Press Releases

Choice Hotels Reports 2000 Results; Recurring Diluted EPS Increases 7%
PRNewswire
SILVER SPRING, Md.

Choice Hotels International, Inc. today reported 2000 recurring net income of $58.4 million, or $1.10 recurring diluted earnings per share (EPS), increases of 2.0% and 6.8% respectively, over the $57.2 million in recurring net income and $1.03 recurring diluted EPS reported for 1999. The company reported recurring net income of $14.8 million for the fourth quarter 2000, as well as fourth quarter 1999. Recurring diluted EPS was $0.28 for the fourth quarter 2000, compared to $0.27 for the same period a year ago. These results exclude certain charges related to previously announced actions, which are discussed below.

Net income for 2000, including the impact of the settlement of the Sunburst Hospitality receivable, a company-wide restructuring and Choice's investment in Friendly Hotels plc, was $42.4 million or $0.80 diluted EPS, compared to $57.1 million in net income and $1.03 diluted EPS for 1999. For fourth quarter 2000, net income was $2.5 million or $0.05 diluted EPS, compared to $14.0 million and $0.26 for the same period a year ago.

Recurring earnings before interest, taxes, depreciation and amortization (EBITDA) increased to $109.7 million for the year, an increase of 7.7% over the $101.9 million for 1999. EBITDA margins increased to 65.5% for 2000 from 64.6% for 1999.

The company reported royalty revenues of $137.7 million for 2000, compared to $128.7 million for 1999, an increase of 7.0%. For fourth quarter 2000, royalty revenues were $35.1 million, a 6.0% increase over the $33.1 million for the same period in 1999.

"2000 proved to be a pivotal year in getting the company better positioned for future growth" said Charles A. Ledsinger, Jr., president and chief executive officer. "The settlement of the Sunburst receivable strengthens our balance sheet considerably. As a result, we have more capability to build our core business and to capitalize on new development opportunities. We also continue to aggressively buy back shares of our common stock, with our Board authorizing an additional five million shares just last week."

He added, "In our hotel franchising business, we enjoyed another good year for unit growth, executing almost 300 new domestic contracts and opening more than 300 new properties. In addition, we ended the year with nearly 500 projects under development."

As previously disclosed, the company recorded certain charges in the fourth quarter related to the settlement of the Sunburst receivable, a corporate-wide restructuring and its investment in Friendly Hotels.

Choice recognized a $5.6 million charge related to the company's domestic and international operations reorganization. The restructuring will improve service and support to its franchisees and create a more focused and competitive overhead structure. The restructuring charges also include the costs related to the termination of an in-room Internet initiative launched earlier in the year.

In January 2001, the company received from Sunburst approximately $102 million in cash and an 11-3/8% seven-year senior subordinated note in the amount of $35 million. For the year 2000, the company recognized a loss of $7.6 million on the monetization of the Sunburst note.

In Europe, Friendly Hotels plc announced a comprehensive restructuring program to strengthen its balance sheet, improve its operations and accelerate growth of its franchising business. Elements of the restructuring include a revaluation of its real estate portfolio, disposal of non-core assets, restructuring of its banking arrangements and certain commercial arrangements with Choice, and a strengthened management team. Choice recorded an equity loss of $12.1 million associated with this restructuring for the year 2000. The company is required to recognize changes in Friendly's book value as an equity adjustment to its recorded investment.

System Growth

In 2000, the total number of domestic Choice hotels on-line grew 3.9% to 3,244 from 3,123 for 1999. For the year, the total number of domestic hotel rooms increased 3.0% to 265,962 from 258,120 in 1999. Choice executed 298 new domestic hotel franchise contracts in 2000 and opened a total of 274 domestic hotels. At the end of 2000, Choice had 493 hotels under development in its domestic hotel system, representing 39,539 rooms.

As of December 31, 2000, the total number of Choice hotels worldwide grew 3.4% to 4,392 from 4,248 as of the same date a year ago. This represents an increase of 3.6% in the number of rooms open of 350,351 from 338,254.

