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Investor Alert

press release

May 11, 2020, 6:01 a.m. EDT

Choice Hotels International Reports 2020 First Quarter Results

97% of domestic hotels remain open; Choice Hotels' brands experience RevPAR index gains versus competition in Q1 and April

ROCKVILLE, Md., May 11, 2020 /PRNewswire/ --  Choice Hotels International, Inc. /zigman2/quotes/202943946/composite CHH +0.84% , one of the world's largest lodging franchisors, today reported its results for the three months ended March 31, 2020.

"The safety and well-being of guests, franchisees and associates is our top priority during these challenging times. We sincerely thank those who have been working to keep all of us safe through the COVID-19 crisis, particularly healthcare workers and first responders. The strength of our brands and dedication of our franchise owners and their staff, who are taking care of hotel guests in these trying times, have been truly remarkable. These unprecedented times have tested and shown that we possess the expertise, agility and rigor to respond to the challenges presented by the pandemic," said Patrick Pacious, president and chief executive officer, Choice Hotels.

Towards the latter portion of the first quarter of 2020, the company adopted a number of mitigation measures, including mobilizing its efforts to provide a broad range of support to its franchisees, guests and communities, while preserving the company's financial flexibility by bolstering liquidity and reducing discretionary spending. Highlights of first quarter 2020 results include:

  • Net income was $55.5 million for first quarter 2020, representing diluted earnings per share (EPS) of $0.99.

  • First quarter adjusted net income, excluding certain items described in Exhibit 6, decreased 9% to $42.8 million from first quarter 2019. 

  • Adjusted EPS were $0.76, a 10% decrease from first quarter 2019.

  • Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the first quarter were $69.2 million, an 8% decrease from first quarter 2019.

  • Domestic systemwide revenue per available room (RevPAR) declined 15% for first quarter 2020 compared to the same period of the prior year, outperforming total industry results by 430 basis points and exceeding growth within the primary chain scale segments in which the company competes, as reported by STR.

  • Awarded 42 new conversion franchise agreements in first quarter 2020 compared to 47 in the same period of the prior year.

  • Recognized a $30.6 million non-cash tax benefit in first quarter 2020 related to a restructuring of the company's foreign operations.

Mr. Pacious further stated, "We believe that our resilient, asset-light, franchise-focused business model, strong balance sheet and proven portfolio of well-segmented brands — along with our expertise in the extended-stay and midscale segment — position us to navigate the broad impacts of the pandemic. In addition, our expectation is that our heavier mix of leisure travel and portfolio distribution in domestic drive-to markets will benefit us during the reopening of the economy, as we expect overall industry demand will rebound first in these segments. We believe that our long-term focus, disciplined capital allocation strategy and the targeted actions we have undertaken will help us and our franchisees weather the storm and allow us to capitalize on opportunities as these unprecedented circumstances subside."

Balance Sheet and Liquidity

The company continues to benefit from its primarily franchise-only business model, which has historically provided a relatively stable earnings stream, low capital expenditure requirements and significant free cash flow. As a precautionary measure to further enhance liquidity, on April 16, 2020, Choice Hotels obtained a 364-day $250 million term loan with the possibility of a one year-extension subject to lender consent. Consequently, the company now has over $725 million in cash and available borrowing capacity through its revolving credit facility. The term loan will bear interest at LIBOR plus a range of +200 to +275 basis points, based on the company's credit rating, with a 1% floor on the LIBOR rate and contains a similar covenant package to the company's existing revolving credit facility.

Performance Trends

  • Domestic system-wide RevPAR decreased 15% for first quarter 2020 compared to the same period of the prior year, exceeding overall industry performance by 430 basis points. In the first quarter, Choice Hotels' brands outperformed the respective chain scales in which they primarily compete – upper-midscale, midscale and economy.

  • Through February 2020, domestic system-wide RevPAR trended at the high-end of the company's previous provided guidance. However, in March 2020, domestic system-wide RevPAR decreased 37% over the prior year comparable period, with occupancy levels falling below 50%. Daily occupancy levels softened over the last ten days of the month and ranged between 26% and 33%.

  • In April, domestic system-wide RevPAR declined 60% over the prior year comparable period, with the last week of the month trending +280 bps in higher occupancy versus the prior week and nearly one-third of the domestic portfolio achieving occupancy levels at or above 40%. These trends of occupancy gains have continued into May and represent outperformance versus the company's competitive chain scales (See Exhibit 7 for weekly occupancy trends). 

