Choice Hotels Reports First Quarter 2007 Diluted EPS Of $0.24, Domestic Unit Growth Of 4.5%

SILVER SPRING, Md., April 25 /PRNewswire-FirstCall/ -- Choice Hotels International, Inc., today reported the following highlights for the first quarter 2007:

-- Diluted earnings per share ("EPS") for first quarter 2007 were $0.24 compared to $0.26 in the same period of the prior year. Operating income for first quarter 2007 was $27.4 million compared to $30.1 million for first quarter 2006. First quarter 2007 results include termination benefits expense totaling $3.7 million (approximately $0.03 diluted EPS) resulting from previously announced separations of certain executive officers. -- Earnings before interest, taxes and depreciation ("EBITDA") were $29.5 million for first quarter 2007, including the termination benefits expense described above, compared to $32.4 million for first quarter 2006. -- Domestic unit growth increased 4.5 percent in first quarter 2007. -- Domestic system-wide revenue per available room (RevPAR) increased 1.4% for the first quarter of 2007 compared to 9.4% for the first quarter of 2006. The first quarter 2006 RevPAR results include the Hurricane Katrina-induced favorable impact on property-level performance in the southern regions of the United States. Domestic RevPAR for the company's mid-market brands (Comfort Inn, Comfort Suites and Sleep Inn) increased approximately 4% for the first quarter of 2007, with average daily rate increasing 5% for those brands. -- Executed 111 new domestic hotel franchise contracts with new construction contracts comprising 37% of executed agreements. -- The number of domestic hotels under construction, awaiting conversion or approved for development increased 28% to 833 hotels representing 64,078 rooms; the worldwide pipeline increased 25% to 903 hotels representing 70,541 rooms. -- Six domestic hotel franchise contracts were executed for the Cambria Suites brand during the first quarter of 2007, bringing the total to 49 executed since the brand introduction in early 2005. -- Franchising revenues increased 5% and total revenues increased 6% for first quarter 2007 compared to the same period of the prior year. -- Franchising margins for the three months ended March 31, 2007 were 51.0% compared to 59.1% for the first quarter of 2006. First quarter 2007 franchising margin reflects the impact of the $3.7 million of termination benefits described above and the commencement of direct franchising operations in continental Europe. -- The company purchased approximately 0.5 million shares of its common stock at an average price of $37.72 for a total cost of $17.8 million under its share repurchase program during the first quarter 2007.

"During our first quarter, we were very pleased with our net domestic unit growth and the continued significant interest in our Cambria Suites brand among hotel developers," said Charles A. Ledsinger, Jr., vice chairman and chief executive officer. "We recently surpassed the 50-contract milestone for the Cambria Suites brand, with the execution of franchise agreements to build two hotels in Toronto, the brand's first international properties. Across our entire family of brands, we see tremendous opportunities for growth in 2007. Additionally, we remain committed to returning value to our shareholders through a combination of share repurchases and dividends."

Items Affecting Comparability

Fourth Quarter 2006 Acquisition of Continental Europe Franchising Operations

During the fourth quarter of 2006, the company terminated the master franchising agreement covering continental Europe and acquired the direct franchising operations in this region from the former master franchisor. As a result of the acquisition, franchising revenues and selling, general and administrative costs for the three months ended March 31, 2007 increased approximately $0.7 million and $0.9 million, respectively, compared to first quarter 2006.

Outlook for 2007

The company's second quarter 2007 diluted EPS is expected to be $0.41. The company expects full year 2007 diluted EPS of $1.61. Earnings before interest, taxes, depreciation and amortization ("EBITDA") for full-year 2007 is expected to be approximately $187.5 million. These estimates include the following assumptions.

-- The company expects net domestic unit growth of approximately 4% in 2007; -- RevPAR is expected to increase approximately 3.5% for second quarter 2007 and approximately 4% for full-year 2007; -- The effective royalty rate is expected to increase 3 basis points for full-year 2007; -- All figures assume the existing share count and an effective tax rate of 36.7% for second quarter 2007 and 36% for full year 2007; -- All figures assume approximately $3.7 million ($0.03 diluted EPS) of termination benefits expense resulting from the previously announced separations of certain executive officers. Use of Free Cash Flow

The company has consistently used its free cash flow (cash flow from operations less capital expenditures) generated from its operations to return value to shareholders, primarily through share repurchases and dividends.

