Choice Hotels International, Inc.,
-- Adjusted diluted earnings per share ("EPS") for the third quarter
increased 16% to $0.58, compared to adjusted diluted EPS of $0.50 for
the third quarter 2006. Adjusted diluted earnings per share for the
three months ended September 30, 2007 and 2006 exclude reductions of
income tax expense related to reversal of provisions for certain income
tax contingencies of approximately $0.01 and $0.19 per share,
respectively. Diluted EPS for third quarter 2007 was $0.59 compared to
$0.69 in the same period of the prior year.
-- Operating income for third quarter 2007 increased 14% to $62.4 million
compared to $54.6 million for third quarter 2006.
-- Earnings before interest, taxes and depreciation ("EBITDA") were $64.6
million for third quarter 2007, an increase of 14% compared to $56.9
million for third quarter 2006.
-- Domestic units increased 5.7 percent from September 30, 2006.
-- Domestic system-wide revenue per available room (RevPAR) increased 5.6%
for the third quarter of 2007 compared to the same period of the prior
year. Domestic RevPAR for the company's mid-scale without food and
beverage brands (Comfort Inn, Comfort Suites and Sleep Inn), which
represent approximately half of the company's domestic rooms online,
increased 6.1% for the third quarter of 2007, with average daily rate
increasing 5.4% for those brands.
-- Executed 182 new domestic hotel franchise contracts during the third
quarter of 2007 compared to 178 for third quarter 2006. New
construction contracts comprised 46% of executed agreements, as
compared to 31% in the prior year's third quarter. Overall, year-to-
date, new domestic hotel franchise contracts executed increased 4% to
469 compared to 453 in the same period of the prior year.
-- The number of domestic hotels under construction, awaiting conversion
or approved for development increased 18% to 872 hotels representing
68,853 rooms; the worldwide pipeline also increased 18% to 954 hotels
representing 76,823 rooms.
-- The company opened its second and third Cambria Suites hotels -- in
Appleton, Wisconsin and Green Bay, Wisconsin. The fourth Cambria
Suites hotel, in Minneapolis, Minnesota, is projected to open in the
fourth quarter.
-- Franchising revenues and total revenues increased 15% and 17%,
respectively for third quarter 2007 compared to the same period of the
prior year. Year-to-date franchising revenues and total revenues have
increased 11% and 12%, respectively, compared to the same period of
2006.
-- Franchising margins for the third quarter of 2007 were 70.2% compared
to 70.5% for the same period of 2006. Year to date franchising margins
were 62.9% compared to 64.9% for the same period of 2006. Franchising
margins for the nine months ended September 30, 2007 reflect the impact
of $3.7 million of termination benefits for certain executive officers
in the first quarter of 2007. Franchising margins for the third quarter
2007 and year-to-date period ended September 30, 2007 also reflect the
commencement of direct franchising operations in continental Europe.
-- The company purchased approximately 2.9 million shares of its common
stock at an average price of $37.45 for a total cost of $109.2 million
under its share repurchase program during the third quarter 2007.
Year-to-date through October 24, 2007, the company purchased
approximately 4.1 million shares of its common stock at an average
price of $37.72 for a total cost of $155.2 million under its share
repurchase program.
-- The Company increased its 2007 diluted EPS estimate from $1.62 to
$1.67.
"The fundamental strength of our operating model remains strong, as we continue to add more hotels to our distribution system while returning value to our shareholders through share repurchases and dividends," said Charles A. Ledsinger, Jr., vice chairman and chief executive officer. "By offering hotel owners a well-segmented mix of brands suitable for new construction and conversion development opportunities, we have been able to successfully grow our system size and market share in the lodging segments in which we operate."
Items Affecting Comparability
Fourth Quarter 2006 Acquisition of Continental Europe Franchising Operations
During the fourth quarter of 2006, the company terminated the master franchising agreement covering continental Europe and acquired the direct franchising operations in this region from the former master franchisor. As a result of the acquisition, franchising revenues and selling, general and administrative costs for the three months ended September 30, 2007 increased approximately $1.0 million and $0.9 million, respectively, compared to third quarter 2006. Franchising revenues and selling, general and administrative costs for the nine months ended September 30, 2007 increased approximately $2.8 million and $2.6 million, respectively, compared to the same period in 2006.
