
Adjustments
Acceleration of Management Succession Plan
-
-
-
-
-
6,605
Loss on Sublease of Office Space
-
-
-
-
1,503
-
Executive Termination Benefits
491
491
4,444
1,730
4,604
3,537
Curtailment and Settlement of SERP
1,818
1,818
-
-
1,209
-
Loan Reserves Related to Impaired Notes Receivable
-
-
-
-
-
7,555
Product Sales
-
-
-
-
-
-
Impairment of Friendly investment
-
-
-
-
-
-
Depreciation and Amortization
8,927
8,226
8,024
8,342
8,336
8,184
Adjusted EBITDA
202,511
$
203,677
$
184,331
$
170,834
$
163,725
$
200,477
$ |