  • The company's expertise in the extended-stay segment positions Choice Hotels well in the current environment to attract and retain long-term occasion guests, with the WoodSpring Suites brand and the overall extended-stay portfolio experiencing occupancy levels in March at 72% and 69%, respectively. These trends have continued in April and May. WoodSpring Suites' brand RevPAR decreased only 2.9% in first quarter 2020 over the prior year comparable period, while its occupancy levels have remained above 60% since mid-March, attesting to the brand's resiliency.

  • Nearly 90% of the company's domestic hotels are in suburban, small towns and interstate locations, which have consistently reported higher occupancy levels industry-wide, driven by relatively stronger consumer demand for these destinations compared to urban or resort locations.

  • As of May 6, 2020, 97% of the company's more than 5,920 domestic hotels continue to operate. In addition, fewer than 20% of the company's over 1,210 international hotels were temporarily closed as of May 6, 2020. The company experienced a higher number of re-openings domestically in the last two weeks and internationally since mid-April 2020.

Additional details for the company's first quarter 2020 results are as follows:

Revenues

  • Total revenues were flat at $218.2 million for first quarter 2020, compared to the total revenues reported for the same period of 2019.

  • Total revenues excluding marketing and reservation system fees were relatively flat at $107.8 million for first quarter 2020 over the prior year comparable period.

  • First quarter 2020 domestic royalties were $66.3 million, a 12.2% decrease from the same period of 2019.

  • The company's effective domestic royalty rate for first quarter 2020 increased 10 basis points to 4.94% over the prior year first quarter. 

  • Procurement services revenue increased 15% in first quarter 2020 to $13.8 million, compared to the same period of the prior year.

Development

  • The company's extended-stay portfolio continued to expand, reaching 410 domestic hotels, a 9.6% increase since March 31, 2019, and the domestic extended-stay pipeline reached nearly 300 hotels awaiting conversion, under construction or approved for development. Specifically, the WoodSpring Suites brand achieved over 8% growth in the number of open domestic hotels and a 20% increase in its domestic pipeline.

  • The number of domestic hotels and rooms, as of March 31, 2020, increased 1.2% and 2.7%, respectively, from March 31, 2019. The upscale room portfolio expanded 42% since March 31, 2019, including a 25% increase for the Cambria Hotels brand and a 48% increase for the Ascend Hotel Collection, which includes 17 properties associated with the company's strategic partnership with AMResorts, an Apple Leisure Group brand.

  • The number of international hotels and rooms as of March 31, 2020, increased 6.3% and 15.2%, respectively, from the comparable period of 2019.

  • The company's total domestic pipeline of hotels awaiting conversion, under construction or approved for development, as of March 31, 2020, reached 1,000 hotels and over 80,000 rooms, with the Comfort brand's domestic unit pipeline representing over a quarter of the total domestic pipeline.

  • The company awarded 58 domestic franchise agreements in first quarter 2020, a 27% decrease compared to the same period of the prior year. Nearly 60% of the domestic franchise agreements awarded in the first quarter were executed in the month of March, of which approximately 90% were awarded in the second half of the month alone.

Cost Management Program

The company's management and the board of directors have taken steps to adjust the company's cost structure and increase its financial flexibility, including:

  • Reduced the compensation of the board of directors, chief executive officer and other executive officers for the remainder of 2020.

  • Implemented a hiring freeze, except for certain critical positions, and suspended 401(k) matching for the remainder of 2020.

  • Since the beginning of the first quarter, reduced its global workforce by more than 20% through a combination of layoffs and furloughs.

  • Eliminated, reduced or deferred non-essential expenditures, discretionary capital expenditures and investments.

  • Temporarily suspended activity under the company's share repurchase plan.

  • Suspended future, undeclared dividends in the approximate aggregate amount of $25 million for at least the remainder of 2020.

The company estimates that its cost cutting measures, including those listed above, will reduce 2020 selling, general and administrative costs by approximately 25%. While the company has implemented targeted cost and efficiency measures to adapt to the new environment, it believes that opportunities to further increase financial flexibility still remain under various scenarios.

COVID-19 Response – Franchisee, Guest and Community Support

The company has launched a number of broad-ranging initiatives to support its franchisees during this challenging time. The measures to date include, but are not limited to, the following:

  • Implemented fee-deferral and other programs to support franchisees through the crisis.

