EX-99.1 2 q212_release.htm PRESS RELEASE 2Q 2012 Q212_Release
Exhibit 99.1


For Immediate Release


CHOICE HOTELS REPORTS A 20% INCREASE IN SECOND QUARTER 2012 DILUTED EPS AND DOMESTIC REVPAR GROWTH OF 7.7%

New Domestic Hotel Franchise Contracts Rise 54%

    
SILVER SPRING, MD. (July 26, 2012) – Choice Hotels International, Inc., (NYSE:CHH) today reported the following highlights for the second quarter of 2012:

Diluted earnings per share (“EPS”) for the second quarter of 2012 of $0.55 compared to diluted EPS of $0.46 for the second quarter of 2011, a 20% increase.

Earnings before interest, taxes, depreciation and amortization (“EBITDA”) increased 14% to $53.6 million for the three months ended June 30, 2012, compared to $47.0 million for the three months ended June 30, 2011. Operating income increased 14% from $45.1 million for the three months ended June 30, 2011 to $51.6 million for the same period of 2012.

Franchising revenues increased 6% to $77.8 million for the three months ended June 30, 2012 from $73.4 million for the same period of 2011. Total revenues increased 5% to $173.6 million for the three months ended June 30, 2012 compared to the same period of 2011.

Domestic royalty fees for the three months ended June 30, 2012 increased $4.4 million to $59.8 million from $55.4 million in the three months ended June 30, 2011, an increase of 8%.

Franchising margins increased from 61.2% for the three months ended June 30, 2011 to 65.9% for the same period of the current year.

Worldwide unit growth increased 1.3 percent from June 30, 2011 comprised of domestic and international unit growth of 1.3 percent and 1.6 percent, respectively.

Domestic system-wide revenue per available room (“RevPAR”) increased 7.7% for the three months ended June 30, 2012 compared to the same period of 2011 as occupancy and average daily rates increased 250 basis points and 2.8 percent, respectively.

The company executed 106 new domestic hotel franchise contracts for the three months ended

1


June 30, 2012 compared to 69 new domestic hotel franchise contracts in the same period of the prior year, a 54% increase.

The number of worldwide hotels under construction, awaiting conversion or approved for development as of June 30, 2012 was 453 hotels representing 37,380 rooms.

“We are very pleased with our results for the quarter. People are traveling, we are driving record traffic to our hotels and the development environment is improving. Our second quarter results in fact were highlighted by the 106 new domestic franchise agreements we executed in the second quarter of 2012, a 54% increase over the prior year,” said Stephen P. Joyce, president and chief executive officer. “These results demonstrate our ability to attract owners to our family of eleven brands due to our size, scale and distribution which allows us to deliver guests and create opportunities for our franchisees to achieve exceptional returns on investment. We are also excited about our recent announcement of the declaration of a $600 million special cash dividend to shareholders which further illustrates our commitment and adds to our already strong history of returning value to our shareholders over time.”

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.

Dividends

For the six months ended June 30, 2012, the company paid $21.4 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.

On July 26, 2012, the company announced that its board of directors declared a special cash dividend in the amount of $10.41 per share or approximately $600 million in the aggregate. The record date for the special cash dividend is August 20, 2012 and the special cash dividend will be paid on August 23, 2012. The company has been informed by the New York Stock Exchange that, in accordance with its rules, the ex-dividend date is expected to be August 24, 2012. Accordingly, stockholders who sell their shares on or before the payment date will not be entitled to receive the special cash dividend.

The special cash dividend is being paid with the proceeds from the company’s recent offering of $400 million, 5.75% unsecured senior notes and its new senior secured credit facility. On June 27, 2012, the company issued unsecured senior notes in an aggregate principal amount of $400 million, in an underwritten, registered public offering. The notes will mature in July 2022 and bear a coupon rate of interest of 5.75%. Considering bond issuance costs, the company’s effective interest cost related to these senior notes is approximately 5.94%.

On July 25, 2012, the company entered into a senior secured credit facility consisting of a $200 million revolving credit tranche and a $150 million term loan tranche, with a four year term. The company expects to utilize the proceeds from the term loan as well as approximately $50 million under the revolving credit tranche for payment of the special dividend. As a result of entering into the senior secured credit facility, the company’s existing $300 million senior unsecured revolving credit facility was terminated.

