Choice Hotels International Reports A 17% Increase In Third Quarter Diluted Earnings Per Share

ROCKVILLE, Md., Oct. 27, 2016 (hospitalitybusinessnews.com) — Choice Hotels International, Inc. today reported the following highlights for the third quarter 2016:

  • Diluted earnings per share (“EPS”) for the three months ended September 30, 2016 totaled $0.84 per share, an increase of 17 percent from the same period of 2015.
  • Net income for the three months ended September 30, 2016 totaled $47.6 million, an increase of 15 percent from the same period of 2015.
  • Revenues for the three months ended September 30, 2016 totaled $267.6 million, an increase of 11 percent from the same period of 2015.
  • Franchising revenues for the three months ended September 30, 2016 totaled $113.1 million, an increase of 7 percent from the same period of 2015 and domestic system-wide gross room revenues for the three months ended September 30, 2016 totaled approximately $2.1 billion.
  • Domestic royalty fees for the three months ended September 30, 2016 totaled $90.7 million, an increase of 7 percent from the same period of 2015.
  • Domestic system-wide revenue per available room (“RevPAR”) increased 4.5 percent in the third quarter of 2016, as occupancy and average daily rates increased 70 basis points and 3.4 percent, respectively, from the same period of 2015.
  • Domestic RevPAR performance for the third quarter of 2016 exceeded total industry results by 120 basis points and also exceeded growth reported by Smith Travel Research for the primary chain scale segments in which the company competes.
  • Effective domestic royalty rate for the three months ended September 30, 2016 was 4.39 percent, an increase of 12 basis points from the same period of 2015.
  • Domestic hotel executed franchise agreements totaled 161 for the three months ended September 30, 2016, an increase of 25 percent from the same period of 2015, including a 13 percent and 30 percent increase in new construction and conversion agreements, respectively.
  • Comfort family of brands recorded its 24th consecutive month of RevPAR index gains compared to its competition and over the last two years the company has executed 162 new construction franchise agreements which is more than double the number of agreements executed in the prior two year period.
  • The company’s domestic pipeline of hotels awaiting conversion, under construction or approved for development as of September 30, 2016 increased 20 percent from September 30, 2015. The domestic new construction pipeline for the company’s Comfort brand as of September 30, 2016 totaled 180 hotels, a 30 percent increase from September 30, 2015.
  • Adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) from hotel franchising activities for the three months ended September 30, 2016 totaled $85.5 million, an increase of 5 percent over the prior year period.

“We are pleased with our results for the third quarter, which were highlighted by a 17 percent increase in diluted earnings per share and a 4.5% increase in our domestic RevPAR which continues to outpace the RevPAR performance of the industry,” said Stephen P. Joyce, chief executive officer, Choice Hotels. “In addition, our efforts to rejuvenate the Comfort brand are working, including the implementation of higher standards for hotels joining the brand, requiring meaningful property improvement plans at contract windows and targeting underperforming Comforts for termination and replacement with new construction product.  These efforts have resulted in 24 consecutive months of RevPAR index gains and are helping to fuel the growth of our new construction development pipeline.”During the nine months ended September 30, 2016, the company recorded an executive termination benefit charge of approximately $2.2 million. This special item impacted diluted EPS by $0.02 per share for the nine months ended September 30, 2016. The company uses non-GAAP measures that exclude executive termination benefits because those non-GAAP measures allow for period-over-period comparison of on-going core operations before the impact of these charges. These non-GAAP measures, which are reconciled to the comparable GAAP measures in Exhibit 8, include adjusted net income, adjusted diluted EPS, adjusted hotel franchising selling, general and administrative expenses, adjusted EBITDA and adjusted hotel franchising margins.

Use of Cash Flows

Dividends

During the nine months ended September 30, 2016, the company paid cash dividends totaling approximately $35 million. Based on the current quarterly dividend rate of $0.205 per common share, the company expects to pay dividends of approximately $46 million during 2016.

