Exhibit 1
Choice Hotels International, Inc.
Consolidated Statements of Income
(Unaudited)
Three Months Ended June 30,
Variance
2006 2005
$ %
(In thousands, except per share amounts)
REVENUES:
Royalty fees
$53,146 $46,515 $6,631
14%
Initial franchise and relicensing
fees
6,723 6,591 132
2%
Partner services
4,900 4,596 304
7%
Marketing and reservation
72,742 62,610 10,132
16%
Hotel operations
1,180 1,141
39 3%
Other
1,849 842 1,007
120%
Total revenues
140,540 122,295 18,245
15%
OPERATING EXPENSES:
Selling, general and administrative
22,242 19,199 3,043
16%
Depreciation and amortization
2,642 2,256 386
17%
Marketing and reservation
72,742 62,610 10,132
16%
Hotel operations
800 813
(13) (2%)
Total operating expenses
98,426 84,878 13,548
16%
Operating income
42,114 37,417 4,697
13%
OTHER INCOME AND EXPENSES:
Interest expense
4,044 3,872 172
4%
Interest and other investment
(income) loss
174 (404) 578
(143%)
Equity in net income of affiliates
(130) (155) 25
(16%)
Loss on extinguishment of debt
342 -
342 NM
Other
- (53)
53 (100%)
Total other income and
expenses, net
4,430 3,260 1,170
36%
Income before income taxes
37,684 34,157 3,527
10%
Income taxes
13,548 12,609 939
7%
Net income
$24,136 $21,548 $2,588
12%
Weighted average shares outstanding-
basic
65,356 64,452
Weighted average shares outstanding-
diluted
67,105 66,677
Basic earnings per share
$0.37 $0.33 $0.04
12%
Diluted earnings per share
$0.36 $0.32 $0.04
12.5%
Six Months Ended June 30,
Variance
2006 2005 $
%
(In thousands, except per share amounts)
REVENUES:
Royalty fees
$93,010 $80,157 $12,853 16%
Initial franchise and relicensing
fees
12,366 10,902 1,464 13%
Partner services
7,682 7,236 446
6%
Marketing and reservation
130,718 111,653 19,065 17%
Hotel operations
2,160 2,061 99
5%
Other
4,022 1,454 2,568 177%
Total revenues
249,958 213,463 36,495 17%
OPERATING EXPENSES:
Selling, general and administrative
40,517 35,952 4,565 13%
Depreciation and amortization
4,991 4,581 410
9%
Marketing and reservation
130,718 111,653 19,065 17%
Hotel operations
1,545 1,561 (16)
(1%)
Total operating expenses 177,771
153,747 24,024 16%
Operating income
72,187 59,716 12,471 21%
OTHER INCOME AND EXPENSES:
Interest expense
8,084 7,479 605
8%
Interest and other investment
(income) loss
(530) (273) (257) 94%
Equity in net income of affiliates
(388) (354) (34)
10%
Loss on extinguishment of debt
342 -
342 NM
Other
- (186) 186 (100%)
Total other income and
expenses, net
7,508 6,666 842
13%
Income before income taxes
64,679 53,050 11,629 22%
Income taxes
22,878 19,503 3,375 17%
Net income
$41,801 $33,547 $8,254 25%
Weighted average shares outstanding-
basic
65,070 64,297
Weighted average shares outstanding-
diluted
66,925 66,498
Basic earnings per share
$0.64 $0.52 $0.12
23%
Diluted earnings per share
$0.62 $0.50 $0.12
24%
Choice Hotels International, Inc.
Exhibit 2
Consolidated Balance Sheets
(In thousands)
June 30, December 31,
2006
2005
(Unaudited)
ASSETS
Cash and cash equivalents
$21,658 $16,921
Accounts receivable, net
40,724
37,155
Deferred income taxes
2,620
2,616
Other current assets
6,728
6,308
Total
current assets
71,730
63,000
Fixed assets and intangibles, net
146,679 150,376
Receivable -- marketing and
reservation fees
16,565
13,225
Investments, employee benefit plans,
at fair value
28,043
23,337
Other assets
17,259
15,162
Total assets
280,276 265,100
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current portion of long-term debt
146
146
Other current liabilities
129,361 119,999
Total
current liabilities
129,507 120,145
Long-term debt
224,331 273,972
Deferred compensation & retirement
plan obligations
35,147
28,987
Other liabilities
9,314
9,172
Total
liabilities
398,299 432,276
Total
shareholders' deficit
(118,023) (167,176)
Total liabilities and
shareholders' deficit
$280,276 $265,100
Choice Hotels International, Inc.
