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Choice Hotels Reports First Quarter 2004 Net Income of $10.6 million,
Up from $9.7 million Reported for First Quarter 2003, 
12% Growth in Domestic Royalty Revenue 
Hotel Operating Statistics by Brand
.
SILVER SPRING, Md. - April 21, 2004 -- Choice Hotels International, Inc. (NYSE:CHH) today reported first quarter 2004 diluted earnings per share (EPS) 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 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 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) 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 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 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 program on June 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 to purchase up to 0.7 million shares. Total shares outstanding as of March 31, 2004, are 34.2 million.
  • On February 10, 2004, Choice's Board of Directors declared 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, May 4, 2004 at 9:00 a.m. Eastern time at the Choice Hotels Learning Center, 10720 Columbia Pike, Silver Spring, Maryland.
  • Choice's Board of Directors elected David Goldberg as vice president, Corporate & Brand Strategy and Treasurer. In a related move, Thomas Hall was named vice president, Product 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 under accounting principles generally accepted in the United States (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 this release which reconcile these measures to the comparable GAAP measurement.
 

 

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
                                             -------- --------

 

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, Sleep Inn, Econo Lodge, Rodeway Inn and MainStay Suites brands serve guests worldwide.

Certain matters discussed in this press release may constitute forward-looking statements 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. 


 
Contact:

     Choice Hotels International, Inc.
     John Hawkins, Vice President, Corporate Communications
Tel: (301) 592-5075
     john_hawkins@choicehotels.com


 
Also See: Choice Hotels, With 4,810 Franchised Hotels, Reports 2003 Net Income of $71.9 million, Compared to Prior Year Net Income of $ 60.8 million / Hotel Operating Statistics / February 2004
Choice Hotels International, Inc. Reports 1st Qtr 2003 Net Income of $9.7 million; Grows Number of Hotels 3.0% to 4,678 / April 2003


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