Choice Hotels Results

Choice Hotels Reports Second Quarter Domestic RevPAR Increase of 4.3 Percent

Revenues for the three months ended June 30, 2016 totaled $241.8 million, an increase of 4 percent from the same period of 2015.

Choice Hotels

Choice Hotels International, Inc. (NYSE:  CHH) today reported the following highlights for the second quarter 2016:

  • Net income and diluted earnings per share ("EPS") for the three months ended June 30, 2016, totaled $38.8 million and $0.68 per share, respectively. Adjusted net income and adjusted diluted EPS for the three months ended June 30, 2016, which exclude certain special items as described below, increased 12 percent and 15 percent, respectively, over the prior year period. 
  • Adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA") from hotel franchising activities, excluding special items, for the three months ended June 30, 2016 totaled $75.1 million, an increase of 7 percent over the prior year period. 
  • Revenues for the three months ended June 30, 2016 totaled $241.8 million, an increase of 4 percent from the same period of 2015. 
  • Franchising revenues for the three months ended June 30, 2016 totaled $105.9 million, an increase of 7 percent from the same period of 2015. 
  • Domestic royalty fees for the three months ended June 30, 2016, totaled $81.1 million, an increase of 7 percent from the same period of 2015. 
  • Domestic system-wide revenue per available room ("RevPAR") increased 4.3 percent in the second quarter of 2016, as occupancy and average daily rates increased 80 basis points and 3 percent, respectively from the same period of 2015. 
  • Domestic RevPAR performance for the second quarter of 2016 exceeded total industry results by 80 basis points and also exceeded growth reported by Smith Travel Research for the primary chain scale segments in which the company competes. 
  • Effective domestic royalty rate for the three months ended June 30, 2016 was 4.40 percent, an increase of 12 basis points from the same period of 2015. 
  • Domestic hotel executed franchise agreements totaled 147 for the three months ended June 30, 2016, an increase of 6 percent from the same period of 2015. 
  • Executed 9 new domestic franchise agreements during the three months ended June 30, 2016 for the Cambria hotels & suites brand including projects in Boston, MA, Los Angeles, CA and Seattle, WA.
  • Domestic relicensing and contract renewal transactions totaled 107 for the three months ended June 30, 2016, an increase of 26 percent from the same period of 2015. 
  • The company's domestic pipeline of hotels awaiting conversion, under construction or approved for development as of June 30, 2016 increased 14 percent from June 30, 2015. The domestic pipeline for the company's Cambria brand as of June 30, 2016 totaled 53 hotels, a 112 percent increase from June 30, 2015. 
  • The company purchased 0.4 million shares of common stock under its share repurchase program during the three months ended June 30, 2016 at a total cost of approximately $19.4 million. 

"We are pleased with our results for the second quarter, which were highlighted by a 15 percent increase in adjusted diluted earnings per share," said Stephen P. Joyce, chief executive officer, Choice Hotels. "In addition, we delivered strong RevPAR gains to our domestic franchise system which continue to exceed the growth levels experienced by the overall industry and primary chain scale segments in which we compete. Demand for our brands remains strong and we will continue to invest in programs designed to drive more reservations through our central channels, improve guest loyalty and improve the value of our brands in an effort to drive incremental business to our franchisees."

Special Item

During the three and six months ended June 30, 2016, the company recorded an executive termination benefit charge of approximately $2.2 million. This special item impacted diluted EPS by $0.03 and $0.02 per share for the three and six months ended June 30, 2016, respectively. The company evaluates certain non-GAAP measures that exclude executive termination benefits because those non-GAAP measures allow for period-over-period comparison of on-going core operations before the impact of these charges. These non-GAAP measures, which are reconciled to the comparable GAAP measures in Exhibit 8, include adjusted net income, adjusted diluted EPS, adjusted hotel franchising selling, general and administrative expenses, adjusted EBITDA and adjusted hotel franchising margins.  