  • Advocated with the federal government to secure and expand franchisees' access to capital resulting in over 6,800 application submissions for government relief SBA programs and other CARES Act benefits.

  • Established a proactive, ongoing multi-channel franchisee outreach and education program being utilized by thousands of hotel owners to learn how to access newly available capital and reduce their operating costs.

  • Drove business to its franchised hotels from a wide variety of industries, government and emergency-management agencies, translating to an increase in occupancy.

In addition, Choice Hotels and its franchisees have taken a number of steps to support guests, local communities and those affected by COVID-19, including:

  • Revised Choice Hotels' guest cancellation policy and deferred the expiration of loyalty points to provide travelers greater flexibility during these challenging times.

  • Launched the "Commitment to Clean" initiative to provide hotels with the latest resources and training to achieve superior levels of cleanliness and address health and safety concerns associated with the COVID-19 pandemic, leveraging the company's long-standing relationship with Ecolab, an industry expert and global leader in water, hygiene and infection prevention technologies and services; guidance from the Centers for Disease Control and Prevention (CDC), the World Health Organization and the U.S. Travel Association; Choice's membership in the American Hotel and Lodging Association (AHLA) Safe Stay Advisory Council; and insights from the company's franchisee advisory councils, which represent its hotel owners across the country.

  • Offered members of the company's Choice Privileges loyalty program the option to donate points towards Serta, Inc.'s initiative to help address nationwide hospital bed shortages caused by the pandemic, the American Red Cross' COVID-19 relief efforts, the International Franchise Association's "Franchising Gives Back" program and Operation Homefront's drive to provide hotel rooms for service members and their families who have been displaced from their current housing due to COVID-19. In addition, Choice Hotels is matching loyalty point donations to various degrees and making its own contributions.

  • Offered discounted hotel rates to essential workers and volunteers serving communities across the country during the COVID-19 crisis.

Dividends and Stock Repurchases

The company will continue to follow a prudent and disciplined capital allocation strategy and ensure the level of investment activity is aligned with the current environment.

Dividends During the three months ended March 31, 2020, the company paid cash dividends totaling $12.8 million. In first quarter 2020, the company declared a cash dividend on its common stock of $0.225 per share, which was paid on April 16, 2020. The company suspended the payout of future dividends for at least the remainder of 2020, as previously disclosed on April 8, 2020 . As a result, total dividends paid during 2020 will be approximately $25 million.

Stock Repurchases During the three months ended March 31, 2020, the company repurchased approximately 0.7 million shares of common stock for approximately $54.1 million under its stock repurchase program, as well as through repurchases from employees in connection with tax withholding and option exercises relating to awards under the company's equity incentive plans. As of March 31, 2020, the company had 3.4 million shares remaining under the current share repurchase authorization. The company has temporarily suspended share repurchases under the stock repurchase program as previously disclosed on April 8, 2020 , but may continue to repurchase stock from employees in conjunction with tax withholding and option exercises under the company's equity incentive plans.

Outlook On March 17, 2020 , the company announced that it withdrew its previously issued outlook for 2020 and will not be providing formal guidance at this time. The ultimate and precise impact of COVID-19 on second quarter and full year 2020 is unknown at this time, as it will depend on the duration of social distancing and shelter-in-place mandates, the confidence level of consumers to travel and the pace and level of the broader macroeconomic recovery.

The company currently expects the impact of COVID-19 on business performance will be more significant for the quarter ended June 30, 2020, than the quarter ended March 31, 2020, as the adverse effects on the domestic market, where the majority of Choice Hotels' franchised hotels are located, only began to be observed in March. Based on experts' projections, economic activity is expected to begin to stabilize in third quarter 2020, and a recovery, spurred by the government stimulus and anticipated pent-up travel demand, will likely be underway by fourth quarter 2020. The company is optimistic that it will experience some degree of sequential improvement in the back half of 2020.

As the year progresses, the company will continue to evaluate the impact of COVID-19 across its business and will provide further updates in the next earnings report based on the best information then available.

Conference Call Choice Hotels International will conduct a conference call on Monday, May 11, 2020, at 11:00 a.m. Eastern Time to discuss the company's first quarter 2020 earnings results. The dial-in number to listen to the call domestically is 1-888-349-0087 and the number for international participants is 1-412-317-5259. A live webcast will also be available on the company's investor relations website, http://investor.choicehotels.com/ , and can be accessed via the Financial Performance and Presentations tab.

