Press Releases

Choice Hotels Reports 2nd Quarter Recurring Net Income of $14.3 Million; Recurring Diluted EPS of $0.27
PRNewswire
SILVER SPRING, Md.

Choice Hotels International, Inc. today reported second quarter 2000 recurring net income of $14.3 million, or $0.27 recurring diluted earnings per share (EPS), compared to the $14.5 million in recurring net income and $0.26 recurring diluted EPS reported for second quarter 1999.

"Although our second quarter growth was essentially flat, we are encouraged by our strong domestic RevPAR performance and the almost 10% growth in royalty revenues," said Charles A. Ledsinger, Jr., president and chief executive officer. "The margins, however, were negatively impacted by costs associated with our various Internet initiatives and severance costs associated with the recent outsourcing of the company's information technology support function."

He continued, "We are enjoying a strong summer season, setting new records for the revenues booked through Choice 2001, our central reservations system. In fact, for the first time ever, we exceeded the $7 million mark for a single day three times and recorded 29 days exceeding $6 million, more than double the number of $6 million days in the previous year. Bookings through Choice's web site have generated more than $43 million in the first six months of this year, a 130% increase over the same period a year ago."

The company reported royalty revenues of $34.3 million for second quarter 2000, compared to $31.3 million for second quarter 1999, an increase of 9.8%. Domestic revenue per available room (RevPAR) increased 5.6% from $35.47 in second quarter 1999 to $37.47 in the quarter just ended.

For the first six months of 2000, Choice reported recurring net income of $24.2 million or $0.45 recurring diluted EPS versus recurring net income of $24.1 million and $0.43 recurring diluted EPS reported for the first six months of 1999.

Royalty revenues for the first half of 2000 increased 7.5% to $59.2 million from the $55.1 million for the same period a year ago. The system- wide domestic effective royalty rate increased eight basis points for the first six months of 2000 to 3.71% from 3.63% for the same period a year ago. Domestic RevPAR also was up 3.3% from $31.23 for the first half of 1999 to $32.27 for the first six months of 2000.

System Growth

As of June 30, 2000, the total number of Choice hotels worldwide on-line grew 5.3% to 4,303 from 4,088 as of the same date a year ago. As of the same date, the total number of rooms worldwide increased 4.9% to 343,511 from 327,505 as of the same date a year ago.

As of June 30, 2000, the company had 685 franchised hotels with 58,191 rooms either in design or under construction in its worldwide hotel system.

Friendly Investment

Choice is continuing to review its strategic options with respect to its investment in Friendly Hotels plc, the company's master franchisor for the United Kingdom, Ireland and continental Europe. Such options may include discussions with the board of Friendly, which may lead to a capital restructuring of Friendly and amendments to the master franchise agreement with Choice.

It is possible that such actions could result in a write down or deferral of certain amounts due to Choice and other Choice assets related to Friendly, which currently represent a total net investment of approximately $48 million. Any write down or deferral so made is not expected to be material to Choice's cash flow or financial condition.

Sunburst Agreement

Choice and Sunburst Hospitality Corporation exercised their rights under a previously negotiated "put/call" agreement related to three of Sunburst's MainStay Suites hotels. Sunburst will transfer title to these properties to Choice as consideration for $16.3 million of the $149 million amount due to Choice under Sunburst's subordinated note. The fair market value of these assets is approximately $12.2 million. Accordingly, Choice has recognized a pre-tax loss on early prepayment of note of $4.1 million in the quarter ended June 30, 2000.

Notable Events

Among the notable company events occurring since the previous earnings report:

  * Continuation of the stock repurchase program announced June 25, 1998.
    The company has purchased 8.7 million shares of common stock at a total
    cost of $123.6 million, as of July 27, 2000, and has remaining authority
    to acquire up to 5.1 million shares.

  * ChoiceBuys.com, the company's on-line purchasing system for franchisees,
    was named one of the 200 most promising business-to-business (B2B) web
    sites by Forbes.com in its first annual Best of the Web:B2B guide.

