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Choice Hotels International Reports A 17% Increase In Third Quarter Diluted Earnings Per Share

ROCKVILLE, Md., Oct. 27, 2016 /PRNewswire/ -- Choice Hotels International, Inc. (CHH) today reported the following highlights for the third quarter 2016:

  • Diluted earnings per share ("EPS") for the three months ended September 30, 2016 totaled $0.84 per share, an increase of 17 percent from the same period of 2015.
  • Net income for the three months ended September 30, 2016 totaled $47.6 million, an increase of 15 percent from the same period of 2015. 
  • Revenues for the three months ended September 30, 2016 totaled $267.6 million, an increase of 11 percent from the same period of 2015.
  • Franchising revenues for the three months ended September 30, 2016 totaled $113.1 million, an increase of 7 percent from the same period of 2015 and domestic system-wide gross room revenues for the three months ended September 30, 2016 totaled approximately $2.1 billion.
  • Domestic royalty fees for the three months ended September 30, 2016 totaled $90.7 million, an increase of 7 percent from the same period of 2015.
  • Domestic system-wide revenue per available room ("RevPAR") increased 4.5 percent in the third quarter of 2016, as occupancy and average daily rates increased 70 basis points and 3.4 percent, respectively, from the same period of 2015.
  • Domestic RevPAR performance for the third quarter of 2016 exceeded total industry results by 120 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 September 30, 2016 was 4.39 percent, an increase of 12 basis points from the same period of 2015.
  • Domestic hotel executed franchise agreements totaled 161 for the three months ended September 30, 2016, an increase of 25 percent from the same period of 2015, including a 13 percent and 30 percent increase in new construction and conversion agreements, respectively.
  • Comfort family of brands recorded its 24th consecutive month of RevPAR index gains compared to its competition and over the last two years the company has executed 162 new construction franchise agreements which is more than double the number of agreements executed in the prior two year period.
  • The company's domestic pipeline of hotels awaiting conversion, under construction or approved for development as of September 30, 2016 increased 20 percent from September 30, 2015. The domestic new construction pipeline for the company's Comfort brand as of September 30, 2016 totaled 180 hotels, a 30 percent increase from September 30, 2015.
  • Adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA") from hotel franchising activities for the three months ended September 30, 2016 totaled $85.5 million, an increase of 5 percent over the prior year period.

 

Choice Hotels International Logo chain (PRNewsFoto/Choice Hotels International, Inc)

"We are pleased with our results for the third quarter, which were highlighted by a 17 percent increase in diluted earnings per share and a 4.5% increase in our domestic RevPAR which continues to outpace the RevPAR performance of the industry," said Stephen P. Joyce, chief executive officer, Choice Hotels. "In addition, our efforts to rejuvenate the Comfort brand are working, including the implementation of higher standards for hotels joining the brand, requiring meaningful property improvement plans at contract windows and targeting underperforming Comforts for termination and replacement with new construction product.  These efforts have resulted in 24 consecutive months of RevPAR index gains and are helping to fuel the growth of our new construction development pipeline."

Special Item

During the nine months ended September 30, 2016, the company recorded an executive termination benefit charge of approximately $2.2 million. This special item impacted diluted EPS by $0.02 per share for the nine months ended September 30, 2016. The company uses 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. 

Use of Cash Flows

Dividends

During the nine months ended September 30, 2016, the company paid cash dividends totaling approximately $35 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 0.6 million shares of common stock under its share repurchase program during the nine months ended September 30, 2016, at a total cost of approximately $29 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 $78 million in support of the Cambria brand during the nine months ended September 30, 2016. The company also recycled approximately $25 million of investments in support of Cambria resulting in net advances of $53 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.  On September 30, 2016, the company had approximately $181 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 $272 million and $274 million;
  • Net domestic unit growth for 2016 is expected to be approximately 2%;
  • RevPAR is expected to increase between 4% and 5% for the fourth quarter and range between 3.5% and 4.25% for full-year 2016; and
  • The effective royalty rate is expected to increase between 10 and 11 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 $18 million and $19 million.

