Choice Hotels Reports Record Results for Second Quarter 2006; Diluted EPS Up 12.5%, Net Income Up 12% Over Prior Year
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Choice Hotels Reports Record Results for Second Quarter 2006; Diluted EPS Up 12.5%, Net Income Up 12% Over Prior Year
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Category: North America & West Indies / Carribean islands
This is a press release selected by our editorial committee and published online for free on 2006-07-26
Choice Hotels International, Inc., (NYSE: CHH) today reported the following highlights for the second quarter of 2006:
* Diluted earnings per share (EPS) increased 12.5% to $0.36, compared to
$0.32 for second quarter 2005.
* Net income grew 12% from $21.5 million in second quarter 2005 to $24.1
million in the same period of this year.
* Earnings before interest, taxes, depreciation and amortization
("EBITDA") increased 13% to $44.7 million from $39.7 million in second
quarter 2005.
* Operating income increased 13% to $42.1 million, compared to $37.4
million for the same period in 2005.
* Total revenues increased 15% to $140.5 million compared to the second
quarter of 2005.
* Domestic system-wide revenue per available room (RevPAR) increased
7.7%, Average Daily Rate (ADR) increased 5.7% and occupancy rose 110
basis points compared to the second quarter of 2005.
* Domestic unit growth increased 4.8% compared to the second quarter
2005 (excluding the 2005 acquisition of Suburban, domestic unit growth
increased 3.2%).
* Year-to-date contracts for new construction hotel franchises increased
14% to 106; overall year-to-date new domestic hotel franchise
contracts were comparable to the second quarter 2005, with 275
contracts executed in 2006 as compared to 276 in the prior year's
first two quarters.
* Executed five contracts for new upscale Cambria Suites brand during
the quarter, with 15 signed year-to-date and 28 since the brand was
introduced in 2005. First property in Boise, Idaho expected to open
in December 2006.
* The domestic hotel pipeline of hotels under construction, awaiting
conversion or approved for development increased more than 45% from
the prior year to 687 hotels, representing 53,765 rooms; an additional
65 hotels, representing 5,993 rooms, were in the worldwide pipeline at
June 30, 2006.
"We continue to focus on brand enhancements and are seeing strong growth in occupancy, average daily rate and RevPAR," said Charles A. Ledsinger, Jr., president and chief executive officer. "We are pleased with the substantial increase in year-to-date sales of our new construction brands, most notably with our Cambria Suites and Comfort Suites offerings."
"We believe that the inherent strength of our business model, the ongoing improvements to our core brands, and the expansion of our newest brands will enable us to drive top-line and bottom-line growth in a variety of economic cycles," Ledsinger added. "We are very pleased with the 13 percent increase in EBITDA over the prior year's second quarter and remain confident about the company's long-term prospects."
Outlook for 2006
The company's third quarter 2006 diluted EPS is expected to be $0.46. Full-year 2006 diluted EPS is expected to be $1.45. Earnings before interest, taxes, depreciation and amortization ("EBITDA") is expected to be $175 million. These estimates include the following assumptions.
* The company expects net domestic unit growth of approximately 4% in
2006;
* RevPAR is expected to increase 5% for third quarter 2006 and 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 36% for full
year 2006.
Use of Free Cash Flow
The company has consistently used its free cash flow (cash flow from operations less capital expenditures) generated from its operations to return value to shareholders. This is primarily achieved through share repurchases and dividends.
For the six months ended June 30, 2006, the company paid $16.9 million of cash dividends to shareholders. The annual dividend rate per common share is $0.52.
The company has remaining authorization to purchase up to 5.1 million shares under the share repurchase program. Repurchases will continue to be made in the open market and through privately negotiated transactions subject to market and other conditions. No minimum number of shares has been fixed. Since Choice announced its stock repurchase program on June 25, 1998, the company has repurchased 33.6 million shares of its common stock for a total cost of $711.9 million through July 25, 2006. Considering the effect of a two-for-one stock split in October 2005, the company has repurchased 66.6 million shares at an average price of $10.69 per share.
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.
Conference Call
Choice will conduct a conference call on Wednesday, July 26, 2006, at 10 a.m. EDT to discuss the company's second quarter 2006 results. The call-in number to listen to the call is 1-877-209-0397. The conference call also will be Web cast simultaneously via the company's Web site, http://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 http://www.choicehotels.com for those unable to listen to the call on July 26. The call will also be available for replay until August 26, 2006, by calling 1-800-475-6701 (access code 832732).
Items Impacting Comparability
Acquisition of Suburban
During 2005, the company acquired Suburban Franchise Holding Company, Inc. ("Suburban"), which included 67 Suburban Extended Stay Hotel 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.
Two-for-One Stock Split
In October 2005, the company effected a two-for-one stock split of its outstanding shares of common stock, par value $.01 per share. Unless otherwise noted, 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.
About Choice Hotels
Choice Hotels International franchises more than 5,200 hotels, representing more than 430,000 rooms, in the United States and more than 40 countries and territories. As of June 30, 2006, 687 hotels are under development in the United States, representing 53,765 rooms, and an additional 65 hotels, representing 5,993 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 Hotel brands serve guests worldwide.
Additional corporate information may be found on Choice Hotels' Internet site, which may be accessed at http://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. The company's Form 10-K for the year ended December 31, 2005 details some of the important risk factors that you should review.
Statement Concerning Non-GAAP Financial Measurements
Franchising revenues, franchising margins, EBITDA, and free cash flows 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 total revenues, operating income, operating margins, and cash flows from operations. 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 Hotel, Econo Lodge, and Rodeway Inn are proprietary trademarks and service marks of Choice Hotels International, Inc.
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