The senior secured credit facility is secured by a first priority pledge of equity by certain wholly-owned subsidiaries and contains customary financial covenants, including with respect to restrictions on liens,

2


incurring indebtedness, making investments, restricted payments and effecting mergers and/or asset sales. In addition, the senior secured credit facility imposes certain financial maintenance covenants. The company may elect to have borrowings under the senior secured credit facility bear interest at (i) a base rate plus a margin ranging from 100 to 325 basis points based on the company’s total leverage ratio or (ii) LIBOR plus a margin ranging from 200 to 425 basis points based on the company’s total leverage ratio.

Share Repurchases

During the three months ended June 30, 2012, the company purchased approximately 0.2 million shares of its common stock at an average price of $37.39 for a total cost of $7.0 million under the share repurchase program. During the six months ended June 30, 2012, the company repurchased 0.5 million shares for a total cost of $19.9 million at an average price of $37.02 and has authorization to purchase up to an additional 1.4 million shares under this program. We expect to continue making repurchases under our share repurchase program 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 45.3 million shares of its common stock for a total cost of $1.1 billion through June 30, 2012. Considering the effect of a two-for-one stock split in October 2005, the company had repurchased 78.3 million shares through June 30, 2012 under the share repurchase program at an average price of $13.89 per share.

Other

Our board of directors 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 strategic markets. 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. 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.
                      

Outlook for 2012
The company’s third quarter 2012 diluted EPS is expected to be $0.61. The company expects full-year 2012 diluted EPS to range between $1.91 and $1.94. EBITDA for full-year 2012 are expected to range between $201.0 million and $203.5 million. These estimates include the following assumptions:

The company expects net domestic unit growth to range between flat and a 1% increase in 2012;
RevPAR is expected to increase approximately 5% for third quarter of 2012 and increase between 6% and 7% for full-year 2012;
The effective royalty rate is expected to remain flat for full-year 2012;
All figures assume the existing share count and an effective tax rate of 34.0% for the third quarter and 33.8% for full-year 2012.
Diluted EPS guidance for full-year 2012 reflects the impact of increased borrowing costs to be incurred as the result of the declaration of a $600 million special cash dividend to be paid in the third quarter of 2012 which is expected to total approximately $14 million or $0.16 per share.


3


Conference Call
Choice will conduct a conference call on Friday, July 27, 2012 at 9:30 a.m. EST to discuss the company’s second quarter 2012 results. The dial-in number to listen to the call is 1-866-730-5767, and the access code is 51535988. International callers should dial 1-857-350-1591 and enter the access code 51535988. 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 12:00 p.m. EST on Friday, July 27, 2012 through Monday, August 27, 2012 by calling 1-888-286-8010 and entering access code 76425859. The international dial-in number for the replay is 1-617-801-6888, access code 76425859. 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 approximately 6,200 hotels, representing more than 495,000 rooms, in the United States and more than 30 other countries and territories.  As of June 30, 2012, more than 375 hotels were under construction, awaiting conversion or approved for development in the United States, representing more than 30,000 rooms, and 75 hotels, representing approximately 6,700 rooms, were under construction, awaiting conversion or approved for development in 15 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 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 Private Securities Litigation Reform Act of 1995.  Generally, our use of words such as "expect," "estimate," "believe," "anticipate," "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, 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, 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

4


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, 2011, filed with the Securities and Exchange Commission on February 29, 2012 and our quarterly reports filed on Form 10-Q.  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 Presented in Exhibit 8
Adjusted diluted EPS, EBITDA, franchising revenues and 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 required by its franchise agreements to use these fees collected for marketing and reservation activities. Cumulative reservation and marketing system fees not expended are recorded as a liability 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 system 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: The company’s management uses adjusted diluted EPS, which excludes a reduction in the carrying amount of land held for sale resulting in a loss of $1.8 million included in other gains and losses during the six months ended June 30, 2011. This amount represented net income of $1.1 million and diluted EPS of $0.02 for the six months ended June 30, 2011. The company utilizes this non-GAAP measure to enable investors to perform meaningful comparisons of past, present and future

5


operating results and as a means to emphasize the results of on-going operations.


