Choice Hotels International Inc. (CHH, Financial) filed Quarterly Report for the period ended 2009-06-30.
Choice Hotels Int\'l. is one of the largest hotel franchise companies in the world with hotels inns all-suite hotels and resorts open and under development in countries across the globe under the brand names Comfort Quality Clarion Sleep Inn Rodeway Inn Econo Lodge and MainStay Suites. Choice Hotels International Inc. has a market cap of $1.77 billion; its shares were traded at around $29.25 with a P/E ratio of 17.2 and P/S ratio of 2.8. The dividend yield of Choice Hotels International Inc. stocks is 2.5%.
million. Since the programs inception through June 30, 2009, we have repurchased 42.1 million shares (including 33.0 million prior to the two-for-one stock split effected in October 2005) of common stock at a total cost of $985.5 million. Considering the effect of the two-for-one stock split, the Company has repurchased 75.1 million shares at an average price of $13.12. At June 30, 2009 the Company had remaining authorization to purchase up to 4.7 million shares under the current stock repurchase authorization of the board of directors. Upon completion of the current authorization, our board of directors will evaluate the propriety of additional share repurchases. During the six months ended June 30, 2009 we paid cash dividends totaling approximately $22.3 million and we presently expect to continue to pay dividends in the future, subject to future business performance, economic conditions and changes in income tax regulations. Based on our present dividend rate and outstanding share count, aggregate annual dividends for 2009 would be approximately $44.4 million.
Results of Operation: Royalty fees, operating income, net income and diluted earnings per share (EPS) represent key measurements of these value drivers. In the three months ended June 30, 2009, royalty fees revenue totaled $54.9 million, a 14% decrease from the same period in 2008. Operating income totaled $38.1 million for the three months ended June 30, 2009, a $6.5 million or 15% decline from the same period in 2008. Net income decreased $1.5 million or 6% from the same period of the prior year to $25.5 million. Diluted earnings per share for the quarter ended June 30, 2009 were $0.42 compared to $0.43 for the three months ended June 30, 2008. Results for the three months ended June 30, 2009 include charges to selling general and administrative (SG&A) expenses totaling $1.9 million (approximately $0.02 diluted EPS) resulting from a loss on sublease of office space and employee termination benefits. The results for the three months ended June 30, 2008 include charges to SG&A expenses totaling $6.4 million (approximately $0.06 diluted EPS) resulting from employee termination benefits and benefits paid due to the acceleration of the Companys management succession plan. These measurements will continue to be a key management focus in 2009 and beyond.
The Company recorded net income of $25.5 million for the three months ended June 30, 2009, a $1.5 million, or 6% decline from the $27.0 million for the quarter ended June 30, 2008. The decrease in net income for the three months ended June 30, 2009, is primarily attributable to a $6.5 million or 15% decline in operating income partially offset by lower effective borrowing rates and the appreciation in the fair value of investments held in the Companys non-qualified employee benefit plans compared to the prior year. Operating income declined $6.5 million as the Companys franchising revenues (total revenues excluding marketing and reservations revenues and hotel operations) declined $13.6 million or 17%. The decline in franchising revenues was primarily due to a 15.7% decline in RevPAR and fewer initial and relicensing fee contracts executed compared to the prior year. The decline in franchising revenues was partially offset by a $7.2 million or 21% decline in SG&A costs from the same period of the prior year. SG&A expenses for the three months ended June 30, 2008 included charges of $6.4 million resulting from employee termination benefits and benefits paid due to the acceleration of the Companys management succession plan. SG&A costs for the three months ended June 30, 2009 include charges totaling $1.9 million resulting from a loss on sublease of office space and employee termination benefits.
Franchising Revenues: Franchising revenues were $66.9 million for the three months ended June 30, 2009 compared to $80.5 million for the three months ended June 30, 2008. The decline in franchising revenues is primarily due to a 14% decrease in royalty revenues and a 51% decrease in initial franchise and relicensing fees. In addition, other income decreased by 44% for the three months ended June 30, 2009 compared to the three months ended June 30, 2008.
Domestic royalty fees for the three months ended June 30, 2009 decreased $6.9 million to $50.0 million from $56.9 million in the three months ended June 30, 2008, a decrease of 12%. The decline in royalties is attributable to a combination of factors including a 15.7% decline in RevPAR offset by a 4.5% increase in the number of domestic franchised hotel rooms and an increase in the effective royalty rate of the domestic system from 4.20% to 4.26%. System-wide RevPAR declined due to a 700 basis point decline in occupancy and a 4.1% decline in average daily rates.
Read the The complete ReportCHH is in the portfolios of Ron Baron of Baron Funds.
Choice Hotels Int\'l. is one of the largest hotel franchise companies in the world with hotels inns all-suite hotels and resorts open and under development in countries across the globe under the brand names Comfort Quality Clarion Sleep Inn Rodeway Inn Econo Lodge and MainStay Suites. Choice Hotels International Inc. has a market cap of $1.77 billion; its shares were traded at around $29.25 with a P/E ratio of 17.2 and P/S ratio of 2.8. The dividend yield of Choice Hotels International Inc. stocks is 2.5%.