Share Repurchases

The company repurchased 0.6 million shares of common stock under its share repurchase program during the nine months ended September 30, 2016, at a total cost of approximately $29 million. The company currently has authorization to purchase up to 1.1 million additional shares under this program.

Hotel Development & Financing

Pursuant to its program to encourage acceleration of the growth of our upscale select-service Cambria hotels & suites brand, the company advanced approximately $78 million in support of the Cambria brand during the nine months ended September 30, 2016. The company also recycled approximately $25 million of investments in support of Cambria resulting in net advances of $53 million for the current year.  These advances are primarily in the form of joint venture investments, forgivable key money loans, senior and mezzanine lending and site acquisitions.  On September 30, 2016, the company had approximately $181 million reflected in its consolidated balance sheet pursuant to these financial support activities. With respect to lending and joint venture investments, the company generally expects to recycle these loans and investments within a five year period.

Outlook

The company’s consolidated 2016 outlook reflects the following assumptions:

Hotel Franchising

  • Adjusted EBITDA from franchising activities for full-year 2016 are expected to range between $272 million and $274 million;
  • Net domestic unit growth for 2016 is expected to be approximately 2%;
  • RevPAR is expected to increase between 4% and 5% for the fourth quarter and range between 3.5% and 4.25% for full-year 2016; and
  • The effective royalty rate is expected to increase between 10 and 11 basis points for full-year 2016 as compared to full-year 2015.

Non-Hotel Franchising Activities

  • Net reductions in full-year 2016 EBITDA relating to our non-hotel franchising operations, which primarily relate to SkyTouch and vacation rental activities are expected to range between approximately $18 million and $19 million.

Other Items

  • The effective tax rate is expected to be approximately 33% for the fourth quarter and approximately 31.5% for full-year 2016.
  • Adjusted EBITDA and adjusted EPS estimates exclude executive termination benefits incurred in the nine months ended September 30, 2016 as discussed above under Special Item.
  • Diluted EPS estimates are based on the current number of shares outstanding and thus do not factor in any changes that may occur due to new equity grants or any further repurchases of common stock under the company’s share repurchase program.

Consolidated Outlook

The company’s fourth quarter 2016 diluted EPS is expected to be at least $0.51. The company expects full-year 2016 adjusted diluted EPS to range between $2.43 and $2.46 and full year 2016 adjusted EBITDA to range between $253 million and $256 million.

Choice Hotels International, Inc.

Exhibit 1

Consolidated Statements of Income

(Unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

Variance

Variance

2016

2015

$

%

2016

2015

$

%

(In thousands, except per share amounts)

REVENUES:

Royalty fees

$              96,114

$              89,929

$     6,185

7%

$            247,168

$            233,543

$     13,625

6%

Initial franchise and relicensing fees

6,284

6,170

114

2%

17,146

17,703

(557)

(3%)

Procurement services

7,615

6,271

1,344

21%

23,719

19,667

4,052

21%

Marketing and reservation system

152,018

134,463

17,555

13%

412,193

366,298

45,895

13%

Other

5,546

4,693

853

18%

16,220

11,716

4,504

38%

      Total revenues

267,577

241,526

26,051

11%

716,446

648,927

67,519

10%

OPERATING EXPENSES:

Selling, general and administrative

34,357

30,152

4,205

14%

109,515

95,712

13,803

14%

Depreciation and amortization

2,986

3,108

(122)

(4%)

8,707

8,793

(86)

(1%)

Marketing and reservation system

152,018

134,463

17,555

13%

412,193

366,298

45,895

13%

Total operating expenses

189,361

167,723

21,638

13%

530,415

470,803

59,612

13%

Gain on sale of assets, net

402

402

NM

402

402

NM

Operating income

78,618

73,803

4,815

7%

186,433

178,124

8,309

5%

OTHER INCOME AND EXPENSES, NET:

Interest expense

11,150

10,821

329

3%

33,466

32,057

1,409

4%

Interest income

(836)

(359)

(477)

133%

(2,502)

(982)

(1,520)

