SILVER SPRING, Md. (February 12, 2001) - Choice Hotels International, Inc. (NYSE:CHH) today reported 2000 recurring net income of $58.4 million, or $1.10 recurring diluted earnings per share (EPS), increases of 2.0% and 6.8% respectively, over the $57.2 million in recurring net income and $1.03 recurring diluted EPS reported for 1999. The company reported recurring net income of $14.8 million for the fourth quarter 2000, as well as fourth quarter 1999. Recurring diluted EPS was $0.28 for the fourth quarter 2000, compared to $0.27 for the same period a year ago. These results exclude certain charges related to previously announced actions, which are discussed below.
Net income for 2000, including the impact of the settlement of the Sunburst Hospitality receivable, a company-wide restructuring and Choice`s investment in Friendly Hotels plc, was $42.4 million or $0.80 diluted EPS, compared to $57.1 million in net income and $1.03 diluted EPS for 1999. For fourth quarter 2000, net income was $2.5 million or $0.05 diluted EPS, compared to $14.0 million and $0.26 for the same period a year ago.
Recurring earnings before interest, taxes, depreciation and amortization (EBITDA) increased to $109.7 million for the year, an increase of 7.7% over the $101.9 million for 1999. EBITDA margins increased to 65.5% for 2000 from 64.6% for 1999.
The company reported royalty revenues of $137.7 million for 2000, compared to $128.7 million for 1999, an increase of 7.0%. For fourth quarter 2000, royalty revenues were $35.1 million, a 6.0% increase overthe $33.1 million for the same period in 1999.
“2000 proved to be a pivotal year in getting the company better positioned for future growth” said Charles A. Ledsinger, Jr., president and chief executive officer. “The settlement of the Sunburst receivable strengthens our balance sheet considerably. As a result, we have more capability to build our core business and to capitalize on new development opportunities. We also continue to aggressively buy back shares of our common stock, with our Board authorizing an additional five million shares just last week.”
He added, “In our hotel franchising business, we enjoyed another good year for unit growth, executing almost 300 new domestic contracts and opening more than 300 new properties. In addition, we ended the year with nearly 500 projects under development.”
As previously disclosed, the company recorded certain charges in the fourth quarter related to the settlement of the Sunburst receivable, a corporate-wide restructuring and its investment in Friendly Hotels.
Choice recognized a $5.6 million charge related to the company`s domestic and international operations reorganization. The restructuring will improve service and support to its franchisees and create a more focused and competitive overhead structure. The restructuring charges also include the costs related to the termination of an in-room Internet initiative launched earlier in the year.
In January 2001, the company received from Sunburst approximately $102 million in cash and an 11-3/8% seven-year senior subordinated note in the amount of $35 million. For the year 2000, the company recognized a loss of $7.6 million on the monetization of the Sunburst note.
In Europe, Friendly Hotels plc announced a comprehensive restructuring program to strengthen its balance sheet, improve its operations and accelerate growth of its franchising business. Elements of the restructuring include a revaluation of its real estate portfolio, disposal of non-core assets, restructuring of its banking arrangements and certain commercial arrangements with Choice, and a strengthened management team. Choice recorded an equity loss of $12.1 million associated with this restructuring for the year 2000. The company is required to recognize changes in Friendly`s book value as an equity adjustment to its recorded investment.
Among the notable company events occurring since the previous earnings report:
* Authorization for an additional repurchase of up to five million shares of common stock. Since the Board first authorized a share repurchase program in October 1997, the company has repurchased approximately 16 million shares. Currently there are approximately 45 million shares of common stock outstanding.
* Selection of Arnold Worldwide/Washington as the company`s agency of record to create a new marketing campaign for the company`s hotel brands.