Choice Hotels Reports Record Diluted EPS of $1.32 for Full-Year 2005
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Choice Hotels Reports Record Diluted EPS of $1.32 for Full-Year 2005
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Category: Worldwide
This is a press release selected by our editorial committee and published online for free on 2006-02-15
Choice Hotels International, Inc., (NYSE:CHH) today reported the following highlights for the fourth quarter and full-year 2005, including records for full-year and fourth-quarter earnings per share, revenues and domestic hotel franchise contracts:
Diluted earnings per share (EPS) for full-year 2005 were $1.32 compared to $1.08 for 2004; Diluted earnings per share for fourth quarter 2005 were $0.32 compared to $0.30 for fourth quarter 2004;
Adjusted diluted EPS (on a non-GAAP basis, excluding specified items) for full-year 2005 were $1.26, up 18% from $1.07 for the same period in 2004; Adjusted diluted EPS for fourth quarter 2005 were $0.32, up 14% from $0.28 for the fourth quarter of 2004;
Earnings before interest taxes and depreciation expense ("EBITDA") for full-year 2005 increased 13% to $153 million from $135 million in 2004. Operating income increased more than 15% for both full-year and fourth quarter 2005 compared to the same periods in the prior year, to $143.8 million and $36.2 million, respectively;
Domestic unit growth increased 5.6%; excluding the acquisition of Suburban, domestic unit growth increased 3.9%;
Domestic system-wide revenue per available room (RevPAR) increased 7.3% for fourth-quarter 2005 and 6.1% for full-year 2005 compared to prior year results;
Full year 2005 new domestic hotel franchise contracts up 16% to a record 639;
Franchising revenues up 16% and 13% for fourth quarter and full-year 2005, respectively; Total revenues up 14% and 11% for fourth quarter and full-year, respectively;
The domestic hotel pipeline of hotels under construction, awaiting conversion or approved for development increased more than 30% to 603 hotels representing 46,464 rooms; the worldwide pipeline increased 21% to 687 hotels, representing 54,075 rooms;
According to Smith Travel Research ("STR") Choice branded system-wide market share in the United States has increased 89 basis points to 7.35% of total industry rooms since 2002. The total number of domestic hotel rooms has increased at an annual rate of less than 1% per annum during these same 3 years.
"We are very pleased with our performance for the fourth quarter and for the full-year 2005. We achieved record results, including record franchise sales and our highest year-end domestic hotel pipeline. These results provide solid momentum heading into 2006 and reflect the strength and sustainability of our business model," said Charles A. Ledsinger, Jr., president and chief executive officer. "While continuing to invest in the business, we also returned nearly $80 million to our shareholders through share repurchases and dividends during the year."
He added, "We continue to be encouraged by our strong pipeline, the healthy operating environment for the lodging industry and the development potential for the two brands we added to our portfolio in 2005, the upscale Cambria Suites brand and Suburban Extended Stay Hotels."
During 2005, the company acquired Suburban Franchise Holding Company, Inc., which included 67 Suburban Extended Stay Hotels units open and operating in the United States. The results of operations for Suburban have been included in the company's results of operations since September 28, 2005.
Diluted earnings per share for each of the full-year and fourth quarter periods ended December 31, 2005 and 2004 include reductions of income tax expense related to the resolution of certain tax contingencies. Diluted earnings per share for full-year 2005 include additional income tax expense related to the company's repatriation of foreign earnings pursuant to the American Jobs Creation Act. Diluted earnings per share for full-year 2004 include certain costs related to the extinguishment of debt. To present results on a comparable basis the company has provided adjusted diluted earnings per share amounts that exclude these items.
Use of Free Cash Flow
The company has consistently used its free cash flow (cash flow from operations less capital expenditures) generated from operations to return value to shareholders. This is primarily achieved through share repurchases and dividends.
During the year ended December 31, 2005, the company repurchased approximately 1.1 million shares (including 0.5 million prior to the 2 for 1 stock split effected in October 2005) of its common stock for a total cost of $48.6 million. The company has remaining authorization to purchase up to 5.1 million shares. No minimum number of shares has been fixed. Since Choice announced its stock repurchase program on June 25, 1998 and through February 14, 2006, the company has repurchased 33.6 million shares (including 33.0 million prior to the 2 for 1 stock split effected in October 2005) of its common stock at an average price of $21.16 per share and for a total cost of $711.9 million.
