SILVER SPRING, Md. (February 15, 2005) � Choice Hotels International,
Inc. (NYSE:CHH) today reported the following highlights for the fourth
quarter and full year 2004:
-
Diluted earnings per share for full year 2004 were $2.15 compared to $1.96
for 2003; Diluted earnings per share for fourth quarter 2004 were $0.60
compared to $0.57 for fourth quarter 2003;
-
Adjusted diluted earnings per share for full year 2004 were $2.16, up 16%
from $1.87 for the same period in 2003, on a non-GAAP basis, excluding
specified items;
-
Royalty revenues up 13% and 11% for fourth quarter and full year 2004,
respectively, total revenues up 12% and 11% for fourth quarter and full
year, respectively;
-
Domestic unit growth of 5.4%;
-
Domestic system-wide revenue per available room increased 7.9% for fourth
quarter 2004 and 5.1% for full year 2004 compared to prior year results;
-
Year-to-date new domestic hotel franchise contracts up 17% to a record
552;
-
Domestic hotels under development increased in 2004 by more than 14% to
460 hotels representing 35,652 rooms at year end 2004; worldwide hotels
under development grew 16% to 569 hotels at year end 2004, representing
45,167 rooms;
-
Company returned more than $175 million of cash to shareholders in 2004
through a combination of treasury share repurchases and dividends;
-
Company announces 2005 full year guidance of $2.38 to $2.42 diluted earnings
per share.
�Choice Hotels enjoyed yet another record-setting year in 2004 as we added
more than 15,000 rooms to our domestic system and achieved a significant
milestone with more than 400,000 rooms open worldwide,� said Charles A.
Ledsinger, Jr., president and chief executive officer. �We had a
second consecutive record development year, with more than 550 contracts
for new franchises executed, which positions us well for unit growth in
2005 and beyond.�
He added, �We are also encouraged by strengthening industry fundamentals
that contributed to an increase in domestic RevPAR of nearly 8% in the
fourth quarter. We are optimistic that the strong momentum reflected in
our 2004 results will carry forward into next year. We are especially
excited with this month�s announcement of the launch of our new upscale
brand, Cambria Suites, which has received an enthusiastic reception from
developers.�
Full Year 2004 & Fourth Quarter Performance
Choice reported full year 2004 net income of $74.3 million, or $2.15
diluted earnings per share (EPS), a 10% increase in diluted EPS over the
same period for 2003. For full year 2003, the company reported net
income of $71.9 million, or $1.96 diluted EPS.
Adjusted net income for full year 2004 was $74.8 million, compared to
adjusted net income of $68.5 million for the same period in 2003. Adjusted
diluted EPS was $2.16 for full year 2004, a 16% increase compared to the
same period in 2003. Adjusted net income and adjusted diluted EPS presented
for full year 2004 exclude a $0.4 million (net of related tax effect),
or $0.01 per share, loss on extinguishment of debt. Adjusted net income
and adjusted diluted EPS presented for full year 2003 exclude a $3.4 million
gain (net of related tax effect), or $0.09 per share, attributable to the
prepayment of a note receivable from Sunburst Hospitality Corporation (�Sunburst�)
which was repaid to the Company in December 2003.
Operating income for full year 2004 increased 10% from $114.0 million
to $125.0 million. Franchising margins for 2004 increased to 60.9%
from 60.4% for full year 2003.
The company also reported total revenues of $428.8 million for 2004,
compared to $386.1 million in 2003, an increase of 11%. Franchising revenues,
which include royalty revenues, initial and relicensing fees, partner services
and other revenue, for 2004 were $203.8 million, an increase of 9% from
the $187.1 million reported a year ago.
Royalty revenues for 2004 were $167.2 million, compared to $151.3 million
for 2003, an increase of 11%.
System-wide domestic revenue per available room (RevPAR) was $35.95
for full year 2004, compared to $34.21 for 2003, a 5.1% increase.
For fourth quarter 2004, Choice reported net income of $20.3 million
or $0.60 diluted EPS compared to net income of $20.7 million and $0.57
diluted EPS reported for fourth quarter 2003.