Adoption of New Accounting Standard

On April 1, 2016, the company adopted Accounting Standards Update ("ASU") Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting ("ASU No. 2016-09"), which requires that excess tax benefits and deficiencies related to stock compensation be recognized as income tax expense or benefit in the company's income statement.  Adoption of the standard required that the company retrospectively apply the requirement to the beginning of the year of adoption, January 1, 2016.  As a result, the company has reduced is previously reported income tax expense for the first quarter of 2016 by $1.6 million.

Use of Cash Flows

Dividends

During the six months ended June 30, 2016, the company paid cash dividends totaling approximately $23 million. Based on the current quarterly dividend rate of $0.205 per common share, the company expects to pay dividends of approximately $46 million during 2016.

Share Repurchases

The company repurchased 0.5 million shares of common stock under its share repurchase program during the six months ended June 30, 2016, at a total cost of approximately $23 million. The company currently has authorization to purchase up to 1.1 million additional shares under this program.  

Hotel Development & Financing

Pursuant to its program to encourage acceleration of the growth of our upscale select-service Cambria hotels & suites brand, the company advanced approximately $67 million in support of the Cambria brand during the six months ended June 30, 2016. The company also recycled approximately $18 million of investments in support of Cambria resulting in net advances of $49 million for the current year. These advances are primarily in the form of joint venture investments, forgivable key money loans, senior and mezzanine lending and site acquisitions.  At June 30, 2016, the company had approximately $176 million reflected in its consolidated balance sheet pursuant to these financial support activities. With respect to lending and joint venture investments, the company generally expects to recycle these loans and investments within a five year period.

Outlook

The company's consolidated 2016 outlook reflects the following assumptions:

Hotel Franchising 

  • Adjusted EBITDA from franchising activities for full-year 2016 are expected to range between $270 million and $274 million; 
  • Net domestic unit growth for 2016 is expected to be between 2% and 3%; 
  • RevPAR is expected to increase between 3.5% and 4.0% for third quarter and range between 3.5% and 4.0% for full-year 2016; and 
  • The effective royalty rate is expected to increase between 7 and 9 basis points for full-year 2016 as compared to full-year 2015. 

Non-Hotel Franchising Activities

  • Net reductions in full-year 2016 EBITDA relating to our non-hotel franchising operations, which primarily relate to SkyTouch and vacation rental activities are expected to range between approximately $16 million and $19 million. 

Other Items

  • The effective tax rate is expected to be approximately 32.5% and 31.7% for the third quarter and full-year 2016. 
  • Adjusted EBITDA and adjusted EPS estimates exclude executive termination benefits incurred in the second quarter of 2016 as discussed above under Special Item.
  • Diluted EPS estimates are based on the current number of shares outstanding and thus do not factor in any changes that may occur due to new equity grants or any further repurchases of common stock under the company's share repurchase program.

Consolidated Outlook

The company's third quarter 2016 diluted EPS is expected to be at least $0.78. The company expects full-year 2016 adjusted diluted EPS to range between $2.38 and $2.43 and full year 2016 adjusted EBITDA to range between $252 million and $256 million. The adjusted EPS and adjusted consolidated EBITDA estimates assume that we incur net reductions in EBITDA related to non-hotel franchising activities at the midpoint of the range for these investments.

Choice Hotels International, Inc.

 

Exhibit 1

Consolidated Statements of Income

(Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

Variance

Variance

2016

2015

$

%

2016*

2015

$

%

(In thousands, except per share amounts)

REVENUES:

Royalty fees

$              86,195

$              81,183

$     5,012

6%

$            151,054

$            143,614

$       7,440

5%

Initial franchise and relicensing fees

5,706

5,816

(110)

(2%)

10,862

11,533

(671)

(6%)

Procurement services

10,308

8,589

1,719

20%

16,104

13,396

2,708

20%

Marketing and reservation system

133,814

133,122

692

1%

260,175

231,835

28,340

12%

Other

5,728

3,446

2,282

66%

10,674

7,023

3,651

52%

      Total revenues

241,751

232,156

9,595

4%

448,869

407,401

41,468

10%

OPERATING EXPENSES:

Selling, general and administrative

40,039

33,122

6,917

21%

75,158

65,560

9,598

15%

Depreciation and amortization

2,956

2,995

(39)

(1%)