Other Items

  • The effective tax rate is expected to be approximately 33% for the fourth quarter and approximately 31.5% for full-year 2016.
  • Adjusted EBITDA and adjusted EPS estimates exclude executive termination benefits incurred in the nine months ended September 30, 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 fourth quarter 2016 diluted EPS is expected to be at least $0.51. The company expects full-year 2016 adjusted diluted EPS to range between $2.43 and $2.46 and full year 2016 adjusted EBITDA to range between $253 million and $256 million.

Conference Call

Choice will conduct a conference call on Thursday, October 27, 2016 at 10:00 a.m. EDT to discuss the company's third quarter 2016 results. The dial-in number to listen to the call domestically is 1-855-638-5678 and the number for international participants is 1-920-663-6286.  The conference call also will be webcast simultaneously via the company's website, www.choicehotels.com.  Interested investors and other parties wishing to access the call via the webcast should go to the website and click on the Investor Info link.  The Investor page will feature a conference call microphone icon to access the call.

The call will be recorded and available for replay beginning at 1:00 p.m. EDT on Thursday, October 27, 2016 by calling 1-855-859-2056 (domestic) or 1-404-537-3406 (international) and entering access code 96677474. In addition, the call will be archived and available on choicehotels.com via the Investor Info link.

About Choice Hotels

Choice Hotels International, Inc. (CHH) is one of the world's largest lodging companies. With more than 6,400 hotels franchised in more than 40 countries and territories, Choice Hotels International® represents more than 500,000 rooms around the globe.  As of September 30, 2016, 745 hotels were in our development pipeline. Our company's Ascend Hotel Collection®, Cambria® hotels & suites, Comfort Inn®, Comfort Suites®, Sleep Inn®, Quality®, Clarion®, MainStay Suites®, Suburban Extended Stay Hotel®, Econo Lodge®, Rodeway Inn®, and Vacation Rentals by Choice HotelsTM brands provide a spectrum of lodging choices to meet guests' needs. With more than 28 million members and counting, our Choice Privileges® rewards program enhances every trip a guest takes, with benefits ranging from instant, every day rewards to exceptional experiences, starting right when they join.  All hotels and vacation rentals are independently owned and operated. Visit us at www.choicehotels.com for more information.

SkyTouch Technology® is a business division of Choice Hotels that develops and markets cloud-based technology products, including inventory management, pricing and connectivity to third party channels, to hoteliers not under franchise agreements with the company.

Forward-Looking Statements

Certain matters discussed in this press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Generally, our use of words such as "expect," "estimate," "believe," "anticipate," "should,"  "will," "forecast," "plan,"  "project," "assume" or similar words of futurity identify such forward-looking statements.  These 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 of the company's revenue, earnings and other financial and operational measures, company debt levels, ability to repay outstanding indebtedness, payment of dividends, repurchases of common stock and future operations, among other matters.   We caution you not to place undue reliance on any such forward-looking statements.  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; foreign currency fluctuations; 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 marketing and reservations systems and other operating systems; our ability to grow our franchise system; exposure to risks related to development activities; fluctuations in the supply and demand for hotels rooms; our ability to realize anticipated benefits from acquired businesses; the level of acceptance of alternative growth strategies we may implement; operating risks associated with our international operations; the outcome of litigation; and our ability to manage our indebtedness.  These and other risk factors are discussed in detail in the company's filings with the Securities and Exchange Commission including our annual reports on Form 10-K and our quarterly reports filed on Form 10-Q.  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 Presented in this Press Release

Adjusted EBITDA, franchising revenues, adjusted hotel franchising SG&A, Adjusted EBITDA from hotel franchising activities and adjusted hotel franchising margins are non-GAAP financial measurements.  These measures should not be considered as an alternative to any measure of performance or liquidity as promulgated under or authorized by generally accepted accounting principles in the United States ("GAAP"), such as net income, total revenues and operating margins.  The company's calculation of these measurements may be different from the calculations used by other companies and therefore comparability may be limited.  The company has included an exhibit accompanying this release that reconciles these items to the most comparable GAAP financial measures. We discuss management's reasons for reporting these non-GAAP measures below.