Net income of $20.3 million for fourth quarter 2004 increased 17% compared
to adjusted net income of $17.3 million for the same period in 2003. Diluted
EPS for fourth quarter 2004 increased 25% compared to adjusted diluted
EPS of $0.48 for fourth quarter 2003. Adjusted net income and adjusted
diluted EPS presented for fourth quarter 2003 exclude a $3.4 million gain
(net of related tax effect), or $0.09 per share, gain on the Sunburst note
receivable prepayment.
Operating income for fourth quarter 2004 increased 11% to $31.5 million,
compared to $28.3 million for the same period a year ago.
Total revenues were $106.9 million for the three months ended December
31, 2004, an increase of 12% compared to $95.2 million for the same period
in 2003. Franchising revenues for the last three months of 2004 increased
11% to $53.7 million, compared to $48.5 million for the same period a year
ago.
Royalty revenues for fourth quarter 2004 were $42.9 million, compared
to $38.1 million for the same period a year ago, an increase of 13%.
System-wide domestic RevPAR was $35.96 for the last three months of
2004, compared to $33.34 for the same period in 2003, a 7.9% gain.
2004 Unit Growth
The number of domestic Choice hotels on-line grew by 5.4% to 3,834 (309,586
rooms on-line) as of December 31, 2004 from 3,636 (294,268 rooms on-line)
as of the same date a year ago. Net domestic franchise additions
in 2004 were 198 compared to 154 net domestic franchise additions in 2003,
a 29% increase. In fourth quarter 2004, net domestic franchise
additions were 38, an increase of 9% compared to 35 for the same period
a year ago.
Choice executed 552 new domestic hotel franchise contracts representing
47,277 rooms in 2004, compared to 470 new contracts representing 41,039
rooms for the same period a year ago, increases of approximately 17% and
15% respectively. For the quarter ended December 31, 2004, Choice
executed 198 new domestic hotel franchise contracts, representing 17,078
rooms, compared to 176 contracts, representing 15,075 rooms, for the same
period in 2003, increases of 12% and 13% respectively. These increases
in executed new franchise contracts and an increase in the number of existing
franchise relicensings have contributed to better than 19% increases in
initial franchise and relicensing fees for both the three month period
and year ended December 31, 2004, compared to the same periods in 2003.
For full year 2004, 182 contracts for new construction hotel franchises,
representing 12,799 rooms were executed, compared to 128 contracts, representing
8,649 rooms for the same period a year ago, representing increases of approximately
42% and 48%, respectively. For the three months ended December 31, 2004,
82 contracts for new construction hotels representing 5,931 rooms were
executed, representing increases of 64% and 82%, respectively, compared
to 50 contracts, representing 3,250 rooms, for new construction hotels
for the same period a year ago.
As of December 31, 2004, Choice had 460 hotels under development in
its domestic hotel system, representing 35,652 rooms, compared to 401 hotels
and 31,409 rooms at the same date in 2003, increases of 15% and 14%, respectively.
As of December 31, 2004, the number of Choice hotels on-line worldwide
grew 3.5% to 4,977 from 4,810 as of the same date a year ago. This
growth represents an increase of 3.9% in the number of rooms open to 403,806
from 388,618. As of December 31, 2004, Choice had 569 hotels under
development worldwide, representing 45,167 rooms, compared to 491 hotels
and 39,877 rooms at the same date in 2003.
Use of Free Cash Flow
The company has consistently used the free cash flow (cash flows from
operations less capital expenditures) generated from its operations to
return value to its shareholders. This is primarily achieved through
share repurchases and dividends.
During 2004, the company purchased 3.2 million shares of its common
stock at an average price of $46.45 per share for a total cost of $148.3
million. For the three months ended December 31, 2004, the company purchased
0.9 million shares of its common stock at a total cost of $47.1 million.
The company has remaining authorization to purchase up to 1.8 million shares.
Since Choice announced its stock repurchase program on June 25, 1998, the
company has purchased 32.5 million shares of its common stock at an average
price of $20.38 per share and a total cost of $663 million, through December
31, 2004. Total shares outstanding as of December 31, 2004, are 32.3
million.
During 2004, the company paid $27.7 million of cash dividends to shareholders.
The current annual dividend rate on the company�s common stock is $0.90
per share.
The company expects to continue to return value to its shareholders
through a combination of share repurchases and dividends.