Contacts
David White, Senior Vice President, Chief Financial Officer & Treasurer
(301) 592-5117
Robin Pence, Vice President, Public Relations
(301) 592-5186


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.

ã 2012 Choice Hotels International, Inc. All rights reserved.

6


Choice Hotels International, Inc.
 
 
 
 
 
Exhibit 1
 
Consolidated Statements of Income
 
 
 
 
 
 
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
 
 
 
 
Variance
 
 
 
 
 
Variance
 
 
2012
 
2011
 
$
 
%
 
2012
 
2011
 
$
 
%
(In thousands, except per share amounts)
 
 
 
 
 
 
 
 
 
 
REVENUES:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Royalty fees
 
$
66,064

 
$
61,620

 
$
4,444

 
7
 %
 
$
113,917

 
$
105,414

 
$
8,503

 
8
 %
Initial franchise and relicensing fees
3,178

 
2,779

 
399

 
14
 %
 
5,706

 
5,500

 
206

 
4
 %
Procurement services
 
6,836

 
6,673

 
163

 
2
 %
 
10,151

 
9,934

 
217

 
2
 %
Marketing and reservation
 
94,633

 
90,832

 
3,801

 
4
 %
 
165,562

 
153,799

 
11,763

 
8
 %
Hotel operations
 
1,224

 
1,073

 
151

 
14
 %
 
2,202

 
1,937

 
265

 
14
 %
Other
 
1,686

 
2,324

 
(638
)
 
(27
)%
 
5,252

 
3,998

 
1,254

 
31
 %
      Total revenues
 
173,621

 
165,301

 
8,320

 
5
 %
 
302,790

 
280,582

 
22,208

 
8
 %
OPERATING EXPENSES:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Selling, general and administrative
 
24,554

 
26,539

 
(1,985
)
 
(7
)%
 
48,903

 
50,386

 
(1,483
)
 
(3
)%
Depreciation and amortization
 
1,977

 
1,948

 
29

 
1
 %
 
3,994

 
3,903

 
91

 
2
 %
Marketing and reservation
 
94,633

 
90,832

 
3,801

 
4
 %
 
165,562

 
153,799

 
11,763

 
8
 %
Hotel operations
 
867

 
860

 
7

 
1
 %
 
1,676

 
1,693

 
(17
)
 
(1
)%
Total operating expenses
 
122,031

 
120,179

 
1,852

 
2
 %
 
220,135

 
209,781

 
10,354

 
5
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income
 
51,590

 
45,122

 
6,468

 
14
 %
 
82,655

 
70,801

 
11,854

 
17
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OTHER INCOME AND EXPENSES, NET:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense
 
3,540

 
3,267

 
273

 
8
 %
 
6,657

 
6,491

 
166

 
3
 %
Interest income
 
(394
)
 
(221
)
 
(173
)
 
78
 %
 
(731
)
 
(431
)
 
(300
)
 
70
 %
Other (gains) and losses
 
377

 
(38
)
 
415

 
(1,092
)%
 
(1,626
)
 
1,005

 
(2,631
)
 
(262
)%
Equity in net (income) loss of affiliates
 
128

 

 
128

 
NM
 
183

 
(301
)
 
484

 
(161
)%
Total other income and expenses, net
 
3,651

 
3,008

 
643

 
21
 %
 
4,483

 
6,764

 
(2,281
)
 
(34
)%
Income before income taxes
 
47,939

 
42,114

 
5,825

 
14
 %
 
78,172

 
64,037

 
14,135

 
22
 %
Income taxes
 
16,077

 
14,536

 
1,541

 
11
 %
 
26,313

 
20,729

 
5,584

 
27
 %
Net income
 
$
31,862

 
$
27,578

 
$
4,284

 
16
 %
 
$
51,859

 
$
43,308

 
$
8,551

 
20
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per share
 
$
0.55

 
$
0.46

 
$
0.09

 
20
 %
 
$
0.89

 
$
0.72

 
$
0.17

 
24
 %
Diluted earnings per share
 
$
0.55

 
$
0.46

 
$
0.09

 
20
 %
 
$
0.89

 
$
0.72

 
$
0.17

 
24
 %



7


Choice Hotels International, Inc.
 