About Choice Hotels Choice Hotels International, Inc. /zigman2/quotes/202943946/composite CHH +0.84% is one of the largest lodging franchisors in the world. With more than 7,100 hotels, representing over 590,000 rooms, in over 40 countries and territories as of March 31, 2020, the Choice [® ] family of hotel brands provide business and leisure travelers with a range of high-quality lodging options from limited service to full-service hotels in the upscale, midscale, extended-stay and economy segments. The award-winning Choice Privileges [®] loyalty program offers members benefits ranging from everyday rewards to exceptional experiences. For more information, visit  www.choicehotels.com .

Forward-Looking Statement 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, expenses, earnings, debt levels, ability to repay outstanding indebtedness, payment of dividends, repurchases of common stock, and other financial and operational measures, including occupancy and open hotels, the company's ability to benefit from any rebound in leisure demand, our liquidity, our ability to assist franchisees through relief or other financial measures, our ability to minimize or manage disruptions posed by COVID-19, our ability to achieve cost savings and reduce discretionary spending and investments, and the impact of COVID-19 and economic conditions on our 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, continuation, resurgence, or worsening of the COVID-19 pandemic, including quarantines, "stay-at-home" orders, or other travel restrictions; new information which may emerge concerning the severity or impact of the COVID-19 pandemic and the development of vaccines and treatments for COVID-19; changes in consumer demand and confidence, including the impact of the COVID-19 pandemic on unemployment rates, consumer discretionary spending and the demand for travel, transient and group business; the impact of COVID-19 on the global hospitality industry, particularly but not exclusively in the U.S. travel market; the success of our mitigation efforts in response to the COVID-19 pandemic; the performance of our brands and categories in any recovery from the COVID-19 pandemic disruption; the timing and amount of future dividends and share repurchases; changes to general, domestic, and foreign economic conditions, including access to liquidity and capital as a result of COVID-19; future domestic or global outbreaks of COVID-19 or other epidemics, pandemics or contagious diseases or fear of such outbreaks; changes in law and regulation applicable to the travel, lodging, or franchising industries; foreign currency fluctuations; impairments or declines in value of the company's assets; operating risks common in the travel, lodging, or 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 and our relationships with our franchisees; our ability to keep pace with improvements in technology utilized for marketing and reservations systems and other operating systems; the commercial acceptance of our SaaS technology solutions division's products and services; our ability to grow our franchise system; exposure to risks related to our hotel development, financing, and ownership activities; exposures to risks associated with our investments in new businesses; fluctuations in the supply and demand for hotel rooms; our ability to realize anticipated benefits from acquired businesses; impairments or losses relating to acquired businesses; the level of acceptance of alternative growth strategies we may implement; cyber security and data breach risks; ownership and financing activities; hotel closures or financial difficulties of our franchisees; operating risks associated with our international operations, especially in areas currently most affected by COVID-19; the outcome of litigation; our ability to effectively manage our indebtedness and secure our indebtedness; and any future resurgence of COVID-19. These and other risk factors are discussed in detail in the company's filings with the Securities and Exchange Commission, including our annual report 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, except as required by law.

Non-GAAP Financial Measurements The company evaluates its operations utilizing the performance metrics of adjusted EBITDA, revenues excluding marketing and reservation system activities, adjusted net income, and adjusted EPS, which are all non-GAAP financial measurements. These measures, which are reconciled to the comparable GAAP measures in Exhibit 6, should not be considered as an alternative to any measure of performance or liquidity as promulgated under or authorized by GAAP, such as net income, EPS, and total revenues. The company's calculation of these measurements may be different from the calculations used by other companies and comparability may therefore be limited.

We discuss management's reasons for reporting these non-GAAP measures and how each non-GAAP measure is calculated below.

In addition to the specific adjustments noted below with respect to each measure, the non-GAAP measures presented herein also exclude debt-restructuring costs, restructuring of the company's operations including employee severance benefit and legal costs and gains and losses on sale and impairment of assets primarily related to the company's operations that provide Software as a Service ("SaaS") technology solutions to vacation-rental management companies to allow for period-over-period comparison of ongoing core operations before the impact of these discrete and infrequent charges.

