Choice Hotels Reports 1st Quarter Diluted EPS of $0.20; Company Revises '02 EPS Estimates Upward.Business Editors SILVER SPRING, Md.--(BUSINESS WIRE)--April 23, 2002 Choice Hotels International, Inc. (NYSE NYSE See: New York Stock Exchange :CHH CHH Cartilage Hair Hypoplasia CHH Crustacean Hyperglycemic Hormone CHH Carter Holt Harvey Limited (Australia & New Zealand) CHH Chuan Hup Holdings Limited (Singapore) CHH Certified Hardware Hosineer ) today reported first quarter 2002 net income of $8.6 million, or $0.20 diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of (EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. ), compared to the $7.4 million in net income and $0.16 diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. EPS reported for first quarter 2001. The 2001 results include an after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. loss of $1.3 million related to a disposed dis·pose v. dis·posed, dis·pos·ing, dis·pos·es v.tr. 1. To place or set in a particular order; arrange. 2. investment and $0.5 million of goodwill amortization expense. Excluding the investment loss and impact of goodwill amortization, 2001 comparable net income and diluted EPS would have been $9.2 million and $0.20 per share, respectively. "Our business model continues to demonstrate the fundamental strength of our franchising company," said Charles Charles, archduke of Austria Charles, 1771–1847, archduke of Austria; brother of Holy Roman Emperor Francis II. Despite his epilepsy, he was the ablest Austrian commander in the French Revolutionary and Napoleonic wars; however, he was handicapped by A. Ledsinger, Jr., president and chief executive officer. "Focused cost containment cost containment, n the features of a dental benefits program or of the administration of the program designed to reduce or eliminate certain charges to the plan. initiatives, coupled with lower interest rates and strong unit growth, offset lower royalty Compensation for the use of property, usually copyrighted works, patented inventions, or natural resources, expressed as a percentage of receipts from using the property or as a payment for each unit produced. revenues due to reduced RevPAR RevPAR A performance metric in the hotel industry which stands for "revenue per available room." RevPAR is typically calculated by multiplying a hotel's average daily room rate (ADR) by its occupancy rate. performance in a slower economy." He continued, "Unit growth was bolstered bol·ster n. A long narrow pillow or cushion. tr.v. bol·stered, bol·ster·ing, bol·sters 1. To support or prop up with or as if with a long narrow pillow or cushion. 2. through hotel openings in our Comfort Suites and Sleep Inn new construction brands. Additionally, over the past eight months we have benefited from greater conversion activity due to the tight capital market." Overall, Choice signed 59 hotel franchise contracts representing 5,278 rooms in first quarter 2002, compared to 57 contracts representing 5,217 rooms for the same period a year ago. Of that total, 49 were for conversions and 10 for new construction, compared to 31 conversions and 26 new construction in first quarter 2001. Earnings before interest, taxes, depreciation and amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
The company reported royalty revenues of $26.0 million for first quarter 2002, compared to $26.9 million for first quarter 2001. Revenue from partner services increased 15.8% from $1.9 million in first quarter 2001 to $2.2 million in the quarter just ended. The system-wide domestic effective royalty rate increased from 3.88% in first quarter 2001 to 3.97% for the first quarter of 2002. Domestic RevPAR was $26.16 in first quarter 2002, compared to $28.25 for the same period a year ago. This decline is consistent with the overall decrease in RevPAR for the hotel industry. Updated 2002 Outlook The company announced that 2002 EBITDA should approximate ap·prox·i·mate v. To bring together, as cut edges of tissue. adj. 1. Relating to the contact surfaces, either proximal or distal, of two adjacent teeth; proximate. 