Outlook for 2007
The company's fourth quarter 2007 diluted EPS is expected to be $0.41. The company expects full year 2007 diluted EPS of $1.67. Earnings before interest, taxes, depreciation and amortization ("EBITDA") for full-year 2007 are expected to be approximately $189 million. These estimates include the following assumptions.
-- The company expects net domestic unit growth of approximately 5% in
2007;
-- RevPAR is expected to increase approximately 4% for fourth quarter 2007
and approximately 4% for full-year 2007;
-- The effective royalty rate is expected to increase 4 basis points for
full-year 2007;
-- All figures assume the existing share count and an effective tax rate
of 36.0% for fourth quarter 2007 and 36.1 % for full year 2007;
-- All figures assume approximately $3.7 million ($0.03 diluted EPS) of
termination benefits expense resulting from the previously announced
separations of certain executive officers.
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, primarily through share repurchases and dividends.
The annual dividend rate per common share was increased 13 percent by the Board of Directors in September and is now $0.68. For the three and nine months ended September 30, 2007, the company paid $9.8 million and $29.5 million, respectively, of cash dividends to shareholders.
During the quarter, the company's Board of Directors authorized an increase under the company's existing stock repurchase program to acquire up to an additional three million shares of its outstanding common stock. For the three months ended September 30, 2007, the company purchased approximately 2.9 million shares of its common stock at an average price of $37.45 for a total cost of $109.2 million under its share repurchase program. For the nine months ended September 30, 2007, the company purchased approximately 4.1 million shares of its common stock at an average price of $37.72 for a total cost of $155.2 million. At September 30, 2007, the company had authorization to purchase up to an additional 4.0 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 37.8 million shares of its common stock for a total cost of $867.1 million through September 30, 2007. Considering the effect of a two-for-one stock split in October 2005, the company has repurchased 70.8 million shares under the share repurchase program at an average price of $12.26 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 Thursday October 25, 2007 at 9:30 a.m. EDT to discuss the company's third quarter results. The call-in number to listen to the call is 1-866-269-9613. International callers should dial 612-234-9960. The conference call also will be Web cast 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 beginning at 1:00 p.m. EDT on October 25 and will be available through November 25 by calling 1-800-475-6701, access code 888352. International callers should dial 320-365-3844 and enter access code 888352.
About Choice Hotels
Choice Hotels International franchises more than 5,500 hotels, representing more than 450,000 rooms, in the United States and 37 countries and territories. As of September 30, 2007, 872 hotels are under development in the United States, representing 68,853 rooms, and an additional 82 hotels, representing 7,970 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 www.choicehotels.com.
Forward-Looking Statements
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 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 for the company's revenue, earnings and other financial and operational measures, company debt levels, payment of stock dividends, and future operations. We caution you not to place undue reliance on any forward-looking statements, which are made as of the date of this press release. 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 Risk Factors section of the company's Form 10-K for the year ended December 31, 2006, filed with the Securities and Exchange Commission on March 1, 2007. 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
Franchising revenues, franchising margins, adjusted diluted EPS and 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 total revenues, operating margins, diluted EPS 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 Hotel, Econo Lodge, and Rodeway Inn are proprietary trademarks and service marks of Choice Hotels International, Inc.
Exhibit 1
Choice Hotels International, Inc.