5,721

5,685

36

1%

Marketing and reservation system

133,814

133,122

692

1%

260,175

231,835

28,340

12%

Total operating expenses

176,809

169,239

7,570

4%

341,054

303,080

37,974

13%

Operating income

64,942

62,917

2,025

3%

107,815

104,321

3,494

3%

OTHER INCOME AND EXPENSES, NET:

Interest expense

11,224

11,057

167

2%

22,316

21,236

1,080

5%

Interest income

(827)

(277)

(550)

199%

(1,666)

(623)

(1,043)

167%

Other gains

(321)

(1,173)

852

(73%)

(259)

(1,641)

1,382

(84%)

Equity in net (income) loss of affiliates

(744)

431

(1,175)

(273%)

1,436

1,436

-

0%

Total other income and expenses, net

9,332

10,038

(706)

(7%)

21,827

20,408

1,419

7%

Income before income taxes

55,610

52,879

2,731

5%

85,988

83,913

2,075

2%

Income taxes

16,788

17,066

(278)

(2%)

26,003

26,506

(503)

(2%)

Net income

$              38,822

$              35,813

$     3,009

8%

$              59,985

$              57,407

$       2,578

4%

Basic earnings per share

$                 0.69

$                 0.62

$       0.07

11%

$                 1.06

$                 1.00

$        0.06

6%

Diluted earnings per share

$                 0.68

$                 0.62

$       0.06

10%

$                 1.06

$                 0.99

$        0.07

7%

 

 

* Year to date results for June 30, 2016 reflect the adoption of Accounting Standards Update Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting ("ASU No. 2016-09"), which requires companies to recognize excess tax benefits and deficiencies as income tax expense or benefit in the income statement.  Adoption of the standard required that the company retrospectively apply the requirement to the beginning of the year of adoption, January 1, 2016.  As a result, the company has reduced its previously reported income tax expense for the first quarter of 2016 by $1.6 million.

 

 

 

Choice Hotels International, Inc.

 

Exhibit 2

Consolidated Balance Sheets

(In thousands, except per share amounts)

 June 30, 

 December 31, 

2016

2015

(Unaudited)

ASSETS

Cash and cash equivalents

$           207,888

$          193,441

Accounts receivable, net

126,689

89,352

Other current assets

43,466

28,160

Total current assets

378,043

310,953

Fixed assets and intangibles, net

178,089

179,433

Notes receivable, net of allowances

92,195

82,572

Investments in unconsolidated entities

78,801

67,037

Investments, employee benefit plans, at fair value

16,516

17,674

Other assets

99,746

59,341

Total assets

$           843,390

$          717,010

LIABILITIES AND SHAREHOLDERS' DEFICIT

Accounts payable 

$              74,925

$            64,431

Accrued expenses and other current liabilities

69,776

70,807

Deferred revenue

113,763

71,587

Current portion of long-term debt

833

1,191

Total current liabilities

259,297

208,016

Long-term debt

901,352

812,945

Deferred compensation & retirement plan obligations  

20,873

22,859

Other liabilities

35,696

69,089

Total liabilities

1,217,218

1,112,909

Total shareholders' deficit

(373,828)

(395,899)

Total liabilities and shareholders' deficit

$           843,390

$          717,010

 

 

 

Choice Hotels International, Inc.

 

Exhibit 3

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

Six Months Ended June 30,

2016

2015*

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$       59,985

$       57,407

Adjustments to reconcile net income to net cash provided 

 by operating activities:

  Depreciation and amortization  

5,721

5,685

  (Gain) loss on sale of assets

7

(1,595)

  Provision for bad debts, net

962

1,197

  Non-cash stock compensation and other charges

7,966

5,399

  Excess tax benefits from stock-based compensation

1,404

4,613

  Non-cash interest and other (income) loss

958

1,340

  Deferred income taxes

4,030

(2,095)

  Equity (earnings) losses from unconsolidated joint ventures, net of distributions received

2,193

2,781

Changes in assets and liabilities:

  Receivables

(39,058)

(28,856)

  Advances to/from marketing and reservation activities, net

(42,671)

3,724

  Forgivable notes receivable, net

(13,174)

(19,186)

