Choice Hotels International, Inc.
Exhibit 1
Consolidated Statements of Income
(Unaudited)
Three Months Ended December 31,
Variance
2006 2005
$ %
(In thousands, except per share
amounts)
REVENUES:
Royalty fees
$54,271 $49,120 $5,151
10%
Initial franchise and
relicensing
fees
9,530 8,717 813
9%
Brand solutions
3,092 3,024
68 2%
Marketing and reservation
74,307 58,629 15,678
27%
Hotel operations
1,163 1,079
84 8%
Other
1,345 1,416 (71)
(5%)
Total revenues
143,708 121,985 21,723
18%
OPERATING EXPENSES:
Selling, general and administrative
26,316 23,987 2,329
10%
Depreciation and amortization
2,370 2,282
88 4%
Marketing and reservation
74,307 58,629 15,678
27%
Hotel operations
829 840
(11) (1%)
Total operating expenses
103,822 85,738 18,084
21%
Operating income
39,886 36,247 3,639
10%
OTHER INCOME AND EXPENSES:
Interest expense
2,807 4,031 (1,224) (30%)
Interest and other investment
income (942) (134)
(808) 603%
Equity in net income of
affiliates (315)
(182) (133) 73%
Loss on extinguishment
of debt
- -
- NM
Other
- (3)
3 (100%)
Total other income and
expenses, net
1,550 3,712 (2,162) (58%)
Income before income taxes
38,336 32,535 5,801
18%
Income taxes
13,707 10,983 2,724
25%
Net income
$24,629 $21,552 $3,077
14%
Weighted average shares outstanding-
basic
65,728 64,360
Weighted average shares outstanding-
diluted
67,171 66,360
Basic earnings per share
$0.37 $0.33 $0.04
12%
Diluted earnings per share
$0.37 $0.32 $0.05
16%
Twelve Months Ended December 31,
Variance
2006 2005 $
%
(In thousands, except per share
amounts)
REVENUES:
Royalty fees
$211,645 $187,340 $24,305 13%
Initial franchise and
relicensing
fees
29,629 25,388 4,241
17%
Brand solutions
13,945 13,382 563
4%
Marketing and reservation
278,026 243,123 34,903 14%
Hotel operations
4,505 4,293 212
5%
Other
6,912 3,873 3,039
78%
Total revenues
544,662 477,399 67,263 14%
OPERATING EXPENSES:
Selling, general and administrative
87,112 78,250 8,862
11%
Depreciation and amortization
9,705 9,051 654
7%
Marketing and reservation
278,026 243,123 34,903 14%
Hotel operations
3,194 3,225 (31)
(1%)
Total operating expenses
378,037 333,649 44,388 13%
Operating income
166,625 143,750 22,875 16%
OTHER INCOME AND EXPENSES:
Interest expense
14,098 15,325 (1,227) (8%)
Interest and other investment
income (2,041) (1,094) (947)
87%
Equity in net income of
affiliates (1,052) (803)
(249) 31%
Loss on extinguishment
of debt
342 -
342 NM
Other
- (420) 420
(100%)
Total other income and
expenses, net
11,347 13,008 (1,661) (13%)
Income before income taxes
155,278 130,742 24,536 19%
Income taxes
42,491 43,177 (686)
(2%)
Net income
$112,787 $87,565 $25,222 29%
Weighted average shares outstanding-
basic
65,387 64,429
Weighted average shares outstanding-
diluted
67,050 66,336
Basic earnings per share
$1.72 $1.36 $0.36
26%
Diluted earnings per share
$1.68 $1.32 $0.36
27%
Choice Hotels International, Inc.
Exhibit 2
Consolidated Balance Sheets
(In thousands)
December 31, December 31,
2006 2005
(Unaudited)
ASSETS
Cash and cash equivalents
$35,841 $16,921
Accounts receivable, net
41,694 37,155
Deferred income taxes
1,790 2,616
Other current assets
7,757 6,308
Total
current assets
87,082 63,000
Fixed assets and intangibles, net
144,124 150,376
Receivable -- marketing fees
6,662 13,225
Investments, employee benefit plans,
at fair
value
31,529 23,337
Other assets
33,912 15,333
Total assets
303,309 265,271
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current portion of long-term debt
146 146
Other current liabilities
139,645 120,170
Total
current liabilities
139,791 120,316
Long-term debt
172,390 273,972
Deferred compensation & retirement
plan
obligations
40,101 28,987
Other liabilities
13,407 9,172
Total
liabilities
365,689 432,447
Total
shareholders' deficit
(62,380) (167,176)
Total liabilities and shareholders'
deficit
$303,309 $265,271
Choice Hotels International, Inc.
