Posted:29-October-2008
Choice Hotels Reports Third Quarter 2008 Diluted EPS of $0.57, Domestic Unit Growth of 6.0%
Choice Hotels International, Inc., (NYSE: CHH) today reported the following highlights for third quarter 2008: Diluted earnings per share ("EPS") for third quarter 2008 were $0.57, compared to $0.59 for the same period of the prior year.
Adjusted diluted EPS for the nine months ended September 30, 2008 were $1.36, a 5% increase compared to $1.30 in the same period of the prior year. Diluted EPS were $1.30 for the nine months ended September 30, 2008 compared to $1.26 for the same period of 2007. Adjusted diluted EPS for the nine months ended September 30, 2008 excludes a $3.8 million after-tax charge (approximately $0.06 diluted EPS) resulting from the previously announced acceleration of the Company's management succession plan. Adjusted diluted EPS for the nine months ended September 30, 2007 excludes a $2.3 million after-tax charge (approximately $0.04 diluted EPS) resulting from termination benefits for certain executive officers.
Earnings before interest, taxes and depreciation ("EBITDA") were $63.9 million for third quarter 2008, compared to $64.5 million for third quarter 2007. Operating income for third quarter 2008 was $61.9 million compared to $62.4 million for third quarter 2007.
Adjusted earnings before interest, taxes and depreciation ("Adjusted EBITDA") increased 4% to $152.8 million for the nine months ended September 30, 2008, compared to $147.2 million for the same period of 2007. Operating income for the nine months ended September 30, 2008 was $140.5 million compared to $137.1 million for the same period of 2007. Adjusted EBITDA for the nine months ended September 30, 2008 excludes a $6.1 million charge resulting from the acceleration of the Company's management succession plan. Adjusted EBITDA for the nine months ended September 30, 2007 excludes a $3.7 million charge resulting from termination benefits for certain executive officers.
Domestic unit and room growth increased 6.0 percent and 5.4 percent, respectively, since September 30, 2007.
Domestic system-wide revenue per available room (RevPAR) declined 1.6% for third quarter 2008 compared to the same period of the prior year. The decrease was due to a 280 basis point decline in occupancy, which was partially offset by a 2.7% increase in average daily rate.
The effective royalty rate increased 7 basis points to 4.19% for the three months ended September 30, 2008 compared to 4.12% for the same period of the prior year.
Franchising revenues increased 1% and total revenues increased 9% for third quarter 2008 compared to the same period in 2007. Year to date franchising revenues and total revenues increased 6% and 9%, respectively, compared to the same period of 2007.
Executed 160 new domestic hotel franchise contracts during the third quarter of 2008 compared to 182 for third quarter 2007. Overall, year to date, new domestic hotel franchise contracts executed increased 5% to 491 compared to 469 in the same period of the prior year.
The number of domestic hotels under construction, awaiting conversion or approved for development increased 10% from September 30, 2007 to 955 hotels representing 76,269 rooms; the worldwide pipeline increased 13% from September 30, 2007 to 1,074 hotels representing 85,916 rooms.
"The fundamental resiliency of Choice's business model was evident in our third quarter results, as the company grew its franchising revenues and once again demonstrated robust domestic unit and room growth during a period marked by significant industry-wide occupancy declines," said Stephen P. Joyce, president and chief executive officer. "As we continue to face an uncertain economic environment, we are confident that our unrelenting focus on our franchisees' profitability, aided by Choice's strong centralized support systems will position us well to achieve continued long-term profitable growth. We also anticipate benefitting from hotel developers' interest in our portfolio of conversion brands, which are appropriate for the various stages of a hotel asset's long lifecycle. We remain focused on executing our strategy of increasing domestic market share, strengthening our brands, and returning value to our shareholders."
Outlook for 2008
The uncertainty around the current economic environment and credit market conditions and their impact on travel patterns and hotel development activities makes it difficult to predict future results, particularly as it relates to underlying assumptions for RevPAR, new hotel franchise and relicensing sales and interest and investment income and expense.
The company's fourth quarter 2008 diluted EPS is expected to be $0.40. The company expects full year 2008 adjusted diluted EPS of $1.76. Adjusted EBITDA for full-year 2008 are expected to be approximately $197.5 million. These estimates include the following assumptions:
The company expects net domestic unit growth of approximately 5.5% in 2008;
RevPAR is expected to decline approximately 6% for fourth quarter 2008 and decline approximately 1.5% for full-year 2008;
The effective royalty rate is expected to increase 6 basis points for full-year 2008;
All figures assume the share count as of October 27, 2008 and an effective tax rate of 36.25% for fourth quarter 2008 and 37% for full year 2008;
All figures exclude a $6.1 million charge ($3.8 million after-tax and approximately $0.06 diluted EPS) resulting from the previously announced acceleration of the Company's management succession plan.
