SILVER SPRING, Maryland—Choice Hotels International Friday reported the following highlights for first quarter 2012:
•Diluted earnings per share ("EPS") for first quarter 2012 were $0.34 compared to adjusted diluted EPS of $0.28 for the first quarter of 2011. Adjusted diluted EPS for the first quarter of 2011 excludes certain special items, as described below, totaling $0.02. Diluted EPS were $0.26 for the three months ended March 31, 2011.
•Earnings before interest, taxes, depreciation and amortization ("EBITDA") increased 19% to $33.1 million for the three months ended March 31, 2012, compared to $27.7 million for the three months ended March 31, 2011. Operating income increased 21% from $25.7 million for the three months ended March 31, 2011 to $31.1 million for the same period of 2012.
•Franchising revenues increased 11% to $57.3 million for the three months ended March 31, 2012 from $51.5 million for the same period of 2011. Total revenues increased 12% to $129.2 million for the three months ended March 31, 2012 compared to the same period of 2011.
•Worldwide unit growth increased 0.8 percent from March 31, 2011 comprised of domestic and international unit growth of 0.7 percent and 0.9 percent, respectively.
•Domestic system-wide revenue per available room ("RevPAR") increased 8.6% for the three months ended March 31, 2012 compared to the same period of 2011 as occupancy and average daily rates increased 250 basis points and 2.5 percent, respectively.
•The company executed 64 new domestic hotel franchise contracts for the quarter ended March 31, 2012 compared to 56 new domestic hotel franchise contracts in the same period of the prior year, a 14% increase.
•The number of worldwide hotels under construction, awaiting conversion or approved for development as of March 31, 2012 was 471 hotels representing 38,210 rooms;
"Domestic RevPAR growth exceeded our expectations due to a combination of strong occupancy gains and increases in average daily rates," said Stephen P. Joyce, president and chief executive officer. "While the development environment continues to be challenging, we are pleased with the continued strengthening of leisure travel and the success of our programs designed to drive business through our central reservation channels which deliver guests at the highest average daily rates."
Special Items
During the three months ended March 31, 2011, the company reduced the carrying amount of a parcel of land held for sale resulting in a loss of $1.8 million included in other gains and losses. This amount represented diluted EPS of $0.02 for the three months ended March 31, 2011.
Outlook for 2012
The company's second quarter 2012 diluted EPS is expected to be $0.51. The company expects full-year 2012 diluted EPS to range between $2.03 and $2.08. EBITDA for full-year 2012 are expected to range between $200 million and $203 million. These estimates include the following assumptions:
•The company expects net domestic unit growth to be relatively flat in 2012;
•RevPAR is expected to increase approximately 7% for second quarter of 2012 and increase between approximately 5% and 7% for full-year 2012;
•The effective royalty rate is expected to increase 1 basis point for full-year 2012;
•All figures assume the existing share count and an effective tax rate of 34.5% for the second quarter and full-year 2012.
Use of Free Cash Flow
The company has historically used its free cash flow (cash flow from operations less capital expenditures) to return value to shareholders, primarily through share repurchases and dividends.
For the three months ended March 31, 2012, the company paid $10.7 million of cash dividends to shareholders. The current quarterly dividend rate per common share is $0.185, subject to declaration by our board of directors.
During the three months ended March 31, 2012, the company purchased approximately 0.3 million shares of its common stock at an average price of $36.81 for a total cost of $12.9 million under the share repurchase program. Subsequent to March 31, 2012 and through April 26, 2012, the company repurchased an additional 0.1 million shares for a total cost of $5.3 million at an average price of $37.28 and has authorization to purchase up to an additional 1.5 million shares under this program. We expect to continue making repurchases in the open market and through privately negotiated transactions, subject to market and other conditions. No minimum number of share repurchases has been fixed. Since Choice announced its stock repurchase program on June 25, 1998, the company has repurchased 45.1 million shares of its common stock for a total cost of $1.1 billion through March 31, 2012. Considering the effect of a two-for-one stock split in October 2005, the company had repurchased 78.1 million shares through March 31, 2012 under the share repurchase program at an average price of $13.83 per share.
Our board of directors previously authorized us to enter into programs which permit us to offer financing, investment and guaranty support to qualified franchisees as well as to acquire and resell real estate to incent franchise development for certain brands in strategic markets. Over the next several years, we expect to continue to opportunistically deploy capital pursuant to these programs to promote growth of our emerging brands. The amount and timing of the investment in these programs will be dependent on market and other conditions. Notwithstanding these programs, the company expects to continue to return value to its shareholders through a combination of share repurchases and dividends, subject to market and other conditions.