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, franchise-agreement acquisition cost amortization, other (gains) and losses, equity in net income (loss) of unconsolidated affiliates, mark-to-market adjustments on non-qualified retirement plan investments, share based compensation expense (benefit) and surplus or deficits generated by marketing and reservation-system activities. We consider adjusted EBITDA to be an indicator of operating performance because it measures 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 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 and share based compensation expense (benefit) is dependent on the design of compensation plans in place and the usage of them. Accordingly, the impact of interest expense and share based compensation expense (benefit) 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 or amortizing franchise-agreement acquisition costs. These differences can result in considerable variability in the relative asset costs and estimated lives and, therefore, the depreciation and amortization expense among companies. Mark-to-market adjustments on non-qualified retirement-plan investments recorded in SG&A are excluded from EBITDA, as the company accounts for these investments in accordance with accounting for deferred-compensation arrangements when investments are held in a rabbi trust and invested. Changes in the fair value of the investments are recognized as both compensation expense in SG&A and other gains and losses. As a result, the changes in the fair value of the investments do not have a material impact on the company's net income. Surpluses and deficits generated from marketing and reservation activities are excluded, as the company's franchise agreements require the marketing and reservation-system revenues to be used exclusively for expenses associated with providing franchise services, such as central reservation and property-management systems, reservation delivery, and national marketing and media advertising. Franchisees are required to reimburse the company for any deficits generated from these marketing and reservation-system activities and the company is required to spend any surpluses generated in future periods. Since these activities will be managed to break-even over time, quarterly or annual surpluses and deficits have been excluded from the measurements utilized to assess the company's operating performance.

Adjusted Net Income and Adjusted Earnings Per Share:  Adjusted net income and EPS exclude the impact of surpluses or deficits generated from marketing and reservation-system activities. Surpluses and deficits generated from marketing and reservation activities are excluded, as the company's franchise agreements require the marketing and reservation system revenues to be used exclusively for expenses associated with providing franchise services, such as central reservation and property-management systems, reservation delivery, and national marketing and media advertising. Franchisees are required to reimburse the company for any deficits generated from these marketing and reservation-system activities and the company is required to spend any surpluses generated in future periods. Since these activities will be managed to break-even over time, quarterly or annual surpluses and deficits have been excluded from the measurements utilized to assess the company's operating performance. We consider adjusted net income and adjusted EPS to be indicators of operating performance because excluding these items allow for period-over-period comparisons of our ongoing operations.

Revenues, Excluding Marketing and Reservation System Activities: The company reports revenues, excluding marketing and reservation-system activities. The company is no longer excluding the other non-hotel franchising revenues from these measures because their impact is insignificant on the company's overall results. These non-GAAP measures we present are commonly used measures of performance in our industry and facilitate comparisons between the company and its competitors. Marketing and reservation-system activities are excluded, as the company's franchise agreements require the marketing and reservation-system revenues to be used exclusively for expenses associated with providing franchise services, such as central reservation and property-management systems, reservation delivery, and national marketing and media advertising. Franchisees are required to reimburse the company for any deficits generated from these marketing and reservation-system activities and the company is required to spend any surpluses generated in future periods. Since these activities will be managed to break-even over time, quarterly or annual surpluses and deficits have been excluded from the measurements utilized to assess the company's operating performance.

© 2020 Choice Hotels International, Inc. All rights reserved.

Choice Hotels International, Inc. and Subsidiaries





Exhibit 1
Condensed Consolidated Statements of Income






(Unaudited)




































Three Months Ended March 31,






Variance


2020
2019
$
%
(In thousands, except per share amounts)
















REVENUES
















Royalty fees
$               70,339
$             80,353
$   (10,014)
(12%)
Initial franchise and relicensing fees
7,284
6,807
477
7%
Procurement services
13,797
11,947
1,850
15%
Marketing and reservation system
110,385
110,064
321
0%
Owned hotels
9,422
-
9,422
NM
Other
6,948
9,149
(2,201)
(24%)
      Total revenues
218,175
218,320
(145)
(0%)









OPERATING EXPENSES
















Selling, general and administrative
28,835
39,514
(10,679)
(27%)
Depreciation and amortization
6,529
3,616
2,913
81%
Marketing and reservation system
130,447
119,839
10,608
9%
Owned  hotels
6,034
-
6,034
NM
Total operating expenses
171,845
162,969
8,876
5%









Impairment of goodwill & long-lived assets
-
(10,401)
10,401
(100%)
Gain on sale of assets, net
-
100
(100)
(100%)