155%

Other (gains) losses

(746)

1,402

(2,148)

(153%)

(1,005)

(239)

(766)

321%

Equity in net (income) loss of affiliates

(1,150)

(329)

(821)

250%

286

1,107

(821)

(74%)

Total other income and expenses, net

8,418

11,535

(3,117)

(27%)

30,245

31,943

(1,698)

(5%)

Income before income taxes

70,200

62,268

7,932

13%

156,188

146,181

10,007

7%

Income taxes

22,635

20,849

1,786

9%

48,638

47,355

1,283

3%

Net income

$              47,565

$              41,419

$     6,146

15%

$            107,550

$              98,826

$       8,724

9%

Basic earnings per share

$                  0.85

$                  0.72

$      0.13

18%

$                  1.91

$                  1.72

$        0.19

11%

Diluted earnings per share

$                  0.84

$                  0.72

$      0.12

17%

$                  1.90

$                  1.71

$        0.19

11%

Choice Hotels International, Inc.

Exhibit 2

Consolidated Balance Sheets

(In thousands, except per share amounts)

 September 30, 

 December 31, 

2016

2015

(Unaudited)

ASSETS

Cash and cash equivalents

$           205,953

$         193,441

Accounts receivable, net

129,422

89,352

Other current assets

36,554

28,160

Total current assets

371,929

310,953

Fixed assets and intangibles, net

178,078

179,433

Notes receivable, net of allowances

98,450

82,572

Investments in unconsolidated entities

83,740

67,037

Investments, employee benefit plans, at fair value

16,414

17,674

Other assets

97,665

59,341

Total assets

$           846,276

$         717,010

LIABILITIES AND SHAREHOLDERS’ DEFICIT

Accounts payable 

$              60,363

$            64,431

Accrued expenses and other current liabilities

75,880

70,807

Deferred revenue

121,592

71,587

Current portion of long-term debt

660

1,191

Total current liabilities

258,495

208,016

Long-term debt

866,247

812,945

Deferred compensation & retirement plan obligations  

20,890

22,859

Other liabilities

38,086

69,089

Total liabilities

1,183,718

1,112,909

Total shareholders’ deficit

(337,442)

(395,899)

Total liabilities and shareholders’ deficit

$           846,276

$         717,010

Choice Hotels International, Inc.

Exhibit 3

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

Nine Months Ended September 30,

2016

2015*

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$                  107,550

$              98,826

Adjustments to reconcile net income to net cash provided 

 by operating activities:

  Depreciation and amortization  

8,707

8,793

  Gain on disposal of assets

(377)

(1,519)

  Provision for bad debts, net

1,093

1,540

  Non-cash stock compensation and other charges

11,037

8,929

  Excess tax benefits from stock-based compensation

2,149

4,885

  Non-cash interest and other loss

807

3,168

  Deferred income taxes

(4,329)

(1,799)

  Equity in net losses from unconsolidated joint ventures less distributions received

1,654

2,917

Changes in assets and liabilities, net of acquisition:

  Receivables

(42,426)

(24,532)

  Advances to/from marketing and reservation activities, net

(25,783)

18,341

  Forgivable notes receivable, net

(15,109)

(21,029)

  Accounts payable

(3,532)

5,111

  Accrued expenses and other current liabilities

(14,261)

(14,083)

  Income taxes payable/receivable

19,219

11,066

  Deferred revenue

49,976

2,122

  Other assets

(9,958)

(4,826)

  Other liabilities

1,992

5,748

 NET CASH PROVIDED BY OPERATING ACTIVITIES 

88,409

103,658

CASH FLOWS FROM INVESTING ACTIVITIES:

Investment in property and equipment

(17,584)

(21,810)

Proceeds from sales of assets

8,360

6,347

Acquisitions of real estate

(25,263)

(8,767)

Business acquisiton, net of cash acquired

(1,341)

(13,269)

Contributions to equity method investments

(24,179)

(3,811)

Distributions from equity method investments

3,700

270

Purchases of investments, employee benefit plans

(1,430)

