Net Income of $18.5 million Compared to
Prior Year Net Income of $17.1 million
Gains 151 New Domestic Hotel Franchise Contracts in 2nd Qtr
Hotel Operating Statistics
Domestic Unit Growth Rises 4.5%
SILVER SPRING, Md. - July 27, 2004-- Choice Hotels International, Inc. (NYSE:CHH) today reported second quarter 2004 net income of $18.5 million, or $0.53 diluted earnings per share (EPS), a 13% increase in EPS over the same period of a year ago. At the end of second quarter 2003, the company reported net income of $17.1 million, or $0.47 diluted EPS.
The company also announced that its operating income increased to $32.1 million for second quarter 2004, a 12% gain over the $28.7 million reported at the end of second quarter 2003. Franchising margins increased to 61.5% for second quarter 2004 from 58.1% for the same period of a year ago. Operating cash flows for second quarter 2004 increased to $47.4 million, or 18% compared to the same period of 2003.
"Choice continues to enjoy very strong franchise development while seeing increased travel demand at our franchised hotels," said Charles A. Ledsinger, Jr., president and chief executive officer. "We experienced 31% growth in our new domestic hotel franchise contracts, compared to a record development performance in 2003. This sustained high level of demand by hotel owners and developers underscores the strength of our brands in the segments in which we compete."
He added, "Because of our very strong development activity, including continued growth in franchise applications, our pipeline of new hotels for entry into our system is robust and will drive strong unit growth into the future. We also are pleased by the continued solid growth in RevPAR, which provides our franchisees with a better return on their investment."
Second Quarter Performance
The company reported total revenues of $107.2 million for second quarter 2004, compared to $103.5 million for the same period in 2003, an increase of 4%. Franchising revenues, which include royalty fees, initial and relicensing fees, partner services revenue and other revenue, for the second quarter of 2004 were $51.8 million, an increase of 6% from the $49.0 million reported in the same period a year ago.
The company reported royalty revenues of $41.7 million for second quarter 2004, compared to $37.6 million for the same period in 2003, an increase of 11%.
System-wide domestic revenue per available room (RevPAR) was $36.10 in second quarter 2004, compared to $33.81 for the second quarter of 2003, an increase of 7%.
For the first six months of 2004, Choice reported net income of $29.1 million or $0.83 diluted EPS, increases of 9% and 15% respectively over the $26.8 million and $0.72 diluted EPS reported for the first six months of 2003. Operating income through June 30, 2004 increased 11% to $51.0 million, compared to $45.9 million for the same period a year ago.
Royalty revenues for the first six months of 2004 were $72.4 million, compared to $64.9 million for the same period a year ago. Domestic RevPAR was $31.62 for the first half of 2004, compared to $29.89 for the first six months of 2003.
Net income and diluted earnings per share for the quarter and six months ended June 30, 2003 included approximately $1.2 million ($0.7 million, net of the related tax effect) and $2.3 million ($1.5 million, net of the related tax effect), respectively of interest income attributable to a note receivable from Sunburst Hospitality Corporation, which was repaid to the Company in December 2003. Second quarter 2003 revenues, operating income, net income and diluted earnings per share also included approximately $1.7 million ($1.1 million, net of the related tax effect) of liquidated damages received from Sunburst for franchise terminations. These items represented diluted EPS of $0.05 and $0.07 for the three and six months ended June 30, 2003.
2004 Unit Growth
The total number of domestic Choice hotels on-line grew by 4.5% to 3,723 (301,182 rooms on-line) as of June 30, 2004 from 3,562 (289,701 rooms on-line) as of the same period a year ago. Net domestic property additions in the second quarter of 2004 were 35, compared to 46 net domestic additions in the same period of 2003. For the first six months of this year, net domestic property additions were 87, compared to 80 for the same period of a year ago.
Choice executed 151 new domestic hotel franchise contracts representing 13,094 rooms in second quarter 2004, compared to 115 new contracts representing 10,125 rooms for the same period a year ago, increases of approximately 30%. For the year 2004 through June 30, Choice has executed 232 new domestic hotel franchise contracts, representing 19,987 rooms, compared to 186 contracts, representing 17,695 rooms, for the same period in 2003. This 25% increase in executed contracts and an increase in the number of existing franchise relicensings resulted in a 11% and 18% increase in initial franchise and relicensing fees respectively for the three and six months ended June 30, 2004, compared to the same periods in 2003.
In second quarter 2004, 33 contracts for new construction hotels, representing 2,226 rooms were executed, compared to 28 contracts, representing 1,899 rooms for the same period a year ago, each representing an increase of better than 17%.
As of June 30, 2004, the total number of Choice hotels worldwide grew 3% to 4,884 from 4,743 as of the same date a year ago. This growth represents an increase of 3% in the number of rooms open to 396,013 from 383,592. At the end of second quarter 2004, Choice had 475 hotels under development worldwide, representing 37,997 rooms compared to 396 hotels and 33,906 rooms in 2003.
Third Quarter & Year 2004 Estimates
The company's third quarter 2004 earnings are expected to be in the range of $0.75 to $0.77. Full year 2004 diluted EPS are expected to be between $2.10 and $2.13, assuming second-half 2004 RevPAR growth of approximately 4.0%.
Among the notable company events occurring since the previous earnings report:
Franchising revenues and franchising margins 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 or operating income margins. The company's calculation of franchising
revenues and franchising margins 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 measurements.
Choice Hotels International franchises more than 4,800 hotels open, representing approximately 400,000 rooms, in the United States and 41 other countries and territories. As of June 30, 2004, 395 hotels are under development in the United States, representing 30,841 rooms, and an additional 80 hotels, representing 7,156 rooms, are under development in 17 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.
|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 Adds 41,000 Franchise Rooms in 2003; Reports 342 Conversions and 128 New Construction Contracts / January 2004|