For the three months ended March 31, 2007, the company paid $9.9 million of cash dividends to shareholders. The annual dividend rate per common share is $0.60.

For the three months ended March 31, 2007, the company purchased approximately 0.5 million shares of its common stock at an average price of $37.72 for a total cost of $17.8 million under its share repurchase program. The company has authorization to purchase up to an additional 4.6 million shares under the share repurchase program. Repurchases will continue to be made in the open market and through privately negotiated transactions subject to market and other conditions. No minimum number of shares has been fixed. Since Choice announced its stock repurchase program on June 25, 1998, the company has repurchased 34.1 million shares of its common stock for a total cost of $729.7 million through March 31, 2007. Considering the effect of a two-for-one stock split in October 2005, the company has repurchased 67.1 million shares under the share repurchase program at an average price of $10.87 per share.

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.

Conference Call

Choice will conduct a conference call on Thursday, April 26, 2007 at 10:00 a.m. EDT to discuss the company's first quarter results. The call-in number to listen to the call is 1-888-400-7916. International callers should dial 703-925-2612. The conference call also will be Web cast simultaneously via the company's Web site, http://www.choicehotels.com/. Interested investors and other parties wishing to access the call on the Web should go to the Web site and click on the Investor Info link. The Investor Information page will feature a conference call microphone icon to access the call.

The audio of the call will be archived and available on http://www.choicehotels.com/ beginning at 1:30 p.m. EDT on April 26 and will be available through May 26 by calling 1-800-475-6701, access code 869362. International callers should dial 320-365-3844 and enter access code 869362.

About Choice Hotels

Choice Hotels International franchises more than 5,400 hotels, representing more than 440,000 rooms, in the United States and 39 countries and territories. As of March 31, 2007, 833 hotels are under development in the United States, representing 64,078 rooms, and an additional 70 hotels, representing 6,463 rooms, are under development in more than 15 countries and territories. The company's Cambria Suites, Comfort Inn, Comfort Suites, Quality, Clarion, Sleep Inn, Econo Lodge, Rodeway Inn, MainStay Suites and Suburban Extended Stay Hotel brands serve guests worldwide.

Additional corporate information may be found on Choice Hotels' Internet site, which may be accessed at http://www.choicehotels.com/.

Forward-Looking Statements

Certain matters discussed in this press release may constitute forward- looking statements within the meaning of the federal securities law. Such statements are based on management's beliefs, assumptions and expectations, which in turn are based on information currently available to management. Actual performance and results could differ from those expressed in or contemplated by the forward-looking statements due to a number of risks, uncertainties and other factors, many of which are beyond Choice's ability to predict or control. The company's Form 10-K for the year ended December 31, 2006 details some of the important risk factors that you should review.

Statement Concerning Non-GAAP Financial Measurements

Franchising revenues, franchising margins, and EBITDA are non-GAAP financial measurements. These financial measurements are presented as supplemental disclosures because they are used by management in reviewing and analyzing the company's performance. This information should not be considered as an alternative to any measure of performance as promulgated under accounting principles generally accepted in the United States (GAAP), such as total revenues, operating income, and operating margins. The company's calculation of these measurements may be different from the calculation used by other companies and therefore comparability may be limited. The company has included exhibits accompanying this release that reconcile these measures to the comparable GAAP measurement.

Cambria Suites, Comfort Inn, Comfort Suites, Quality, Clarion, Sleep Inn, MainStay Suites, Suburban Extended Stay Hotel, Econo Lodge, and Rodeway Inn are proprietary trademarks and service marks of Choice Hotels International, Inc.