 
 
 
Exhibit 2

Consolidated Balance Sheets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(In thousands, except per share amounts)
 
 
 June 30,
 
 December 31,
 
 
 
 
 
2012
 
2011
 
 
 
 
 
(Unaudited)

 
 
 
 
 
 
 
 
 
 
ASSETS
 
 
 
 
 
Cash and cash equivalents
 
 
$
485,390

 
$
107,057

Accounts receivable, net
 
 
62,643

 
53,012

Investments, employee benefit plans, at fair value
 
 
5,184

 
12,094

Other current assets
 
 
30,656

 
22,633

 
Total current assets
 
 
583,873

 
194,796

Fixed assets and intangibles, net
 
 
131,992

 
135,252

Receivable -- marketing and reservation fees
 
 
64,838

 
54,014

Investments, employee benefit plans, at fair value
 
 
12,221

 
11,678

Other assets
 
 
64,814

 
51,949

 
 
Total assets
 
 
$
857,738

 
$
447,689

LIABILITIES AND SHAREHOLDERS' DEFICIT
 
 
 
 
 
Accounts payable and accrued expenses
 
 
$
81,685

 
$
92,240

Deferred revenue
 
 
64,422

 
68,825

Deferred compensation & retirement plan obligations
 
 
19,276

 
18,935

Current portion of long-term debt
 
 
683

 
673

Other current liabilities
 
 
15,674

 
3,892

 
Total current liabilities
 
 
181,740

 
184,565

Long-term debt
 
 
651,717

 
252,032

Deferred compensation & retirement plan obligations
 
 
19,482

 
20,593

Other liabilities
 
 
16,042

 
16,060

 
Total liabilities
 
 
868,981

 
473,250

Common stock, $0.01 par value
 
 
580

 
583

Additional paid-in-capital
 
 
101,719

 
102,665

Accumulated other comprehensive loss
 
 
(6,350
)
 
(6,801
)
Treasury stock, at cost
 
 
(932,663
)
 
(916,955
)
Retained earnings
 
 
825,471

 
794,947

 
Total shareholders' deficit
 
 
(11,243
)
 
(25,561
)
 
 
Total liabilities and shareholders' deficit
 
 
$
857,738

 
$
447,689



8



Choice Hotels International, Inc.
 
 
Exhibit 3

 
Consolidated Statements of Cash Flows
 
 
 
 
(Unaudited)
 
 
 
 
 
 
 
 
 
(In thousands)
Six Months Ended June 30,
 
 
 
 
 
 
 
2012
 
2011
 
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
 
 
 
Net income
$
51,859

 
$
43,308

 
Adjustments to reconcile net income to net cash provided
 
 
 
 
 by operating activities:
 
 
 
 
  Depreciation and amortization
3,994

 
3,903

 
  Provision for bad debts
1,236

 
1,340

 
  Non-cash stock compensation and other charges
4,868

 
7,436

 
  Non-cash interest and other (income) loss
(820
)
 
22

 
  Dividends received from equity method investments
399

 
159

 
  Equity in net (income) loss of affiliates
183

 
(301
)
 
Changes in assets and liabilities:
 
 
 
 
  Receivables
(12,258
)
 
(11,058
)
 
  Receivable - marketing and reservation fees, net
(2,389
)
 
(11,387
)
 
  Accounts payable
6,330

 
6,026

 
  Accrued expenses
(17,659
)
 
(11,004
)
 
  Income taxes payable/receivable
11,808

 
11,404

 
  Deferred income taxes
(194
)
 
40

 
  Deferred revenue
(4,404
)
 
(6,463
)
 
  Other assets
(4,331
)
 
(750
)
 
  Other liabilities
(820
)
 
(624
)
 
 NET CASH PROVIDED BY OPERATING ACTIVITIES
37,802

 
32,051

 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
Investment in property and equipment
(6,236
)
 
(5,110
)
 
Equity method investments
(6,315
)
 
(1,600
)
 
Purchases of investments, employee benefit plans
(969
)
 
(1,139
)
 
Proceeds from sales of investments, employee benefit plans
8,969

 
347

 
Issuance of notes receivable
(5,820
)
 
(2,651
)
 
Collections of notes receivable
210

 
13

 
Other items, net
(226
)
 
(192
)
 
 NET CASH USED IN INVESTING ACTIVITIES
(10,387
)
 
