Choice Hotels International, Inc. (NYSE:CHH) today reported third quarter net income of $21.9 million, or $0.37 diluted earnings per share (EPS).
Included in the third quarter results was an after-tax gain of $7.2 million related to the early extinguishment of certain long-term debt obligations, which contributed $0.12 to diluted EPS. Diluted EPS before extraordinary item for third quarter 1998 was $0.25, a 25% increase over third quarter 1997 diluted EPS of $0.20.
Net income before extraordinary item was $14.7 million for third quarter 1998, a 23% increase over third quarter 1997 net income of $12.0 million
For the quarter, the company reported franchise-related revenues of $46.7 million, compared to $43.1 million for the same period in 1997. Franchise-related revenues exclude European hotel operations revenue. The company sold its European hotel operations to Friendly Hotels PLC in January 1998.
“Choice Hotels`s strong financial performance underscores the fundamental strength of our franchising business,” said Charles A. Ledsinger, Jr., president and chief executive officer. “We continue to demonstrate solid unit growth that benefits our franchisees and provides enhanced brand equity.”
He continued, “With a strong balance sheet, established hotel brands and industry-leading expertise in franchise development, Choice Hotels is well-positioned to capitalize on new opportunities in the industry moving forward.”
Year-to-date through September 30, 1998, the company reported franchise-related revenues of $123.2 million, compared to $116.2 million posted for the same nine-month period in 1997. Net income before extraordinary item for the first three quarters of 1998 was $35.9 million, a 28% increase over the $28.0 million posted for the same period in 1997. Diluted EPS before extraordinary item for the first three quarters of 1998 increased 33% to $0.60 per diluted share from the $0.45 per diluted share reported for the same period in 1997.
Royalty revenues for third quarter 1998 increased 5.6 % to $35.7 million from $33.8 million for the same period a year ago. Year-to-date through September 30, 1998, royalty revenues were $85.7 million, an 8.5 % increase over the $79.0 million recorded for the same period in 1997.
As of September 30, 1998, the total number of domestic Choice hotels on-line grew 6.0% to 3,024 from 2,852 as of the same date a year ago. As of September 30, 1998, the total number of domestic rooms increased 4.4 % to 251,415 from 240,908 as of the same date a year ago.
In the third quarter of this year, the company added 105 hotels and terminated 32 properties in its domestic system. The terminations reflect the company`s ongoing initiative to remove properties that do not meet Choice Hotels` strict quality standards.
As of September 30, 1998, the company had 792 franchised hotels with 68,759 rooms either in design or under construction in its domestic hotel system, compared to 719 franchised hotels with 61,560 rooms as of the same date a year ago. The company has an additional 577 franchised hotels with 36,098 rooms under development in its international system.
Notable Third Quarter Events:
* Appointment of Charles A. Ledsinger, Jr., as president and chief executive officer. A 20-year hotel industry veteran, Ledsinger most recently was president and chief operating officer of the St. Joe Company, Florida`s largest private landowner and a leading developer. Prior to that, he held senior executive positions with the Promus Companies and its predecessor, Holiday Inn.
* Continuation of the stock repurchase program announced June 25, 1998. The company has purchased 3.0 million shares of common stock during the year and has remaining authority to acquire up to 5.7 million shares.