Press Releases

Choice Hotels Reports 3rd Quarter Net Income Up 6%; Diluted EPS Increases 12%
PRNewswire
SILVER SPRING, Md.

Choice Hotels International, Inc. today reported third quarter 2000 net income of $19.4 million, or $0.37 diluted earnings per share (EPS), increases of 5.8% and 12.1% respectively, over the $18.3 million in net income and $0.33 diluted EPS reported for third quarter 1999.

Earnings before interest, taxes, depreciation and amortization (EBITDA) increased to $35.5 million for the quarter, an increase of 11.3% over the $31.9 million for the third quarter of 1999. EBITDA margins increased to 71.3% for the quarter from 67.7% for the third quarter of 1999.

"As a result of a very strong summer season, our franchised hotels delivered a robust performance this quarter," said Charles A. Ledsinger, Jr., president and chief executive officer. "The continued improvement in our brands' quality and amenities helped attract more guests, resulting in improved room rates. RevPAR gains, improvement in effective royalty rates, successful cost control and room supply additions resulted in solid EBITDA growth and expanding EBITDA margins."

"Revenue on bookings through our central reservations system is up 9% for the year to date, with revenue from global distribution sources up 21% and from our proprietary Internet site up 124%," he added. "Our Web site volume has doubled in the past year, and now represents more than 6% of our bookings, generated almost $75 million in revenue through September."

He continued, "Looking ahead, the recently announced restructuring of our note from Sunburst Hospitality, under which Choice will receive approximately $76 million in cash, will significantly strengthen an already solid balance sheet. Choice will be better positioned to take advantage of new growth opportunities and to continue to buy back stock at accretive valuations."

The company reported royalty revenues of $43.4 million for third quarter 2000, compared to $40.5 million for third quarter 1999, an increase of 7.2%. The system-wide domestic effective royalty rate also increased from 3.82% in third quarter 1999 to 3.88% for the third quarter of 2000. Domestic revenue per available room (RevPAR) increased 5.6% from $43.42 in third quarter 1999 to $45.85 in the quarter just ended.

For the first nine months of 2000, Choice reported recurring net income of $43.6 million or $0.82 recurring diluted EPS, increases of 2.8% and 7.9% respectively, over the $42.4 million and $0.76 recurring diluted EPS reported for the first nine months of 1999.

Royalty revenues for the first three quarters of 2000 increased 7.4% to $102.6 million from the $95.5 million for the same period a year ago. The system-wide domestic effective royalty rate increased 6 basis points for the first nine months of 2000 to 3.84% from 3.78% for the same period a year ago. Domestic RevPAR also was up 4.3% from $35.24 for the first three quarters of 1999 to $36.76 for the first nine months of 2000.

System Growth

As of September 30, 2000, the total number of Choice domestic hotels on- line grew 3.6% to 3,234 from 3,121 as of the same date a year ago. This represents an increase of 2.7% in the number of domestic rooms open of 265,906 from 258,892. At the end of the third quarter of 2000, Choice had 488 hotels under development in its domestic hotel system, representing 39,530 rooms.

At the end of the first nine months of 2000, the total number of Choice hotels worldwide on-line grew 4.6% to 4,371 from 4,179 as of the same period a year ago. As of September 30, 2000, the total number of rooms worldwide increased 4.1% to 349,392 from 335,524 as of the same date a year ago.

As of September 30, 2000, the company had 694 franchised hotels with 61,244 rooms either in design or under construction in its worldwide hotel system.

Sunburst Agreement

Choice and Sunburst Hospitality Corporation reached agreement on September 20, 2000 on the terms of a proposed restructuring of a $136 million note. Contingent on the closing of Sunburst's announced recapitalization, Choice will receive a cash payment of approximately $76 million plus additional interest accruing from the date of the agreement until closing.

In addition, Choice will receive a newly issued 11-3/8% seven-year senior subordinated note in the amount of $60 million, which will contain standard and customary high-yield loan terms and conditions. This new note will contain, among other things, a cash pay interest feature that begins 18 months from issuance.

Friendly Investment

Choice continues 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 $45 million. Any write down or deferral so made is not expected to be material to Choice's cash flow or financial condition.

Notable Events

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

  *  Appointed Wayne Wielgus as senior vice president, marketing, and Gary
     Thomson, senior vice president and chief information officer.

  *  Named Don Brockway, vice president, worldwide reservations operations,
     and Janna Morrison, vice president, property systems, as officers of
     the company.

Choice Hotels International is the second-largest hotel franchisor in the world with 4,371 hotels open, representing 349,392 rooms, and another 694 hotels under development, representing 61,244 rooms, in 41 countries, as of September 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)                     September 30,             December 31,
                                          2000                      1999
   (Unaudited)

  ASSETS

  Cash and cash equivalents    $        14,181            $        11,850
  Other current assets                  35,507                     30,072
       Total current assets             49,688                     41,922

  Fixed assets and
  intangibles, net                     176,254                    166,062
  Note receivable from
   Sunburst Hospitality                137,032                    141,853
  Investments and other                131,452                    114,821

       Total assets                    494,426                    464,658


  LIABILITIES

  Current portion of
   long-term debt                       50,846                     44,646
  Other current liabilities             45,193                     44,179
  Total current liabilities             96,039                     88,825

  Long-term debt                       256,699                    262,710
  Deferred income taxes
   and other                            54,036                     47,507

       Total liabilities               406,774                    399,042

       Total shareholders'
        equity                          87,652                     65,616