  Accounts payable

10,567

16,990

  Accrued expenses and other current liabilities

(8,842)

(6,969)

  Income taxes payable/receivable

9,059

2,450

  Deferred revenue

42,164

4,041

  Other assets

(10,834)

(5,152)

  Other liabilities

(2,576)

769

 NET CASH PROVIDED BY OPERATING ACTIVITIES 

27,861

42,543

CASH FLOWS FROM INVESTING ACTIVITIES:

Investment in property and equipment

(10,912)

(14,554)

Proceeds from sales of assets

1,700

6,283

Acquisitions of real estate

(25,389)

-

Contributions to equity method investments

(19,688)

(2,446)

Distributions from equity method investments

3,619

270

Purchases of investments, employee benefit plans

(1,140)

(1,736)

Proceeds from sales of investments, employee benefit plans

1,136

1,087

Issuance of mezzanine and other notes receivable

(13,048)

(1,500)

Collections of mezzanine and other notes receivable

10,158

3,567

Other items, net

(311)

(261)

 NET CASH USED BY INVESTING ACTIVITIES 

(53,875)

(9,290)

CASH FLOWS FROM FINANCING ACTIVITIES:

Net borrowings pursuant to revolving credit facilities

87,950

13,000

Principal payments on long-term debt

(623)

(6,169)

Purchases of treasury stock

(28,278)

(6,244)

Dividends paid

(23,193)

(22,940)

Proceeds from exercise of stock options

4,234

5,696

 NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES

40,090

(16,657)

Net change in cash and cash equivalents

14,076

16,596

Effect of foreign exchange rate changes on cash and cash equivalents

371

(825)

Cash and cash equivalents at beginning of period

193,441

214,879

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$     207,888

$     230,650

 

 

* Year to date results for June 30, 2015 reflect the adoption of ASU No. 2016-09, which requires companies to recognize excess tax benefits related to the exercise of share based awards as operating activities in the statement of cash flows.  The company has elected to apply the ASU retrospectively and as a result excess tax benefits totaling $4.6 million for the six months ended June 30, 2015 have been reclassified from cash flows from financing activities to cash flows from operating activities.

 

 

 

 

CHOICE HOTELS INTERNATIONAL, INC. 

Exhibit 4

SUPPLEMENTAL OPERATING INFORMATION 

DOMESTIC HOTEL SYSTEM

(UNAUDITED)

For the Six Months Ended June 30, 2016

For the Six Months Ended June 30, 2015

Change

Average Daily

Average Daily

Average Daily

Rate

Occupancy

RevPAR

Rate

Occupancy

RevPAR

Rate

Occupancy

RevPAR

Comfort Inn

$            90.11

64.0%

$  57.67

$          87.35

63.5%

$  55.48

3.2%

50

bps

3.9%

Comfort Suites

95.51

68.9%

65.80

93.06

68.2%

63.43

2.6%

70

bps

3.7%

Sleep

81.13

64.2%

52.08

79.60

64.0%

50.93

1.9%

20

bps

2.3%

Quality

75.79

57.9%

43.88

73.16

57.5%

42.05

3.6%

40

bps

4.4%

Clarion

80.52

56.3%

45.35

78.25

56.3%

44.07

2.9%

-

bps

2.9%

Econo Lodge

59.24

52.4%

31.03

57.47

52.4%

30.13

3.1%

-

bps

3.0%

Rodeway

60.72

54.6%

33.15

57.22

55.8%

31.90

6.1%

(120)

bps

3.9%

MainStay

75.80

63.4%

48.02

76.24

68.5%

52.23

(0.6%)

(510)

bps

(8.1%)

Suburban

49.67

74.9%

37.21

47.25

76.5%

36.15

5.1%

(160)

bps

2.9%

Ascend Hotel Collection

125.21

56.9%

71.28

122.78

59.8%

73.45

2.0%

(290)

bps

(3.0%)