(10,332
)
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
Net repayments pursuant to revolving credit facilities

 
(200
)
 
Repayments of long-term debt
(333
)
 
(13
)
 
Proceeds from the issuance of long-term debt
393,444

 
75

 
Purchase of treasury stock
(22,173
)
 
(2,527
)
 
Dividends paid
(21,396
)
 
(21,922
)
 
Excess tax benefits from stock-based compensation
641

 
1,061

 
Debt issuance costs
(153
)
 
(2,356
)
 
Proceeds from exercise of stock options
445

 
3,132

 
 NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES
350,475

 
(22,750
)
 
Net change in cash and cash equivalents
377,890

 
(1,031
)
 
Effect of foreign exchange rate changes on cash and cash equivalents
443

 
733

 
Cash and cash equivalents at beginning of period
107,057

 
91,259

 
CASH AND CASH EQUIVALENTS AT END OF PERIOD
$
485,390

 
$
90,961

 

9


CHOICE HOTELS INTERNATIONAL, INC.
Exhibit 4
 
SUPPLEMENTAL OPERATING INFORMATION
 
 
 
DOMESTIC HOTEL SYSTEM
 
 
 
(UNAUDITED)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Six Months Ended June 30, 2012*
 
For the Six Months Ended June 30, 2011*
 
Change
 
 
Average Daily
 
 
 
 
 
Average Daily
 
 
 
 
 
Average Daily
 
 
 
 
 
 
 
Rate
 
Occupancy
 
RevPAR
 
Rate
 
Occupancy
 
RevPAR
 
Rate
 
Occupancy
 
RevPAR
Comfort Inn
 
$
77.48

 
53.6
%
 
$
41.52

 
$
75.27

 
51.1
%
 
$
38.47

 
2.9
%
 
250

bps
 
7.9
%
Comfort Suites
 
83.15

 
57.6
%
 
47.92

 
81.82

 
53.7
%
 
43.96

 
1.6
%
 
390

bps
 
9.0
%
Sleep
 
69.90

 
52.0
%
 
36.32

 
67.81

 
48.7
%
 
33.03

 
3.1
%
 
330

bps
 
10.0
%
Quality
 
66.29

 
46.8
%
 
31.03

 
64.47

 
44.7
%
 
28.81

 
2.8
%
 
210

bps
 
7.7
%
Clarion
 
71.85

 
44.6
%
 
32.07

 
70.89

 
42.4
%
 
30.07

 
1.4
%
 
220

bps
 
6.7
%
Econo Lodge
 
52.48

 
44.0
%
 
23.09

 
51.60

 
42.4
%
 
21.89

 
1.7
%
 
160

bps
 
5.5
%
Rodeway
 
49.36

 
46.2
%
 
22.81

 
47.78

 
43.2
%
 
20.66

 
3.3
%
 
300

bps
 
10.4
%
MainStay
 
67.02

 
67.4
%
 
45.16

 
64.06

 
61.8
%
 
39.57

 
4.6
%
 
560

bps
 
14.1
%
Suburban
 
40.48

 
67.3
%
 
27.24

 
39.82

 
65.3
%
 
25.99

 
1.7
%
 
200

bps
 
4.8
%
Ascend Collection
 
109.96

 
59.4
%
 
65.28

 
106.96

 
55.3
%
 
59.19

 
2.8
%
 
410

bps
 
10.3
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
$
70.38

 
50.7
%
 
$
35.66

 
$
68.57

 
48.2
%
 
$
33.02

 
2.6
%
 
250

bps
 
8.0
%
* Operating statistics represent hotel operations from December through May
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended June 30, 2012*
 
For the Three Months Ended June 30, 2011*
 
Change
 
 
Average Daily
 
 
 
 
 
Average Daily
 
 
 
 
 
Average Daily
 
 
 
 
 
 
 