Exhibit 3
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Six Months Ended June 30,
2006
2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
$41,801 $33,547
Adjustments to reconcile net income
to net
cash provided by operating activities:
Depreciation and amortization
4,991
4,581
Gain on sale of assets
-
(186)
Provision for bad debts
(127)
68
Non-cash stock compensation
5,550
2,561
Non-cash interest and
other investment
(income) loss
(107)
87
Loss on extinguishment
of debt
342
-
Equity in net income of
affiliates
(388)
(354)
Changes in assets and liabilities:
Receivables
(3,414) (2,778)
Receivable -- marketing
and reservation
fees, net
670 (5,754)
Accounts payable
8,404
10,109
Accrued expenses and other
(7,549) (2,240)
Income taxes payable
4,815
13,610
Deferred income taxes
(1,912)
309
Deferred revenue
3,603
4,255
Other current assets
(420)
449
Other liabilities
6,200
5,014
NET CASH PROVIDED BY OPERATING
ACTIVITIES* 62,459
63,278
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in property and equipment
(4,045) (8,023)
Proceeds from disposition of assets
-
1,812
Issuance of notes receivable
(1,277)
(449)
Proceeds from sales of investments
1,387
2,834
Purchases of investments
(5,784) (6,508)
Other items, net
232
(441)
NET CASH USED IN INVESTING ACTIVITIES
(9,487) (10,775)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of long-term debt
(73)
(73)
Net repayments pursuant to revolving
credit facility
(49,600) (23,704)
Debt issuance costs
(472)
(193)
Excess tax benefits from stock-based
compensation
11,983
-
Purchase of treasury stock
(1,132) (18,843)
Dividends paid
(16,925) (14,494)
Proceeds from exercise of stock options
7,984
9,255
NET CASH USED IN FINANCING ACTIVITIES
(48,235) (48,052)
Net change in cash and cash equivalents
4,737
4,451
Cash and cash equivalents at beginning
of
period
16,921
28,518
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $21,658
$32,969
* Net cash provided by operating activities for the six
month ended June 30, 2005 includes approximately $6.0 million of excess
tax benefits related to stock-based compensation. Effective January 1,
2006, the Company began reporting these excess tax benefits as cash flows
from financing activities as a result of the adoption of Statement of Financial
Accounting Standards no. 123R "Accounting for Stock-Based Compensation."
EXHIBIT 4
CHOICE HOTELS INTERNATIONAL,
INC.
SUPPLEMENTAL OPERATING INFORMATION
DOMESTIC HOTEL SYSTEM
(UNAUDITED)
For the Six Months Ended June 30, 2006
Average Daily
Rate Occupancy RevPAR
COMFORT INN
$69.76 57.9%
$40.40
COMFORT SUITES
81.30 64.3%
52.24
QUALITY
64.26 50.8%
32.63
CLARION
77.11 48.1%
37.11
SLEEP
64.64 58.6%
37.87
MAINSTAY
66.48 63.7%
42.33
ECONO LODGE
50.52 43.3%
21.89
RODEWAY
48.57 41.9%
20.33
TOTAL DOMESTIC SYSTEM*
$67.21 53.7%
$36.12
For the Six Months Ended June 30, 2005
Average Daily
Rate Occupancy RevPAR
COMFORT INN
$65.58 55.7%