First Quarter & Full-Year 2005
The company�s first quarter 2005 diluted EPS is expected to be $0.32
to $0.34. These first quarter estimates assume the existing share
count and RevPAR growth of approximately 5% to 6%. Full year 2005 diluted
EPS is expected to be $2.38 to $2.42. These estimates assume the existing
share count and RevPAR growth of approximately 5% to 7%. These estimates
exclude the effect of adopting Statement of Financial Accounting Standards
No. 123R, Share-Based Payment (SFAS 123R) related to unvested stock options
granted prior to 2003.
Non-GAAP Financial Measures
Franchising revenues, franchising margins, adjusted net income, adjusted
diluted EPS and free cash flow 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, operating income margins,
net income, diluted EPS and cash flows from operations. The company�s calculation
of these measurements may be different from the calculation used by other
companies and therefore comparability may be limited. The company has included
exhibits 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
Three Months Ended Twelve Months Ended
share amounts)
December December December December
31, 2004 31, 2003 31, 2004 31, 2003
------------------ ------------------
REVENUES:
Royalty fees
$42,914 $38,130 $167,151 $151,326
Initial franchise and
relicensing fees
6,566 5,514 20,112 16,799
Partner services
3,242 3,597 12,524 13,227
Marketing and reservation
52,204 45,871 221,313 195,420
Hotel operations
967 826 3,729
3,565
Other
993 1,220 3,977
5,767
------------------ ------------------
Total revenues
106,886 95,158 428,806 386,104
OPERATING EXPENSES:
Selling, general and
administrative
20,042 17,823 69,654 62,860
Depreciation and amortization
2,422 2,753 9,947
11,225
Marketing and reservation
52,204 45,871 221,313 195,420
Hotel operations
742 399 2,892
2,616
------------------ ------------------
Total operating expenses
75,410 66,846 303,806 272,121
Operating income
31,476 28,312 125,000 113,983
OTHER INCOME AND EXPENSES:
Interest expense
3,328 2,612 11,605 11,597
Interest and other investment
income
(783) (1,546) (1,093) (6,185)
Gain on prepayment of note
receivable from Sunburst
- (3,433) -
(3,383)
Equity in net income of
affiliates
(271) (247) (722)
(582)
Loss on extinguishment of debt
- -
696 -
Other
(4) 122 (10)
129
------------------ ------------------
Total other income and
expenses
2,270 (2,492) 10,476 1,576
------------------ ------------------
Income before income taxes
29,206 30,804 114,524 112,407
Income taxes
8,874 10,084 40,179 40,544
------------------ ------------------
Net income
$20,332 $20,720 $74,345 $71,863
================== ==================
Weighted average shares
outstanding-basic
32,350 35,303 33,203 35,699
================== ==================
Weighted average shares
outstanding-diluted
33,716 36,513 34,500 36,674
================== ==================
Basic earnings per share
$0.63 $0.59 $2.24
$2.01
================== ==================
Diluted earnings per share
$0.60 $0.57 $2.15
$1.96
================== ==================
Choice Hotels International, Inc.
Exhibit 2
Consolidated Balance Sheets
(In thousands)
December 31, December 31,
2004 2003
------------ ------------
(Unaudited)
ASSETS
Cash and cash equivalents
$27,554 $20,031
Accounts receivable, net
34,611 33,631
Deferred income taxes
2,252 1,957
Other current assets
4,212 3,613
------------ ------------
Total current assets
68,629 59,232
Fixed assets and intangibles, net
140,214 150,256
Receivable -- marketing and reservation fees
21,683 32,368
Other assets
31,862 25,416
------------ ------------
Total assets
262,388 267,272
------------ ------------
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current portion of long-term debt
10,146 23,829
Other current liabilities
90,945 78,382
------------ ------------
Total current liabilities
101,091 102,211
Long-term debt
318,557 222,823
Deferred income taxes
6,974 21,562
Other liabilities
38,819 38,863
------------ ------------
Total liabilities
465,441 385,459
------------ ------------
Total shareholders' deficit
(203,053) (118,187)
------------ ------------
Total liabilities and
shareholders' deficit
$262,388 $267,272
------------ ------------
Choice Hotels International, Inc.