Rate
 
Occupancy
 
RevPAR
 
Rate
 
Occupancy
 
RevPAR
 
Rate
 
Occupancy
 
RevPAR
Comfort Inn
 
$
79.87

 
60.2
%
 
$
48.05

 
$
77.54

 
57.7
%
 
$
44.73

 
3.0
%
 
250

bps
 
7.4
%
Comfort Suites
 
85.71

 
64.2
%
 
55.01

 
83.89

 
60.3
%
 
50.55

 
2.2
%
 
390

bps
 
8.8
%
Sleep
 
72.52

 
58.7
%
 
42.56

 
69.95

 
55.0
%
 
38.45

 
3.7
%
 
370

bps
 
10.7
%
Quality
 
68.43

 
52.5
%
 
35.95

 
66.58

 
50.4
%
 
33.58

 
2.8
%
 
210

bps
 
7.1
%
Clarion
 
74.71

 
50.2
%
 
37.53

 
73.14

 
47.9
%
 
35.01

 
2.1
%
 
230

bps
 
7.2
%
Econo Lodge
 
54.14

 
49.2
%
 
26.62

 
53.10

 
47.4
%
 
25.14

 
2.0
%
 
180

bps
 
5.9
%
Rodeway
 
51.10

 
50.4
%
 
25.76

 
49.34

 
47.7
%
 
23.55

 
3.6
%
 
270

bps
 
9.4
%
MainStay
 
69.06

 
72.9
%
 
50.32

 
66.31

 
69.2
%
 
45.87

 
4.1
%
 
370

bps
 
9.7
%
Suburban
 
41.58

 
71.9
%
 
29.89

 
41.13

 
69.7
%
 
28.68

 
1.1
%
 
220

bps
 
4.2
%
Ascend Collection
 
114.40

 
66.4
%
 
$
75.94

 
$
113.44

 
60.4
%
 
$
68.50

 
0.8
%
 
600

bps
 
10.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
$
72.69

 
56.6
%
 
$
41.16

 
$
70.72

 
54.1
%
 
$
38.22

 
2.8
%
 
250

bps
 
7.7
%
* Operating statistics represent hotel operations from March through May
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Quarter Ended
 
 
 
For the Six Months Ended
 
 
 
 
 
 
 
 
 
 
 
6/30/2012

 
6/30/2011

 
 
 
6/30/2012

 
6/30/2011

 
 
 
 
 
 
 
 
 
System-wide effective royalty rate
 
4.32
%
 
4.33
%
 
 
 
4.33
%
 
4.34
%
 
 
 
 
 
 
 
 
 

10


CHOICE HOTELS INTERNATIONAL, INC.
 
Exhibit 5
SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA
 
 
 
(UNAUDITED)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 30, 2012
 
June 30, 2011
 
 
Variance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Hotels
 
Rooms
 
Hotels
 
Rooms
 
Hotels
 
Rooms
 
%
 
%
 
Comfort Inn
 
1,379

 
107,895

 
1,416

 
110,736

 
(37
)
 
(2,841
)
 
(2.6
)%
 
(2.6
)%
 
Comfort Suites
 
608

 
46,903

 
613

 
47,441

 
(5
)
 
(538
)
 
(0.8
)%
 
(1.1
)%
 
Sleep
 
391

 
28,327

 
394

 
28,625

 
(3
)
 
(298
)
 
(0.8
)%
 
(1.0
)%
 
Quality
 
1,082

 
93,655

 
1,027

 
89,571

 
55

 
4,084

 
5.4
 %
 
4.6
 %
 
Clarion
 
189

 
27,534

 
193

 
28,335

 
(4
)
 
(801
)
 
(2.1
)%
 
(2.8
)%
 
Econo Lodge
 
801

 
49,114

 
778

 
48,197

 
23

 
917

 
3.0
 %
 
1.9
 %
 
Rodeway
 
401

 
22,671

 
377

 
20,506

 
24

 
2,165

 
6.4
 %
 
10.6
 %
 
MainStay
 
40

 
3,083

 
39

 
3,007

 
1

 
76

 
2.6
 %
 
2.5
 %
 
Suburban
 
62

 
7,260

 
61

 
7,255

 
1

 
5

 
1.6
 %
 
0.1
 %
 
Ascend Collection
 
52

 
4,652

 
44

 
3,392

 
8

 
1,260

 
18.2
 %
 
37.1
 %
 
Cambria Suites
 
19

 
2,221

 
19

 
2,215

 

 
6

 
0.0
 %
 
0.3
 %
 
Domestic Franchises
 
5,024

 
393,315

 
4,961

 
389,280

 
63

 
4,035

 
1.3
 %
 
1.0
 %
 
International Franchises
 
1,175

 
104,522

 
1,156

 
102,086

 
19

 
2,436

 
1.6
 %
 
2.4
 %
 
Total Franchises
 
6,199

 
497,837

 
6,117

 
491,366

 
82

 
6,471

 
1.3
 %
 
1.3
 %
 

11


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exhibit 6
CHOICE HOTELS INTERNATIONAL, INC.
 