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization: Adjusted EBITDA reflects net income excluding the impact of interest expense, interest income, provision for income taxes, depreciation and amortization, other (gains) and losses, equity in net income of unconsolidated affiliates and executive termination benefits. We consider adjusted EBITDA to be an indicator of operating performance because we use it to measure our ability to service debt, fund capital expenditures, and expand our business. We also use adjusted EBITDA, as do analysts, lenders, investors and others, to evaluate companies because it excludes certain items that can vary widely across different industries or among companies within the same industry. For example, interest expense can be dependent on a company's capital structure, debt levels and credit ratings. Accordingly, the impact of interest expense on earnings can vary significantly among companies. The tax positions of companies can also vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the jurisdictions in which they operate. As a result, effective tax rates and provision for income taxes can vary considerably among companies. Adjusted EBITDA also excludes depreciation and amortization because companies utilize productive assets of different ages and use different methods of both acquiring and depreciating productive assets. These differences can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies.

Franchising Revenues, Adjusted Hotel Franchising EBITDA, Adjusted Hotel Franchising SG&A and Margins:  The company reports franchising revenues, adjusted hotel franchising EBITDA, adjusted franchising hotel SG&A and margins which exclude marketing and reservation revenues; the SkyTouch Technology division; recently acquired operations that provide Software as a Service ("SaaS") technology solutions to vacation rental management companies; revenue generated from the ownership of an office building that is leased to a third-party and executive termination benefits.  These non-GAAP measures are a commonly used measure of performance in our industry and facilitate comparisons between the company and its competitors. Marketing and reservation activities are excluded since the company is required by its franchise agreements to use the fees collected for marketing and reservation activities; as such, no income or loss to the company is generated. Cumulative marketing and reservation system fees not expended are recorded as a liability in the company's financial statements and are carried over to the next year and expended in accordance with the franchise agreements. Cumulative marketing and reservation expenditures in excess of fees collected for marketing and reservation activities are deferred and recorded as an asset in the company's financial statements and recovered in future periods.  SkyTouch Technology is a division of the company that develops and markets cloud-based technology products, including inventory management, pricing and connectivity to third party channels, to hoteliers not under franchise agreements with the company. The operations for SkyTouch Technology and our vacation rental technology solutions provider are excluded since they do not reflect the company's core franchising business but are adjacent, complementary lines of business.

© 2016 Choice Hotels International, Inc.  All rights reserved.

 

Choice Hotels International, Inc.












Exhibit 1

Consolidated Statements of Income













(Unaudited)

































































Three Months Ended September 30,


Nine Months Ended September 30,







Variance






Variance



2016


2015


$


%


2016


2015


$


%

(In thousands, except per share amounts)


































REVENUES:


































Royalty fees


$              96,114


$              89,929


$     6,185


7%


$            247,168


$            233,543


$     13,625


6%

Initial franchise and relicensing fees


6,284


6,170


114


2%


17,146


17,703


(557)


(3%)

Procurement services


7,615


6,271


1,344


21%


23,719


19,667


4,052


21%

Marketing and reservation system


152,018


134,463


17,555


13%


412,193


366,298


45,895


13%

Other


5,546


4,693


853


18%


16,220


11,716


4,504


38%

      Total revenues


267,577


241,526


26,051


11%


716,446


648,927


67,519


10%


















OPERATING EXPENSES:


































Selling, general and administrative


34,357


30,152


4,205


14%


109,515


95,712


13,803


14%

Depreciation and amortization


2,986


3,108


(122)


(4%)


8,707


8,793


(86)


(1%)