(2,977)

Proceeds from sales of investments, employee benefit plans

1,395

2,920

Issuance of mezzanine and other notes receivable

(20,281)

(25,253)

Collections of mezzanine and other notes receivable

11,040

3,697

Other items, net

(422)

(445)

 NET CASH USED BY INVESTING ACTIVITIES 

(66,005)

(63,098)

CASH FLOWS FROM FINANCING ACTIVITIES:

Net borrowings pursuant to revolving credit facilities

52,814

162,032

Principal payments on long-term debt

(836)

(130,194)

Proceeds from the issuance of long-term debt

176

Debt issuance costs

(284)

(2,169)

Purchases of treasury stock

(33,958)

(56,450)

Dividends paid

(34,690)

(34,173)

Proceeds from exercise of stock options

6,802

6,381

 NET CASH USED BY FINANCING ACTIVITIES

(10,152)

(54,397)

Net change in cash and cash equivalents

12,252

(13,837)

Effect of foreign exchange rate changes on cash and cash equivalents

260

(1,781)

Cash and cash equivalents at beginning of period

193,441

214,879

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$                  205,953

$            199,261

* Year to date results for September 30, 2015 reflect the adoption of ASU No. 2016-09, which requires companies to recognize excess tax benefits related to the exercise of share based awards as operating activities in the statement of cash flows.  The company has elected to apply the ASU retrospectively and as a result excess tax benefits totaling $4.9 million for the nine months  ended September 30, 2015 have been reclassified from cash flows from financing activities to cash flows from operating activities.

CHOICE HOTELS INTERNATIONAL, INC.

Exhibit 4

SUPPLEMENTAL OPERATING INFORMATION 

DOMESTIC HOTEL SYSTEM

(UNAUDITED)

For the Nine Months Ended September 30, 2016

For the Nine Months Ended September 30, 2015

Change

Average Daily

Average Daily

Average Daily

Rate

Occupancy

RevPAR

Rate

Occupancy

RevPAR

Rate

Occupancy

RevPAR

Comfort Inn

$             93.78

67.2%

$          63.00

$             90.65

66.8%

$         60.52

3.5%

40

bps

4.1%

Comfort Suites

97.44

70.8%

69.01

94.83

69.9%

66.25

2.8%

90

bps

4.2%

Sleep

83.09

66.4%

55.14

81.34

65.7%

53.45

2.2%

70

bps

3.2%

Quality

78.97

60.8%

48.00

76.02

60.2%

45.75

3.9%

60

bps

4.9%

Clarion

83.67

59.7%

49.95

80.93

58.9%

47.68

3.4%

80

bps

4.8%

Econo Lodge

62.33

55.3%

34.47

60.44

55.1%

33.30

3.1%

20

bps

3.5%

Rodeway

64.14

57.3%

36.74

60.56

58.5%

35.44

5.9%

(120)

bps

3.7%

MainStay

77.34

66.2%

51.18

78.03

69.7%

54.35

(0.9%)

(350)

bps

(5.8%)

Suburban

50.15

76.0%

38.11

47.75

77.0%

36.78

5.0%

(100)

bps

3.6%

Ascend Hotel Collection

130.34

59.0%

76.95

127.38

59.9%

76.34

2.3%

(90)

bps

0.8%

Total 

$             83.22

63.1%

$          52.50

$             80.77

62.9%

$         50.79

3.0%

20

bps

3.4%

For the Three Months Ended September 30, 2016

For the Three Months Ended September 30, 2015

Change

Average Daily

Average Daily

Average Daily

Rate

Occupancy

RevPAR

Rate

Occupancy

RevPAR

Rate

Occupancy

RevPAR

Comfort Inn

$           100.02

73.4%

$          73.41

$             96.35

73.2%

$         70.54

3.8%

20

bps

4.1%

Comfort Suites

100.95

74.6%

75.35

98.06

73.2%

71.79

2.9%

140

bps

5.0%

Sleep

86.59

70.6%

61.15

84.44

69.1%

58.31

2.5%

150

bps

4.9%

Quality

84.31

66.4%

55.96

80.80

65.3%

52.79

4.3%

110

bps

6.0%

Clarion

88.98

66.4%

59.08

85.46

63.9%

54.61

4.1%

250

bps

8.2%

Econo Lodge

67.44

60.9%

41.08

65.32

60.1%

39.27

3.2%

80

bps

4.6%

Rodeway

69.72

62.3%

43.45

66.00

63.7%

42.02

5.6%

(140)