2007 Choice Hotels International, Inc. All rights reserved. Exhibit 1 Choice Hotels International, Inc. Consolidated Statements of Income (Unaudited) Three Months Ended March 31, Variance 2007 2006 $ % (In thousands, except per share amounts) REVENUES: Royalty fees $43,328 $39,864 $3,464 9% Initial franchise and relicensing fees 4,931 5,643 (712) (13%) Brand solutions 2,986 2,782 204 7% Marketing and reservation 62,041 57,976 4,065 7% Hotel operations 1,096 980 116 12% Other 1,801 2,173 (372) (17%) Total revenues 116,183 109,418 6,765 6% OPERATING EXPENSES: Selling, general and administrative 23,900 18,275 5,625 31% Depreciation and amortization 2,115 2,349 (234) (10%) Marketing and reservation 62,041 57,976 4,065 7% Hotel operations 741 745 (4) (1%) Total operating expenses 88,797 79,345 9,452 12% Operating income 27,386 30,073 (2,687) (9%) OTHER INCOME AND EXPENSES: Interest expense 2,997 4,040 (1,043) (26%) Interest and other investment income (601) (704) 103 (15%) Equity in net income of affiliates (194) (258) 64 (25%) Total other income and expenses, net 2,202 3,078 (876) (28%) Income before income taxes 25,184 26,995 (1,811) (7%) Income taxes 8,869 9,330 (461) (5%) Net income $16,315 $17,665 $(1,350) (8%) Weighted average shares outstanding- basic 65,782 64,781 Weighted average shares outstanding- diluted 67,048 66,728 Basic earnings per share $0.25 $0.27 $(0.02) (7%) Diluted earnings per share $0.24 $0.26 $(0.02) (8%) Choice Hotels International, Inc. Exhibit 2 Consolidated Balance Sheets (In thousands) March 31, December 31, 2007 2006 (Unaudited) ASSETS Cash and cash equivalents $35,380 $35,841 Accounts receivable, net 37,406 41,694 Deferred income taxes 3,060 1,790 Other current assets 6,930 7,757 Total current assets 82,776 87,082 Fixed assets and intangibles, net 143,770 144,124 Receivable -- marketing fees 12,172 6,662 Investments, employee benefit plans, at fair value 35,415 31,529 Other assets 31,137 33,912 Total assets $305,270 $303,309 LIABILITIES AND SHAREHOLDERS' DEFICIT Current portion of long-term debt $146 $146 Other current liabilities 137,852 139,645 Total current liabilities 137,998 139,791 Long-term debt 184,370 172,390 Deferred compensation & retirement plan obligations 39,687 40,101 Other liabilities 13,704 13,407 Total liabilities 375,759 365,689 Total shareholders' deficit (70,489) (62,380) Total liabilities and shareholders' deficit $305,270 $303,309 Choice Hotels International, Inc. Exhibit 3 Consolidated Statements of Cash Flows (Unaudited) (In thousands) Three months ended March 31, 2007 2006 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $16,315 $17,665 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,115 2,349 Provision for bad debts (570) (409) Non-cash stock compensation and other charges 4,698 3,369 Non-cash interest and other income (319) (505) Dividends received from equity method investees 295 169 Equity in net income of affiliates (194) (258) Changes in assets and liabilities, net of acquisitions: Receivables 4,995 3,231 Receivable - marketing and reservation fees, net (7,131) (8,319) Accounts payable (1,046) 5,785 Accrued expenses and other (11,502) (8,665) Income taxes payable 3,914 708 Deferred income taxes 299 1,799 Deferred revenue 2,586 2,450 Other assets 897 808 Other liabilities 5,101 4,275 NET CASH PROVIDED BY OPERATING ACTIVITIES 20,453 24,452 CASH FLOWS FROM INVESTING ACTIVITIES: Investment in property and equipment (3,020) (1,193) Acquisitions, net of cash acquired (343) - Purchases of investments (4,496) (4,353) Proceeds from sales of investments 961 859 Issuance of notes receivable (131) (649) Collection of notes