News for the Hospitality Executive
Choice Hotels 2009 Q1 Net Income
Declines Slightly from $16.3 million to $18.6 million
in the Prior Year Same Quarter; Domestic RevPAR Down 10.3%
Hotel Operating Statistics
Outlook for 2009
The uncertainty around the current economic environment and credit market conditions and their impact on travel patterns and hotel development activities makes it difficult to predict future results, particularly as it relates to underlying assumptions for RevPAR, new hotel franchise and relicensing sales and interest and investment income and expense.
The company's second quarter 2009 diluted EPS is expected to be $0.41. The company expects full-year of 2009 diluted EPS of $1.68. EBITDA for the full-year of 2009 are expected to be approximately $175.5 million. These estimates include the following assumptions:
• The company expects net domestic unit growth of approximately 3.0%
Use of Free Cash Flow
The company has consistently used its free cash flow (cash flow from operations less capital expenditures) to return value to shareholders, primarily through share repurchases and dividends.
For the three months ended March 31, 2009 the company paid $11.2 million of cash dividends to shareholders. The current quarterly dividend rate per common share is $0.185, subject to declaration by our board of directors.
For the three months ended March 31, 2009, the company purchased approximately 0.7 million shares of its common stock at an average price of $26.82 for a total cost of $18.0 million under the share repurchase program and has authorization to purchase up to an additional 5.3 million shares under this program. We expect to continue making repurchases in the open market and through privately negotiated transactions, subject to market and other conditions. No minimum number of share repurchases has been fixed. Since Choice announced its stock repurchase program on June 25, 1998, the company has repurchased 41.5 million shares of its common stock for a total cost of $968.6 million through March 31, 2009. Considering the effect of a two-for-one stock split in October 2005, the company has repurchased 74.4 million shares under the share repurchase program at an average price of$13.01 per share.
Our Board has authorized us to enter into programs which permit us to
offer financing, investment and guaranty support to qualified franchisees
to incent multi-unit franchise development in top markets. We expect to
opportunistically deploy this capital over the next several years. Our
annual investment in these programs is dependent on market and other conditions.
Notwithstanding these programs, the company expects to continue to return
value to its shareholders through a combination of share repurchases and
dividends, subject to market and other conditions.
Impact of the Adoption of New Accounting Pronouncements on Earnings Per Share
In June 2008, the Financial Accounting Standards Board ("FASB") issued FASB Staff Position Emerging Issues Task Force No. 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities" ("FSP EITF 03-6-1"). FSP EITF 03-6-1 clarified that all share-based payment awards that contain rights to non-forfeitable dividends participate in undistributed earnings with common shareholders. Therefore, awards of this nature are considered participating securities and the two-class method of computing basic and diluted earnings per share must be applied rather than the treasury stock method. FSP EITF 03-6-1 is effective for fiscal years beginning after December 15, 2008. In addition, once effective, all prior period earnings per share data presented must be adjusted retrospectively to conform to the provisions of FSP EITF 03-6-1.
The Company's outstanding unvested restricted stock awards contain rights to non-forfeitable dividends and as a result, the Company applied this guidance in the first quarter of 2009. The two-class method of calculating earnings per share is more dilutive to both basic and diluted shares outstanding than the previously utilized treasury stock method. In accordance with FSP EITF 03-6-1, the Company has also retrospectively adjusted its basic and diluted shares outstanding for the three months ended March 31, 2008 under the two-class method which resulted in a reduction of the Company's diluted earnings per share from $0.30 to $0.29 per share.
Choice will conduct a conference call on Friday, May 1,
2009 at 10:00 a.m. EDT to discuss the company's first quarter results.
The dial-in number to listen to the call is 1-866-804-6927, and the access
code is 46241510. International callers should dial 1-857-350-1673 and
enter the access code 46241510. 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
Information page will feature a conference call microphone icon to access
About Choice Hotels
Choice Hotels International franchises more than 5,800 hotels, representing more than 475,000 rooms, in the United States and more than 30 countries and territories. As of March 31, 2009, 896 hotels are under construction, awaiting conversion or approved for development in the United States, representing 70,381 rooms, and an additional 111 hotels, representing 9,114 rooms, are under construction, awaiting conversion or approved for development in more than 15 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 serve guests worldwide. In addition, via its Ascend Collection membership program, travelers in the United States and theCaribbean have upscale lodging options at historic, boutique and unique hotels.
