Choice Hotels Reports First Quarter Diluted Earnings Per Share of $0.30; Diluted EPS Gain of 15%.Business Editors SILVER SPRING, Md.--(BUSINESS WIRE)--April 21, 2004 Company Also Reports Year Over Year Domestic 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. Revenue Growth of 12%; Initial and Relicensing Fees Up 31% 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 2004 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. ) 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 Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. 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 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. "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 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. ) 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 executed 1) adj. to have been completed. (Example: "it is an executed contract") 2) v. to have completed or fully performed. (Example: "he executed all the promises made in the contract") 3) v. 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 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 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 Stock repurchase A firm's repurchase of outstanding shares of its common stock. program on June June: see month. 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 The right or permission to use a system resource; the process of granting access. See access control. to purchase up to 0.7 million shares. Total shares outstanding as of March 31, 2004, are 34.2 million. -- On February February: see month. 10, 2004, Choice's Board of Directors declared de·clare v. de·clared, de·clar·ing, de·clares v.tr. 1. To make known formally or officially. See Synonyms at announce. 2. To state emphatically or authoritatively; affirm. 3. 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 Tuesday: see week. , May 4, 2004 at 9:00 a.m. Eastern time at the Choice Hotels Learning Center, 10720 Columbia Pike Columbia Pike may refer to:
Spring, Maryland Maryland (mâr`ələnd), one of the Middle Atlantic states of the United States. It is bounded by Delaware and the Atlantic Ocean (E), the District of Columbia (S), Virginia and West Virginia (S, W), and Pennsylvania (N). . -- Choice's Board of Directors elected e·lect v. e·lect·ed, e·lect·ing, e·lects v.tr. 1. To select by vote for an office or for membership. 2. To pick out; select: elect an art course. David Goldberg as vice president, Corporate & Brand Strategy and Treasurer TREASURER. An officer entrusted with the treasures or money either of a private individual, a corporation, a company, or a state. 2. It is his duty to use ordinary diligence in the performance of his office, and to account with those whose money he has. . In a related move, Thomas Hall Thomas Hall may refer to:
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 prom·ul·gate tr.v. prom·ul·gat·ed, prom·ul·gat·ing, prom·ul·gates 1. To make known (a decree, for example) by public declaration; announce officially. See Synonyms at announce. 2. under accounting principles generally accepted in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (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 ac·com·pa·ny v. ac·com·pa·nied, ac·com·pa·ny·ing, ac·com·pa·nies v.tr. 1. To be or go with as a companion. 2. this release which reconcile these measures to the comparable GAAP measurement. Conference Call Choice will conduct a conference call on Thursday Thursday: see week. , April 22, 2004 at 11 a.m. Eastern time to discuss the first quarter 2004 results. 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 1-800-450-0819. 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 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 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-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December December: see month. 31, 2003. 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 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.
Choice Hotels International, Inc. Exhibit 1
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share amounts) Three Months Ended
March 31, March 31,
REVENUES: 2004 2003
--------- ---------
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
========= =========
Choice Hotels International, Inc. Exhibit 2
Consolidated Balance Sheets
(Unaudited)
(In thousands) March December
31, 31,
2004 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
--------- ---------
Choice Hotels International, Inc. Exhibit 3
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands) Three Months Ended
March 31, March 31,
2004 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
CHOICE HOTELS INTERNATIONAL Exhibit 4
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%
CHOICE HOTELS INTERNATIONAL Exhibit 5
SUPPLEMENTAL INFORMATION
CALCULATION OF FRANCHISING REVENUES
(UNAUDITED)
(In thousands) Three Months Ended
March March
31, 31,
2004 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
-------- --------
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