receivable 306 190 Other items, net (300) (228) NET CASH USED IN INVESTING ACTIVITIES (7,023) (5,374) CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments of long-term debt (36) (37) Net (repayments) borrowings pursuant to revolving credit facility 12,000 (14,800) Excess tax benefits from stock-based compensation 1,362 5,050 Purchase of treasury stock (19,001) (1,277) Dividends paid (9,895) (8,436) Proceeds from exercise of stock options 1,679 3,437 NET CASH USED IN FINANCING ACTIVITIES (13,891) (16,063) Net change in cash and cash equivalents (461) 3,015 Cash and cash equivalents at beginning of period 35,841 16,921 CASH AND CASH EQUIVALENTS AT END OF PERIOD $35,380 $19,936 CHOICE HOTELS INTERNATIONAL, INC. EXHIBIT 4 SUPPLEMENTAL OPERATING INFORMATION DOMESTIC HOTEL SYSTEM (UNAUDITED) For the Three Months Ended March 31, 2007 Average Daily Rate Occupancy RevPAR Comfort Inn $70.59 51.2% $36.11 Comfort Suites 83.28 56.8% 47.29 Sleep 64.17 51.9% 33.28 Midscale without Food & Beverage 72.46 52.4% 37.98 Quality 63.45 43.4% 27.54 Clarion 73.84 41.3% 30.48 Midscale with Food & Beverage 65.95 42.9% 28.27 Econo Lodge 49.42 39.2% 19.36 Rodeway 47.67 38.5% 18.37 Economy 49.06 39.0% 19.15 MainStay 65.90 58.2% 38.35 Suburban 38.67 63.6% 24.59 Extended Stay 44.11 62.4% 27.54 Total Domestic System $66.18 47.6% $31.52 For the Three Months Ended March 31, 2006 Average Daily Rate Occupancy RevPAR Comfort Inn $67.12 51.7% $34.70 Comfort Suites 79.18 58.8% 46.58 Sleep 62.00 51.8% 32.14 Midscale without Food & Beverage 68.98 53.1% 36.63 Quality 61.79 44.9% 27.77 Clarion 76.25 42.5% 32.44 Midscale with Food & Beverage 65.29 44.3% 28.95 Econo Lodge 48.54 39.0% 18.92 Rodeway 46.80 39.0% 18.23 Economy 48.23 39.0% 18.80 MainStay 65.31 57.0% 37.23 Suburban 36.97 69.3% 25.63 Extended Stay 41.64 66.9% 27.88 Total Domestic System $63.85 48.7% $31.08 Change Average Daily Rate Occupancy RevPAR Comfort Inn 5.2% -50 bps 4.1% Comfort Suites 5.2% -200 bps 1.5% Sleep 3.5% 10 bps 3.5% Midscale without Food & Beverage 5.0% -70 bps 3.7% Quality 2.7% -150 bps (0.8%) Clarion (3.2%) -120 bps (6.0%) Midscale with Food & Beverage 1.0% -140 bps (2.3%) Econo Lodge 1.8% 20 bps 2.3% Rodeway 1.9% -50 bps 0.8% Economy 1.7% 0 bps 1.9% MainStay 0.9% 120 bps 3.0% Suburban 4.6% -570 bps (4.1%) Extended Stay 5.9% -450 bps (1.2%) Total Domestic System 3.6% -110 bps 1.4% For the Quarter Ended 03/31/2007 03/31/2006 System-wide effective royalty rate 4.14% 4.07% CHOICE HOTELS INTERNATIONAL, INC. EXHIBIT 5 SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA (UNAUDITED) March 31, 2007 March 31, 2006 Hotels Rooms Hotels Rooms Comfort Inn 1,421 110,980 1,418 111,032 Comfort Suites 442 34,649 415 32,666 Sleep 330 24,772 322 24,384 Midscale without Food & Beverage 2,193 170,401 2,155 168,082 Quality 757 74,036 670 66,657 Clarion 161 23,881 151 23,157 Midscale with Food & Beverage 918 97,917 821 89,814 Econo Lodge 812 49,202 818 50,144 Rodeway 240 14,930 185 11,387 Economy 1,052 64,132 1,003 61,531 MainStay 30 2,237 27 2,047 Suburban 61 8,088 64 8,460 Extended Stay 91 10,325 91 10,507 Domestic Franchises 4,254 342,775 4,070 329,934 International Franchises 1,152 98,481 1,168 98,456 Total Franchises 5,406 441,256 5,238 428,390 Variance Hotels Rooms % % Comfort Inn 3 (52) 0.2% (0.0%) Comfort Suites 27 1,983 6.5% 6.1% Sleep 8 388 2.5% 1.6% Midscale without Food & Beverage 38 2,319 1.8% 1.4% Quality 87 7,379 13.0% 11.1% Clarion 10 724 6.6% 3.1% Midscale with Food & Beverage 97 8,103 11.8% 9.0% Econo Lodge (6) (942) (0.7%) (1.9%) Rodeway 55 3,543 29.7% 31.1% Economy 49 2,601 4.9% 4.2% MainStay 3 190 11.1% 9.3% Suburban (3) (372) (4.7%) (4.4%) Extended