Additional corporate information may be found on the Choice Hotels Web site, which may be accessed atwww.choicehotels.com.
Certain matters discussed in this press release constitute forward-looking statements within the meaning of the federal securities law. Generally, our use of words such as "expect," "estimate," "believe," "anticipate," "will," "forecast," "plan," project," "assume" or similar words of futurity identify statements that are forward-looking and that we intend to be included within the Safe Harbor protections provided by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements are based on management's current beliefs, assumptions and expectations regarding future events, which in turn are based on information currently available to management. Such statements may relate to projections of the company's revenue, earnings and other financial and operational measures, company debt levels, payment of stock dividends, and future operations, among other matters. We caution you not to place undue reliance on any such forward-looking statements. Forward-looking statements do not guarantee future performance and involve known and unknown risks, uncertainties and other factors.
Several factors could cause actual results, performance or achievements of the company to differ materially from those expressed in or contemplated by the forward-looking statements. Such risks include, but are not limited to, changes to general, domestic and foreign economic conditions; operating risks common in the lodging and franchising industries; changes to the desirability of our brands as viewed by hotel operators and customers; changes to the terms or termination of our contracts with franchisees; our ability to keep pace with improvements in technology utilized for reservations systems and other operating systems; fluctuations in the supply and demand for hotels rooms; and our ability to manage effectively our indebtedness. These and other risk factors are discussed in detail in the Risk Factors section of the company's Form 10-K for the year ended December 31, 2008, filed with the Securities and Exchange Commission on March 2, 2009. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
Statement Concerning Non-GAAP Financial Measurements
EBITDA, franchising revenues and franchising margins are non-GAAP financial measurements. 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 operating income, total revenues and operating margins. The company's calculation of these measurements may be different from the calculations used by other companies and therefore comparability may be limited. The company has included an exhibit accompanying this release that reconciles these measures to the comparable GAAP measurement. We discuss management's reasons for reporting these non-GAAP measures below.
Earnings Before Interest, Taxes, Depreciation and Amortization: EBITDA reflects earnings excluding the impact of interest expense, tax expense, depreciation and amortization. Our management considers EBITDA to be an indicator of operating performance because it can be used to measure our ability to service debt, fund capital expenditures, and expand our business. EBITDA is a commonly used measure of performance in our industry. In addition, it is used by analysts, lenders, investors and others, as well as by us, to facilitate comparisons between the Company and its competitors because it excludes certain items that can vary widely across different industries or among companies within the same industry.
Franchising Revenues and Margins: The Company reports franchising revenues and margins which exclude marketing and reservation revenues and hotel operations. Marketing and reservation activities are excluded from revenues and operating margins since the Company is contractually required by its franchise agreements to use these fees collected for marketing and reservation activities. Cumulative reservation and marketing fees not expended are recorded as a payable on the Company's financial statements and are carried over to the next fiscal year and expended in accordance with the franchise agreements. Cumulative marketing and reservation expenditures in excess of fees collected for marketing and reservation activities are recorded as a receivable on the Company's financial statements. In addition, the Company has the contractual authority to require that the franchisees in the system at any given point repay the Company for any deficits related to marketing and reservation activities. Hotel operations are excluded since they do not reflect the most accurate measure of the Company's core franchising business. These non-GAAP measures are a commonly used measure of performance in our industry and facilitate comparisons between the Company and its competitors.
Cambria Suites, Comfort Inn, Comfort Suites, Quality, Clarion, Sleep Inn, MainStay Suites, Suburban Extended Stay Hotel, Econo Lodge, and Rodeway Inn are proprietary trademarks and service marks of Choice Hotels International, Inc.
Choice Hotels International, Inc.
|Also See:||Choice Hotels Reports 4th Qtr Net Income of $18.7 million, Compared with $27.9 million a Year Earlier; System-wide RevPAR Fell 7.7% in the Quarter / Brand Operating Statistics / February 2009|
|Choice Hotels International Inc. Reports a 6.5% Decline in Third Qtr Net Income of $35.9 million Compared with $38.4 million a Year Earlier; Higher Operating Costs Wipes Away a 9.2% Increase in Revenues / October 2008|