Marketing and reservation system


152,018


134,463


17,555


13%


412,193


366,298


45,895


13%

Total operating expenses


189,361


167,723


21,638


13%


530,415


470,803


59,612


13%


















Gain on sale of assets, net


402


-


402


NM


402


-


402


NM


















Operating income


78,618


73,803


4,815


7%


186,433


178,124


8,309


5%


















OTHER INCOME AND EXPENSES, NET:

















Interest expense


11,150


10,821


329


3%


33,466


32,057


1,409


4%

Interest income


(836)


(359)


(477)


133%


(2,502)


(982)


(1,520)


155%

Other (gains) losses


(746)


1,402


(2,148)


(153%)


(1,005)


(239)


(766)


321%

Equity in net (income) loss of affiliates


(1,150)


(329)


(821)


250%


286


1,107


(821)


(74%)

Total other income and expenses, net


8,418


11,535


(3,117)


(27%)


30,245


31,943


(1,698)


(5%)


















Income before income taxes


70,200


62,268


7,932


13%


156,188


146,181


10,007


7%

Income taxes


22,635


20,849


1,786


9%


48,638


47,355


1,283


3%

Net income


$              47,565


$              41,419


$     6,146


15%


$            107,550


$              98,826


$       8,724


9%



































Basic earnings per share


$                  0.85


$                  0.72


$      0.13


18%


$                  1.91


$                  1.72


$        0.19


11%



































Diluted earnings per share


$                  0.84


$                  0.72


$      0.12


17%


$                  1.90


$                  1.71


$        0.19


11%

 

 

Choice Hotels International, Inc.




Exhibit 2

Consolidated Balance Sheets





















(In thousands, except per share amounts)

 September 30, 


 December 31, 






2016


2015






(Unaudited)











ASSETS















Cash and cash equivalents



$           205,953


$         193,441

Accounts receivable, net



129,422


89,352

Other current assets



36,554


28,160


Total current assets



371,929


310,953









Fixed assets and intangibles, net


178,078


179,433

Notes receivable, net of allowances


98,450


82,572

Investments in unconsolidated entities

83,740


67,037

Investments, employee benefit plans, at fair value

16,414


17,674

Other assets




97,665


59,341











Total assets


$           846,276


$         717,010

























LIABILITIES AND SHAREHOLDERS' DEFICIT












Accounts payable 



$              60,363


$            64,431

Accrued expenses and other current liabilities

75,880


70,807

Deferred revenue



121,592


71,587

Current portion of long-term debt


660


1,191


Total current liabilities


258,495


208,016









Long-term debt



866,247


812,945

Deferred compensation & retirement plan obligations  

20,890


22,859

Other liabilities




38,086


69,089










Total liabilities



1,183,718


1,112,909










Total shareholders' deficit


(337,442)


(395,899)











Total liabilities and shareholders' deficit

$           846,276


$         717,010

 

 

Choice Hotels International, Inc.



Exhibit 3



Consolidated Statements of Cash Flows






(Unaudited)






















(In thousands)

Nine Months Ended September 30,










2016


2015*



CASH FLOWS FROM OPERATING ACTIVITIES:












Net income

$                  107,550


$              98,826









Adjustments to reconcile net income to net cash provided 






 by operating activities:






  Depreciation and amortization  

8,707


8,793



  Gain on disposal of assets

(377)


(1,519)



  Provision for bad debts, net

1,093


1,540



  Non-cash stock compensation and other charges

11,037


8,929



  Excess tax benefits from stock-based compensation

2,149


4,885



  Non-cash interest and other loss

807


3,168



  Deferred income taxes

(4,329)


(1,799)



  Equity in net losses from unconsolidated joint ventures less distributions received

1,654


2,917









Changes in assets and liabilities, net of acquisition:






  Receivables

(42,426)


(24,532)



  Advances to/from marketing and reservation activities, net

(25,783)


18,341



  Forgivable notes receivable, net

(15,109)


(21,029)



  Accounts payable

(3,532)


5,111



  Accrued expenses and other current liabilities

(14,261)


(14,083)