Exhibit 3
Consolidated Statements of Cash Flow
(Unaudited)
(In thousands)
Twelve Months Ended
December 31, December 31,
2004 2003
-------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
$74,345 $71,863
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
9,947 11,225
Gain on Sunburst Hospitality note
prepayment
- (3,383)
Provision for bad debts
(157) (189)
Non-cash stock compensation
4,019 2,226
Non-cash interest and other investment
income
(463) (886)
Loss on extinguishment of debt
696 -
Equity in net income of affiliates
(722) (582)
Changes in assets and liabilities, net of
acquisitions:
Receivables
(735) (887)
Receivable -- marketing and reservation
fees, net
19,743 24,726
Accounts payable
978 6,439
Accrued expenses and other
12,802 7,616
Income taxes payable
2,854 (2,675)
Deferred income taxes
(14,883) (7,970)
Other current assets
(599) 383
Other liabilities
(26) 7,579
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES
107,799 115,485
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in property and equipment
(6,859) (8,480)
Proceeds from disposition of property
- 498
Prepayment of Sunburst Hospitality note
- 44,701
Issuance of notes receivable
(2,264) (4,433)
Acquisition of flag
- (1,211)
Purchases of investments, net
(4,157) (2,673)
Other items, net
(436) (618)
------------ ------------
NET CASH (USED IN) PROVIDED BY INVESTING
ACTIVITIES
(13,716) 27,784
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt
192,000
-
Principal payments of long-term debt
(267,739) (17,404)
Net borrowings (repayments) pursuant to
revolving credit facility
157,725 (43,800)
Debt issue costs
(1,010) -
Purchase of treasury stock
(148,273) (80,358)
Dividends paid
(27,690) -
Proceeds from exercise of stock options
8,427 6,097
------------ ------------
NET CASH USED IN FINANCING ACTIVITIES
(86,560) (135,465)
------------ ------------
Net change in cash and cash equivalents
7,523 7,804
Cash and cash equivalents at beginning of
period
20,031 12,227
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD
$27,554 $20,031
============ ============
CHOICE HOTELS INTERNATIONAL,
INC. Exhibit 4
SUPPLEMENTAL OPERATING INFORMATION BY BRAND
DOMESTIC HOTEL SYSTEM
(UNAUDITED)
Three Months Ended Twelve Months
Ended
December 31, December 31, December 31, December 31,
2004 2003
2004 2003
------------ ------------ ------------ ------------
COMFORT INN
Hotels
1,432 1,413
1,432 1,413
Rooms
112,325 111,218
112,325 111,218
Avg. Daily Rate
$65.70 $62.80
$65.53 $64.05
Occupancy %
61.3% 58.6%
60.1% 58.2%
RevPAR
$40.29 $36.82
$39.37 $37.28
COMFORT SUITES
Hotels
389 370
389 370
Rooms
30,682 29,198
30,682 29,198
Avg. Daily Rate
$72.90 $70.68
$73.68 $72.58
Occupancy %
64.1% 60.8%
64.1% 61.2%
RevPAR
$46.70 $42.99
$47.26 $44.44
QUALITY
Hotels
576 508
576 508
Rooms
58,785 52,766
58,785 52,766
Avg. Daily Rate
$61.85 $60.90
$63.62 $64.19
Occupancy %
53.8% 51.8%
54.1% 51.6%
RevPAR
$33.30 $31.52
$34.41 $33.14
CLARION
Hotels
158 138
158 138
Rooms
23,652 20,737
23,652 20,737
Avg. Daily Rate
$72.47 $70.63
$72.37 $72.27
Occupancy %
50.7% 48.8%
51.1% 49.2%
RevPAR
$36.71 $34.48
$36.97 $35.55
SLEEP
Hotels
311 309
311 309
Rooms
23,766 23,678
23,766 23,678
Avg. Daily Rate
$59.67 $57.24
$59.50 $58.01
Occupancy %
60.3% 58.2%
59.5% 57.5%
RevPAR
$35.99 $33.32
$35.42 $33.33
MAINSTAY
Hotels
27 26
27 26
Rooms
2,150 2,063
2,150 2,063
Avg. Daily Rate
$61.93 $58.87
$61.09 $61.50
Occupancy %
65.2% 63.4%
62.2% 62.9%
RevPAR
$40.36 $37.33
$37.97 $38.70
ECONO LODGE
Hotels
781 734
781 734
Rooms
48,301 45,420
48,301 45,420
Avg. Daily Rate
$48.75 $46.97
$48.92 $47.88
Occupancy %
47.9% 46.5%
48.2% 47.5%
RevPAR
$23.36 $21.86
$23.57 $22.76
RODEWAY
Hotels
160 138
160 138
Rooms
9,925 9,188
9,925 9,188
Avg. Daily Rate
$50.09 $47.37
$52.33 $49.84
Occupancy %
49.3% 43.5%
48.7% 44.8%
RevPAR
$24.67 $20.59
$25.49 $22.32
TOTAL CHOICE - DOMESTIC
Hotels
3,834 3,636
3,834 3,636
Rooms
309,586 294,268
309,586 294,268
Avg. Daily Rate
$63.17 $60.98
$63.56 $62.53
Occupancy %
56.9% 54.7%
56.6% 54.7%
RevPAR
$35.96 $33.34
$35.95 $34.21
Effective Royalty
Rate
4.05% 4.06%
4.04% 4.01%
CHOICE HOTELS INTERNATIONAL, INC.