Exhibit 3
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Twelve months ended December 31,
2006
2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
$112,787 $87,565
Adjustments to reconcile net income
to net cash provided
by operating activities:
Depreciation and amortization
9,705
9,051
Gain on sale of assets
-
(386)
Provision for bad debts
(163)
391
Non-cash stock compensation
and other
charges
10,644
5,288
Loss on extinguishment
of debt
342
-
Non-cash interest and
other income
(1,576)
(294)
Dividends received from
equity method
investees
1,095
681
Equity in net income of
affiliates
(1,052)
(803)
Changes in assets and liabilities,
net
of acquisitions:
Receivables
(3,007) (2,415)
Receivable - marketing
and
reservation fees,
net
19,049
19,393
Accounts payable
6,888
1,923
Accrued expenses and other
(7,631) 12,894
Income taxes payable
2,857
11,250
Deferred income taxes
(17,214) (13,318)
Deferred revenue
15,036
8,822
Other assets
(1,724) (2,040)
Other liabilities
7,892
(4,414)
NET CASH PROVIDED BY OPERATING
ACTIVITIES* 153,928
133,588
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in property and equipment
(7,707) (11,504)
Acquisitions, net of cash acquired
(826) (7,314)
Purchases of investments
(10,515) (8,929)
Proceeds from sales of investments
3,728
3,539
Issuance of notes receivable
(2,433) (2,667)
Collection of notes receivable
868
462
Proceeds from disposition of assets
-
2,811
Other items, net
(446)
(929)
NET CASH USED IN INVESTING ACTIVITIES
(17,331) (24,531)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of long-term debt
(146)
(150)
Net repayments pursuant to revolving
credit facility
(101,500) (55,129)
Debt issuance costs
(477)
(193)
Excess tax benefits from stock-based
compensation
12,699
-
Purchase of treasury stock
(1,365) (49,154)
Dividends paid
(35,386) (30,241)
Proceeds from exercise of stock options
8,498
14,213
NET CASH USED IN FINANCING ACTIVITIES
(117,677) (120,654)
Net change in cash and cash equivalents
18,920 (11,597)
Cash and cash equivalents at beginning
of
period
16,921
28,518
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $35,841
$16,921
* Net cash provided by operating activities
for the twelve months ended
December 31, 2005 includes
approximately $9.9 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."
CHOICE HOTELS INTERNATIONAL, INC.
EXHIBIT 4
SUPPLEMENTAL OPERATING INFORMATION
DOMESTIC HOTEL SYSTEM
(UNAUDITED)
For the Twelve Months Ended
December 31, 2006
Average Daily
Rate Occupancy RevPAR
Comfort Inn
$73.08 63.0%
$46.06
Comfort Suites
82.93 67.0%
55.59
Sleep
66.44 62.4%
41.43
Midscale without
Food & Beverage 74.18
63.7% 47.26
Quality
66.89 55.3%
37.01
Clarion
78.98 51.2%
40.41
Midscale with Food
& Beverage
69.76 54.3%
37.87
Econo Lodge
53.09 47.7%
25.31
Rodeway
51.66 45.8%
23.66
Economy
52.83 47.3%
24.99
MainStay
67.26 69.4%
46.66
Total Domestic System*
$69.71 58.0%
$40.46
For the Twelve Months Ended
December 31, 2005
Average Daily
Rate Occupancy RevPAR
Comfort Inn
$68.84 61.7%
$42.45
Comfort Suites
77.51 66.3%
51.36
Sleep
62.52 61.0%
38.16
Midscale without
Food & Beverage 69.68
62.4% 43.51
Quality
64.86 54.6%
35.41
Clarion
74.62 52.5%
39.15
Midscale with Food
& Beverage
67.41 54.0%
36.41
Econo Lodge
50.95 48.2%
24.56
Rodeway
49.91 46.7%
23.31
Economy
50.78 48.0%
24.35
MainStay
64.76 65.7%
42.54
Total Domestic System*
$66.24 57.6%
$38.15
Change
Average Daily
Rate Occupancy RevPAR
