Choice Hotels Reports Record Results For First Quarter 2006: Diluted EPS up 44%, Net Income up 47% Over Prior Year
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Choice Hotels Reports Record Results For First Quarter 2006: Diluted EPS up 44%, Net Income up 47% Over Prior Year
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Category: Worldwide -
This is a press release selected by our editorial committee and published online for free on 2006-04-26
Choice Hotels International, Inc., (NYSE: CHH) today reported the following highlights for the first quarter of 2006:
* Diluted earnings per share (EPS) increased 44% to $0.26, compared to
$0.18 for first quarter 2005.
* Net income grew 47% from $12.0 million in first quarter 2005 to $17.7
million in the same period of this year.
* Earnings before interest, taxes, depreciation and amortization
("EBITDA") increased 32% to $32.4 million from $24.6 million in first
quarter 2005.
* Operating income increased 35% to $30.1 million, compared to $22.3
million for the same period in 2005.
* Total revenues increased 20% to $109.4 million compared to the first
quarter of 2005.
* Domestic system-wide revenue per available room (RevPAR) increased 9.4%
compared to the first quarter of 2005.
* Domestic unit growth increased 5.2% compared to the first quarter 2005
(excluding the acquisition of Suburban, domestic unit growth increased
3.6%).
* Year-to-date new domestic hotel franchise contracts were up 17% to 120,
with new construction contracts increasing 41 percent to 48, as
compared to 34 in first quarter 2005, including 10 contracts for the
new Cambria Suites brand, as compared to 13 for the full year 2005.
* Franchising revenues were up 22% for first quarter.
* The domestic hotel pipeline of hotels under construction, awaiting
conversion or approved for development increased more than 60% to 653
hotels, representing 51,157 rooms; an additional 69 hotels,
representing 6,223 rooms, were in the worldwide pipeline at March 31,
2006.
"Choice's franchising business model continues to deliver strong revenue and earnings growth, as evidenced by our track record of outstanding results and total returns to shareholders, which have been in excess of 45% on an annualized basis over the past five years," said Charles A. Ledsinger, Jr., president and chief executive officer. "Choice has shown that it can generate solid, predictable growth in a wide variety of economic conditions and industry cycles, further underscoring the strength of our business model and the predictability of our business. As a result, we are confident that the combination of our sound operating strategies and the strength of the lodging and hospitality industry positions us well for continued top-line and bottom- line growth."
"We also are quite pleased with the significant increase in our new construction projects, particularly our new upscale Cambria Suites brand," continued Ledsinger. "Since we introduced the brand a little over a year ago, we have executed 23 contracts, including 10 in the first quarter of this year."
Outlook for 2006
The company's second quarter 2006 diluted EPS is expected to be $0.36 to $0.39. Full-year 2006 diluted EPS is expected to be $1.46 to $1.49. Earnings before interest, taxes, depreciation and amortization ("EBITDA") is expected to be $175 million to $179 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% to 7.5% for second quarter 2006 and
5.5% to 7% 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 36.5% 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 quarter ended March 31, 2006, the company paid $8.4 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 April 25, 2006. Considering the effect of the 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, April 26, 2006, at 10 a.m. EDT to discuss the company's first quarter 2006 results. The call-in number to listen to the call is 1-800-553-0351. 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 April
26. The call will also be available for replay until May 26, 2006, by calling 1-800-475-6701 (access code 824816).
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 425,000 rooms, in the United States and more than 40 countries and territories. As of March 31, 2006, 653 hotels are under development in the United States, representing 51,157 rooms, and an additional 69 hotels, representing 6,223 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. 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, 2005.
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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