2. Close together. $115 million to $117 million, with 2002 diluted EPS reaching $1.41 to $1.43, up from the previous estimate of $1.37 to $1.40. The company expects second quarter 2002 diluted EPS to be $0.34 to $0.36. System Growth As of March 31, 2002, the total number of Choice hotels worldwide on-line grew 3.4% to 4,541 from 4,390 as of the same date a year ago. As of the same date, the total number of rooms worldwide increased 3.7% to 363,074 from 349,994 as of the same date a year ago. The company had 772 franchised hotels with 57,309 rooms either in design or under construction in its worldwide hotel system as of March 31, 2002. The company will discuss its first quarter 2002 results in a conference call on April 23, 2002, at 11 a.m. Eastern time. The call-in call-in adj. Being in a format such that listeners or viewers are invited to have their telephone conversations with the host or guests on a show broadcast to other listeners: a call-in radio show. n. number to listen to the call is 888/273-9891. The conference call also will be Webcast simultaneously si·mul·ta·ne·ous adj. 1. Happening, existing, or done at the same time. See Synonyms at contemporary. 2. Mathematics via the company's Web site, www.choicehotels.com. The audio of the call will be archived and available for replay until May 14, 2002, by calling 800/475-6701. The access code for the replay is: 634576. Notable Events Among the notable company events occurring since the previous earnings report: -- The company has remaining authority to acquire up to 3.4 million shares. Since Choice announced its stock repurchase program on June 25, 1998, the company has purchased 23.0 million shares of common stock at a total cost of $356.5 million, as of April 23, 2002. Total shares outstanding as of April 23, 2002 are 40.3 million. -- The Comfort Inn brand was named winner of Entrepreneur magazine's Ninth Annual Business Travel Award as "the best low-priced hotel value." -- Joe Squeri undertook responsibility for the franchise development function and assumed the title, senior vice president, development and chief financial officer. -- The company announced that Ron Burgett, one of its top sales professionals, will head up a new initiative aimed at selling its economy Econo Lodge and Rodeway Inn brand franchises. As vice president, development-economy brands, Burgett will focus a dedicated sales team on helping the economy brands achieve their true development potential. Choice Hotels International is the second-largest hotel franchisor in the world with 4,541 hotels open, representing 363,074 rooms, and another 772 hotels under development, representing 57,309 rooms, in 46 countries, as of March 31, 2002. Its Comfort, Quality, Clarion A family of application development systems for Windows from SoftVelocity, Inc., Pompano Beach, FL (www.softvelocity.com). Clarion provides a comprehensive set of tools for development, including a screen builder, 4GL and application generator. , Sleep Inn, Econo Lodge Econo Lodge is an economy motel chain based in the United States. Econo Lodge is the second largest brand in the Choice Hotels system. It is one of the best known names of its category and provides affordable rooms to budget travelers. , Rodeway Inn Rodeway Inn is an upper-priced economy chain of motels in the United States and Canada. Rodeway Inn is a brand of the Choice Hotels group. There are over 150 locations in North America. and MainStay Suites Mainstay Suites is a brand of mid-priced extended stay hotels franchised by Choice Hotels International. Mainstay Suites hotels provide comfortable and affordable accommodations to extended stay travelers as well as provide many amenities to its guests. brands serve guests worldwide. Certain matters discussed in this press release may constitute forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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-Q Form 10-Q See 10-Q. for the period ended September September: see month. 30, 2001. Additional corporate information may be found on the Choice Hotels' Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the site, which may be accessed at www.choicehotels.com Comfort, Comfort Suites, Quality, Clarion, Sleep Inn, Econo Lodge, Rodeway Inn, MainStay Suites, Choice Privileges privileges, n the authority granted to a physician or dental professional by a hospital governing board to provide patient care in the hospital. Clinical privileges are limited to the individual's license, experience, and competence. , EA$Y CHOICE and ChoiceBuys.com are registered trademarks, service marks and trade names of Choice Hotels International, Inc. Choice Hotels also owns and uses common law marks, including Profit Manager.