Comfort Inn
6.2% 130 bps
8.5%
Comfort Suites
7.0% 70 bps
8.2%
Sleep
6.3% 140 bps
8.6%
Midscale without
Food & Beverage
6.5% 130 bps
8.6%
Quality
3.1% 70 bps
4.5%
Clarion
5.8% -130 bps 3.2%
Midscale with Food
& Beverage
3.5% 30 bps
4.0%
Econo Lodge
4.2% -50 bps
3.1%
Rodeway
3.5% -90 bps
1.5%
Economy
4.0% -70 bps
2.6%
MainStay
3.9% 370 bps
9.7%
Total Domestic System*
5.2% 40 bps
6.1%
For the Three Months Ended
December 31, 2006
Average Daily
Rate Occupancy RevPAR
Comfort Inn
$73.14 63.5%
$46.46
Comfort Suites
82.35 66.1%
54.42
Sleep
66.04 62.5%
41.29
Midscale without
Food & Beverage 74.04
63.9% 47.30
Quality
65.79 54.6%
35.89
Clarion
78.38 51.0%
39.98
Midscale with Food
& Beverage
68.79 53.7%
36.91
Econo Lodge
52.74 47.6%
25.10
Rodeway
49.79 43.4%
21.61
Economy
52.18 46.7%
24.38
MainStay
66.91 72.8%
48.74
Total Domestic System*
$69.27 57.8%
$40.04
For the Three Months Ended
December 31, 2005
Average Daily
Rate Occupancy RevPAR
Comfort Inn
$68.81 63.4%
$43.65
Comfort Suites
77.28 68.2%
52.70
Sleep
62.68 62.0%
38.88
Midscale without
Food & Beverage 69.68
64.1% 44.69
Quality
63.47 55.1%
34.95
Clarion
75.70 53.9%
40.80
Midscale with Food
& Beverage
66.57 54.8%
36.46
Econo Lodge
50.83 47.9%
24.35
Rodeway
48.01 44.7%
21.47
Economy
50.37 47.3%
23.85
MainStay
65.55 68.1%
44.64
Total Domestic System*
$65.99 58.5%
$38.60
Change
Average Daily
Rate Occupancy RevPAR
Comfort Inn
6.3% 10 bps
6.4%
Comfort Suites
6.6% -210 bps 3.3%
Sleep
5.4% 50 bps
6.2%
Midscale without
Food & Beverage
6.3% -20 bps
5.8%
Quality
3.7% -50 bps
2.7%
Clarion
3.5% -290 bps (2.0%)
Midscale with Food
& Beverage
3.3% -110 bps 1.2%
Econo Lodge
3.8% -30 bps
3.1%
Rodeway
3.7% -130 bps 0.7%
Economy
3.6% -60 bps
2.2%
MainStay
2.1% 470 bps
9.2%
Total Domestic System*
5.0% -70 bps
3.7%
* Amounts exclude Suburban activity
because comparable pre-acquisition
data is not available
For the Quarter Ended For the Year Ended
12/31/2006 12/31/2005 12/31/2006 12/31/2005
System-wide effective
royalty rate
4.13% 4.08%
4.10% 4.08%
CHOICE HOTELS INTERNATIONAL, INC.
EXHIBIT 5
SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA
(UNAUDITED)
December 31, 2006 December 31, 2005
Hotels Rooms Hotels Rooms
Comfort Inn
1,415 110,877 1,428 111,598
Comfort Suites
433 33,976 411
32,251
Sleep
327 24,575 319
24,205
Midscale without
Food & Beverage 2,175 169,428 2,158
168,054
Quality
736 72,054 660
66,316
Clarion
162 23,945 153
23,554
Midscale with
Food & Beverage 898
95,999 813 89,870
Econo Lodge
816 49,679 805
49,763
Rodeway
233 14,168 180
11,051
Economy
1,049 63,847 985
60,814
MainStay
29 2,183 27
2,047
Suburban
60 7,984 65
8,568
Extended
Stay
89 10,167 92
10,615
Domestic Franchises
4,211 339,441 4,048 329,353
International Franchises
1,165 97,944 1,162 97,703
Total Franchises
5,376 437,385 5,210 427,056
Variance
Hotels Rooms %
%
Comfort Inn
(13) (721) (0.9%) (0.6%)
Comfort Suites
22 1,725 5.4%
5.3%
Sleep
8 370 2.5%
1.5%
Midscale without
Food & Beverage 17
1,374 0.8% 0.8%
Quality
76 5,738 11.5%
8.7%
Clarion
9 391 5.9%
1.7%
Midscale with
Food & Beverage 85
6,129 10.5% 6.8%
Econo Lodge
11 (84) 1.4%
(0.2%)
Rodeway
53 3,117 29.4%
28.2%
Economy
64 3,033 6.5%
5.0%
MainStay
2 136 7.4%
6.6%
Suburban
(5) (584) (7.7%) (6.8%)
Extended
Stay
(3) (448) (3.3%) (4.2%)
Domestic Franchises
163 10,088 4.0%
3.1%
International Franchises
3 241 0.3%
0.2%
Total Franchises
166 10,329 3.2%
2.4%
CHOICE HOTELS INTERNATIONAL, INC.