Consolidated Statements of Income
(Unaudited)
Three Months Ended September 30,
Variance
2007 2006 $ %
(In thousands, except per share
amounts)
REVENUES:
Royalty fees $73,219 $64,364 $8,855 14%
Initial franchise and relicensing
fees 8,902 7,733 1,169 15%
Brand solutions 3,622 3,171 451 14%
Marketing and reservation 86,795 73,001 13,794 19%
Hotel operations 1,196 1,182 14 1%
Other 2,675 1,545 1,130 73%
Total revenues 176,409 150,996 25,413 17%
OPERATING EXPENSES:
Selling, general and administrative 24,230 20,279 3,951 19%
Depreciation and amortization 2,158 2,344 (186) (8%)
Marketing and reservation 86,795 73,001 13,794 19%
Hotel operations 867 820 47 6%
Total operating expenses 114,050 96,444 17,606 18%
Operating income 62,359 54,552 7,807 14%
OTHER INCOME AND EXPENSES:
Interest expense 3,992 3,207 785 24%
Interest and other investment income (534) (569) 35 (6%)
Equity in net income of affiliates (462) (349) (113) 32%
Loss on extinguishment of debt - - - NM
Total other income and expenses, net 2,996 2,289 707 31%
Income before income taxes 59,363 52,263 7,100 14%
Income taxes 20,969 5,906 15,063 255%
Net income $38,394 $46,357 $(7,963) (17%)
Weighted average shares
outstanding-basic 63,556 65,668
Weighted average shares
outstanding-diluted 64,602 67,152
Basic earnings per share $0.60 $0.71 $(0.11) (15%)
Diluted earnings per share $0.59 $0.69 $(0.10) (14%)
Nine Months Ended September 30,
Variance
2007 2006 $ %
(In thousands, except per share
amounts)
REVENUES:
Royalty fees $175,723 $157,374 $18,349 12%
Initial franchise and relicensing fees 21,482 20,099 1,383 7%
Brand solutions 12,603 10,853 1,750 16%
Marketing and reservation 230,646 203,719 26,927 13%
Hotel operations 3,485 3,342 143 4%
Other 6,362 5,567 795 14%
Total revenues 450,301 400,954 49,347 12%
OPERATING EXPENSES:
Selling, general and administrative 73,735 60,796 12,939 21%
Depreciation and amortization 6,410 7,335 (925) (13%)
Marketing and reservation 230,646 203,719 26,927 13%
Hotel operations 2,402 2,365 37 2%
Total operating expenses 313,193 274,215 38,978 14%
Operating income 137,108 126,739 10,369 8%
OTHER INCOME AND EXPENSES:
Interest expense 10,206 11,291 (1,085) (10%)
Interest and other investment income (2,856) (1,099) (1,757) 160%
Equity in net income of affiliates (837) (737) (100) 14%
Loss on extinguishment of debt - 342 (342) (100%)
Total other income and expenses, net 6,513 9,797 (3,284) (34%)
Income before income taxes 130,595 116,942 13,653 12%
Income taxes 47,241 28,784 18,457 64%
Net income $83,354 $88,158 $(4,804) (5%)
Weighted average shares
outstanding-basic 64,929 65,272
Weighted average shares
outstanding-diluted 66,077 67,009
Basic earnings per share $1.28 $1.35 $(0.07) (5%)
Diluted earnings per share $1.26 $1.32 $(0.06) (5%)
Choice Hotels International, Inc. Exhibit 2
Consolidated Balance Sheets
(In thousands) September 30, December 31,
2007 2006
(Unaudited)
ASSETS
Cash and cash equivalents $47,354 $35,841
Accounts receivable, net 54,110 41,694
Deferred income taxes 3,062 1,790
Investments, employee benefit plans,
at fair value 3,384 -
Other current assets 12,046 7,757
Total current assets 119,956 87,082
Fixed assets and intangibles, net 142,865 144,124
Receivable -- marketing fees 87 6,662
Investments, employee benefit plans,
at fair value 34,425 31,529
Other assets 40,488 33,912
Total assets $337,821 $303,309
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current portion of long-term debt $8,400 $146
Other current liabilities 142,686 139,645
Total current liabilities 151,086 139,791
Long-term debt 269,962 172,390
Deferred compensation & retirement
plan obligations 42,290 40,101
Other liabilities 23,482 13,407
Total liabilities 486,820 365,689
Common stock, $0.01 par value 628 664
Additional paid-in-capital 83,373 81,689
Accumulated other comprehensive income
(loss) 830 (772)
Treasury stock, at cost (770,212) (627,311)
Retained earnings 536,382 483,350
Total shareholders' deficit (148,999) (62,380)
Total liabilities and
shareholders' deficit $337,821 $303,309
Choice Hotels International, Inc. Exhibit 3
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands) Nine Months Ended September 30,
2007 2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $83,354 $88,158
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 6,410 7,335
Provision for bad debts 133 35
Non-cash stock compensation and
other charges 9,164 8,250
Non-cash interest and other income (1,599) (385)
Loss on extinguishment of debt - 342
Dividends received from equity
method investees 495 657
Equity in net income of affiliates (837) (737)
Changes in assets and liabilities:
Receivables (12,155) (8,149)
Receivable - marketing and
reservation fees, net 17,248 18,585
Accounts payable (551) (2,227)
Accrued expenses and other (9,403) (17,237)
Income taxes payable 8,614 19,776
Deferred income taxes (9,035) (12,319)
Deferred revenue (80) 7,142
Other assets (435) 476
Other liabilities 9,081 5,888
NET CASH PROVIDED BY OPERATING
ACTIVITIES 100,404 115,590
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in property and equipment (8,734) (5,281)
Acquisitions, net of cash acquired (343) -
Purchases of investments, employee
benefit plans (7,128) (7,976)
Proceeds from sales of investments,
employee benefit plans 2,703 2,885
Issuance of notes receivable (5,066) (1,780)
Collections of notes receivable 675 772
Other items, net (468) (859)
NET CASH USED IN INVESTING ACTIVITIES (18,361) (12,239)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of long-term debt (422) (109)
Net borrowings (repayments) pursuant
to revolving credit facility 106,200 (86,500)
Debt issuance costs - (477)
Excess tax benefits from stock-based
compensation 4,870 12,550
Purchase of treasury stock (156,749) (1,326)
Dividends paid (29,522) (25,494)
Proceeds from exercise of stock
options 5,093 8,162
NET CASH USED IN FINANCING
ACTIVITIES (70,530) (93,194)
Net change in cash and cash
equivalents 11,513 10,157
Cash and cash equivalents at
beginning of period 35,841 16,921
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $47,354 $27,078
EXHIBIT 4
CHOICE HOTELS INTERNATIONAL, INC.
