Choice Hotels International Inc. (CHH, Financial) filed Quarterly Report for the period ended 2012-06-30.
Choice Hotels International, Inc. has a market cap of $2.39 billion; its shares were traded at around $41.37 with a P/E ratio of 19.9 and P/S ratio of 3.7. The dividend yield of Choice Hotels International, Inc. stocks is 1.8%. Choice Hotels International, Inc. had an annual average earning growth of 8.2% over the past 10 years. GuruFocus rated Choice Hotels International, Inc. the business predictability rank of 2-star.
The Company recorded net income of $31.9 million for the three month period ended June 30, 2012, a 16% increase from the $27.6 million for the quarter ended June 30, 2011. The increase in net income for the three months ended June 30, 2012 is primarily attributable to the $6.5 million or 14% increase in operating income partially offset by a $0.6 million increase in other income and expenses, net. The increase in other income and expenses, net is primarily due to a $0.4 million decline in the fair value of investments held in the Company's non-qualified benefit plans compared to a $38 thousand increase in the fair value of these investments in the prior year period. Operating income increased $6.5 million as the Company's franchising revenues for the three months ended June 30, 2012 increased $4.4 million or 6% from the same period of the prior year and SG&A expenses decreased $2.0 million or 7%.
Franchising Revenues: Franchising revenues were $135.0 million for the six months ended June 30, 2012 compared to $124.8 million for the six months ended June 30, 2011, an increase of 8%. The increase in franchising revenues is primarily due to an 8% increase in royalty fees, a 4% increase in initial franchise and relicensing fees and a $1.3 million increase in other income.
Total marketing and reservations revenues were $165.6 million and $153.8 million for the six months ended June 30, 2012 and 2011, respectively. Depreciation and amortization attributable to marketing and reservation activities was $7.0 million for the six months ended June 30, 2012 compared to $6.5 million for the six months ended June 30, 2011. Interest expense attributable to marketing and reservation activities was $2.2 million and $2.0 million for the six months ended June 30, 2012 and 2011, respectively.
The Company has invested the employee salary deferrals in diversified long-term investments which are intended to provide investment returns that partially offset the earnings credited to the participants. The diversified investments held in the trusts totaled $7.4 million and $14.2 million as of June 30, 2012 and December 31, 2011, respectively, and are recorded at their fair value, based on quoted market prices. At June 30, 2012, the Company expects $5.2 million of the assets held in the trust to be distributed to participants during the next twelve months. These investments are considered trading securities and therefore the changes in the fair value of the diversified assets is included in other gains and losses in the accompanying consolidated statements of income. The Company recorded investment gains during the six months ended June 30, 2012 and 2011 of approximately $1.1 million and $0.5 million, respectively. In addition, the EDCP Plan held shares of the Company's common stock at a market value of $0.1 million at June 30, 2012 which were recorded as a component of shareholders' deficit.
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Choice Hotels International, Inc. has a market cap of $2.39 billion; its shares were traded at around $41.37 with a P/E ratio of 19.9 and P/S ratio of 3.7. The dividend yield of Choice Hotels International, Inc. stocks is 1.8%. Choice Hotels International, Inc. had an annual average earning growth of 8.2% over the past 10 years. GuruFocus rated Choice Hotels International, Inc. the business predictability rank of 2-star.
Highlight of Business Operations:
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, 2012, royalty fees revenue totaled $66.1 million, a 7% increase from the same period in 2011. Operating income totaled $51.6 million for the three months ended June 30, 2012, a $6.5 million or 14% increase from the same period in 2011. Net income increased 16% from the same period of the prior year to $31.9 million. Diluted earnings per share for the quarter ended June 30, 2012 were $0.55 compared to $0.46 for the three months ended June 30, 2011. These measurements will continue to be a key management focus in 2012 and beyond.The Company recorded net income of $31.9 million for the three month period ended June 30, 2012, a 16% increase from the $27.6 million for the quarter ended June 30, 2011. The increase in net income for the three months ended June 30, 2012 is primarily attributable to the $6.5 million or 14% increase in operating income partially offset by a $0.6 million increase in other income and expenses, net. The increase in other income and expenses, net is primarily due to a $0.4 million decline in the fair value of investments held in the Company's non-qualified benefit plans compared to a $38 thousand increase in the fair value of these investments in the prior year period. Operating income increased $6.5 million as the Company's franchising revenues for the three months ended June 30, 2012 increased $4.4 million or 6% from the same period of the prior year and SG&A expenses decreased $2.0 million or 7%.
Franchising Revenues: Franchising revenues were $135.0 million for the six months ended June 30, 2012 compared to $124.8 million for the six months ended June 30, 2011, an increase of 8%. The increase in franchising revenues is primarily due to an 8% increase in royalty fees, a 4% increase in initial franchise and relicensing fees and a $1.3 million increase in other income.
Total marketing and reservations revenues were $165.6 million and $153.8 million for the six months ended June 30, 2012 and 2011, respectively. Depreciation and amortization attributable to marketing and reservation activities was $7.0 million for the six months ended June 30, 2012 compared to $6.5 million for the six months ended June 30, 2011. Interest expense attributable to marketing and reservation activities was $2.2 million and $2.0 million for the six months ended June 30, 2012 and 2011, respectively.
The Company has invested the employee salary deferrals in diversified long-term investments which are intended to provide investment returns that partially offset the earnings credited to the participants. The diversified investments held in the trusts totaled $7.4 million and $14.2 million as of June 30, 2012 and December 31, 2011, respectively, and are recorded at their fair value, based on quoted market prices. At June 30, 2012, the Company expects $5.2 million of the assets held in the trust to be distributed to participants during the next twelve months. These investments are considered trading securities and therefore the changes in the fair value of the diversified assets is included in other gains and losses in the accompanying consolidated statements of income. The Company recorded investment gains during the six months ended June 30, 2012 and 2011 of approximately $1.1 million and $0.5 million, respectively. In addition, the EDCP Plan held shares of the Company's common stock at a market value of $0.1 million at June 30, 2012 which were recorded as a component of shareholders' deficit.
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