 
SUPPLEMENTAL INFORMATION BY BRAND
 
 
DEVELOPMENT RESULTS -- DOMESTIC NEW HOTEL CONTRACTS
 
 
(UNAUDITED)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Six Months Ended June 30, 2012
 
For the Six Months Ended June 30, 2011
 
% Change
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New
 
 
 
 
 
New
 
 
 
 
 
New
 
 
 
 
 
 
Construction
 
Conversion
 
Total
 
Construction
 
Conversion
 
Total
 
Construction
 
Conversion
 
Total
Comfort Inn
 
6

 
12

 
18

 
5

 
18

 
23

 
20%
 
(33)%
 
(22)%
Comfort Suites
 
7

 
4

 
11

 
1

 
4

 
5

 
600%
 
0%
 
120%
Sleep
 
11

 
1

 
12

 
3

 
1

 
4

 
267%
 
0%
 
200%
Quality
 

 
63

 
63

 

 
35

 
35

 
NM
 
80%
 
80%
Clarion
 

 
7

 
7

 

 
8

 
8

 
NM
 
(13)%
 
(13)%
Econo Lodge
 

 
18

 
18

 

 
18

 
18

 
NM
 
0%
 
0%
Rodeway
 

 
31

 
31

 

 
18

 
18

 
NM
 
72%
 
72%
MainStay
 
1

 
1

 
2

 
1

 
3

 
4

 
0%
 
(67)%
 
(50)%
Suburban
 

 
1

 
1

 
2

 
1

 
3

 
(100)%
 
0%
 
(67)%
Ascend Collection
 
1

 
4

 
5

 

 
5

 
5

 
NM
 
(20)%
 
0%
Cambria Suites
 
2

 

 
2

 
2

 

 
2

 
0%
 
NM
 
0%
Total Domestic System
 
28

 
142

 
170

 
14

 
111

 
125

 
100%
 
28%
 
36%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended June 30, 2012
 
For the Three Months Ended June 30, 2011
 
% Change
 
 
New
 
 
 
 
 
New
 
 
 
 
 
New
 
 
 
 
 
 
Construction
 
Conversion
 
Total
 
Construction
 
Conversion
 
Total
 
Construction
 
Conversion
 
Total
Comfort Inn
 
5

 
4

 
9

 
3

 
11

 
14

 
67%
 
(64)%
 
(36)%
Comfort Suites
 
6

 
2

 
8

 
1

 
2

 
3

 
500%
 
0%
 
167%
Sleep
 
8

 
1

 
9

 
1

 
1

 
2

 
700%
 
0%
 
350%
Quality
 

 
36

 
36

 

 
11

 
11

 
NM
 
227%
 
227%
Clarion
 

 
5

 
5

 

 
3

 
3

 
NM
 
67%
 
67%
Econo Lodge
 

 
14

 
14

 

 
12

 
12

 
NM
 
17%
 
17%
Rodeway
 

 
19

 
19

 

 
13

 
13

 
NM
 
46%
 
46%
MainStay
 
1

 
1

 
2

 

 
3

 
3

 
NM
 
(67)%
 
(33)%
Suburban
 

 
1

 
1

 
2

 
1

 
3

 
(100)%
 
0%
 
(67)%
Ascend Collection
 

 
2

 
2

 

 
4

 
4

 
NM
 
(50)%
 
(50)%
Cambria Suites
 
1

 

 
1

 
1

 

 
1

 
0%
 
NM
 
0%
Total Domestic System
 
21

 
85

 
106

 
8

 
61

 
69

 
163%
 
39%
 
54%

12


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
 
 
June 30, 2012
 
June 30, 2011
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Units
 
Units
 
Conversion
 
New Construction
 
Total
 
 
Conversion
 
New Construction
 
Total
 
Conversion
 
New Construction
 
Total
 
Units
 
%
 
Units
 
%
 
Units
 
%
Comfort Inn
 
25

 
40

 
65

 
27

 
50

 
77

 
(2
)
 