  Income taxes payable/receivable

19,219


11,066



  Deferred revenue

49,976


2,122



  Other assets

(9,958)


(4,826)



  Other liabilities

1,992


5,748









 NET CASH PROVIDED BY OPERATING ACTIVITIES 

88,409


103,658









CASH FLOWS FROM INVESTING ACTIVITIES:












Investment in property and equipment

(17,584)


(21,810)



Proceeds from sales of assets

8,360


6,347



Acquisitions of real estate

(25,263)


(8,767)



Business acquisiton, net of cash acquired

(1,341)


(13,269)



Contributions to equity method investments

(24,179)


(3,811)



Distributions from equity method investments

3,700


270



Purchases of investments, employee benefit plans

(1,430)


(2,977)



Proceeds from sales of investments, employee benefit plans

1,395


2,920



Issuance of mezzanine and other notes receivable

(20,281)


(25,253)



Collections of mezzanine and other notes receivable

11,040


3,697



Other items, net

(422)


(445)









 NET CASH USED BY INVESTING ACTIVITIES 

(66,005)


(63,098)









CASH FLOWS FROM FINANCING ACTIVITIES:












Net borrowings pursuant to revolving credit facilities

52,814


162,032



Principal payments on long-term debt

(836)


(130,194)



Proceeds from the issuance of long-term debt

-


176



Debt issuance costs

(284)


(2,169)



Purchases of treasury stock

(33,958)


(56,450)



Dividends paid

(34,690)


(34,173)



Proceeds from exercise of stock options

6,802


6,381









 NET CASH USED BY FINANCING ACTIVITIES

(10,152)


(54,397)









Net change in cash and cash equivalents

12,252


(13,837)



Effect of foreign exchange rate changes on cash and cash equivalents

260


(1,781)



Cash and cash equivalents at beginning of period

193,441


214,879









CASH AND CASH EQUIVALENTS AT END OF PERIOD

$                  205,953


$            199,261









* Year to date results for September 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 $4.9 million for the nine months  ended September 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 Nine Months Ended September 30, 2016


For the Nine Months Ended September 30, 2015


Change



























Average Daily






Average Daily






Average Daily










Rate


Occupancy


RevPAR


Rate


Occupancy


RevPAR


Rate


Occupancy


RevPAR

























Comfort Inn


$             93.78


67.2%


$          63.00


$             90.65


66.8%


$         60.52


3.5%


40

bps


4.1%



Comfort Suites


97.44


70.8%


69.01


94.83


69.9%


66.25


2.8%


90

bps


4.2%



Sleep


83.09


66.4%


55.14


81.34


65.7%


53.45


2.2%


70

bps


3.2%



Quality


78.97


60.8%


48.00


76.02


60.2%


45.75


3.9%


60

bps


4.9%



Clarion


83.67


59.7%


49.95


80.93


58.9%


47.68


3.4%


80

bps


4.8%



Econo Lodge


62.33


55.3%


34.47


60.44


55.1%


33.30


3.1%


20

bps


3.5%



Rodeway


64.14


57.3%


36.74


60.56


58.5%


35.44


5.9%


(120)

bps


3.7%



MainStay


77.34


66.2%


51.18


78.03


69.7%


54.35


(0.9%)


(350)

bps


(5.8%)



Suburban


50.15


76.0%


38.11


47.75


77.0%


36.78


5.0%


(100)

bps


3.6%



Ascend Hotel Collection


130.34


59.0%


76.95


127.38


59.9%


76.34


2.3%


(90)