  * Promoted Daniel Rothfeld to senior vice president, e-commerce and
    emerging business opportunities, and named Thomas F. Hall vice president
    of emerging brands.

Choice Hotels International is the second-largest hotel franchisor in the world with 4,303 hotels open, representing 343,511 rooms, and another 685 hotels under development, representing 58,191 rooms, in 39 countries, as of June 30, 2000. Its Comfort, Quality, Clarion, Sleep Inn, Econo Lodge, Rodeway Inn and MainStay Suites brands serve guests worldwide.

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. For further information on factors that could impact Choice and the statements contained therein, we refer you to the filings made by Choice with the Securities and Exchange Commission, including its registration statement on Form S-4 and report on Form 10-Q for the period ended June 30, 1999.

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

Comfort, Quality, Clarion, Sleep Inn, Econo Lodge, Rodeway Inn, MainStay Suites and ChoiceBuys.com are registered trademarks and service marks of Choice Hotels International Inc.

  Choice Hotels International, Inc.
  Consolidated Balance Sheets


  (In thousands)                                  June 30,    December 31,
                                                    2000           1999
                                                 (Unaudited)

  ASSETS

  Cash and cash equivalents                        $17,573        $11,850
  Other current assets                              30,958         30,072
  Total current assets                              48,531         41,922

  Fixed assets and intangibles, net                165,538        166,062
  Note receivable from
   Sunburst Hospitality, net                       145,421        141,853
  Investments and other                            136,222        114,821

     Total assets                                  495,712        464,658

     LIABILITIES

  Current portion of long-term debt                 49,446         44,646
  Other current liabilities                         33,530         45,012
    Total current liabilities                       82,976         89,658

  Long-term debt                                   286,719        262,710
  Deferred income taxes and other                   54,466         46,674

    Total liabilities                              424,161        399,042

    Total shareholders' equity                      71,551         65,616

     Total liabilities and shareholders' equity   $495,712       $464,658



  Choice Hotels International, Inc.
  Consolidated Statements of Income
  (Unaudited)

  (In thousands, except per share amounts)

                           Three Months Ended           Six Months Ended
                         June 30,      June 30,      June 30,      June 30,
  Revenues                 2000          1999          2000         1999

  Royalty fees           $34,328       $31,274      $59,213       $55,073
  Initial franchise
   fees and
   relicensing fees        3,435         3,744        6,782         6,593
  Partner service
   revenue                 2,088         2,092        4,386         3,808
  Other                    1,314         1,565        2,429         2,147
    Total revenues        41,165        38,675       72,810        67,621

  Operating expenses

  Selling, general
   and administrative     14,071        12,637       26,299        23,614
  Depreciation and
   amortization            3,053         1,625        5,555         3,303
    Total operating
     expenses             17,124        14,262       31,854        26,917

  Operating income        24,041        24,413       40,956        40,704

  Other
  Interest and dividend
   income                (5,219)       (5,141)     (10,119)       (9,842)
  Interest expense and
   other                   5,917         5,179       11,568        10,063
  Equity Loss-Friendly
   Hotels                    164            95        1,889           190
  Loss on early
   prepayment of note      4,100             -        4,100             -
  Gain on sale of stock        -             -            -       (1,260)
    Total other            4,962           133        7,438         (849)

  Income before income
   taxes                  19,079        24,280       33,518        41,553
  Income taxes             7,441         9,749       13,072        16,744
  Net income             $11,638       $14,531      $20,446       $24,809


Recurring net income(a) $14,297 $14,531 $24,182 $24,059

  Weighted average shares
   outstanding            53,092        54,998       53,038        55,449

  Diluted shares outstanding53,534      55,809       53,688        56,153

  Diluted earnings per share$0.22        $0.26        $0.38         $0.44

  Diluted recurring
   earnings per share      $0.27         $0.26        $0.45         $0.43


  (a)Recurring net income excludes the impact of the Equity loss-Friendly
  Hotels and the Loss on early prepayment
  of note.

