Choice Hotels Reports Second Quarter 2009 Adjusted Diluted EPS of $0.44, Domestic Unit Growth of 4.8%

Choice Hotels International, Inc., (NYSE:CHH) today reported the following highlights for second quarter 2009:

• Adjusted diluted earnings per share ("EPS") for second quarter 2009 were $0.44, compared to $0.49 for the same period of the prior year. Diluted EPS were $0.42 for second quarter 2009 compared to $0.43 for second quarter 2008. Adjusted diluted EPS for second quarter 2009 and 2008 exclude certain special items, as described below, totaling $0.02 and $0.06, respectively.

• Excluding special items, adjusted earnings before interest, taxes and depreciation ("EBITDA") were $42 million for the three months ended June 30, 2009, compared to $53.1 million for the same period of 2008. Operating income for the three months ended June 30, 2009 was $38.1 million compared to $44.6 million for the same period of 2008.

• Adjusted selling, general and administrative ("SG&A") costs for the second quarter of 2009 totaled $25.2 million which represented a 10% decline from the same period of the prior year. Adjusted SG&A costs exclude special items totaling $1.9 million and $6.4 million for the three months ended June 30, 2009 and 2008, respectively.

• Domestic unit and room growth increased 4.8 percent and 4.5 percent, respectively, from June 30, 2008.

• Domestic system-wide revenue per available room ("RevPAR") declined 15.7% for the second quarter of 2009 compared to the same period of 2008.

• The effective royalty rate increased 6 basis points to 4.26% for the three months ended June 30, 2009 compared to 4.20% for the same period of the prior year.

• Franchising revenues declined 17% from $80.5 million for the three months ended June 30, 2008 compared to $66.9 million for the same period of 2009. Total revenues for the three months ended June 30, 2009 declined 14% compared to the same period of 2008.

• The company executed 118 new domestic hotel franchise contracts for the three months ended June 30, 2009, a decline of 40% compared to the 198 contracts executed in the same period of the prior year.

• The number of domestic hotels under construction, awaiting conversion or approved for development declined 17% from June 30, 2008 to 827 hotels representing 64,384 rooms; the worldwide pipeline declined 15% from June 30, 2008 to 937 hotels representing 73,121 rooms.

"Despite the extremely challenging industry-wide RevPAR environment and significant decline in domestic hotel transactions across the industry, the appeal of our brands, strong marketing and guest distribution platform, as well as our franchise sales expertise once again enabled us to achieve significant domestic unit and room growth." said Stephen P. Joyce, president and chief executive officer. "In this environment, our value-oriented brands position us well to serve travelers looking for ways to stretch their travel budgets. Additionally, on account of our conversion brands, we are particularly well positioned in this environment to increase our market share as the lodging cycle progresses. We also remain focused on returning value to our shareholders, and during the first half of 2009 we returned $57.2 million to shareholders through a combination of share repurchases and dividends."

Special Items

During the three and six months ended June 30, 2009, the company recorded employee termination benefits of approximately $0.4 million and $0.8 million, respectively. In addition, during the three months ended June 30, 2009, the company recorded a $1.5 million charge related to the sublease of a portion of its office space. These special items represent diluted EPS of $0.02 for both the three and six months ended June 30, 2009.

During the three and six months ended June 30, 2008, the company recorded employee termination benefits of approximately $0.3 million and $0.4 million, respectively. Furthermore, the company incurred $6.1 million of benefit costs during the three months ended June 30, 2008 resulting from the acceleration of the company's management succession plan. These special items represented diluted EPS of $0.06 for both the three and six months ended June 30, 2008.

Outlook for 2009

The uncertainty around the current economic environment and credit market conditions and their impact on travel patterns and hotel development activities makes it difficult to predict future results, particularly as they relate to underlying assumptions for RevPAR, new hotel franchise and relicensing sales and interest and investment income and expense.

The company's third quarter 2009 adjusted diluted EPS is expected to be $0.51. The company expects full-year of 2009 adjusted diluted EPS of $1.66. Adjusted EBITDA for the full-year of 2009 are expected to be approximately $169 million. These estimates include the following assumptions:

• The company expects net domestic unit growth of approximately 3.25% in 2009;

• RevPAR is expected to decline approximately 15% for the third quarter of 2009 and decline approximately 13% for the full-year of 2009;

• The effective royalty rate is expected to increase 5 basis points for the full-year of 2009;

• All figures assume the existing share count and an effective tax rate of 36.5% for the third quarter and full-year of 2009;

• Adjusted EBITDA and adjusted diluted EPS for third quarter 2009 exclude $1.3 million ($0.8 million after tax and approximately $0.01 diluted EPS) of operating expenses related to employee termination benefits.

• Adjusted EBITDA and adjusted diluted EPS for full year 2009 exclude $3.6 million ($2.2 million after tax and approximately $0.04 diluted EPS) of operating expenses related to employee termination benefits and a loss on the sublease of office space.


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