bps


0.8%

























Total 


$             83.22


63.1%


$          52.50


$             80.77


62.9%


$         50.79


3.0%


20

bps


3.4%





























































































For the Three Months Ended September 30, 2016


For the Three Months Ended September 30, 2015


Change



























Average Daily






Average Daily






Average Daily










Rate


Occupancy


RevPAR


Rate


Occupancy


RevPAR


Rate


Occupancy


RevPAR

























Comfort Inn


$           100.02


73.4%


$          73.41


$             96.35


73.2%


$         70.54


3.8%


20

bps


4.1%



Comfort Suites


100.95


74.6%


75.35


98.06


73.2%


71.79


2.9%


140

bps


5.0%



Sleep


86.59


70.6%


61.15


84.44


69.1%


58.31


2.5%


150

bps


4.9%



Quality


84.31


66.4%


55.96


80.80


65.3%


52.79


4.3%


110

bps


6.0%



Clarion


88.98


66.4%


59.08


85.46


63.9%


54.61


4.1%


250

bps


8.2%



Econo Lodge


67.44


60.9%


41.08


65.32


60.1%


39.27


3.2%


80

bps


4.6%



Rodeway


69.72


62.3%


43.45


66.00


63.7%


42.02


5.6%


(140)

bps


3.4%



MainStay


79.91


71.5%


57.13


81.26


71.8%


58.36


(1.7%)


(30)

bps


(2.1%)



Suburban


51.09


78.2%


39.96


48.77


78.1%


38.09


4.8%


10

bps


4.9%



Ascend Hotel Collection


138.97


63.0%


87.50


134.88


60.1%


81.07


3.0%


290

bps


7.9%

























Total 


$             88.27


68.4%


$          60.39


$             85.38


67.7%


$         57.80


3.4%


70

bps


4.5%









































































































































For the Quarter Ended




For the Nine Months Ended














9/30/2016


9/30/2015




9/30/2016


9/30/2015


































System-wide effective royalty rate


4.39%


4.27%




4.39%


4.28%












 

 

CHOICE HOTELS INTERNATIONAL, INC.

Exhibit 5

SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA


(UNAUDITED)


























































September 30, 2016


September 30, 2015


Variance






















Hotels


Rooms


Hotels


Rooms


Hotels


Rooms


%


%




















Comfort Inn


1,126


87,346


1,188


92,029


(62)


(4,683)


(5.2%)


(5.1%)


Comfort Suites


565


43,610


574


44,311


(9)


(701)


(1.6%)


(1.6%)


Sleep


378


27,035


374


26,913


4


122


1.1%


0.5%


Quality


1,407


111,564


1,325


105,950


82


5,614


6.2%


5.3%


Clarion


164


22,456


176


24,626


(12)


(2,170)


(6.8%)


(8.8%)


Econo Lodge


853


52,773


854


52,963


(1)


(190)


(0.1%)


(0.4%)


Rodeway


526


30,058


488


27,095


38


2,963


7.8%


10.9%


MainStay


54


4,020


48


3,656


6


364


12.5%


10.0%


Suburban


58


6,471


63


7,065


(5)


(594)


(7.9%)


(8.4%)


Ascend Hotel Collection


119


9,761


112


9,407


7


354


6.3%


3.8%


Cambria hotel & suites


25


3,113


24


2,917


1


196


4.2%


6.7%




















Domestic Franchises


5,275


398,207


5,226


396,932


49


1,275


0.9%


0.3%




















International Franchises


1,144


110,945


1,153


107,425


(9)


3,520


(0.8%)


3.3%




















Total Franchises


6,419


509,152


6,379


504,357


40


4,795


0.6%


1.0%


 

 



















Exhibit 6


CHOICE HOTELS INTERNATIONAL, INC.

SUPPLEMENTAL INFORMATION BY BRAND

DEVELOPMENT RESULTS -- DOMESTIC NEW HOTEL CONTRACTS

(UNAUDITED)



















































































For the Nine Months Ended September 30, 2016


For the Nine Months Ended September 30, 2015


% Change
























New






New






New








Construction


Conversion


Total


Construction


Conversion


Total


Construction


Conversion


Total






















Comfort Inn


20


26


46


17


28


45


18%


(7%)


2%


Comfort Suites


17


1


18


18


3


21


(6%)


(67%)


(14%)


Sleep


26


1


27


19


-


19


37%


NM


42%


Quality


-


118


118


3


114


117


(100%)


