Choice Hotels Reports a 12% Increase in Q2 2014 Income; Executed 125 New Domestic Franchises
August 8, 2014 10:13am
Second Quarter Franchising EBITDA Increases 12%
ROCKVILLE, Md., Aug. 8, 2014 -- Choice Hotels International, Inc. (NYSE: CHH) today reported the following highlights for the second quarter of 20141:
"During the second quarter, momentum in our core lodging business was very strong and we are pleased with our performance, which exceeded our expectations. We achieved continued net domestic unit growth, strong development results and a nearly 8% percent increase in domestic RevPAR," said Stephen P. Joyce, president and chief executive officer. "These trends supported double-digit percentage EBITDA growth and meaningful franchising margin expansion. We are optimistic that our performance will continue to be strong in the second half of 2014."
In the first quarter of 2014, the company entered into a plan to sell its three owned hotels operated under the MainStay Suites brand. The company determined that the disposal of these hotels met the definition of a discontinued operation since the operations and cash flows of these components will be eliminated from the on-going operations of the company and the company will not have significant continuing involvement in the operations of the hotels after the disposal transaction.
At June 30, 2014, the company had disposed of all three of the owned MainStay Suites hotels and the new owners of each of those hotels had executed new franchise agreements with the company.
The company's consolidated statements of income for the three months and six months ended June 30, 2014 reflect these three company-owned hotels as discontinued operations. In addition, the company's statements of income for the three and six months ended June 30, 2013 have been reclassified to account for these operations as discontinued. Summarized financial information related to these discontinued operations is presented in Exhibit 9 of this press release.
The company's consolidated 2014 outlook reflects continued growth of the company's core hotel franchising business, continued investment in the SkyTouch division and the sale of the three company-owned Mainstay Suites hotels described above as well as the following assumptions:
The company's third quarter 2014 diluted EPS is expected to be $0.62. The company expects full-year 2014 diluted EPS to range between $1.92 and $1.96. Consolidated EBITDA for full-year 2014 are expected to range between $211 million and $214 million.
Items Impacting Comparability
We reported on August 5, 2014 that the company changed its accounting for royalty and certain marketing and reservation fees in order to comply with generally accepted accounting principles in the United States ("GAAP") by reporting these fees in the same period that the underlying gross room revenues are earned by our franchisees rather than one month in arrears (our historical practice).
We believe that this change in the timing of our revenue recognition for these fees will make it easier for analysts and investors to compare our results to other lodging companies.
The financial results and supplemental operating information as of and for the periods ended June 30, 2014 have been prepared in accordance with the new accounting practice.
As a result of this change, the income statement and cash flow statement included herein for the periods ended June 30, 2013 have been preliminarily restated based on currently available information to reflect our new accounting practice for these fees. The company plans to file the restated quarterly financial statements as soon as administratively possible. Until the restatement is complete, additional information may become available which could cause the company's current estimates to change.
Due to the seasonality of the company's business, the impact of the new revenue recognition practice will generally be positive for the first two quarters of the year and negative in the final two quarters of the year. However, this change is expected to result in immaterial positive revisions to total revenues, operating income and earnings per share for the full years ended December 31, 2013, 2012 and 2011. The company plans to file the revised annual financial statements in an amended Annual Report on Form 10-K. The December 31, 2013 balance sheet included in Exhibit 2 has been preliminarily revised to reflect this change.
More information about this accounting change and restatement can be found in the Company's Form 8-K filed on August 5, 2014.
To view all tables corresponding to this release please visit:
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q2 2014 results
SkyTouch Technology is a division of Choice Hotels International, Inc. that develops and markets cloud-based technology products, including inventory management, pricing and connectivity to third party channels, to hoteliers not under franchise agreements with the company.
Additional corporate information can be found on the Choice Hotels International, Inc. web site, which may be accessed at www.choicehotels.com.
Contact: David White, Senior Vice President, Chief Financial Officer & Treasurer
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