Operating income
46,330
45,050
1,280
3%









OTHER INCOME AND EXPENSES, NET







Interest expense
11,380
11,211
169
2%
Interest income
(2,288)
(2,613)
325
(12%)
Other losses (gains)
4,277
(2,198)
6,475
(295%)
Loss on extinguishment of debt
607
-
607
NM
Equity in net loss of affiliates
1,955
2,171
(216)
(10%)
Total other income and expenses, net
15,931
8,571
7,360
86%
Income tax (benefit) expense
30,399
36,479
(6,080)
(17%)
Income before income taxes
(25,064)
6,398
(31,462)
(492%)









Net income 
$               55,463
$             30,081
$    25,382
84%


















Basic earnings per share
$                   1.00
$                 0.54
$        0.46
85%


















Diluted earnings per share
$                   0.99
$                 0.54
$        0.45
83%

 

Choice Hotels International, Inc. and Subsidiaries

Exhibit 2
Condensed Consolidated Balance Sheets


(Unaudited)













(In thousands, except per share amounts)  March 31, 
 December 31, 





2020
2019














ASSETS













Cash and cash equivalents

$           321,954
$           33,766
Accounts receivable, net

148,281
141,566
Other current assets

61,044
61,257

Total current assets

531,279
236,589








Intangible assets, net

292,030
290,421
Goodwill


159,196
159,196
Property and equipment, net
351,045
351,502
Investments in unconsolidated entities 78,583
78,655
Notes receivable, net of allowances
102,759
103,054
Investments, employee benefit plans, at fair value 21,083
24,978
Operating lease right-of-use-assets
23,689
24,088
Other assets


144,288
118,189










Total assets
$        1,703,952
$       1,386,672
























LIABILITIES AND SHAREHOLDERS' DEFICIT










Accounts payable 

$             68,987
$           73,449
Accrued expenses and other current liabilities 65,939
90,364
Deferred revenue

60,442
71,594
Current portion of long-term debt
7,335
7,511
Liability for guest loyalty program
52,717
82,970

Total current liabilities
255,420
325,888








Long-term debt

1,208,945
844,102
Deferred revenue

126,656
112,662
Liability for guest loyalty program
81,291
46,698
Operating lease liabilities

20,196
21,270
Deferred compensation and retirement plan obligations   25,869
29,949
Other liabilities


29,429
29,614









Total liabilities

1,747,806
1,410,183









Total shareholders' deficit
(43,854)
(23,511)










Total liabilities and shareholders' deficit $        1,703,952
$       1,386,672

 

 

Choice Hotels International, Inc. and Subsidiaries

Exhibit 3
Condensed Consolidated Statements of Cash Flows


(Unaudited)












(In thousands) Three Months Ended March 31,





2020
2019
CASH FLOWS FROM OPERATING ACTIVITIES:






Net income $                   55,463
$              30,081




Adjustments to reconcile net income to net cash provided


 by operating activities:


  Depreciation and amortization   6,529
3,616
  Depreciation and amortization - marketing and reservation system  4,873
4,521
  Franchise agreement acquisition cost amortization 2,819
2,685
  Impairment of goodwill and long lived assets -
10,401
  Gain on disposal of assets -
(2,120)
  Provision for credit losses, net 7,686
2,983
  Loss on extinguishment of debt 607
-
  Non-cash stock compensation and other charges (2,575)
3,989
  Non-cash interest and other loss (income) 4,339
(2,495)
  Deferred income taxes (26,677)
(2,257)
  Equity in net losses from unconsolidated joint ventures, less distributions received 2,105
3,954
  Franchise agreement acquisition costs, net of reimbursements (7,122)
(6,401)
  Change in working capital and other, net of acquisition (42,283)
(31,014)




 NET CASH PROVIDED BY OPERATING ACTIVITIES  5,764
17,943




CASH FLOWS FROM INVESTING ACTIVITIES:






Investment in property and equipment (6,229)
(14,906)
Investment in intangible assets (1,004)
(760)
Proceeds from sales of assets -
10,585
Contributions to equity method investments (2,201)
(8,495)
Distributions from equity method investments 157
5,724
Purchases of investments, employee benefit plans (1,544)
(1,603)
Proceeds from sales of investments, employee benefit plans 1,697
1,637
Issuance of notes receivable (5,778)
(1,755)
Collections of notes receivable 63
5,096
Other items, net 14
197