4%


1%


Clarion


3


15


18


-


7


7


NM


114%


157%


Econo Lodge


1


41


42


-


39


39


NM


5%


8%


Rodeway


-


60


60


-


57


57


NM


5%


5%


MainStay


15


-


15


16


-


16


(6%)


NM


(6%)


Suburban


-


1


1


1


4


5


(100%)


(75%)


(80%)


Ascend Hotel Collection


2


15


17


3


22


25


(33%)


(32%)


(32%)


Cambria hotel & suites


16


-


16


14


2


16


14%


(100%)


0%






















Total Domestic System


100


278


378


91


276


367


10%


1%


3%








































































































For the Three Months Ended September 30, 2016


For the Three Months Ended September 30, 2015


% Change
























New






New






New








Construction


Conversion


Total


Construction


Conversion


Total


Construction


Conversion


Total






















Comfort Inn


8


12


20


4


8


12


100%


50%


67%


Comfort Suites


9


-


9


5


1


6


80%


(100%)


50%


Sleep


12


1


13


10


-


10


20%


NM


30%


Quality


-


45


45


-


39


39


NM


15%


15%


Clarion


-


6


6


-


1


1


NM


500%


500%


Econo Lodge


-


12


12


-


11


11


NM


9%


9%


Rodeway


-


33


33


-


22


22


NM


50%


50%


MainStay


9


-


9


10


-


10


(10%)


NM


(10%)


Suburban


-


-


-


-


1


1


NM


(100%)


(100%)


Ascend Hotel Collection


-


9


9


2


6


8


(100%)


50%


13%


Cambria hotel & suites


5


-


5


7


2


9


(29%)


(100%)


(44%)






















Total Domestic System


43


118


161


38


91


129


13%


30%


25%


 

 

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



September 30, 2016


September 30, 2015















Units


Units


Conversion


New Construction


Total



Conversion


New
Construction


Total


Conversion


New
Construction


Total


Units


%


Units


%


Units


%


























Comfort Inn


39


83


122


39


63


102


-


0%


20


32%


20


20%

Comfort Suites


3


97


100


1


75


76


2


200%


22


29%


24


32%

Sleep Inn


1


89


90


-


72


72


1


NM


17


24%


18


25%

Quality


57


3


60


56


5


61


1


2%


(2)


(40%)


(1)


(2%)

Clarion


11


5


16


9


2


11


2


22%


3


150%


5


45%

Econo Lodge


28


3


31


26


4


30


2


8%


(1)


(25%)


1


3%

Rodeway


45


1


46


44


2


46


1


2%


(1)


(50%)


-


0%

MainStay


-


66


66


1


54


55


(1)


(100%)


12


22%


11


20%

Suburban


5


6


11


4


10


14


1


25%


(4)


(40%)


(3)


(21%)

Ascend Hotel Collection


33


17


50


21


18


39


12


57%


(1)


(6%)


11


28%

Cambria hotel & suites


5


52


57


2


32


34


3


150%


20


63%


23


68%




























227


422


649


203


337


540


24


12%


85


25%


109


20%

 


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 September 30, 


Nine Months Ended September 30, 






















2016


2015


2016


2015






Hotel Franchising Revenues:




























Total Revenues


$              267,577


$               241,526


$               716,446


$              648,927






Adjustments:














     Marketing and reservation system revenues


(152,018)


(134,463)


(412,193)


(366,298)






     Non-hotel franchising activities


(2,424)


(1,459)


(6,521)


(2,473)






Hotel Franchising Revenues


$              113,135


$               105,604


$               297,732


$              280,156




















Adjusted Hotel Franchising Margins:




























Operating Margin:




























Total Revenues


$              267,577


$               241,526


$               716,446


$              648,927






Operating Income


$                78,618


$                 73,803


$               186,433


$              178,124






     Operating Margin


29.4%


30.6%


26.0%


27.4%




















Adjusted Hotel Franchising Margin:




