  Total liabilities and
   shareholders' equity               $494,426                   $464,658



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

  (In thousands, except per share amounts)

                           Three Months Ended          Nine Months Ended
                         Sept. 30,     Sept. 30,    Sept. 30,     Sept. 30,
  Revenues                  2000          1999         2000          1999

  Royalty fees           $43,390       $40,472     $102,603       $95,545
  Initial franchise
   fees and relicensing
   fees                    3,279         3,300       10,061         9,893
  Partner service
   revenue                 2,131         2,354        6,517         6,162
  Other                      979         1,001        3,408         3,148
       Total revenues     49,779        47,127      122,589       114,748

  Operating expenses

  Selling, general and
   administrative         14,290        15,192       40,591        38,808
  Depreciation and
   amortization            2,770         1,690        8,325         4,993
       Total operating
        expenses          17,060        16,882       48,916        43,801

  Operating
   income-franchising     32,719        30,245       73,673        70,947

  Hotel operations            83            --           83            --

  Other
  Interest and dividend
   income                 (5,094)       (5,259)     (15,213)      (15,103)
  Interest expense
   and other               6,084         5,108       17,650        15,171
  Equity (gain)/
   loss-Friendly Hotels    (109)            15        1,780           205
  Loss on early
   prepayment of note         --            --        4,100            --
  Gain on sale of stock       --            --           --        (1,260)
       Total other           881          (136)       8,317          (987)

  Income before
   income taxes           31,921        30,381       65,439        71,934
  Income taxes            12,449        12,043       25,521        28,787
  Net income             $19,472       $18,338      $39,918       $43,147

  Recurring net
   income (a)            $19,404       $18,338      $43,586       $42,397

  Weighted average
   shares outstanding     52,768        54,619       52,874        55,174

  Diluted shares
   outstanding            53,119        55,501       53,324        55,898

  Diluted earnings
   per share               $0.37         $0.33        $0.75         $0.77

  Diluted recurring
   earnings per share      $0.37         $0.33        $0.82         $0.76

  (a)Recurring net income excludes the impact of the equity
  (gain)/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         Nine Months Ended
                               September 30,              September 30,
                            2000          1999         2000          1999

  COMFORT INN
  Hotels                   1,284         1,244        1,284         1,244
  Rooms                  100,557        97,506      100,557        97,506
  Avg. Daily Rate (ADR)   $66.86        $63.47       $62.03        $59.13
  Occupancy %              74.0%         74.8%        63.1%         64.2%
  RevPAR                  $49.46        $47.47       $39.14        $37.96


  COMFORT SUITES
  Hotels                     267           220          267           220
  Rooms                   21,188        17,891       21,188        17,891
  Avg. Daily Rate (ADR)   $74.73        $72.18       $72.02        $69.91
  Occupancy %              73.8%         74.2%        66.2%         67.0%
  RevPAR                  $55.13        $53.55       $47.68        $46.82


  QUALITY
  Hotels                     433           436          433           436
  Rooms                   49,286        50,330       49,286        50,330
  Avg. Daily Rate (ADR)   $69.20        $65.90       $64.37        $62.01
  Occupancy %              67.6%         67.0%        57.5%         58.1%
  RevPAR                  $46.79        $44.13       $37.02        $36.01


  CLARION
  Hotels                     115           115          115           115
  Rooms                   18,542        19,388       18,542        19,388
  Avg. Daily Rate (ADR)   $84.03        $75.65       $81.56        $73.82
  Occupancy %              66.3%         64.3%        59.0%         59.0%
  RevPAR                  $55.69        $48.60       $48.12        $43.53

  SLEEP
  Hotels                     257           220          257           220
  Rooms                   19,857        16,847       19,857        16,847
  Avg. Daily Rate (ADR)   $58.70        $56.33       $55.82        $53.98
  Occupancy %              68.5%         69.1%        59.8%         60.4%
  RevPAR                  $40.19        $38.95       $33.35        $32.58

  MAINSTAY
  Hotels                      34            27           34            27
  Rooms                    3,099         2,506        3,099         2,506
  Avg. Daily Rate (ADR)   $66.10        $60.95       $62.91        $58.37
  Occupancy %              77.2%         74.7%        70.0%         64.7%
  RevPAR                  $50.99        $45.50       $44.03        $37.78

  ECONO LODGE
  Hotels                     692           690          692           690
  Rooms                   43,405        43,778       43,405        43,778
  Avg. Daily Rate (ADR)   $50.83        $49.22       $46.51        $45.06
  Occupancy %              63.7%         64.7%        52.8%         54.1%
  RevPAR                  $32.37        $31.85       $24.57        $24.37

  RODEWAY
  Hotels                     152           169          152           169
  Rooms                    9,972        10,646        9,972        10,646
  Avg. Daily Rate (ADR)   $55.55        $50.56       $48.77        $45.86
  Occupancy %              60.2%         60.6%        50.1%         50.2%
  RevPAR                  $33.44        $30.61       $24.45        $23.01

  TOTAL CHOICE - DOMESTIC
  Hotels                   3,234         3,121        3,234         3,121
  Rooms                  265,906       258,892      265,906       258,892
  Avg. Daily Rate (ADR)   $65.73        $62.15       $61.57        $58.48
  Occupancy %              69.8%         69.9%        59.7%         60.3%
  RevPAR                  $45.85        $43.42       $36.76        $35.24

SOURCE: Choice Hotels International

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