                       CHOICE HOTELS INTERNATIONAL
               SUPPLEMENTAL OPERATING INFORMATION BY BRAND
                          DOMESTIC HOTEL SYSTEM
                               (UNAUDITED)


                         For the Quarter Ended         Six Months Ended
                                June 30,                    June 30,
                            2000          1999         2000          1999

  COMFORT INN
   Hotels                  1,265         1,196        1,265         1,196
   Rooms                  99,124        92,990       99,124        92,990
   Avg. Daily Rate (ADR)  $60.53        $57.55       $58.91        $56.18
   Occupancy %             65.2%         65.6%        57.8%         59.0%
   RevPAR                 $39.47        $37.76       $34.07        $33.14


  COMFORT SUITES
   Hotels                    250           207          250           207
   Rooms                  20,141        16,902       20,141        16,902
   Avg. Daily Rate (ADR)  $71.37        $69.24       $70.21        $68.36
   Occupancy %             68.5%         68.9%        62.3%         63.8%
   RevPAR                 $48.89        $47.69       $43.75        $43.58


  QUALITY
   Hotels                    432           435          432           435
   Rooms                  48,990        50,419       48,990        50,419
   Avg. Daily Rate (ADR)  $63.72        $61.32       $61.55        $59.73
   Occupancy %             59.5%         60.2%        52.2%         53.9%
   RevPAR                 $37.88        $36.93       $32.11        $32.17


  CLARION
   Hotels                    113           112          113           112
   Rooms                  18,892        19,022       18,892        19,022
   Avg. Daily Rate (ADR)  $82.61        $73.08       $79.82        $71.92
   Occupancy %             62.4%         61.7%        55.0%         56.4%
   RevPAR                 $51.51        $45.06       $43.87        $40.56


  SLEEP
   Hotels                    247           210          247           210
   Rooms                  18,825        16,123       18,825        16,123
   Avg. Daily Rate (ADR)  $55.38        $53.71       $53.96        $52.34
   Occupancy %             62.6%         62.8%        55.1%         56.2%
   RevPAR                 $34.65        $33.72       $29.73        $29.41


  MAINSTAY
   Hotels                     32            26           32            26
   Rooms                   2,958         2,409        2,958         2,409
   Avg. Daily Rate (ADR)  $62.76        $56.62       $60.94        $56.00
   Occupancy %             71.6%         66.1%        65.9%         59.4%
   RevPAR                 $44.93        $37.41       $40.17        $33.27


  ECONO LODGE
   Hotels                    682           690          682           690
   Rooms                  42,906        44,015       42,906        44,015
   Avg. Daily Rate (ADR)  $45.13        $43.82       $43.67        $42.56
   Occupancy %             53.8%         54.6%        47.7%         48.9%
   RevPAR                 $24.29        $23.91       $20.83        $20.82


  RODEWAY
   Hotels                    155           181          155           181
   Rooms                  10,209        11,371       10,209        11,371
   Avg. Daily Rate (ADR)  $46.26        $44.06       $44.76        $42.61
   Occupancy %             51.1%         50.1%        45.9%         46.2%
   RevPAR                 $23.62        $22.07       $20.53        $19.70


  TOTAL CHOICE - DOMESTIC
   Hotels                  3,176         3,057        3,176         3,057
   Rooms                 262,045       253,251      262,045       253,251
   Avg. Daily Rate (ADR)  $60.68        $57.36       $58.93        $56.05
   Occupancy %             61.8%         61.8%        54.8%         55.7%
   RevPAR                 $37.47        $35.47       $32.27        $31.23

SOURCE: Choice Hotels International

Contact: John Hawkins, Vice President of Corporate Communication,
301-592-5032, or email: john_hawkins@choicehotels.com; or Joe Squeri, Senior
Vice President and Chief Financial Officer, 301-592-5006, or email:
joe_squeri@choicehotels.com; both of Choice Hotels International, Inc.