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Choice Hotels International, Inc. reported the following highlights for fourth quarter and full year 2009. Adjusted diluted earnings per share (“EPS”) for full year 2009 were $1.71 compared to $1.77 for full year 2008. Diluted EPS were $1.63 for full year 2009 compared to $1.59 for 2008. Adjusted diluted EPS for full year 2009 and 2008 exclude special items, as described below, totaling $0.08 and $0.18, respectively.
Excluding special items, adjusted earnings before interest, taxes and depreciation (“EBITDA”) were $163.7 million for the year ended December 31, 2009, compared to $200.5 million for full year 2008. Operating income for the year ended December 31, 2009 was $148.1 million compared to $174.6 million for the same period of 2008.
Franchising revenues declined $45.6 million or 15% from $300.3 million for the year ended December 31, 2008 to $254.7 million for the same period of the current year. Total revenues declined $77.5 million or 12% to $564.2 million for the year ended December 31, 2009 compared to the same period of the prior year.
Adjusted selling, general and administrative (“SG&A”) costs for full year 2009 totaled $91.9 million which represented a 9% decline from the same period of the prior year. Adjusted SG&A costs exclude special items totaling $7.3 million and $17.7 million for the year ended December 31, 2009 and 2008, respectively.
Interest and other investment income for the year ended December 31, 2009 improved by approximately $13.6 million from the same period of the prior year primarily due to the appreciation in the fair value of investments held in the company’s non-qualified employee benefit plans during the current period compared to a decline in the fair value of these investments in the prior year.
Domestic unit and room growth increased 4.0 percent and 3.9 percent, respectively, from December 31, 2008. Domestic system-wide revenue per available room (“RevPAR”) declined 14.4% for full year 2009 compared to full year 2008.
The effective royalty rate increased 6 basis points to 4.26% for the year ended December 31, 2009 compared to 4.20% for the same period of the prior year.
The company executed 369 new domestic hotel franchise contracts for the year ended December 31, 2009, a decline of 47% compared to the 698 contracts executed in the same period of the prior year.
The number of domestic hotels under construction, awaiting conversion or approved for development declined 26% from December 31, 2008 to 727 hotels representing 57,140 rooms; the worldwide pipeline declined 24% from December 31, 2008 to 843 hotels representing 66,585 rooms.
Fourth Quarter Results
Adjusted EPS for fourth quarter 2009 were $0.43 compared to $0.41 for the same period of the prior year. Diluted EPS were $0.40 for fourth quarter 2009 compared to $0.30 for fourth quarter 2008. Adjusted diluted EPS for fourth quarter 2009 and 2008 exclude certain special items, as described below, totaling $0.03 and $0.11, respectively.
Excluding special items, adjusted EBITDA were $39.7 million for the three months ended December 31, 2009, compared to $46.9 million for the same period of 2008. Operating income for both the three months ended December 31, 2009 and 2008 were $34.1 million.
Franchising revenues declined 13% from $71.3 million for the three months ended December 31, 2008 to $62.2 million for the same period of 2009. Total revenues for the three months ended December 31, 2009 declined 9% compared to the same period of 2008.
Adjusted SG&A costs for the fourth quarter of 2009 totaled $22.6 million which represented a 9% decline from the same period of the prior year. Adjusted SG&A costs exclude special items totaling $3.5 million and $10.8 million for the three months ended December 31, 2009 and 2008, respectively.
Interest and other investment income for the three months ended December 31, 2009 improved by approximately $5.0 million from the same period of the prior year primarily due to the appreciation in the fair value of investments held in the company’s non-qualified employee benefit plans during the current period compared to a decline in the fair value of these investments in the same period of the prior year.
Domestic system-wide revenue per available room (“RevPAR”) declined 14.4% for the fourth quarter of 2009 compared to the same period of 2008.
The effective royalty rate increased 7 basis points to 4.30% for the three months ended December 31, 2009 compared to 4.23% for the same period of the prior year.
The company executed 112 new domestic hotel franchise contracts for the three months ended December 31, 2009, a decline of 46% compared to the 207 contracts executed in the same period of the prior year.
“Despite operating in the midst of an incredibly difficult environment, which has resulted in industry-wide RevPAR declines and a significant decrease in domestic hotel transactions, the company has remained focused on returning value to our shareholders,” said Stephen P. Joyce, president and chief executive officer. “During 2009, we returned more than $100 million to our shareholders through a combination of share repurchases and dividends at a time when many other companies have reduced or eliminated their dividend and share repurchase programs. Additionally, we continued to build on our strong track record of domestic system growth on account of our well-known family of value-oriented brands. While the near-term domestic RevPAR and franchise sales environments remain challenging, we believe that our franchise business model, strong brands and strong balance sheet position us for long-term profitable growth and a continued ability to return value to our shareholders.”
Outlook for 2010
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 they relate to underlying assumptions for RevPAR, new hotel franchise and relicensing sales and interest and investment income and expense.
The company’s first quarter 2010 diluted EPS is expected to be $0.25. The company expects full-year 2010 diluted EPS to be between $1.65 and $1.70. EBITDA for full-year 2010 are expected to be between $166 million and $170 million. These estimates include the following assumptions:
– The company expects net domestic unit growth of approximately 2% in 2010;
– RevPAR is expected to decline approximately 12% for first quarter of 2010 and decline between 2% and 4% for full-year 2010;
– The effective royalty rate is expected to increase 6 basis points for full-year 2010;
– All figures assume the existing share count and an effective tax rate of 36.5% for the first quarter and full-year 2010;
– Projections assume that the company’s existing credit facility remains in place for full-year 2010.
TravelDailyNews Asia-Pacific editorial team has an experience of over 35 years in B2B travel journalism as well as in tourism & hospitality marketing and communications.