Highlight of Business Operations:
The Companys outstanding unvested restricted stock awards contain rights to non-forfeitable dividends and as a result, the Company applied this guidance in the first quarter of 2009. The two-class method of calculating earnings per share is more dilutive to both basic and diluted shares outstanding than the previously utilized treasury stock method. In accordance with FSP EITF 03-6-1, the Company has retrospectively adjusted its basic and diluted shares outstanding for the three and six months ended June 30, 2008. Basic and diluted earnings per share for the three months ended June 30, 2008 remained unchanged; however, basic and diluted earnings per share for the six months ended June 30, 2008 were reduced from $0.74 to $0.73 and $0.73 to $0.72, respectively. Additionally, based on the implementation of FSP EITF 03-6-1, basic and diluted earnings per share for the year ended December 31, 2008 were reduced from $1.62 to $1.61 and $1.60 to $1.59 per share, respectively.million. Since the programs inception through June 30, 2009, we have repurchased 42.1 million shares (including 33.0 million prior to the two-for-one stock split effected in October 2005) of common stock at a total cost of $985.5 million. Considering the effect of the two-for-one stock split, the Company has repurchased 75.1 million shares at an average price of $13.12. At June 30, 2009 the Company had remaining authorization to purchase up to 4.7 million shares under the current stock repurchase authorization of the board of directors. Upon completion of the current authorization, our board of directors will evaluate the propriety of additional share repurchases. During the six months ended June 30, 2009 we paid cash dividends totaling approximately $22.3 million and we presently expect to continue to pay dividends in the future, subject to future business performance, economic conditions and changes in income tax regulations. Based on our present dividend rate and outstanding share count, aggregate annual dividends for 2009 would be approximately $44.4 million.
Results of Operation: Royalty fees, operating income, net income and diluted earnings per share (EPS) represent key measurements of these value drivers. In the three months ended June 30, 2009, royalty fees revenue totaled $54.9 million, a 14% decrease from the same period in 2008. Operating income totaled $38.1 million for the three months ended June 30, 2009, a $6.5 million or 15% decline from the same period in 2008. Net income decreased $1.5 million or 6% from the same period of the prior year to $25.5 million. Diluted earnings per share for the quarter ended June 30, 2009 were $0.42 compared to $0.43 for the three months ended June 30, 2008. Results for the three months ended June 30, 2009 include charges to selling general and administrative (SG&A) expenses totaling $1.9 million (approximately $0.02 diluted EPS) resulting from a loss on sublease of office space and employee termination benefits. The results for the three months ended June 30, 2008 include charges to SG&A expenses totaling $6.4 million (approximately $0.06 diluted EPS) resulting from employee termination benefits and benefits paid due to the acceleration of the Companys management succession plan. These measurements will continue to be a key management focus in 2009 and beyond.
The Company recorded net income of $25.5 million for the three months ended June 30, 2009, a $1.5 million, or 6% decline from the $27.0 million for the quarter ended June 30, 2008. The decrease in net income for the three months ended June 30, 2009, is primarily attributable to a $6.5 million or 15% decline in operating income partially offset by lower effective borrowing rates and the appreciation in the fair value of investments held in the Companys non-qualified employee benefit plans compared to the prior year. Operating income declined $6.5 million as the Companys franchising revenues (total revenues excluding marketing and reservations revenues and hotel operations) declined $13.6 million or 17%. The decline in franchising revenues was primarily due to a 15.7% decline in RevPAR and fewer initial and relicensing fee contracts executed compared to the prior year. The decline in franchising revenues was partially offset by a $7.2 million or 21% decline in SG&A costs from the same period of the prior year. SG&A expenses for the three months ended June 30, 2008 included charges of $6.4 million resulting from employee termination benefits and benefits paid due to the acceleration of the Companys management succession plan. SG&A costs for the three months ended June 30, 2009 include charges totaling $1.9 million resulting from a loss on sublease of office space and employee termination benefits.
Franchising Revenues: Franchising revenues were $66.9 million for the three months ended June 30, 2009 compared to $80.5 million for the three months ended June 30, 2008. The decline in franchising revenues is primarily due to a 14% decrease in royalty revenues and a 51% decrease in initial franchise and relicensing fees. In addition, other income decreased by 44% for the three months ended June 30, 2009 compared to the three months ended June 30, 2008.
Domestic royalty fees for the three months ended June 30, 2009 decreased $6.9 million to $50.0 million from $56.9 million in the three months ended June 30, 2008, a decrease of 12%. The decline in royalties is attributable to a combination of factors including a 15.7% decline in RevPAR offset by a 4.5% increase in the number of domestic franchised hotel rooms and an increase in the effective royalty rate of the domestic system from 4.20% to 4.26%. System-wide RevPAR declined due to a 700 basis point decline in occupancy and a 4.1% decline in average daily rates.
Read the The complete ReportCHH is in the portfolios of Ron Baron of Baron Funds.
