ROCKVILLE, MD – Choice Hotels International, Inc today reported the following highlights for the fourth quarter and full-year 2014:
Fourth Quarter Highlights
• Franchising revenues for the three months ended December 31, 2014, totaled $81.4 million, an increase of 12 percent from the same period of 2013.
• Earnings before interest, taxes, depreciation and amortization (“EBITDA”) from franchising activities for the three months ended December 31, 2014, totaled $52.7 million, an increase of 15 percent from the same period of 2013.
• Franchising margins for the three months ended December 31, 2014, were 62.1 percent, an increase of 150 basis points from the same period of 2013.
• Diluted earnings per share (“EPS”) from continuing operations for the three months ended December 31, 2014, totaled $0.43, an increase of 7 percent from the same period of 2013.
• Domestic royalty fees for the three months ended December 31, 2014, totaled $59.2 million, an increase of 11 percent from the same period of 2013.
• Domestic system-wide revenue per available room (“RevPAR”) increased 11.2 percent in the fourth quarter of 2014, as occupancy and average daily rates increased 370 basis points and 3.8 percent, respectively from the same period of 2013.
• Domestic hotel executed franchise agreements totaled 269 for the three months ended December 31, 2014, an increase of 25 percent from the same period of 2013.
• New construction domestic hotel executed franchise agreements totaled 80 for the three months ended December 31, 2014, an increase of 78 percent from the same period of 2013.
• The company purchased 1.0 million shares of common stock under its share repurchase program during the three months ended December 31, 2014, at a total cost of approximately $54.2 million.
• The company’s board of directors authorized an increase in the number of shares for repurchase under the current share repurchase program to 3 million shares.
“Our fourth quarter results exceeded our expectations and we closed out a record year driven by strong RevPAR performance and franchise development results,” said Stephen P. Joyce, president and chief executive officer, Choice Hotels. “Domestic RevPAR gains in 2014 improved each quarter culminating with an 11% increase in the fourth quarter which outpaced the gains reported by Smith Travel Research in the chain scale segments in which we compete. Our efforts and initiatives to strengthen our brands and improve business delivery to our franchisees are illustrated by our RevPAR performance and doubling the number of new construction franchise agreements for our Comfort family of brands. We are optimistic that developers will continue to respond to our program to rejuvenate our iconic Comfort brand and are optimistic that RevPAR performance will continue to be strong in 2015.”
Full-Year Highlights
• EBITDA from franchising activities in 2014 totaled $240.0 million, an increase of $25.1 million or 12 percent from 2013.
• Franchising revenues in 2014 totaled $344.8 million, an increase of $27.8 million or 9 percent from 2013.
• Franchising SG&A expenses in 2014 totaled $104.8 million, an increase of 3 percent from 2013.
• Franchising margins for 2014 were 67.2 percent, an increase of 210 basis points from 2013.
• Diluted EPS from continuing operations in 2014 totaled $2.07, an increase of 8 percent from 2013.
• Domestic royalty fees in 2014 totaled $263.0 million, an increase of 8 percent from 2013.
• Domestic system-wide RevPAR increased 8.5 percent in 2014 as occupancy and average daily rates increased 310 basis points and 3.0 percent, respectively, from 2013.
• Domestic units increased 0.8 percent from December 31, 2013.
• New franchise contracts, executed in 2014 for domestic hotels, totaled 566, a 7 percent increase from 2013.
• Domestic relicensing and contract renewal transactions in 2014 totaled 336 contracts, an increase of 16 percent from 2013.
• The company’s domestic pipeline of hotels under construction, awaiting conversion or approved for development increased 21 percent from December 31, 2013.
Discontinued Operations
In the first quarter of 2014, the company entered into a plan to sell its three owned hotels operated under the MainStay Suites brand. The company determined that the disposal of these hotels met the definition of a discontinued operation since the operations and cash flows of these components will be eliminated from the on-going operations of the company and the company will not have significant continuing involvement in the operations of the hotels after the disposal transaction.
At December 31, 2014, the company had disposed of all three hotels and the new owners of each of those hotels had executed new franchise agreements with the company.
The company’s consolidated statement of income for the three months and year ended December 31, 2014 reflect these three company-owned hotels as discontinued operations. In addition, the company’s statement of income for the three months and year ended December 31, 2013 has been recast to account for these operations as discontinued. Summarized financial information related to these discontinued operations is presented in Exhibit 9 of this press release.
Outlook
The company’s consolidated 2015 outlook reflects the following assumptions:
• All figures assume no additional repurchases of common stock under the company’s share repurchase program; and
• The effective tax rate for continuing operations is expected to be 31.8% and 31.1% for the first quarter and full- year 2015, respectively.
Franchising
• EBITDA from franchising activities for full-year 2015 are expected to range between $254 million and $259 million;
• Net domestic unit growth for 2015 is expected to be approximately 1%;
• RevPAR is expected to increase approximately 11% for the first quarter and range between 6.5% and 8% for full-year 2015; and
• The effective royalty rate is expected to increase 2 basis points for full-year 2015 as compared to full-year 2014.
SkyTouch
• Net reductions in EBITDA relating to our investment in the SkyTouch division for full-year 2015 are expected to range between $15 million and $20 million.
Consolidated Outlook
The company’s first quarter 2015 diluted EPS is expected to be $0.37. The company expects full-year 2015 diluted EPS to range between $2.14 and $2.21. EBITDA for full-year 2015 are expected to range between $236 million and $241 million.