$36.51
COMFORT SUITES
75.65 61.5%
46.52
QUALITY
62.17 49.5%
30.78
CLARION
71.87 47.8%
34.35
SLEEP
60.39 56.4%
34.06
MAINSTAY
62.37 60.6%
37.80
ECONO LODGE
48.13 43.6%
21.00
RODEWAY
46.22 43.4%
20.05
TOTAL DOMESTIC SYSTEM*
$63.51 52.5%
$33.32
Change
Average Daily
Rate Occupancy RevPAR
COMFORT INN
6.4% 220 bps
10.7%
COMFORT SUITES
7.5% 280 bps
12.3%
QUALITY
3.4% 130 bps
6.0%
CLARION
7.3% 30 bps
8.0%
SLEEP
7.0% 220 bps
11.2%
MAINSTAY
6.6% 310 bps
12.0%
ECONO LODGE
5.0% -30 bps
4.2%
RODEWAY
5.1% -150 bps
1.4%
TOTAL DOMESTIC SYSTEM*
5.8% 120 bps
8.4%
For the Three Months Ended June 30, 2006
Average Daily
Rate Occupancy RevPAR
COMFORT INN
$71.84 64.0%
$45.97
COMFORT SUITES
83.04 69.5%
57.72
QUALITY
66.18 56.5%
37.36
CLARION
77.77 53.5%
41.63
SLEEP
66.69 65.2%
43.47
MAINSTAY
67.43 70.3%
47.39
ECONO LODGE
52.09 47.5%
24.75
RODEWAY
49.98 44.5%
22.23
TOTAL DOMESTIC SYSTEM*
$69.01 59.2%
$40.87
For the Three Months Ended June 30, 2005
Average Daily
Rate Occupancy RevPAR
COMFORT INN
$67.32 61.7%
$41.51
COMFORT SUITES
77.37 67.3%
52.09
QUALITY
64.39 55.0%
35.44
CLARION
73.33 53.8%
39.46
SLEEP
62.49 62.5%
39.07
MAINSTAY
63.75 66.7%
42.55
ECONO LODGE
49.68 48.4%
24.05
RODEWAY
46.93 47.2%
22.15
TOTAL DOMESTIC SYSTEM*
$65.30 58.1%
$37.95
Change
Average Daily
Rate Occupancy RevPAR
COMFORT INN
6.7% 230 bps 10.7%
COMFORT SUITES
7.3% 220 bps 10.8%
QUALITY
2.8% 150 bps
5.4%
CLARION
6.1% -30 bps
5.5%
SLEEP
6.7% 270 bps 11.3%
MAINSTAY
5.8% 360 bps 11.4%
ECONO LODGE
4.9% -90 bps
2.9%
RODEWAY
6.5% -270 bps 0.4%
TOTAL DOMESTIC SYSTEM*
5.7% 110 bps
7.7%
* Amounts exclude Suburban activity
from January 1, 2006 through June 30,
2006 because comparable
pre-acquisition data for Q2 2005 is not
available.
For the Quarter Ended For the Six Months Ended
6/30/2006 6/30/2005 6/30/2006
6/30/2005
System-wide effective
royalty rate
4.12% 4.09%
4.10% 4.08%
EXHIBIT 5
CHOICE HOTELS INTERNATIONAL, INC.
SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA
(UNAUDITED)
June 30, 2006 June 30, 2005
Hotels Rooms Hotels Rooms
COMFORT INN
1,411 110,440 1,448 114,023
COMFORT SUITES
417 32,786 402
31,648
QUALITY
692 68,407 612
61,783
CLARION
157 23,262 155
23,543
SLEEP
320 24,133 317
24,169
MAINSTAY
27 2,047 28
2,189
SUBURBAN
64 8,439 -
-
ECONO LODGE
825 50,673 795
49,741
RODEWAY
203 12,469 169
10,381
DOMESTIC FRANCHISES
4,116 332,656 3,926 317,477
INTERNATIONAL FRANCHISES
1,168 98,818 1,161 97,211
TOTAL FRANCHISES
5,284 431,474 5,087 414,688
Variance
Hotels Rooms %
%
COMFORT INN
(37) (3,583) (2.6%) (3.1%)
COMFORT SUITES
15 1,138 3.7%
3.6%
QUALITY
80 6,624 13.1%
10.7%
CLARION
2 (281) 1.3%
(1.2%)
SLEEP
3 (36) 0.9%
(0.1%)
MAINSTAY
(1) (142) (3.6%) (6.5%)
SUBURBAN
64 8,439 NM
NM
ECONO LODGE
30 932 3.8%
1.9%
RODEWAY
34 2,088 20.1%
20.1%
DOMESTIC FRANCHISES
190 15,179 4.8%
4.8%
INTERNATIONAL FRANCHISES
7 1,607 0.6%
1.7%
TOTAL FRANCHISES
197 16,786 3.9%
4.0%
EXHIBIT 6
CHOICE HOTELS INTERNATIONAL, INC.