Total 

$            80.26

60.3%

$  48.43

$          78.08

60.4%

$  47.15

2.8%

(10)

bps

2.7%

For the Three Months Ended June 30, 2016

For the Three Months Ended June 30, 2015

Change

Average Daily

Average Daily

Average Daily

Rate

Occupancy

RevPAR

Rate

Occupancy

RevPAR

Rate

Occupancy

RevPAR

Comfort Inn

$            93.87

70.1%

$  65.84

$          90.92

69.5%

$  63.16

3.2%

60

bps

4.2%

Comfort Suites

98.19

73.6%

72.24

95.59

71.8%

68.64

2.7%

180

bps

5.2%

Sleep

83.93

69.5%

58.35

82.23

68.3%

56.11

2.1%

120

bps

4.0%

Quality

78.61

63.3%

49.79

75.52

62.0%

46.83

4.1%

130

bps

6.3%

Clarion

84.14

62.3%

52.46

80.54

60.8%

48.95

4.5%

150

bps

7.2%

Econo Lodge

61.84

57.3%

35.46

59.86

56.6%

33.87

3.3%

70

bps

4.7%

Rodeway

63.13

57.9%

36.56

59.92

58.4%

35.01

5.4%

(50)

bps

4.4%

MainStay

78.07

68.4%

53.40

78.53

70.4%

55.32

(0.6%)

(200)

bps

(3.5%)

Suburban

51.07

76.9%

39.27

47.96

78.9%

37.86

6.5%

(200)

bps

3.7%

Ascend Hotel Collection

133.28

60.0%

79.94

129.04

59.2%

76.41

3.3%

80

bps

4.6%

Total 

$            83.35

65.5%

$  54.61

$          80.89

64.7%

$  52.36

3.0%

80

bps

4.3%

For the Quarter Ended

For the Six Months Ended

6/30/2016

6/30/2015

6/30/2016

6/30/2015

System-wide effective royalty rate

4.40%

4.28%

4.39%

4.29%

 

 

 

 

CHOICE HOTELS INTERNATIONAL, INC.

 

Exhibit 5

SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA

(UNAUDITED)

June 30, 2016

June 30, 2015

Variance

Hotels

Rooms

Hotels

Rooms

Hotels

Rooms

%

%

Comfort Inn

1,138

88,085

1,215

93,904

(77)

(5,819)

(6.3%)

(6.2%)

Comfort Suites

564

43,522

575

44,447

(11)

(925)

(1.9%)

(2.1%)

Sleep

380

27,188

377

27,207

3

(19)

0.8%

(0.1%)

Quality

1,395

110,952

1,311

105,761

84

5,191

6.4%

4.9%

Clarion

168

23,033

175

24,587

(7)

(1,554)

(4.0%)

(6.3%)

Econo Lodge

847

52,385

853

52,835

(6)

(450)

(0.7%)

(0.9%)

Rodeway

528

29,771

481

26,544

47

3,227

9.8%

12.2%

MainStay

54

4,020

47

3,629

7

391

14.9%

10.8%

Suburban

58

6,471

62

6,959

(4)

(488)

(6.5%)

(7.0%)

Ascend Hotel Collection

116

9,650

110

9,408

6

242

5.5%

2.6%

Cambria hotel & suites

25

3,113

24

2,917

1

196

4.2%

6.7%

Domestic Franchises

5,273

398,190

5,230

398,198

43

(8)

0.8%

(0.0%)

International Franchises

1,156

111,366

1,146

106,763

10

4,603

0.9%

4.3%

Total Franchises

6,429

509,556

6,376

504,961

53

4,595

0.8%

0.9%

 

 

 

 

Exhibit 6

CHOICE HOTELS INTERNATIONAL, INC.

SUPPLEMENTAL INFORMATION BY BRAND

DEVELOPMENT RESULTS -- DOMESTIC NEW HOTEL CONTRACTS

(UNAUDITED)

For the Six Months Ended June 30, 2016

For the Six Months Ended June 30, 2015

% Change

New

New

New

Construction

Conversion

Total

Construction

Conversion

Total

Construction

Conversion

Total

Comfort Inn

12

14

26

13

20

33

(8%)

(30%)

(21%)

Comfort Suites

8

1

9

13

2

15

(38%)

(50%)

(40%)

Sleep

14

-

14

9

-

9

56%

NM

56%

Quality

-

73

73

3

75

78

(100%)