For the year ended December 31, 2005, the company paid $30.2 million of cash dividends to shareholders. The annual dividend rate per common share is $0.52.
The company expects to continue to return value to its shareholders through a combination of dividends and share repurchases, subject to market and other conditions.
Outlook for 2006
The company's first quarter 2006 diluted EPS is expected to be $0.19 to $0.21. Full-year 2006 diluted EPS is expected to be $1.38 to $1.41. Earnings before interest, taxes, depreciation and amortization ("EBITDA") is expected to be $170 million to $173 million for full-year 2006. These estimates include the following assumptions.
The company expects net domestic unit growth of approximately 4% in 2006;
RevPAR is expected to increase 6.5% to 8% for first quarter 2006 and 5% to 6% for full-year 2006;
The effective royalty rate is expected to increase 3 basis points for full-year 2006;
All figures assume the existing share count, include stock-based compensation expense and assume an effective tax rate of 37.5%.
Conference Call
Choice will conduct a conference call on Wednesday, February 15, 2006 at 9 a.m. Eastern time to discuss the company's fourth quarter and full-year 2005 results. The call-in number to listen to the call is 1-800-230-1059. 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 on the Web 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 the call.
The audio of the call will be archived and available on www.choicehotels.com for those unable to listen to the call on February 15. The call will also be available for replay until March 15, 2006 by calling 1-800-475-6701. The access code for the replay is: 814000.
Two-For-One Stock Split
The company effected a two-for-one stock split of its outstanding shares of common stock, par value $.01 per share, effective on October 21, 2005. All share information in this release and in the accompanying exhibits, including per share amounts, have been proportionally adjusted as if the two-for-one stock split had been effective as of the date or period presented (unless otherwise noted).
About Choice Hotels
Choice Hotels International franchises more than 5,200 hotels, representing more than 425,000 rooms, in the United States and more than 40 countries and territories. As of December 31, 2005, 603 hotels are under development in the United States, representing 46,464 rooms, and an additional 84 hotels, representing 7,611 rooms, are under development in more than 20 countries and territories. The company's Cambria Suites, Comfort Inn, Comfort Suites, Quality, Clarion, Sleep Inn, Econo Lodge, Rodeway Inn, MainStay Suites and Suburban Extended Stay Hotels brands serve guests worldwide.
Additional corporate information may be found on Choice Hotels' Internet site, which may be accessed at www.choicehotels.com.
Forward-Looking Statements
Certain matters discussed in this press release may constitute forward-looking statements within the meaning of the federal securities law. Such statements are based on management's beliefs, assumptions and expectations, which in turn are based on information currently available to management. Actual performance and results could differ from those expressed in or contemplated by the forward-looking statements due to a number of risks, uncertainties and other factors, many of which are beyond Choice's ability to predict or control. For further information on factors that could impact Choice the statements contained therein, we refer you to the filings made by Choice with the Securities and Exchange Commission, including its form 10-K for the period ended December 31, 2004.
Statement Concerning Non-GAAP Financial Measurements
Adjusted diluted earnings per share, franchising revenues, franchising margins, free cash flows and earnings before interest, taxes, depreciation and amortization ("EBITDA") are non-GAAP financial measurements. These financial measurements are presented as supplemental disclosures because they are used by management in reviewing and analyzing the company's performance. 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 diluted earnings per share, total revenues, operating income margins, cash flows from operations and operating income. The company's calculation of these measurements may be different from the calculation used by other companies and therefore comparability may be limited. The company has included exhibits accompanying this release that reconcile these measures to the comparable GAAP measurement.
Cambria Suites, Comfort Inn, Comfort Suites, Quality, Clarion, Sleep Inn, MainStay Suites, Suburban Extended Stay Hotels, Econo Lodge, and Rodeway Inn are proprietary trademarks and service marks of Choice Hotels International, Inc..
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