Exhibit 5
SUPPLEMENTAL INFORMATION
CALCULATION OF FRANCHISING REVENUES AND
FRANCHISING MARGINS
(UNAUDITED)
(dollar amounts in thousands) Three Months
Ended Twelve Months Ended
December December December December
31, 2004 31, 2003 31, 2004 31, 2003
------------------ ------------------
Franchising Revenues:
Total Revenues
$106,886 $95,158 $428,806 $386,104
Adjustments:
Marketing and Reservation
Revenues
(52,204) (45,871) (221,313)(195,420)
Hotel Operations
(967) (826) (3,729) (3,565)
------------------ ------------------
Franchising Revenues
$53,715 $48,461 $203,764 $187,119
------------------ ------------------
Franchising Margins:
Operating Margin:
Total Revenues
$106,886 $95,158 $428,806 $386,104
Operating Income
$31,476 $28,312 $125,000 $113,983
------------------ ------------------
Operating Margin
29.4% 29.8% 29.2%
29.5%
------------------ ------------------
Franchising Margin:
Franchising Revenues
$53,715 $48,461 $203,764 $187,119
Operating Income
$31,476 $28,312 $125,000 $113,983
Less: Hotel Operations
225 427
837 949
------------------ ------------------
$31,251 $27,885 $124,163 $113,034
------------------ ------------------
------------------ ------------------
Franchising Margins
58.2% 57.5% 60.9%
60.4%
------------------ ------------------
CHOICE HOTELS INTERNATIONAL, INC.
Exhibit 6
SUPPLEMENTAL INFORMATION
CALCULATION OF ADJUSTED NET INCOME AND ADJUSTED
DILUTED EARNINGS PER
SHARE (EPS)
(UNAUDITED)
(In thousands, except per
share amounts)
Three Months Ended Twelve Months Ended
December December December December
31, 2004 31, 2003 31, 2004 31, 2003
------------------ ------------------
Adjusted Net Income
Net Income
$20,332 $20,720 $74,345 $71,863
Adjustments:
Debt Extinguishment Costs
- -
433 -
Gain on Sunburst Note
Prepayment
- (3,433) -
(3,383)
------------------ ------------------
Adjusted Net Income
$20,332 $17,287 $74,778 $68,480
------------------ ------------------
Weighted average shares
outstanding-diluted
33,716 36,513 34,500 36,674
Diluted Earnings Per Share
$0.60 $0.57 $2.15
$1.96
Adjustments:
Debt Extinguishment Costs
- -
0.01 -
Gain on Sunburst Note
Prepayment
- (0.09) -
(0.09)
------------------ ------------------
Adjusted Diluted Earnings Per
Share (EPS)
$0.60 $0.48 $2.16
$1.87
------------------ ------------------ |
Choice Hotels International franchises more than 4,900 hotels, representing
approximately 400,000 rooms, in the United States and 41 other countries
and territories. As of December 31, 2004, 460 hotels are under development
in the United States, representing 35,652 rooms, and an additional 109
hotels, representing 9,515 rooms, are under development in 21 countries
and territories. Its Comfort Inn, Comfort Suites, Quality, Clarion,
Sleep Inn, Econo Lodge, Rodeway Inn and MainStay Suites brands serve guests
worldwide.
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