(3%)

(6%)

Clarion

3

9

12

-

6

6

NM

50%

100%

Econo Lodge

1

29

30

-

28

28

NM

4%

7%

Rodeway

-

27

27

-

35

35

NM

(23%)

(23%)

MainStay

6

-

6

6

-

6

0%

NM

0%

Suburban

-

1

1

1

3

4

(100%)

(67%)

(75%)

Ascend Hotel Collection

2

6

8

1

16

17

100%

(63%)

(53%)

Cambria hotel & suites

11

-

11

7

-

7

57%

NM

57%

Total Domestic System

57

160

217

53

185

238

8%

(14%)

(9%)

For the Three Months Ended June 30, 2016

For the Three Months Ended June 30, 2015

% Change

New

New

New

Construction

Conversion

Total

Construction

Conversion

Total

Construction

Conversion

Total

Comfort Inn

6

10

16

9

13

22

(33%)

(23%)

(27%)

Comfort Suites

6

1

7

8

-

8

(25%)

NM

(13%)

Sleep

12

-

12

4

-

4

200%

NM

200%

Quality

-

50

50

1

46

47

(100%)

9%

6%

Clarion

2

6

8

-

3

3

NM

100%

167%

Econo Lodge

1

15

16

-

19

19

NM

(21%)

(16%)

Rodeway

-

17

17

-

21

21

NM

(19%)

(19%)

MainStay

5

-

5

2

-

2

150%

NM

150%

Suburban

-

1

1

1

1

2

(100%)

0%

(50%)

Ascend Hotel Collection

1

5

6

-

6

6

NM

(17%)

0%

Cambria hotel & suites

9

-

9

5

-

5

80%

NM

80%

Total Domestic System

42

105

147

30

109

139

40%

(4%)

6%

 

 

 

Exhibit 7

CHOICE HOTELS INTERNATIONAL, INC.

DOMESTIC 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.

Variance

June 30, 2016

June 30, 2015

Units

Units

Conversion

New Construction

Total

Conversion

New Construction

Total

Conversion

New Construction

Total

Units

%

Units

%

Units

%

Comfort Inn

34

80

114

38

64

102

(4)

(11%)

16

25%

12

12%

Comfort Suites

4

95

99

3

76

79

1

33%

19

25%

20

25%

Sleep Inn

-

83

83

1

65

66

(1)

(100%)

18

28%

17

26%

Quality

47

5

52

54

5

59

(7)

(13%)

-

0%

(7)

(12%)

Clarion

9

5

14

11

2

13

(2)

(18%)

3

150%

1

8%

Econo Lodge

26

3

29

24

4

28

2

8%

(1)

(25%)

1

4%

Rodeway

29

2

31

34

3

37

(5)

(15%)

(1)

(33%)

(6)

(16%)

MainStay

-

57

57

1

47

48

(1)

(100%)

10

21%

9

19%

Suburban

5

6

11

6

12

18

(1)

(17%)

(6)

(50%)

(7)

(39%)

Ascend Hotel Collection

29

19

48

25

18

43

4

16%

1

6%

5

12%

Cambria hotel & suites

5

48

53

-

25

25

5

NM

23

92%

28

112%

188

403

591

197

321

518

(9)

(5%)

82

26%

73

14%

 

 

 

CHOICE HOTELS INTERNATIONAL, INC.

Exhibit 8

SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION

(UNAUDITED)

HOTEL FRANCHISING REVENUES AND ADJUSTED HOTEL FRANCHISING MARGINS

(dollar amounts in thousands)

Three Months Ended June 30, 

Six Months Ended June 30, 

2016

2015

2016

2015

Hotel Franchising Revenues:

Total Revenues

$         241,751

$         232,156

$     448,869

$     407,401

Adjustments:

     Marketing and reservation system revenues

(133,814)

(133,122)

(260,175)

(231,835)

     Non-hotel franchising activities

(2,068)

(411)

(4,097)

(1,014)

Hotel Franchising Revenues

$         105,869

$           98,623

$     184,597

$     174,552

Adjusted Hotel Franchising Margins:

