Choice Hotels International, Inc. (NYSE:CHH) today reported 2002 recurring net income of $62.0 million, or $1.55 recurring diluted earnings per share (EPS), a 24% increase in recurring EPS over the previous year. These results exceeded consensus estimates by $0.06.
The company reported recurring net income of $16.2 million for fourth quarter 2002, compared to $12.6 million for fourth quarter 2001. Recurring diluted EPS was $0.43 for fourth quarter 2002, compared to $0.29 for the same period in 2001.
The company`s recurring net income for 2002 excluded $1.1 million or $0.03 per share of non-recurring restructuring charges and losses on property dispositions. The company`s recurring 2001 results excluded $41.3 million, or $0.93 per share, of non-recurring restructuring charges and losses from its investment in Friendly Hotels. Excluding these charges, recurring net income increased 11.5%.
Net income for fourth quarter 2002 and the full year 2002 was $15.1 million and $60.8 million, respectively. Diluted EPS for fourth quarter 2002 and the full year 2002 were $0.40 and $1.52, respectively.
“Exceptionally strong unit growth was a prime driver in our 2002 performance,” said Charles A. Ledsinger, Jr., president and chief executive officer. “This continued strong demand for our brands underscores the value franchisees find in the products and services we deliver to their hotels.”
He added, “In addition to increasing demand, we are seeing a rise in the retention rate of franchisees as well as a measurable increase in franchisee satisfaction.”
Year-End & Fourth Quarter Performance: Net income for the fourth quarter and full twelve months of 2002 includes approximately $0.8 million and $1.6 million, respectively, of tax credits and state tax benefits. The net impact of these tax benefits was to increase diluted EPS by approximately $0.02 and $0.04 for the fourth quarter and full twelve months of 2002, respectively. Earnings before interest, taxes, depreciation and amortization (EBITDA) increased to $117.6 million, excluding restructuring charges of $1.6 million, for 2002, an increase of 2.5% over the $114.7 million, excluding $28.7 million of restructuring charges and Friendly Hotels impairment charges, for 2001. Recurring franchise EBITDA margins increased to 68.1% for 2002 from 67.0% for 2001. The company reported royalty revenues of $142.9 million for 2002, compared to $140.2 million for 2001, an increase of 1.9%. For fourth quarter 2002, royalty revenues increased 5.5% to $34.4 million, compared to $32.6 million for the same period in 2001. System-wide domestic
revenue per available room (RevPAR) was $34.48 in 2002, compared to $35.83 for 2001. For fourth quarter 2002, RevPAR was $32.46, compared to $32.50 for the same period a year ago. For the year 2002, the effective royalty rate increased 2 basis points from 3.95% to 3.97%.
2002 Unit Growth: In 2002, the total number of domestic Choice hotels on-line grew 4.7% to 3,482 from 3,327 for 2001. For the year, the total number of domestic hotel rooms increased 4.4% to 282,423 from 270,514 in 2001. Choice executed 304 new domestic hotel franchise contracts in 2002 and opened a total of 290 domestic hotels. At the end of 2002, Choice had 310 hotels under development in its domestic hotel system, representing 23,766 rooms. As of December 31, 2002, the total number of Choice hotels worldwide grew 2.6% to 4,664 from 4,545 as of the same date a year ago. This represents an increase of 3.1% in the number of rooms open of 373,722 from 362,549. At the end of 2002, Choice had 164 hotels under development in countries outside of the United States, representing 17,799 rooms.
First Quarter & Year 2003 Estimates: The company also announced that it expects first quarter 2003 diluted EPS to be in the range of $0.23 to $0.25 and full year 2003 diluted EPS in the range of $1.65 to $1.68.
Notable Events: Among the notable company events occurring since the previous earnings report: * Since Choice announced its stock repurchase program on June 25, 1998, the company has purchased 26.7 million shares of common stock at an average price of $16.44 per share and a total cost of $439.0 million, as of February 11, 2003. During calendar year 2002, the company purchased 5.4 million shares of common stock. Total shares outstanding as of December 31, 2002, are 37.2 million. The company repurchased approximately 1.4 million shares during the fourth quarter of 2002 at a total cost of $29.9 million.
* The company extended the contract of President and Chief Executive Officer Charles A. Ledsinger, Jr., for another four years to run through October 2006.
* Choice unveiled two new construction prototypes for its Econo Lodge brand, including one with an inn and suites option to provide rooms for more extended stays. These new designs offer developers more cost-efficient construction alternatives in the economy segment.
* David White was elected Vice President and Controller by the Board of Directors.
* The company named Brent Russell to serve as president and chief executive officer of Flag Choice Hotels, its consolidated subsidiary in Australia.
Choice Hotels International is the second-largest hotel franchisor in the world with 4,664 hotels open, representing 373,722 rooms, and another 310 hotels under development in the United States, representing 23,766 rooms, as of December 31, 2002. An additional 164 hotels, representing 17,799 rooms, are under development in 27 other countries as of December 31, 2002. Its Comfort, Quality, Clarion, Sleep Inn, Econo Lodge, Rodeway Inn and MainStay Suites brands serve guests worldwide.