SUPPLEMENTAL OPERATING INFORMATION
DOMESTIC HOTEL SYSTEM
(UNAUDITED)
For the Nine Months Ended
September 30, 2007
Average Daily
Rate Occupancy RevPAR
Comfort Inn $77.04 62.9% $48.45
Comfort Suites 87.54 66.0% 57.74
Sleep 69.53 62.8% 43.69
Midscale without Food & Beverage 78.20 63.5% 49.67
Quality 70.45 54.5% 38.37
Clarion 80.39 51.5% 41.38
Midscale with Food & Beverage 72.76 53.7% 39.10
Econo Lodge 54.43 48.1% 26.17
Rodeway 53.63 47.9% 25.68
Economy 54.25 48.0% 26.06
MainStay 69.91 67.8% 47.38
Suburban 39.98 68.1% 27.23
Extended Stay 46.69 68.0% 31.76
Total $72.04 58.0% $41.80
For the Three Months Ended
September 30, 2007
Average Daily
Rate Occupancy RevPAR
Comfort Inn $82.60 73.2% $60.51
Comfort Suites 90.64 72.7% 65.88
Sleep 73.09 70.8% 51.72
Midscale without Food & Beverage 82.93 72.8% 60.35
Quality 76.08 63.7% 48.47
Clarion 85.09 60.0% 51.05
Midscale with Food & Beverage 78.10 62.8% 49.08
Econo Lodge 59.07 56.3% 33.24
Rodeway 58.55 57.3% 33.52
Economy 58.95 56.5% 33.31
MainStay 73.34 75.3% 55.26
Suburban 40.89 70.3% 28.76
Extended Stay 49.27 71.6% 35.26
Total $76.90 66.9% $51.43
For the Quarter Ended
09/30/2007 09/30/2006
System-wide effective royalty rate 4.12% 4.07%
For the Nine Months Ended
September 30, 2006
Average Daily
Rate Occupancy RevPAR
Comfort Inn $73.06 62.9% $45.92
Comfort Suites 83.12 67.4% 55.99
Sleep 66.58 62.3% 41.48
Midscale without Food & Beverage 74.22 63.7% 47.25
Quality 67.27 55.6% 37.40
Clarion 79.18 51.2% 40.56
Midscale with Food & Beverage 70.10 54.5% 38.20
Econo Lodge 53.21 47.7% 25.38
Rodeway 52.32 46.7% 24.44
Economy 53.05 47.5% 25.20
MainStay 67.39 68.2% 45.97
Suburban 38.34 73.9% 28.32
Extended Stay 43.61 72.8% 31.73
Total $68.81 58.5% $40.28
For the Three Months Ended
September 30, 2006
Average Daily
Rate Occupancy RevPAR
Comfort Inn $78.25 72.6% $56.79
Comfort Suites 86.19 73.3% 63.22
Sleep 69.80 69.6% 48.61
Midscale without Food & Beverage 78.67 72.3% 56.88
Quality 71.73 64.7% 46.42
Clarion 82.51 57.1% 47.14
Midscale with Food & Beverage 74.19 62.8% 46.60
Econo Lodge 57.22 56.1% 32.11
Rodeway 57.14 54.9% 31.38
Economy 57.20 55.9% 31.96
MainStay 68.86 77.1% 53.12
Suburban 38.95 75.4% 29.36
Extended Stay 44.89 75.7% 34.00
Total $72.96 66.8% $48.72
For the Nine Months Ended
09/30/2007 09/30/2006
System-wide effective royalty rate 4.13% 4.08%
Change
Average Daily
Rate Occupancy RevPAR
Comfort Inn 5.4% - bps 5.5%
Comfort Suites 5.3% (140)bps 3.1%
Sleep 4.4% 50 bps 5.3%
Midscale without Food & Beverage 5.4% (20)bps 5.1%
Quality 4.7% (110)bps 2.6%
Clarion 1.5% 30 bps 2.0%
Midscale with Food & Beverage 3.8% (80)bps 2.4%
Econo Lodge 2.3% 40 bps 3.1%
Rodeway 2.5% 120 bps 5.1%
Economy 2.3% 50 bps 3.4%
MainStay 3.7% (40)bps 3.1%
Suburban 4.3% (580)bps (3.8%)
Extended Stay 7.1% (480)bps 0.1%
Total 4.7% (50)bps 3.8%
Change
Average Daily
Rate Occupancy RevPAR
Comfort Inn 5.6% 60 bps 6.6%
Comfort Suites 5.2% (60)bps 4.2%
Sleep 4.7% 120 bps 6.4%
Midscale without Food & Beverage 5.4% 50 bps 6.1%
Quality 6.1% (100)bps 4.4%
Clarion 3.1% 290 bps 8.3%
Midscale with Food & Beverage 5.3% - bps 5.3%
Econo Lodge 3.2% 20 bps 3.5%
Rodeway 2.5% 240 bps 6.8%
Economy 3.1% 60 bps 4.2%
MainStay 6.5% (180) bps 4.0%
Suburban 5.0% (510) bps (2.0%)
Extended Stay 9.8% (410) bps 3.7%
Total 5.4% 10 bps 5.6%
EXHIBIT 5
CHOICE HOTELS INTERNATIONAL, INC.
SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA
(UNAUDITED)
September 30, 2007 September 30, 2006
Hotels Rooms Hotels Rooms
Comfort Inn 1,429 111,505 1,411 110,525
Comfort Suites 470 36,688 427 33,573
Sleep 345 25,617 327 24,609
Midscale without Food & Beverage 2,244 173,810 2,165 168,707
Quality 804 77,515 709 69,699
Clarion 166 23,685 160 23,733
Midscale with Food & Beverage 970 101,200 869 93,432
Econo Lodge 824 50,273 815 50,013
Rodeway 275 16,342 217 13,245
Economy 1,099 66,615 1,032 63,258
MainStay 29 2,166 27 2,046
Suburban 52 6,691 64 8,441
Extended Stay 81 8,857 91 10,487
Cambria Suites 2 219 - -
Domestic Franchises 4,396 350,701 4,157 335,884
International Franchises 1,137 99,579 1,171 98,811
Total Franchises 5,533 450,280 5,328 434,695
Variance
Hotels Rooms % %
Comfort Inn 18 980 1.3% 0.9%
Comfort Suites 43 3,115 10.1% 9.3%
Sleep 18 1,008 5.5% 4.1%
Midscale without Food & Beverage 79 5,103 3.6% 3.0%
Quality 95 7,816 13.4% 11.2%
Clarion 6 (48) 3.8% (0.2%)
Midscale with Food & Beverage 101 7,768 11.6% 8.3%
Econo Lodge 9 260 1.1% 0.5%
Rodeway 58 3,097 26.7% 23.4%
Economy 67 3,357 6.5% 5.3%
MainStay 2 120 7.4% 5.9%
Suburban (12) (1,750) (18.8%) (20.7%)
Extended Stay (10) (1,630) (11.0%) (15.5%)
Cambria Suites 2 219 NM NM
Domestic Franchises 239 14,817 5.7% 4.4%
International Franchises (34) 768 (2.9%) 0.8%
Total Franchises 205 15,585 3.8% 3.6%
EXHIBIT 6
CHOICE HOTELS INTERNATIONAL, INC.
SUPPLEMENTAL INFORMATION BY BRAND
DEVELOPMENT RESULTS -- DOMESTIC NEW HOTEL CONTRACTS
(UNAUDITED)
For the Nine Months Ended
September 30, 2007
New
Construction Conversion Total
Comfort Inn 26 32 58
Comfort Suites 78 4 82
Sleep 33 1 34
Midscale without Food & Beverage 137 37 174
Quality 7 96 103
Clarion 5 28 33
Midscale with Food & Beverage 12 124 136
Econo Lodge 3 50 53
Rodeway 2 62 64
Economy 5 112 117
MainStay 10 1 11
Suburban 10 3 13
Extended Stay 20 4 24
Cambria Suites 18 - 18
Total Domestic System 192 277 469
For the Nine Months Ended
September 30, 2006
New
Construction Conversion Total
Comfort Inn 38 43 81
Comfort Suites 55 3 58
Sleep 27 1 28
Midscale without Food & Beverage 120 47 167
Quality 5 100 105
Clarion 1 22 23
Midscale with Food & Beverage 6 122 128
Econo Lodge - 43 43
Rodeway 2 73 75
Economy 2 116 118
MainStay 5 1 6
Suburban 9 5 14
Extended Stay 14 6 20
Cambria Suites 20 - 20
Total Domestic System 162 291 453
% Change
New
Construction Conversion Total
Comfort Inn (32%) (26%) (28%)
Comfort Suites 42% 33% 41%
Sleep 22% 0% 21%
Midscale without Food & Beverage 14% (21%) 4%
Quality 40% (4%) (2%)
Clarion 400% 27% 43%
Midscale with Food & Beverage 100% 2% 6%
Econo Lodge NM 16% 23%
Rodeway 0% (15%) (15%)
Economy 150% (3%) (1%)
MainStay 100% 0% 83%
Suburban 11% (40%) (7%)
Extended Stay 43% (33%) 20%
Cambria Suites (10%) NM (10%)
Total Domestic System 19% (5%) 4%
For the Three Months Ended
September 30, 2007
New
Construction Conversion Total
Comfort Inn 10 12 22
Comfort Suites 38 1 39
Sleep 17 - 17
Midscale without Food & Beverage 65 13 78
Quality 2 33 35
Clarion 1 7 8
Midscale with Food & Beverage 3 40 43
Econo Lodge 1 22 23
Rodeway 2 23 25
Economy 3 45 48
MainStay 6 - 6
Suburban 3 1 4
Extended Stay 9 1 10
Cambria Suites 3 - 3
Total Domestic System 83 99 182
For the Three Months Ended
September 30, 2006
New
Construction Conversion Total
Comfort Inn 14 25 39
Comfort Suites 14 1 15
Sleep 17 1 18
Midscale without Food & Beverage 45 27 72
Quality - 43 43
Clarion - 4 4
Midscale with Food & Beverage - 47 47
Econo Lodge - 20 20
Rodeway 1 25 26
Economy 1 45 46
MainStay 2 - 2
Suburban 3 3 6
Extended Stay 5 3 8
Cambria Suites 5 - 5
Total Domestic System 56 122 178
% Change
New
Construction Conversion Total
Comfort Inn (29%) (52%) (44%)
Comfort Suites 171% 0% 160%
Sleep 0% (100%) (6%)
Midscale without Food & Beverage 44% (52%) 8%
Quality NM (23%) (19%)
Clarion NM 75% 100%
Midscale with Food & Beverage NM (15%) (9%)
Econo Lodge NM 10% 15%
Rodeway 100% (8%) (4%)
Economy 200% 0% 4%
MainStay 200% NM 200%
Suburban 0% (67%) (33%)
Extended Stay 80% (67%) 25%
Cambria Suites (40%) NM (40%)
Total Domestic System 48% (19%) 2%
Exhibit 7
CHOICE HOTELS INTERNATIONAL, INC.
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.