SUPPLEMENTAL INFORMATION BY BRAND
DEVELOPMENT RESULTS -- NEW HOTEL CONTRACTS
(UNAUDITED)
For the Six Months Ended June 30, 2006
New
Construction Conversion Total
COMFORT INN
24 18
42
COMFORT SUITES
41 2
43
QUALITY
5 57
62
CLARION
1 18
19
SLEEP
10 -
10
MAINSTAY
3 1
4
SUBURBAN
6 2
8
CAMBRIA SUITES
15 -
15
ECONO LODGE
- 23
23
RODEWAY
1 48
49
TOTAL DOMESTIC SYSTEM
106 169
275
For the Six Months Ended June 30, 2005
New
Construction Conversion Total
COMFORT INN
20 25
45
COMFORT SUITES
29 3
32
QUALITY
2 72
74
CLARION
1 8
9
SLEEP
22 1
23
MAINSTAY
9 -
9
SUBURBAN
- -
-
CAMBRIA SUITES
6 -
6
ECONO LODGE
4 49
53
RODEWAY
- 25
25
TOTAL DOMESTIC SYSTEM
93 183
276
% Change
New
Construction Conversion Total
COMFORT INN
20% (28%)
(7%)
COMFORT SUITES
41% (33%)
34%
QUALITY
150% (21%)
(16%)
CLARION
0% 125%
111%
SLEEP
(55%) (100%)
(57%)
MAINSTAY
(67%) NM
(56%)
SUBURBAN
NM NM
NM
CAMBRIA SUITES
150% NM
150%
ECONO LODGE
(100%) (53%)
(57%)
RODEWAY
NM 92%
96%
TOTAL DOMESTIC SYSTEM
14% (8%)
(0%)
For the Three Months Ended June 30, 2006
New
Construction Conversion Total
COMFORT INN
9 5
14
COMFORT SUITES
29 2
31
QUALITY
3 32
35
CLARION
- 9
9
SLEEP
7 -
7
MAINSTAY
1 -
1
SUBURBAN
3 2
5
CAMBRIA
5 -
5
ECONO LODGE
- 14
14
RODEWAY
1 33
34
TOTAL DOMESTIC SYSTEM
58 97
155
For the Three Months Ended June 30, 2005
New
Construction Conversion Total
COMFORT INN
12 15
27
COMFORT SUITES
16 3
19
QUALITY
1 42
43
CLARION
- 5
5
SLEEP
15 -
15
MAINSTAY
9 -
9
SUBURBAN
- -
-
CAMBRIA
5 -
5
ECONO LODGE
1 33
34
RODEWAY
- 16
16
TOTAL DOMESTIC SYSTEM
59 114
173
% Change
New
Construction Conversion Total
COMFORT INN
(25%) (67%)
(48%)
COMFORT SUITES
81% (33%)
63%
QUALITY
200% (24%)
(19%)
CLARION
NM 80%
80%
SLEEP
(53%) NM
(53%)
MAINSTAY
(89%) NM
(89%)
SUBURBAN
NM NM
NM
CAMBRIA
0% NM
0%
ECONO LODGE
(100%) (58%)
(59%)
RODEWAY
NM 106%
113%
TOTAL DOMESTIC SYSTEM
(2%) (15%)
(10%)
EXHIBIT 7
CHOICE HOTELS INTERNATIONAL, INC.
SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION
(UNAUDITED)
CALCULATION OF FRANCHISING REVENUES
AND FRANCHISING MARGINS
Three Months Ended Six Months Ended
(dollar amounts in thousands)
June 30,
June 30,
2006 2005 2006
2005
Franchising Revenues:
Total Revenues
$140,540 $122,295 $249,958 $213,463
Adjustments:
Marketing and reservation
revenues
(72,742) (62,610) (130,718) (111,653)
Hotel Operations
(1,180) (1,141) (2,160) (2,061)
Franchising Revenues
$66,618 $58,544 $117,080 $99,749
Franchising Margins:
Operating Margin:
Total Revenues
$140,540 $122,295 $249,958 $213,463
Operating Income
$42,114 $37,417 $72,187 $59,716
Operating Margin
30.0% 30.6% 28.9%
28.0%
Franchising Margin:
Franchising Revenues
$66,618 $58,544 $117,080 $99,749
Operating Income
$42,114 $37,417 $72,187 $59,716
Less: Hotel Operations
380 328
615 500
$41,734 $37,089 $71,572 $59,216
Franchising Margins
62.6% 63.4% 61.1%
59.4%
CALCULATION OF ADJUSTED NET INCOME
AND ADJUSTED DILUTED EARNINGS PER SHARE
(EPS)
(In thousands, except per share
Three Months Ended Six Months Ended
amounts)
June 30, June 30,
2006 2005 2006
2005
Net Income
$24,136 $21,548 $41,801 $33,547
Adjustments:
Loss on Debt Extinguishment
Costs 217
- 217
-
Adjusted Net Income
$24,353 $21,548 $42,018 $33,547
Weighted average shares outstanding-
diluted
67,105 66,677 66,925 66,498
Diluted Earnings Per Share
$0.36 $0.32 $0.62
$0.50
Adjustments:
Loss on Debt Extinguishment
Costs -
- 0.01
-
Adjusted Diluted Earnings Per Share
(EPS)
$0.36 $0.32 $0.63
$0.50
EBITDA Reconciliation
(in millions)
Full-Year
Q2 2006 Q2 2005 2006
Actuals Actuals Outlook
Operating Income (per GAAP)
$42.1 $37.4 $164.9
Depreciation and amortization
2.6 2.3
10.1
Earnings before interest,
taxes,
depreciation &
amortization (non-GAAP) $44.7
$39.7 $175.0 |