Choice Hotels International, Inc. Exhibit 1
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share amounts) Three Months Ended
March 31, March 31,
2002 2001
REVENUES: (As Revised)(a)
--------- ---------
Royalty fees $ 25,984 $ 26,934
Initial franchise and relicensing fees 2,141 2,318
Partner services revenue 2,151 1,938
Marketing and reservation revenues 43,494 33,845
Hotel operations 699 784
Other revenue 861 1,354
--------- ---------
Total revenues 75,330 67,173
OPERATING EXPENSES:
Selling, general and administrative 12,412 12,501
Depreciation and amortization 2,727 2,890
Marketing and reservation expenses 43,494 33,845
Hotel operations expense 653 520
--------- ---------
Total operating expenses 59,286 49,756
Operating income 16,044 17,417
OTHER:
Interest and dividend income (1,560) (1,679)
Interest expense 3,548 4,807
Equity loss on Friendly investment - 2,158
--------- ---------
Total other 1,988 5,286
--------- ---------
Income before income taxes 14,056 12,131
Income taxes 5,482 4,731
--------- ---------
Net income $ 8,574 $ 7,400
========= =========
Weighted average shares outstanding-basic 41,276 45,798
========= =========
Weighted average shares outstanding-diluted 42,012 46,282
========= =========
Basic earnings per share $ 0.21 $ 0.16
========= =========
Diluted earnings per share $ 0.20 $ 0.16
========= =========
(a) Statements have been revised to present marketing and reservation
revenues and expenses on a gross versus net basis to reflect the
adoption of EITF 99-19.
Choice Hotels International, Inc. Exhibit 2
Consolidated Balance Sheets
(In thousands) March 31, December 31,
2002 2001
-------- --------
(Unaudited)
ASSETS
Cash and cash equivalents $ 15,475 $ 16,871
Other current assets 26,676 26,112
-------- --------
Total current assets 42,151 42,983
Fixed assets and intangibles, net 164,868 167,335
Note receivable from Sunburst 40,170 39,059
Receivable from marketing and
reservation funds 55,913 49,358
Other assets 21,532 22,443
-------- --------
Total assets 324,634 321,178
======== ========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current portion of long-term debt 14,521 13,563
Other current liabilities 53,688 57,614
-------- --------
Total current liabilities 68,209 71,177
Long-term debt 286,577 267,733
Deferred income taxes and other
liabilities 52,289 46,807
-------- --------
Total liabilities 407,075 385,717
-------- --------
Total shareholders' deficit (82,441) (64,539)
-------- --------
Total liabilities and
shareholders' deficit $ 324,634 $ 321,178
========= =========
Choice Hotels International, Inc. Exhibit 3
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands) Three Months Ended
March 31, March 31,
2002 2001
(As Revised)(a)
-----------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $8,574 $7,400
Reconciliation of net income to
net cash provided
by operating activities:
Depreciation and amortization 2,727 2,890
Non-cash interest and dividend
income (1,111) (1,122)
Non-cash stock compensation and
other charges 202 264
Provision for bad debts 198 --
Equity loss on Friendly
investment -- 2,158
Changes in assets and liabilities:
Receivables (762) 1,326
Receivable from marketing and
reservation funds, net (3,371) 2,325
Current liabilities (2,954) (6,041)
Income taxes payable/receivable (243) 5,385
Deferred income taxes and other
liabilities 5,534 (620)
-----------------------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 8,794 13,965
-----------------------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Investment in property and
equipment (2,305) (5,577)
Other items, net (101) (315)
Proceeds from Sunburst note -- 103,429
-----------------------------
NET CASH (UTILIZED IN)
PROVIDED BY INVESTING
ACTIVITIES (2,406) 97,537
-----------------------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from long-term debt 103,800 121,400
Principal payments of
long-term debt (84,014) (140,737)
Purchase of treasury stock (30,793) (105,429)
Proceeds from exercise of
stock options 3,223 643
-----------------------------
NET CASH UTILIZED IN
FINANCING ACTIVITIES (7,784) (124,123)
-----------------------------
Net change in cash and
cash equivalents (1,396) (12,621)
Cash and cash equivalents
at beginning of period 16,871 19,701
-----------------------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $15,475 $7,080
=============================
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
Cash payments during
the period for:
Income taxes, net of
refunds $587 $349
Interest 2,473 3,866
Non-cash investing
activities:
Properties assumed through
the restructuring of
Sunburst note -- 1,475
Non-cash financing
activities:
Income tax benefit
realized from employee
stock options exercised 729 256
(a)Statement presentation has been revised to include the repayments
from/(advances to) marketing and reservation funds, net as an
operating activity to reflect the adoption of EITF 99-19.