Hotel Franchising Revenues


$              113,135


$               105,604


$               297,732


$              280,156




















Operating Income


$                78,618


$                 73,803


$               186,433


$              178,124






Executive termination benefits


-


-


2,206


-






Non-hotel franchising activities operating loss


5,400


5,034


17,140


15,322






Adjusted Hotel Franchising Operating Income


$                84,018


$                 78,837


$               205,779


$              193,446




















     Adjusted Hotel Franchising Margins


74.3%


74.7%


69.1%


69.0%











































































ADJUSTED HOTEL FRANCHISING SELLING, GENERAL AND ADMINISTRATION EXPENSES























(dollar amounts in thousands)


Three Months Ended September 30, 


Nine Months Ended September 30, 






















2016


2015


2016


2015




















Total Selling, General and Administrative Expenses


$                34,357


$                 30,152


$               109,515


$                95,712






Executive termination benefits


-


-


(2,206)


-






Non-hotel franchising activities


(6,723)


(5,724)


(20,438)


(16,145)






Adjusted Hotel Franchising Selling, General and Administration Expenses

$                27,634


$                 24,428


$                 86,871


$                79,567











































































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























(dollar amounts in thousands)
















Three Months Ended September 30, 


Nine Months Ended September 30, 




















2016


2015


2016


2015



















Net income


$                47,565


$                 41,419


$               107,550


$                98,826






Income taxes


22,635


20,849


48,638


47,355






Interest expense


11,150


10,821


33,466


32,057






Interest income


(836)


(359)


(2,502)


(982)






Other (gains) losses


(746)


1,402


(1,005)


(239)






Equity in net (income) loss of affiliates


(1,150)


(329)


286


1,107






Gain on sale of assets


(402)


-


(402)


-






Depreciation and amortization


2,986


3,108


8,707


8,793






Executive termination benefits


-


-


2,206


-





Adjusted EBITDA


$                81,202


$                 76,911


$               196,944


$              186,917



















Hotel franchising 


$                85,500


$                 81,177


$               210,861


$              200,589





Non-hotel franchising activities


(4,298)


(4,266)


(13,917)


(13,672)








$                81,202


$                 76,911


$               196,944


$              186,917





























































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

























(dollar amounts in thousands, except per share amounts)


Three Months Ended September 30, 


Nine Months Ended September 30, 






















2016


2015


2016


2015



















Net Income


$                47,565


$                 41,419


$               107,550


$                98,826





Adjustments:














Executive termination benefits, net of income taxes


-


-


1,394


-





Adjusted Net Income


$                47,565


$                 41,419


$               108,944


$                98,826

































Diluted Earnings Per Share


$                   0.84


$                     0.72


$                     1.90


$                   1.71





Adjustments:














Executive termination benefits


-


-


0.02


-





Adjusted Diluted Earnings Per Share (EPS)


$                   0.84


$                     0.72


$                     1.92


$                   1.71















































ADJUSTED EBITDA AND DILUTED EPS FULL YEAR FORECAST


























(dollar amounts in thousands)
















Range










Estimated Adjusted EBITDA












Fiscal Year 2016























Net income


$              135,000


$               137,100










Income taxes


63,100


64,000










Interest expense


45,100


45,100










Interest income


(3,300)


(3,300)










Gain on sale of assets


(400)


(400)










Other gains


(1,000)


(1,000)










Equity in net loss of affiliates


500


500










Depreciation and amortization


11,800


11,800










Executive termination benefits


2,200


2,200









Adjusted EBITDA


$              253,000


$               256,000























Hotel franchising 


$              272,000


$               274,000









Non-hotel franchising activities


(19,000)


(18,000)












$              253,000


$               256,000








































Range












Estimated Adjusted Diluted EPS












Fiscal Year 2016























Diluted EPS


$                   2.41


$                     2.44









Adjustments:














Executive termination benefits


0.02


0.02









Adjusted Diluted EPS


$                   2.43


$                     2.46









 

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