ROCKVILLE, Md., April 28, 2014 -- Choice Hotels International, Inc. (NYSE: CHH) today reported the following highlights for the first quarter of 2014:
- Diluted earnings per share ("EPS") for the three months ended March 31, 2014 totaled $0.32, an increase of 23 percent from the same period of 2013.
- Diluted EPS from continuing operations for the three months ended March 31, 2014 totaled $0.29, an increase of 12 percent from the same period of 2013.
- Earnings before interest, taxes, depreciation and amortization ("EBITDA") from franchising activities for the three months ended March 31, 2014 totaled $40.1 million, an increase of 15 percent from the same period of 2013.
- Franchising revenues for the three months ended March 31, 2014 totaled $63.2 million, an increase of 6 percent from the same period of 2013.
- Franchising margins for the three months ended March 31, 2014 were 60.2 percent, an increase of 510 basis points from the same period of 2013.
- Domestic royalty fees for the three months ended March 31, 2014 totaled $46.5 million, an increase of 5 percent from the same period of 2013.
- Domestic unit and room growth increased 2.4 percent and 1.6 percent from March 31, 2013, respectively.
- Domestic system-wide revenue per available room ("RevPAR") increased 5.6 percent in the first quarter of 2014 as occupancy and average daily rates increased 200 basis points and 1.1 percent, respectively from the same period of 2013.
- The company executed 59 new domestic hotel franchise contracts for the three months ended March 31, 2014 compared to 83 new domestic hotel franchise contracts for the same period of 2013. Domestic hotel contracts executed during the three months ended March 31, 2013 reflect a multi-faceted strategic marketing alliance with Bluegreen Corporation which resulted in the addition of 21 Bluegreen Vacation Club® Resorts to the company's Ascend Hotel Collection. Excluding this transaction, domestic franchise agreements executed during the first quarter of 2014 totaled 59 compared to 62 new domestic hotel franchise contracts in the same period of 2013.
- Domestic relicensing and contract renewal transactions for the three months ended March 31, 2014 totaled 83 contracts, an increase of 20 percent from the same period of 2013.
- The company sold two of its three company-owned Mainstay Suites hotels during the three months ended March 31, 2014 resulting in a $2.6 million gain.
"We are very pleased with the first quarter performance of our franchising business which exceeded our expectations and resulted in a 15 percent increase in franchising EBITDA and an expansion of our franchising margins due to our strong RevPAR growth and disciplined cost management," said Stephen P. Joyce, president and chief executive officer. "We are optimistic that we are well positioned to benefit from strong consumer and developer demand for our brands."
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 March 31, 2014, the company had disposed of two of the three owned hotels and expects the third hotel to be sold during the year ended December 31, 2014. The new owners of the two MainStay Suites hotels have executed new franchise agreements with the company and we expect that following the sale of the third hotel the new owner will also execute a new franchise agreement.
The company's consolidated statement of income for the three months ended March 31, 2014 and the company's consolidated balance sheet as of March 31, 2014 reflect these three company-owned hotels as discontinued operations. In addition, the company's statement of income for the three months ended March 31, 2013 has 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 and expanded revenue contribution from the SkyTouch division and the sale of the three company-owned Mainstay Suites hotels described below as well as the following assumptions:
- All figures assume no repurchases of common stock under the company's share repurchase program; and
- The effective tax rate for continuing operations is expected to be 30.8% for the second quarter and full-year 2014.
- EBITDA from franchising activities for full-year 2014 are expected to range between $227 million and $232 million;
- Net domestic unit growth for 2014 is expected to increase between 1% and 2%;
- RevPAR is expected to increase approximately 5% for the second quarter and 4.5% to 5.5% for full-year 2014; and
- The effective royalty rate is expected to decline 3 basis points for full-year 2014.
- Reductions in EBITDA from our investment in the SkyTouch division for full-year 2014 are expected to be approximately $20 million;
- Execution of third-party contracts results in annualized revenue ranging between $4 million and $6 million with realized revenues for the year ended December 31, 2014 totaling approximately $2 million; and
- SG&A expenses are forecasted to be approximately $22 million related to investment in business development, sales and marketing and continued software development expenditures related to the division's cloud-based hotel operating system technology related products and services.
- Company EBITDA projections exclude the three company-owned Mainstay Suites hotels which generated EBITDA of approximately $1.1 million in 2013; and
- Diluted EPS projections for the full-year 2014 include a gain on sale of the three company-owned Mainstay Suites hotels totaling $0.03 per share.
Choice will conduct a conference call on Monday, April 28, 2014 at 10:00 a.m. EDT to discuss the company's first quarter 2014 results. The dial-in number to listen to the call is 1-800-591-6942, and the access code is 70683172. International callers should dial 1-617-614-4909 and enter the access code 70683172. The conference call also will be Webcast simultaneously via the company's Web site, www.choicehotels.com. Interested investors and other parties wishing to access the call via the Webcast should go to the Web site and click on the Investor Info link. The Investor page will feature a conference call microphone icon to access the call.
The call will be recorded and available for replay beginning at 2:00 p.m. EDT on Monday, April 28, 2014 through Monday, May 5, 2014 by calling 1-888-286-8010 and entering access code 19637446. The international dial-in number for the replay is 1-617-801-6888, access code 1963746. In addition, the call will be archived for approximately one-year and available on www.choicehotels.com via the Investor Info link.
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About Choice Hotels
Choice Hotels International, Inc. franchises more than 6,300 hotels, representing more than 500,000 rooms, in the United States and more than 35 other countries and territories. As of March 31, 2014, 398 hotels, representing more than 30,000 rooms, were under construction, awaiting conversion or approved for development in the United States. Additionally, 95 hotels, representing approximately 8,900 rooms, were under construction, awaiting conversion or approved for development in more than 15 other countries and territories. The company's Comfort Inn, Comfort Suites, Quality, Sleep Inn, Clarion, Cambria Suites, MainStay Suites, Suburban Extended Stay Hotel, Econo Lodge and Rodeway Inn brands, as well as its Ascend Hotel Collection membership program, serve guests worldwide.
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