Choice Hotels International, Inc. Exhibit 4
Net Franchise EBITDA Margin Analysis
(Unaudited)
(In thousands) Three Months Ended
March 31, March 31,
NET FRANCHISE EBITDA MARGINS 2002 2001
------------------
Franchise revenues:
Royalty fees $25,984 $26,934
Initial franchise and
relicensing fees 2,141 2,318
Partner services revenue 2,151 1,938
Other 861 1,354
------------------
Total revenues 31,137 32,544
Selling, general and
administrative 12,412 12,501
------------------
Net franchise EBITDA margin 18,725 20,043
Net franchise EBITDA margin
percentages 60.1% 61.6%
Note: The company analyzes the profitability of its business based on
net franchise EBITDA margins as defined above. Marketing and
reservation fees are excluded as these represent contractual
pass-throughs and are not profitable components of the company's
business. Hotel operations are excluded as they are not a core
operating activity of the company.
Choice Hotels International, Inc. Exhibit 5
Effects of SFAS No. 142 on Net Income
(Unaudited)
(In thousands,
except per share amounts) Three Months Ended
March 31, March 31,
2002 2001
---------------------
Reported net income $8,574 $7,400
Add back: Goodwill
amortization -- 462
---------------------
Adjusted net income $8,574 $7,862
=====================
Basic earnings per share:
Reported net income $0.21 $0.16
Goodwill amortization -- 0.01
---------------------
Adjusted basic earnings
per share $0.21 $0.17
=====================
Diluted earnings per share:
Reported net income $0.20 $0.16
Goodwill amortization -- 0.01
---------------------
Adjusted diluted earnings
per share $0.20 $0.17
=====================
Note: The company adopted Statement of Financial Accounting Standards
("SFAS") No. 142, "Goodwill and Other Intangible Assets" effective
January 1, 2002, which updates accounting and reporting standards for
the amortization of goodwill and recognition of other intangible
assets.
This exhibit shows the estimated effect on 2001 net income if the
company had not amortized its goodwill during 2001 consistent with the
methods described in SFAS No. 142.
CHOICE HOTELS INTERNATIONAL Exhibit 6
SUPPLEMENTAL OPERATING INFORMATION BY BRAND
DOMESTIC HOTEL SYSTEM
(UNAUDITED)
Three Months Ended
March 31,
2002 2001
---------- ----------
COMFORT INN
Hotels 1,316 1,276
Rooms 103,147 99,879
Avg. Daily Rate $58.26 $59.35
Occupancy % 48.0% 50.0%
RevPAR $27.94 $29.67
COMFORT SUITES
Hotels 313 278
Rooms 24,684 21,840
Avg. Daily Rate $69.56 $71.06
Occupancy % 52.4% 55.6%
RevPAR $36.46 $39.54
QUALITY
Hotels 438 425
Rooms 48,566 47,804
Avg. Daily Rate $59.04 $61.01
Occupancy % 42.3% 46.8%
RevPAR $24.96 $28.58
CLARION
Hotels 125 106
Rooms 18,849 16,915
Avg. Daily Rate $69.95 $75.50
Occupancy % 42.9% 46.6%
RevPAR $29.99 $35.16
SLEEP
Hotels 287 262
Rooms 22,126 20,237
Avg. Daily Rate $53.40 $53.34
Occupancy % 46.3% 48.1%
RevPAR $24.75 $25.67
MAINSTAY
Hotels 41 37
Rooms 3,538 3,320
Avg. Daily Rate $58.66 $63.35
Occupancy % 60.3% 58.5%
RevPAR $35.36 $37.06
ECONO LODGE
Hotels 683 677
Rooms 42,457 42,227
Avg. Daily Rate $42.84 $42.83
Occupancy % 39.9% 42.3%
RevPAR $17.10 $18.13
RODEWAY
Hotels 141 152
Rooms 9,135 10,042
Avg. Daily Rate $42.97 $43.12
Occupancy % 38.0% 40.1%
RevPAR $16.35 $17.27
TOTAL CHOICE - DOMESTIC
Hotels 3,344 3,213
Rooms 272,502 262,264
Avg. Daily Rate $57.46 $58.67
Occupancy % 45.5% 48.1%
RevPAR $26.16 $28.25
Effective Royalty Rate 3.97% 3.88%
|
|
||||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion