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Choice Hotels Reports First Quarter 2008 Diluted EPS Of $0.30, Domestic Unit Growth Of 6%

Choice Hotels Reports First Quarter 2008 Diluted EPS Of $0.30, Domestic Unit Growth Of 6%

Category: Worldwide - Industry economy - Figures / Studies
This is a press release selected by our editorial committee and published online for free on 2008-04-29

Choice Hotels International, Inc., (NYSE: CHH) today reported the following highlights for first quarter 2008:

* Diluted earnings per share ("EPS") for first quarter 2008 increased 25% to $0.30 compared to $0.24 in the same period of the prior year. First quarter 2007 results included termination benefits expense totaling $3.7 million (approximately $0.03 diluted EPS) resulting from the separation from service of certain executive officers during that period.
* Domestic unit growth increased 6.0 percent in first quarter 2008.
* Operating income increased 24% to $34.1 million for first quarter 2008 compared to $27.4 million for first quarter 2007. Earnings before interest, taxes and depreciation ("EBITDA") increased 22% to $36.1 million for first quarter 2008, compared to $29.5 million for first quarter 2007. Operating income and EBITDA for first quarter 2007 both include the termination benefits expense described above.
* Franchising revenues and total revenues both increased 12% for first quarter 2008 compared to the same period in 2007.
* Franchising margins for first quarter 2008 were 56.9% compared to 51.0% for the same period in 2007. First quarter 2007 franchising margins reflect the impact of the $3.7 million of termination benefits described above.
* Domestic system-wide revenue per available room (RevPAR) increased 2.7% for first quarter 2008.
* New domestic hotel franchise contracts executed in first quarter 2008 were 133, up 20% over the prior year.
* The number of domestic hotels under construction, awaiting conversion or approved for development increased 18% to 986 hotels representing 79,276 rooms; the worldwide pipeline increased 20% to 1,082 hotels representing 87,597 rooms.

"During our first quarter, the fundamental strength of our business model was evident as robust unit growth drove increased revenues and profitability," said Charles A. Ledsinger, Jr., vice chairman and chief executive officer. "We were also very fortunate to have brought into the organization three experienced executives in Steve Joyce, president and chief operating officer, Chris Malone, chief marketing officer, and Sandy Michel, general counsel, all of whom have significant franchising backgrounds. Their talents, combined with the strength of our current leadership team, position Choice for continued growth and success."

Outlook for 2008

The company's second quarter 2008 diluted EPS is expected to be $0.47. The company expects full year 2008 diluted EPS of $1.87. Earnings before interest, taxes, depreciation and amortization ("EBITDA") for full-year 2008 are expected to be approximately $205.5 million. These estimates include the following assumptions.

* The company expects net domestic unit growth of approximately 5% in 2008;
* RevPAR is expected to increase approximately 1.5% for second quarter 2008 and approximately 2% for full-year 2008;
* The effective royalty rate is expected to increase 4 basis points for full-year 2008;
* All figures assume the existing share count and an effective tax rate of 37% for second quarter 2008 and 36.7% for full year 2008;

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.

For the three months ended March 31, 2008, the company paid $10.5 million of cash dividends to shareholders. The annual dividend rate per common share is $0.68.

The company has authorization to purchase up to an additional 3.2 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 share repurchases has been fixed. Since Choice announced its stock repurchase program on June 25, 1998, the company has repurchased 38.6 million shares of its common stock for a total cost of $895.9 million through April 25, 2008. Considering the effect of a two-for-one stock split in October 2005, the company has repurchased 71.5 million shares under the share repurchase program at an average price of $12.52 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 Tuesday April 29, 2008 at 9:30 a.m. EDT to discuss the company's first quarter results. The call-in number to listen to the call is 1-800-230-1951. International callers should dial 612- 332-7514. The conference call also will be Web cast simultaneously via the company's Web site, 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 beginning at 11:30 a.m. EDT on April 29 and will be available through May 29, 2008 by calling 1-800-475-6701 and entering access code 918862. The international dial-in for the replay is 320-365-3844, access code 918862. In addition, the call will be archived and available on via the Investor Info link until May 29, 2008.

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