September 30, 2007
Units
New
Conversion Construction Total
Comfort Inn 41 121 162
Comfort Suites 1 258 259
Sleep Inn - 113 113
Midscale without Food & Beverage 42 492 534
Quality 61 12 73
Clarion 23 7 30
Midscale with Food & Beverage 84 19 103
Econo Lodge 45 4 49
Rodeway 52 3 55
Economy 97 7 104
MainStay 1 36 37
Suburban 6 31 37
Extended Stay 7 67 74
Cambria Suites - 57 57
230 642 872
September 30, 2006
Units
New
Conversion Construction Total
Comfort Inn 50 108 158
Comfort Suites 5 197 202
Sleep Inn - 95 95
Midscale without Food & Beverage 55 400 455
Quality 67 11 78
Clarion 14 4 18
Midscale with Food & Beverage 81 15 96
Econo Lodge 32 5 37
Rodeway 56 2 58
Economy 88 7 95
MainStay 1 33 34
Suburban 4 19 23
Extended Stay 5 52 57
Cambria Suites - 33 33
229 507 736
Variance
New
Conversion Construction Total
Units % Units % Units %
Comfort Inn (9) (18%) 13 12% 4 3%
Comfort Suites (4) (80%) 61 31% 57 28%
Sleep Inn - NM 18 19% 18 19%
Midscale without Food & Beverage (13) (24%) 92 23% 79 17%
Quality (6) (9%) 1 9% (5) (6%)
Clarion 9 64% 3 75% 12 67%
Midscale with Food & Beverage 3 4% 4 27% 7 7%
Econo Lodge 13 41% (1) (20%) 12 32%
Rodeway (4) (7%) 1 50% (3) (5%)
Economy 9 10% - 0% 9 9%
MainStay - 0% 3 9% 3 9%
Suburban 2 50% 12 63% 14 61%
Extended Stay 2 40% 15 29% 17 30%
Cambria Suites - NM 24 73% 24 73%
1 0% 135 27% 136 18%
CHOICE HOTELS INTERNATIONAL, INC. EXHIBIT 8
SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION
(UNAUDITED)
CALCULATION OF FRANCHISING REVENUES AND FRANCHISING MARGINS
Three Months Ended Nine Months Ended
(dollar amounts in thousands) September 30, September 30,
2007 2006 2007 2006
Franchising Revenues:
Total Revenues $176,409 $150,996 $450,301 $400,954
Adjustments:
Marketing and reservation
revenues (86,795) (73,001) (230,646) (203,719)
Hotel Operations (1,196) (1,182) (3,485) (3,342)
Franchising Revenues $88,418 $76,813 $216,170 $193,893
Franchising Margins:
Operating Margin:
Total Revenues $176,409 $150,996 $450,301 $400,954
Operating Income $62,359 $54,552 $137,108 $126,739
Operating Margin 35.3% 36.1% 30.4% 31.6%
Franchising Margin:
Franchising Revenues $88,418 $76,813 $216,170 $193,893
Operating Income $62,359 $54,552 $137,108 $126,739
Less: Hotel Operations 329 362 1,083 977
$62,030 $54,190 $136,025 $125,762
Franchising Margins 70.2% 70.5% 62.9% 64.9%
CALCULATION OF ADJUSTED NET INCOME AND
ADJUSTED DILUTED EARNINGS PER SHARE (EPS)
(In thousands, except per share Three Months Ended Nine Months Ended
amounts) September 30, September 30,
2007 2006 2007 2006
Net Income $38,394 $46,357 $83,354 $88,158
Adjustments:
Loss on Debt
Extinguishment Costs - - - 217
Reversal of Provisions for
Income Tax
Contingencies/Unrecognized
Tax Benefits (679) (12,785) (301) (12,581)
Adjusted Net Income $37,715 $33,572 $83,053 $75,794
Weighted average shares
outstanding-diluted 64,602 67,152 66,077 67,009
Diluted Earnings Per Share $0.59 $0.69 $1.26 $1.32
Adjustments:
Loss on Debt
Extinguishment Costs - - - -
Reversal of Provisions for
Income Tax Contingencies/
Unrecognized Tax Benefits (0.01) (0.19) (0.00) (0.19)
Adjusted Diluted Earnings
Per Share (EPS) $0.58 $0.50 $1.26 $1.13
EBITDA Reconciliation
(in millions)
Q3 2007 Q3 2006 Full-Year
Actuals Actuals 2007 Outlook
Operating Income (per GAAP) $62.4 $54.6 $180.4
Depreciation and amortization 2.2 2.3 8.6
Earnings before interest,
taxes, depreciation &
amortization (non-GAAP)* $64.6 $56.9 $189.0
* Nine months ended September 30, 2007 franchising margins, operating
income and EBITDA include approximately $3.7 million of severance
costs related to the previously announced termination of certain
executive officers.
First Call Analyst:
FCMN Contact: david_peikin@choicehotels.com
SOURCE: Choice Hotels International, Inc.
CONTACT: David White, Chief Financial Officer, +1-301-592-5117, or David
Peikin, Senior Director, Corporate Communications, +1-301-592-6361, both of
Choice Hotels International, Inc.
Web site: http://www.choicehotels.com/
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