Choice Hotels Reports Third Quarter 2010 Diluted EPS of $0.68, Domestic RevPAR Growth of 7.4%

Oct 27, 2010, 16:15 ET from Choice Hotels International, Inc.

SILVER SPRING, Md., Oct. 27 /PRNewswire-FirstCall/ -- 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.
  • 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.

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.

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 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.

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.

Choice Hotels International, Inc.

Exhibit 1

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

9

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%

Choice Hotels International, Inc.

Exhibit 2

Consolidated Balance Sheets

(In thousands, except per share amounts)

September 30,

December 31,

2010

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

Choice Hotels International, Inc.

Exhibit 3

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

CHOICE HOTELS INTERNATIONAL, INC.

Exhibit 4

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%

CHOICE HOTELS INTERNATIONAL, INC.

Exhibit 5

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

5

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

9

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

-

2

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

8

880

30.8%

45.3%

Cambria Suites

22

2,558

18

2,073

4

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

New

New

Construction

Conversion

Total

Construction

Conversion

Total

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

September 30, 2009

Units

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

1

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

6

18%

6

18%

Suburban

-

26

26

-

31

31

-

NM

(5)

(16%)

(5)

(16%)

    Extended Stay

-

66

66

-

65

65

-

NM

1

2%

1

2%

Ascend Collection

3

5

8

1

2

3

2

200%

3

150%

5

167%

Cambria Suites

-

35

35

-

43

43

-

NM

(8)

(19%)

(8)

(19%)

151

394

545

186

558

744

(35)

(19%)

(164)

(29%)

(199)

(27%)

CHOICE HOTELS INTERNATIONAL, INC.

Exhibit 8

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

SOURCE Choice Hotels International, Inc.



RELATED LINKS

http://www.choicehotels.com