 NET CASH USED IN INVESTING ACTIVITIES  (14,825)
(4,280)




CASH FLOWS FROM FINANCING ACTIVITIES:






Net borrowings pursuant to revolving credit facilities 396,800
42,400
Proceeds from the issuance of long-term debt -
8,491
Principal payments on long-term debt (33,239)
(123)
Purchase of treasury stock (54,072)
(31,951)
Dividends paid (12,791)
(12,163)
Payments on transfer of interest in notes receivable -
(24,409)
Proceeds from exercise of stock options 1,235
9,203




 NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 297,933
(8,552)




Net change in cash and cash equivalents 288,872
5,111
Effect of foreign exchange rate changes on cash and cash equivalents (684)
57
Cash and cash equivalents at beginning of period 33,766
26,642




CASH AND CASH EQUIVALENTS AT END OF PERIOD $                 321,954
$              31,810

 

CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES Exhibit 4
SUPPLEMENTAL OPERATING INFORMATION 
DOMESTIC HOTEL SYSTEM(1)
(UNAUDITED)


























































































For the Three Months Ended March 31, 2020
For the Three Months Ended March 31, 2019
Change

























Average Daily




Average Daily




Average Daily








Rate
Occupancy
RevPAR
Rate
Occupancy
RevPAR
Rate
Occupancy
RevPAR























Comfort(2)
$              87.57
48.3%
$                     42.33
$              90.78
56.0%
$       50.80
(3.5%)
(770) bps
(16.7%)

Sleep
78.82
48.9%
38.54
82.35
55.7%
45.89
(4.3%)
(680) bps
(16.0%)

Quality
72.79
41.7%
30.37
75.87
48.0%
36.40
(4.1%)
(630) bps
(16.6%)

Clarion(3)
74.60
36.6%
27.33
78.39
43.2%
33.83
(4.8%)
(660) bps
(19.2%)

Econo Lodge
57.25
38.3%
21.94
59.50
42.2%
25.10
(3.8%)
(390) bps
(12.6%)

Rodeway
59.61
40.9%
24.36
60.70
44.4%
26.98
(1.8%)
(350) bps
(9.7%)

WoodSpring Suites
47.02
70.3%
33.05
45.36
75.0%
34.04
3.7%
(470) bps
(2.9%)

MainStay
78.35
53.9%
42.25
82.51
58.7%
48.46
(5.0%)
(480) bps
(12.8%)

Suburban
54.19
61.8%
33.51
58.36
67.7%
39.49
(7.1%)
(590) bps
(15.1%)

Cambria Hotels
131.95
48.2%
63.55
134.26
61.3%
82.26
(1.7%)
(1,310) bps
(22.7%)

Ascend Hotel Collection
119.06
46.2%
54.99
116.61
56.0%
65.26
2.1%
(980) bps
(15.7%)

Total
$              74.22
46.1%
$                     34.24
$              77.18
52.2%
$       40.28
(3.8%)
(610) bps
(15.0%)



































































Effective Royalty Rate








































For the Quarter Ended
















3/31/2020
3/31/2019






































System-wide(4)
4.94%
4.84%








































































































(1) In response to partial hotel closures resulting from the COVID-19 pandemic, the Company revised its calculation of Occupancy to be reflective of full room availability.






     Additionally, the Company also made minor revisions to its ADR calculations, with respect to complimentary rooms.   The revised ADR, Occupancy and RevPAR are reflected in the tables above for all periods noted. 
(2)Includes Comfort family of brand extensions including Comfort and Comfort Suites














(3)Includes Clarion family of brand extensions including Clarion and Clarion Pointe














(4)Includes United States and Caribbean countries and territories
















 

 

CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES Exhibit 5
SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA
(UNAUDITED)
























































March 31, 2020
March 31, 2019
Variance




















Hotels
Rooms
Hotels
Rooms
Hotels
Rooms
%
%


















Comfort(1)
1,621
127,563
1,614
126,396
7
1,167
0.4%
0.9%
Sleep
399
28,188
396
28,111
3
77
0.8%
0.3%
Quality
1,688
128,951
1,642
126,735
46
2,216
2.8%
1.7%
Clarion(2)
178
22,548
173
21,908
5
640
2.9%
2.9%
Econo Lodge
794
47,774
837
50,539
(43)
(2,765)
(5.1%)
(5.5%)
Rodeway
581
33,404
602
34,523
(21)
(1,119)
(3.5%)
(3.2%)
WoodSpring Suites
277
33,303
256
30,766
21
2,537
8.2%
8.2%
MainStay
73
4,636
64
4,281
9
355
14.1%
8.3%
Suburban
60
6,082
54
5,700
6
382
11.1%
6.7%
Cambria Hotels
50
7,222
41
5,797
9
1,425
22.0%
24.6%
Ascend Hotel Collection
205
22,202
179
14,956
26
7,246
14.5%
48.4%


