EXHIBIT 6
SUPPLEMENTAL INFORMATION BY BRAND
DEVELOPMENT RESULTS -- NEW HOTEL CONTRACTS
(UNAUDITED)
For the Twelve For the
Twelve
Months Ended
Months Ended
December 31, 2006 December 31, 2005
New
New
Construc- Conver- Construc- Conver-
tion sion Total tion
sion Total
Comfort Inn
67 65 132
53 56 109
Comfort Suites
98 3
101 89
5 94
Sleep
58 1
59 55
2 57
Midscale
without
Food & Beverage 223
69 292 197
63 260
Quality
6 143 149
5 148 153
Clarion
2 26
28 4
31 35
Midscale
with Food
& Beverage
8 169 177
9 179 188
Econo Lodge
1 80
81 4
85 89
Rodeway
3 105 108
- 75
75
Economy
4 185 189
4 160 164
MainStay
9 1
10 14
- 14
Suburban
14 8
22 -
- -
Extended
Stay
23 9
32 14
- 14
Cambria Suites
30 -
30 13
- 13
Total Domestic System
288 432 720
237 402 639
% Change
New
Construction Conversion Total
Comfort Inn
26% 16%
21%
Comfort Suites
10% (40%)
7%
Sleep
5% (50%)
4%
Midscale
without Food & Beverage 13%
10% 12%
Quality
20% (3%)
(3%)
Clarion
(50%) (16%)
(20%)
Midscale
with Food & Beverage
(11%) (6%)
(6%)
Econo Lodge
(75%) (6%)
(9%)
Rodeway
NM 40%
44%
Economy
0% 16%
15%
MainStay
(36%) NM
(29%)
Suburban
NM NM
NM
Extended
Stay
64% NM
129%
Cambria Suites
131% NM
131%
Total Domestic System
22% 7%
13%
For the Three For the Three
Months Ended
Months Ended
December 31, 2006 December 31, 2005
New
New
Construc- Conver- Construc- Conver-
tion sion Total tion
sion Total
Comfort Inn
29 22
51 18 16
34
Comfort Suites
43 -
43 49
1 50
Sleep
31 -
31 19
1 20
Midscale
without
Food & Beverage 103
22 125 86
18 104
Quality
1 43
44 1
36 37
Clarion
1 4
5 2 16
18
Midscale
w/ Food
& Beverage
2 47
49 3
52 55
Econo Lodge
1 37
38 -
24 24
Rodeway
1 32
33 -
28 28
Economy
2 69
71 -
52 52
MainStay
4 -
4 4
- 4
Suburban
5 3
8 -
- -
Extended
Stay
9 3
12 4
- 4
Cambria Suites
10 -
10 5
- 5
Total Domestic System
126 141 267
98 122 220
% Change
New
Construction Conversion Total
Comfort Inn
61% 38%
50%
Comfort Suites
(12%) (100%)
(14%)
Sleep
63% (100%)
55%
Midscale
without Food & Beverage 20%
22% 20%
Quality
0% 19%
19%
Clarion
(50%) (75%)
(72%)
Midscale
w/ Food & Beverage
(33%) (10%)
(11%)
Econo Lodge
NM 54%
58%
Rodeway
NM 14%
18%
Economy
NM 33%
37%
MainStay
0% NM
0%
Suburban
NM NM
NM
Extended
Stay
125% NM
200%
Cambria Suites
100% NM
100%
Total Domestic System
29% 16%
21%
CHOICE HOTELS INTERNATIONAL, INC.
Exhibit 7
DOMESTIC HOTEL PIPELINE OF HOTELS UNDER CONSTRUCTION,
AWAITING CONVERSION OR APPROVED FOR DEVELOPMENT
(UNAUDITED)
A hotel in the domestic pipeline does
not always result in an open and
operating hotel due to various factors.