bps

3.4%

MainStay

79.91

71.5%

57.13

81.26

71.8%

58.36

(1.7%)

(30)

bps

(2.1%)

Suburban

51.09

78.2%

39.96

48.77

78.1%

38.09

4.8%

10

bps

4.9%

Ascend Hotel Collection

138.97

63.0%

87.50

134.88

60.1%

81.07

3.0%

290

bps

7.9%

Total 

$             88.27

68.4%

$          60.39

$             85.38

67.7%

$         57.80

3.4%

70

bps

4.5%

For the Quarter Ended

For the Nine Months Ended

9/30/2016

9/30/2015

9/30/2016

9/30/2015

System-wide effective royalty rate

4.39%

4.27%

4.39%

4.28%

CHOICE HOTELS INTERNATIONAL, INC.

Exhibit 5

SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA

(UNAUDITED)

September 30, 2016

September 30, 2015

Variance

Hotels

Rooms

Hotels

Rooms

Hotels

Rooms

%

%

Comfort Inn

1,126

87,346

1,188

92,029

(62)

(4,683)

(5.2%)

(5.1%)

Comfort Suites

565

43,610

574

44,311

(9)

(701)

(1.6%)

(1.6%)

Sleep

378

27,035

374

26,913

4

122

1.1%

0.5%

Quality

1,407

111,564

1,325

105,950

82

5,614

6.2%

5.3%

Clarion

164

22,456

176

24,626

(12)

(2,170)

(6.8%)

(8.8%)

Econo Lodge

853

52,773

854

52,963

(1)

(190)

(0.1%)

(0.4%)

Rodeway

526

30,058

488

27,095

38

2,963

7.8%

10.9%

MainStay

54

4,020

48

3,656

6

364

12.5%

10.0%

Suburban

58

6,471

63

7,065

(5)

(594)

(7.9%)

(8.4%)

Ascend Hotel Collection

119

9,761

112

9,407

7

354

6.3%

3.8%

Cambria hotel & suites

25

3,113

24

2,917

1

196

4.2%

6.7%

Domestic Franchises

5,275

398,207

5,226

396,932

49

1,275

0.9%

0.3%

International Franchises

1,144

110,945

1,153

107,425

(9)

3,520

(0.8%)

3.3%

Total Franchises

6,419

509,152

6,379

504,357

40

4,795

0.6%

1.0%

Exhibit 6

CHOICE HOTELS INTERNATIONAL, INC.

SUPPLEMENTAL INFORMATION BY BRAND

DEVELOPMENT RESULTS — DOMESTIC NEW HOTEL CONTRACTS

(UNAUDITED)

For the Nine Months Ended September 30, 2016

For the Nine Months Ended September 30, 2015

% Change

New

New

New

Construction

Conversion

Total

Construction

Conversion

Total

Construction

Conversion

Total

Comfort Inn

20

26

46

17

28

45

18%

(7%)

2%

Comfort Suites

17

1

18

18

3

21

(6%)

(67%)

(14%)

Sleep

26

1

27

19

19

37%

NM

42%

Quality

118

118

3

114

117

(100%)

4%

1%

Clarion

3

15

18

7

7

NM

114%

157%

Econo Lodge

1

41

42

39

39

NM

5%

8%

Rodeway

60

60

57

57

NM

5%

5%

MainStay

15

15

16

16

(6%)

NM

(6%)

Suburban

1

1

1

4

5

(100%)

(75%)

(80%)