(7
)%
 
(10
)
 
(20
)%
 
(12
)
 
(16
)%
Comfort Suites
 
2

 
82

 
84

 
3

 
108

 
111

 
(1
)
 
(33
)%
 
(26
)
 
(24
)%
 
(27
)
 
(24
)%
Sleep Inn
 
1

 
40

 
41

 

 
62

 
62

 
1

 
NM
 
(22
)
 
(35
)%
 
(21
)
 
(34
)%
Quality
 
39

 
3

 
42

 
25

 
5

 
30

 
14

 
56
 %
 
(2
)
 
(40
)%
 
12

 
40
 %
Clarion
 
14

 
1

 
15

 
16

 
2

 
18

 
(2
)
 
(13
)%
 
(1
)
 
(50
)%
 
(3
)
 
(17
)%
Econo Lodge
 
20

 
1

 
21

 
34

 
1

 
35

 
(14
)
 
(41
)%
 

 
0
 %
 
(14
)
 
(40
)%
Rodeway
 
31

 
1

 
32

 
15

 
1

 
16

 
16

 
107
 %
 

 
0
 %
 
16

 
100
 %
MainStay
 
1

 
22

 
23

 
4

 
37

 
41

 
(3
)
 
(75
)%
 
(15
)
 
(41
)%
 
(18
)
 
(44
)%
Suburban
 
2

 
14

 
16

 

 
22

 
22

 
2

 
NM
 
(8
)
 
(36
)%
 
(6
)
 
(27
)%
Ascend Collection
 
8

 
5

 
13

 
5

 
3

 
8

 
3

 
60
 %
 
2

 
67
 %
 
5

 
63
 %
Cambria Suites
 

 
26

 
26

 

 
31

 
31

 

 
NM
 
(5
)
 
(16
)%
 
(5
)
 
(16
)%
 
 
143

 
235

 
378

 
129

 
322

 
451

 
14

 
11
 %
 
(87
)
 
(27
)%
 
(73
)
 
(16
)%

13


CHOICE HOTELS INTERNATIONAL, INC.
Exhibit 8
 
SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION
 
 
(UNAUDITED)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CALCULATION OF FRANCHISING REVENUES AND FRANCHISING MARGINS
 
 
 
 
 
 
 
 
 
 
 
 
(dollar amounts in thousands)
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
 
 
 
2012
 
2011
 
2012
 
2011
 
 
 
Franchising Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Revenues
 
$
173,621

 
$
165,301

 
$
302,790

 
$
280,582

 
 
 
Adjustments:
 
 
 
 
 
 
 
 
 
 
 
     Marketing and reservation revenues
 
(94,633
)
 
(90,832
)
 
(165,562
)
 
(153,799
)
 
 
 
     Hotel operations
 
(1,224
)
 
(1,073
)
 
(2,202
)
 
(1,937
)
 
 
 
Franchising Revenues
 
$
77,764

 
$
73,396

 
$
135,026

 
$
124,846

 
 
 
Franchising Margins:
 
 
 
 
 
 
 
 
 
 
 
Operating Margin:
 
 
 
 
 
 
 
 
 
 
 
Total Revenues
 
$
173,621

 
$
165,301

 
$
302,790

 
$
280,582

 
 
 
Operating Income
 
$
51,590

 
$
45,122

 
$
82,655

 
$
70,801

 
 
 
     Operating Margin
 
29.7
%
 
27.3
%
 
27.3
%
 
25.2
%
 
 
 
 Franchising Margin:
 
 
 
 
 
 
 
 
 
 
 
Franchising Revenues
 
$
77,764

 
$
73,396

 
$
135,026

 
$
124,846

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Income
 
$
51,590

 
$
45,122

 
$
82,655

 
$
70,801

 
 
 
Hotel operations
 
(357
)
 
(213
)
 
(526
)
 
(244
)
 
 
 
 
 
$
51,233

 
$
44,909

 
$
82,129

 
$
70,557

 
 
 
     Franchising Margins
 
65.9
%
 
61.2
%
 
60.8
%
 
56.5
%