Stay - (182) 0.0% (1.7%) Domestic Franchises 184 12,841 4.5% 3.9% International Franchises (16) 25 (1.4%) 0.0% Total Franchises 168 12,866 3.2% 3.0% EXHIBIT 6 CHOICE HOTELS INTERNATIONAL, INC. SUPPLEMENTAL INFORMATION BY BRAND DEVELOPMENT RESULTS -- NEW HOTEL CONTRACTS (UNAUDITED) For the Three For the Three Months Ended Months Ended March 31, 2007 March 31, 2006 % Change New New New Con- Con Con- struc- Conver- struc- Conver- struc- Conver- tion sion Total tion sion Total tion sion Total Comfort Inn 5 3 8 15 13 28 (67%) (77%) (71%) Comfort Suites 14 1 15 12 - 12 17% NM 25% Sleep 8 - 8 3 - 3 167% NM 167% Midscale without Food & Beverage 27 4 31 30 13 43 (10%) (69%) (28%) Quality 1 35 36 2 25 27 (50%) 40% 33% Clarion 2 6 8 1 9 10 100% (33%) (20%) Midscale w/ Food & Beverage 3 41 44 3 34 37 0% 21% 19% Econo Lodge 1 13 14 - 9 9 NM 44% 56% Rodeway - 11 11 - 15 15 NM (27%) (27%) Economy 1 24 25 - 24 24 NM 0% 4% MainStay - - - 2 1 3 (100%) (100%)(100%) Suburban 4 1 5 3 - 3 33% NM 67% Extended Stay 4 1 5 5 1 6 (20%) 0% (17%) Cambria Suites 6 - 6 10 - 10 (40%) NM (40%) Total Domestic System 41 70 111 48 72 120 (15%) (3%) (8%) Exhibit 7 CHOICE HOTELS INTERNATIONAL, INC. DOMESTIC HOTEL 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. March 31, 2007 March 31, 2006 Units Units New New Con Con- Conver- struc- Conver- struc- sion tion Total sion tion Total Comfort Inn 35 120 155 46 95 141 Comfort Suites 3 232 235 2 181 183 Sleep Inn - 123 123 - 86 86 Midscale without Food & Beverage 38 475 513 48 362 410 Quality 74 9 83 61 11 72 Clarion 13 4 17 18 5 23 Midscale with Food & Beverage 87 13 100 79 16 95 Econo Lodge 45 5 50 28 7 35 Rodeway 57 2 59 44 - 44 Economy 102 7 109 72 7 79 MainStay - 30 30 1 32 33 Suburban 5 27 32 1 12 13 Extended Stay 5 57 62 2 44 46 Cambria Suites - 49 49 - 23 23 232 601 833 201 452 653 Variance New Conversion Construction Total Units % Units % Units % Comfort Inn (11) -24% 25 26% 14 10% Comfort Suites 1 50% 51 28% 52 28% Sleep Inn - NM 37 43% 37 43% Midscale without Food & Beverage (10) -21% 113 31% 103 25% Quality 13 21% (2) -18% 11 15% Clarion (5) -28% (1) -20% (6) -26% Midscale with Food & Beverage 8 10% (3) -19% 5 5% Econo Lodge 17 61% (2) -29% 15 43% Rodeway 13 30% 2 NM 15 34% Economy 30 42% - 0% 30 38% MainStay (1) -100% (2) -6% (3) -9% Suburban 4 400% 15 125% 19 146% Extended Stay 3 150% 13 30% 16 35% Cambria Suites - NM 26 113% 26 113% 31 15% 149 33% 180 28% CHOICE HOTELS INTERNATIONAL, INC. EXHIBIT 8 SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION (UNAUDITED) CALCULATION OF FRANCHISING REVENUES AND FRANCHISING MARGINS (dollar amounts in thousands) Three Months Ended March 31, 2007 2006 Franchising Revenues: Total Revenues $116,183 $109,418 Adjustments: Marketing and reservation revenues (62,041) (57,976) Hotel Operations (1,096) (980) Franchising Revenues $53,046 $50,462 Franchising Margins: Operating Margin: Total Revenues $116,183 $109,418 Operating Income* $27,386 $30,073 Operating Margin 23.6% 27.5% Franchising Margin: Franchising Revenues $53,046 $50,462 Operating Income* $27,386 $30,073 Less: Hotel Operations 355 235 $27,031 $29,838 Franchising Margins* 51.0% 59.1% EBITDA Reconciliation (in millions) Q1 2007 Q1 2006 Full-Year Actuals Actuals 2007 Outlook Operating Income (per GAAP)* $27.4 $30.1 $178.0 Depreciation and amortization 2.1 2.3 9.5 Earnings before interest, taxes, depreciation & amortization (non-GAAP) ("EBITDA")* $29.5 $32.4 $187.5 * 2007 Franchising margins, operating income and EBITDA include approximately $3.7 million of severance costs related to the previously announced termination of certain executive officers.