Ascend Hotel Collection

2

15

17

3

22

25

(33%)

(32%)

(32%)

Cambria hotel & suites

16

16

14

2

16

14%

(100%)

0%

Total Domestic System

100

278

378

91

276

367

10%

1%

3%

For the Three Months Ended September 30, 2016

For the Three Months Ended September 30, 2015

% Change

New

New

New

Construction

Conversion

Total

Construction

Conversion

Total

Construction

Conversion

Total

Comfort Inn

8

12

20

4

8

12

100%

50%

67%

Comfort Suites

9

9

5

1

6

80%

(100%)

50%

Sleep

12

1

13

10

10

20%

NM

30%

Quality

45

45

39

39

NM

15%

15%

Clarion

6

6

1

1

NM

500%

500%

Econo Lodge

12

12

11

11

NM

9%

9%

Rodeway

33

33

22

22

NM

50%

50%

MainStay

9

9

10

10

(10%)

NM

(10%)

Suburban

1

1

NM

(100%)

(100%)

Ascend Hotel Collection

9

9

2

6

8

(100%)

50%

13%

Cambria hotel & suites

5

5

7

2

9

(29%)

(100%)

(44%)

Total Domestic System

43

118

161

38

91

129

13%

30%

25%

Exhibit 7

CHOICE HOTELS INTERNATIONAL, INC.

DOMESTIC PIPELINE OF HOTELS UNDER CONSTRUCTION, AWAITING CONVERSION OR APPROVED FOR DEVELOPMENT

(UNAUDITED)

A hotel in the domestic pipeline does not always result in an open and operating hotel due to various factors.

Variance

September 30, 2016

September 30, 2015

Units

Units

Conversion

New Construction

Total

Conversion

New
Construction

Total

Conversion

New
Construction

Total

Units

%

Units

%

Units

%

Comfort Inn

39

83

122

39

63

102

0%

20

32%

20

20%

Comfort Suites

3

97

100

1

75

76

2

200%

22

29%

24

32%

Sleep Inn

1

89

90

72

72

1

NM

17

24%

18

25%

Quality

57

3

60

56

5

61

1

2%

(2)

(40%)

(1)

(2%)

Clarion

11

5

16

9

2

11

2

22%

3

150%

5

45%

Econo Lodge

28

3

31

26

4

30

2

8%

(1)

(25%)

1

3%

Rodeway

45

1

46

44

2

46

1

2%

(1)

(50%)

0%

MainStay

66

66

1

54

55

(1)

(100%)

12

22%

11

20%

Suburban

5

6

11

4

10

14

1

25%

(4)

(40%)

(3)

(21%)

Ascend Hotel Collection

33

17

50

21

18

39

12

57%

(1)

(6%)

11

28%

Cambria hotel & suites

5

52

57

2

32

34

3

150%

20

63%

23

68%

227

422

649

203

337

540

24

12%

85

25%

109

20%

CHOICE HOTELS INTERNATIONAL, INC.

Exhibit 8

SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION

(UNAUDITED)

HOTEL FRANCHISING REVENUES AND ADJUSTED HOTEL FRANCHISING MARGINS

(dollar amounts in thousands)

Three Months Ended September 30, 

Nine Months Ended September 30, 

2016

2015

2016

2015

Hotel Franchising Revenues:

Total Revenues

$              267,577

$               241,526

$               716,446

$              648,927

Adjustments:

     Marketing and reservation system revenues

(152,018)

(134,463)

(412,193)

(366,298)

     Non-hotel franchising activities

(2,424)

(1,459)

(6,521)

(2,473)

Hotel Franchising Revenues

$              113,135

$               105,604

$               297,732

$              280,156

Adjusted Hotel Franchising Margins:

Operating Margin:

Total Revenues

$              267,577

$               241,526

$               716,446

$              648,927

Operating Income

$                78,618

$                 73,803

$               186,433

$              178,124

     Operating Margin

29.4%

30.6%

26.0%

27.4%

Adjusted Hotel Franchising Margin:

Hotel Franchising Revenues

$              113,135

$               105,604

$               297,732

$              280,156

Operating Income

$                78,618

$                 73,803

$               186,433

$              178,124

Executive termination benefits

2,206

Non-hotel franchising activities operating loss

5,400

5,034

17,140

15,322

Adjusted Hotel Franchising Operating Income

$                84,018

$                 78,837

$               205,779

$              193,446

     Adjusted Hotel Franchising Margins

74.3%

74.7%

69.1%

69.0%

ADJUSTED HOTEL FRANCHISING SELLING, GENERAL AND ADMINISTRATION EXPENSES

(dollar amounts in thousands)

Three Months Ended September 30, 

Nine Months Ended September 30, 

2016

2015

2016

2015

Total Selling, General and Administrative Expenses

$                34,357

$                 30,152

$               109,515

$                95,712

Executive termination benefits

(2,206)

Non-hotel franchising activities

(6,723)

(5,724)

(20,438)

(16,145)

Adjusted Hotel Franchising Selling, General and Administration Expenses

$                27,634

$                 24,428

$                 86,871

$                79,567

ADJUSTED EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION (“EBITDA”)

(dollar amounts in thousands)

Three Months Ended September 30, 

Nine Months Ended September 30, 

2016

2015

2016

2015

Net income

$                47,565

$                 41,419

$               107,550

$                98,826

Income taxes

22,635

20,849

48,638

47,355

Interest expense

11,150

10,821

33,466

32,057

Interest income

(836)

(359)

(2,502)

(982)

Other (gains) losses

(746)

1,402

(1,005)

(239)

Equity in net (income) loss of affiliates

(1,150)

(329)

286

1,107

Gain on sale of assets

(402)

(402)

Depreciation and amortization

2,986

3,108

8,707

8,793

Executive termination benefits

2,206

Adjusted EBITDA

$                81,202

$                 76,911

$               196,944

$              186,917

Hotel franchising 

$                85,500

$                 81,177

$               210,861

$              200,589

Non-hotel franchising activities

(4,298)

(4,266)

(13,917)

(13,672)

$                81,202

$                 76,911

$               196,944

$              186,917

ADJUSTED NET INCOME AND ADJUSTED DILUTED EARNINGS PER SHARE (EPS)

(dollar amounts in thousands, except per share amounts)

Three Months Ended September 30, 

Nine Months Ended September 30, 

2016

2015

2016

2015

Net Income

$                47,565

$                 41,419

$               107,550

$                98,826

Adjustments:

Executive termination benefits, net of income taxes

1,394

Adjusted Net Income

$                47,565

$                 41,419

$               108,944

$                98,826

Diluted Earnings Per Share

$                   0.84

$                     0.72

$                     1.90

$                   1.71

Adjustments:

Executive termination benefits

0.02

Adjusted Diluted Earnings Per Share (EPS)

$                   0.84

$                     0.72

$                     1.92

$                   1.71

ADJUSTED EBITDA AND DILUTED EPS FULL YEAR FORECAST

(dollar amounts in thousands)

Range

Estimated Adjusted EBITDA

Fiscal Year 2016

Net income

$              135,000

$               137,100

Income taxes

63,100

64,000

Interest expense

45,100

45,100

Interest income

(3,300)

(3,300)

Gain on sale of assets

(400)

(400)

Other gains

(1,000)

(1,000)

Equity in net loss of affiliates

500

500

Depreciation and amortization

11,800

11,800

Executive termination benefits

2,200

2,200

Adjusted EBITDA

$              253,000

$               256,000

Hotel franchising 

$              272,000

$               274,000

Non-hotel franchising activities

(19,000)

(18,000)

$              253,000

$               256,000

Range

Estimated Adjusted Diluted EPS

Fiscal Year 2016

Diluted EPS

$                   2.41

$                     2.44

Adjustments:

Executive termination benefits

0.02

0.02

Adjusted Diluted EPS

$                   2.43

$                     2.46

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