December 31, 2006
Units
New
Conversion Construction Total
Comfort Inn
56 124
180
Comfort Suites
3 233
236
Sleep Inn
- 123
123
Midscale without
Food & Beverage
59 480
539
Quality
76 10
86
Clarion
11 4
15
Midscale
with Food & Beverage
87 14
101
Econo Lodge
41 5
46
Rodeway
66 3
69
Economy
107 8
115
MainStay
- 33
33
Suburban
5 24
29
Extended
Stay
5 57
62
Cambria Suites
- 43
43
258 602
860
December 31, 2005
Units
New
Conversion Construction Total
Comfort Inn
41 85
126
Comfort Suites
2 165
167
Sleep Inn
1 88
89
Midscale without
Food & Beverage
44 338
382
Quality
54 12
66
Clarion
13 4
17
Midscale
with Food & Beverage
67 16
83
Econo Lodge
41 9
50
Rodeway
35 -
35
Economy
76 9
85
MainStay
1 29
30
Suburban
2 9
11
Extended
Stay
3 38
41
Cambria Suites
- 12
12
190 413
603
Variance
New
Conversion Construction Total
Units % Units % Units
%
Comfort Inn
15 37% 39 46%
54 43%
Comfort Suites
1 50% 68 41%
69 41%
Sleep Inn
(1) -100% 35 40% 34
38%
Midscale without
Food & Beverage 15 34%
142 42% 157 41%
Quality
22 41% (2) -17% 20
30%
Clarion
(2) -15% - 0%
(2) -12%
Midscale
with Food & Beverage 20
30% (2) -13% 18 22%
Econo Lodge
- 0% (4) -44%
(4) -8%
Rodeway
31 89% 3 NM
34 97%
Economy
31 41% (1) -11% 30
35%
MainStay
(1) -100% 4 14%
3 10%
Suburban
3 150% 15 167% 18
164%
Extended
Stay
2 67% 19 50%
21 51%
Cambria Suites
- NM 31 258%
31 258%
68 36% 189 46% 257
43%
CHOICE HOTELS INTERNATIONAL, INC.
EXHIBIT 8
SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION
(UNAUDITED)
CALCULATION OF FRANCHISING REVENUES
AND FRANCHISING MARGINS
Three Months Ended Year Ended
(dollar amounts in thousands)
December 31, December 31,
2006 2005 2006
2005
Franchising Revenues:
Total Revenues
$143,708 $121,985 $544,662 $477,399
Adjustments:
Marketing and reservation
revenues
(74,307) (58,629) (278,026) (243,123)
Hotel Operations
(1,163) (1,079) (4,505) (4,293)
Franchising Revenues
$68,238 $62,277 $262,131 $229,983
Franchising Margins:
Operating Margin:
Total Revenues
$143,708 $121,985 $544,662 $477,399
Operating Income
$39,886 $36,247 $166,625 $143,750
Operating Margin
27.8% 29.7% 30.6%
30.1%
Franchising Margin:
Franchising Revenues
$68,238 $62,277 $262,131 $229,983
Operating Income
$39,886 $36,247 $166,625 $143,750
Less: Hotel Operations
334 239 1,311
1,068
$39,552 $36,008 $165,314 $142,682
Franchising Margins
58.0% 57.8% 63.1%
62.0%
CALCULATION OF ADJUSTED NET INCOME
AND ADJUSTED DILUTED
EARNINGS PER SHARE (EPS)
(In thousands, except per share
Three Months Ended Year Ended
amounts)
December 31, December 31,
2006 2005 2006
2005
Net Income
$24,629 $21,552 $112,787 $87,565
Adjustments:
Loss on Debt Extinguishment
Costs -
- 217
-
Resolution of Provisions
for Income
Tax Contingencies
(210) (454) (12,791) (4,855)
Income Tax Expense Incurred
Due to
Foreign Earnings
Repatriation
- -
- 1,192
Adjusted Net Income
$24,419 $21,098 $100,213 $83,902
Weighted average shares outstanding-
diluted
67,171 66,360 67,050 66,336
Diluted Earnings Per Share
$0.37 $0.32 $1.68
$1.32
Adjustments:
Loss on Debt Extinguishment
Costs -
- -
-
Resolution of Provisions
for Income
Tax Contingencies
(0.01) (0.00) (0.19) (0.08)
Income Tax Expense Incurred
Due to
Foreign Earnings
Repatriation
- -
- 0.02
Adjusted Diluted Earnings Per Share
(EPS)
$0.36 $0.32 $1.49
$1.26
EBITDA Reconciliation
(in millions)
Year Year
Ended Ended
Full-
December December Year
Q4 2006 Q4 2005 31, 2006 31, 2005
2007
Actuals Actuals Actuals
Actuals Outlook*
Operating Income
(per GAAP)
$39.9 $36.2 $166.6
$143.7 $176.2
Depreciation and
amortization
2.4 2.3
9.7 9.1
9.8
Earnings before
interest, taxes,
depreciation &
amortization (non-
GAAP) ("EBITDA")
$42.3 $38.5 $176.3
$152.8 $186.0
* Full Year 2007 Operating
income and EBITDA include approximately $4.5
million of
severance costs related to the previously announced
termination
certain executive officers. |