Operating Margin:

Total Revenues

$         241,751

$         232,156

$     448,869

$     407,401

Operating Income

$           64,942

$           62,917

$     107,815

$     104,321

     Operating Margin

26.9%

27.1%

24.0%

25.6%

Adjusted Hotel Franchising Margin:

Hotel Franchising Revenues

$         105,869

$           98,623

$     184,597

$     174,552

Operating Income

$           64,942

$           62,917

$     107,815

$     104,321

Executive termination benefits

2,206

-

2,206

-

Non-hotel franchising activities operating loss

6,084

4,699

11,740

10,000

$           73,232

$           67,616

$     121,761

$     114,321

     Adjusted Hotel Franchising Margins

69.2%

68.6%

66.0%

65.5%

ADJUSTED HOTEL FRANCHISING SELLING, GENERAL AND ADMINISTRATION EXPENSES

(dollar amounts in thousands)

Three Months Ended June 30, 

Six Months Ended June 30, 

2016

2015

2016

2015

Total Selling, General and Administrative Expenses

$           40,039

$           33,122

$       75,158

$       65,560

Executive termination benefits

(2,206)

-

(2,206)

-

Non-hotel franchising activities

(7,045)

(4,638)

(13,715)

(10,133)

Adjusted Hotel Franchising Selling, General and Administration Expenses

$           30,788

$           28,484

$       59,237

$       55,427

ADJUSTED EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION ("EBITDA")

(dollar amounts in thousands)

Three Months Ended June 30, 

Six Months Ended June 30, 

2016

2015

2016

2015

Net income

$           38,822

$           35,813

$       59,985

$       57,407

Income taxes

16,788

17,066

26,003

26,506

Interest expense

11,224

11,057

22,316

21,236

Interest income

(827)

(277)

(1,666)

(623)

Other gains

(321)

(1,173)

(259)

(1,641)

Equity in net (income) loss of affiliates

(744)

431

1,436

1,436

Depreciation and amortization

2,956

2,995

5,721

5,685

Executive termination benefits

2,206

-

2,206

-

Adjusted EBITDA

$           70,104

$           65,912

$     115,742

$     110,006

Hotel franchising 

$           75,082

$           70,138

$     125,361

$     119,124

Non-hotel franchising activities

(4,978)

(4,226)

(9,619)

(9,118)

$           70,104

$           65,912

$     115,742

$     110,006

ADJUSTED NET INCOME AND ADJUSTED DILUTED EARNINGS PER SHARE (EPS)

(dollar amounts in thousands, except per share amounts)

Three Months Ended June 30, 

Six Months Ended June 30, 

2016

2015

2016

2015

Net Income

$           38,822

$           35,813

$       59,985

$       57,407

Adjustments:

Executive termination benefits

1,394

-

1,394

-

Adjusted Net Income

$           40,216

$           35,813

$       61,379

$       57,407

Diluted Earnings Per Share

$               0.68

$               0.62

$           1.06

$          0.99

Adjustments:

Executive termination benefits

0.03

-

0.02

-

Adjusted Diluted Earnings Per Share (EPS)

$               0.71

$               0.62

$           1.08

$          0.99

ADJUSTED EBITDA AND DILUTED EPS FULL YEAR FORECAST

(dollar amounts in thousands)

Range

Estimated Adjusted EBITDA

Fiscal Year 2016

Net income

$         133,500

$         136,300

Income taxes

62,000

63,200

Interest expense

45,600

45,600

Interest income

(3,200)

(3,200)

Other gains

(600)

(600)

Equity in net loss of affiliates

500

500

Depreciation and amortization

12,000

12,000

Executive termination benefits

2,200

2,200

Adjusted EBITDA

$         252,000

$         256,000

Hotel franchising 

$         269,500

$         273,500

Non-hotel franchising activities

(17,500)

(17,500)

$         252,000

$         256,000

Range

Estimated Adjusted Diluted EPS

Fiscal Year 2016

Diluted EPS

$               2.36

$               2.41

Adjustments:

Executive termination benefits

0.02

0.02

Adjusted Diluted EPS

$               2.38

$               2.43

 



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