Domestic Franchises(3)
5,926
461,873
5,858
449,712
68
12,161
1.2%
2.7%


















International Franchises
1,219
136,350
1,147
118,400
72
17,950
6.3%
15.2%


















Total Franchises
7,145
598,223
7,005
568,112
140
30,111
2.0%
5.3%








































































(1)Includes Comfort family of brand extensions including Comfort and Comfort Suites








(2)Includes Clarion family of brand extensions including Clarion and Clarion Pointe








(3)Includes United States and Caribbean countries and territories











 


CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES
Exhibit 6


SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION




(UNAUDITED)













REVENUES, EXCLUDING MARKETING AND RESERVATION ACTIVITIES

















(dollar amounts in thousands)
Three Months Ended March 31, 
















2020
2019
























Total Revenues
$               218,175
$                218,320




Adjustments:








     Marketing and reservation system revenues
(110,385)
(110,064)




Revenues, excluding marketing and reservation activities
$               107,790
$                108,256

































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













(dollar amounts in thousands)










Three Months Ended March 31, 














2020
2019













Net income 
$                 55,463
$                  30,081




Income taxes
(25,064)
6,398




Interest expense
11,380
11,211




Interest income
(2,288)
(2,613)




Other losses (gains)
4,277
(2,198)




Loss on extinguishment of debt
607
-




Equity in net loss of affiliates
1,955
2,171




Depreciation and amortization
6,529
3,616




Gain on sale of assets, net
-
(100)




Impairment of goodwill & long-lived assets
-
10,401




Mark to market adjustments on non-qualified retirement plan investments
(4,334)
2,173




Operational restructuring charges
1,364
-




Share-based compensation
(2,327)
3,084




Marketing and reservation system reimbursable (surplus) deficit
20,062
9,775




Franchise agreement acquisition costs amortization
1,598
1,521



Adjusted EBITDA
$                 69,222
$                  75,520

































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















(dollar amounts in thousands, except per share amounts)
Three Months Ended March 31, 
















2020
2019













Net income 
$                 55,463
$                  30,081



Adjustments:








Marketing and reservation system reimbursable deficit
16,328
7,986




Impairment of goodwill & long-lived assets
-
9,149




Loss on extinguishment of debt
493
-




Operational restructuring charges
1,070
-




Foreign tax benefit on international restructuring
(30,572)
-



Adjusted Net Income
$                 42,782
$                  47,216























Diluted Earnings Per Share
$                     0.99
$                      0.54



Adjustments:








Marketing and reservation system reimbursable deficit
0.29
0.14




Impairment of goodwill & long-lived assets
-
0.16




Loss on extinguishment of debt
0.01
-




Operational restructuring charges
0.02
-




Foreign tax benefit on international restructuring
(0.55)
-



Adjusted Diluted Earnings Per Share (EPS)
$                     0.76
$                      0.84



 

 

CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES




Exhibit 7
DOMESTIC SYSTEM-WIDE OCCUPANCY VERSUS INDUSTRY (1)





(UNAUDITED)




























Choice
Total

Week beginning
Hotels
Industry

March 8, 2020
51.2%
53.0%

March 15, 2020
38.2%
30.3%

March 22, 2020
30.1%
22.6%

March 29, 2020
28.8%
21.6%

April 5, 2020
27.7%
21.0%

April 12, 2020
30.1%
23.4%

April 19, 2020
31.6%
26.0%

April 26, 2020
34.4%
28.6%

Average
34.0%
28.3%















(1)Source: Smith Travel Research (STR), STR Weekly Hotel Review.

 

Cision
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SOURCE Choice Hotels International, Inc.

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July 10, 2020 4:00p
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/zigman2/quotes/202943946/composite
US : U.S.: NYSE
$ 80.39
+0.67 +0.84%
Volume: 401,649
July 10, 2020 4:00p
P/E Ratio
18.13
Dividend Yield
0.00%
Market Cap
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