Domestic revenue per available room (RevPAR) increased 4.4% from $35.17 in 1999 to $36.72 for 2000. For fourth quarter 2000, RevPAR increased 4.7% from $34.94 to $36.59.

For the year 2000, the effective royalty rate increased 5 basis points from 3.80% to 3.85%. In fourth quarter 2000, the effective royalty increased from 3.86% to 3.89%.

Notable Events

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

  *  Authorization for an additional repurchase of up to five million shares
     of common stock.  Since the Board first authorized a share repurchase
     program in October 1997, the company has repurchased approximately 16
     million shares.  Currently there are approximately 45 million shares of
     common stock outstanding.

  *  Selection of Arnold Worldwide/Washington as the company's agency of
     record to create a new marketing campaign for the company's hotel
     brands.

Choice Hotels International is the second-largest hotel franchisor in the world with 4,392 hotels open, representing 350,351 rooms, and another 703 hotels under development, representing 60,927 rooms, in 43 countries, as of December 31, 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 Statements of Income
                               (Unaudited)

  (In thousands, except per share
   amounts)                           Three Months Ended  For the Year Ended
                                      December December   December  December
                                         31,       31,      31,       31,
  Revenues                              2000      1999     2000      1999

  Royalty fees                         $35,117  $33,109  $137,721  $128,653
  Initial franchise fees and
   relicensing fees                      2,092    4,016    12,154    13,910
  Partner service revenue                3,783    2,892    10,300     9,055
  Other                                  3,556    3,640     7,297     6,111
        Total revenues                  44,548   43,657   167,472   157,729

  Operating expenses

  Selling, general and administrative   16,998   17,051    57,780    55,860
  Restructuring charges                  5,637       --     5,637        --
  Depreciation and amortization          3,238    2,694    11,623     7,687
        Total operating expenses        25,873   19,745    75,040    63,547

  Operating income                      18,675   23,912    92,432    94,182

  Other
  Interest and dividend income          (3,849)  (4,478)  (15,534)  (17,146)
  Interest expense and other             4,371    4,349    18,495    16,409
  Equity loss-Friendly Hotels           10,291      175    12,071       380
  Loss on note-Sunburst                  3,465       --     7,565        --
  Loss on investment                       -      1,328        --     1,328
  Loss of sale of property                 254       --       253        --
  Gain on sale of stock                     --       --        --    (1,260)
        Total other                     14,532    1,374    22,850      (289)

  Income before income taxes             4,143   22,538    69,582    94,471
  Income taxes                           1,616    8,529    27,137    37,316
  Net income                            $2,527  $14,009   $42,445   $57,155

  Recurring net income (a)             $14,786  $14,839   $58,373   $57,236

  Weighted average shares outstanding   52,512   53,957    52,895    54,859

  Diluted shares outstanding            52,827   54,830    53,253    55,667

  Diluted earnings per share             $0.05    $0.26     $0.80     $1.03

  Diluted recurring earnings per share
   (a)                                   $0.28    $0.27     $1.10     $1.03

(a) Recurring net income and diluted recurring earnings per share exclude the impact of the equity loss-Friendly Hotels, the loss on note-Sunburst, loss on investment, loss of sale of property, gain on sale of stock, and restructuring charges.

                     Choice Hotels International, Inc.
                       Consolidated Balance Sheets

  (In thousands)                               December 31,     December 31,
                                                  2000              1999
                                               (Unaudited)
                  ASSETS
  Cash and cash equivalents                      $19,701           $11,850
  Other current assets                            32,386            30,072
       Total current assets                       52,087            41,922

  Fixed assets and intangibles, net              174,772           166,062
  Note receivable from Sunburst
   Hospitality                                   137,492           141,853
  Investments and other                          119,770           114,821

              Total assets                       484,121           464,658

                LIABILITIES

  Current portion of long-term debt               50,046            44,646
  Other current liabilities                       43,784            44,097
       Total current liabilities                  93,830            88,743

  Long-term debt                                 247,179           262,710
  Deferred income taxes and other                 53,020            47,589

       Total liabilities                         394,029           399,042

       Total shareholders' equity                 90,092            65,616

              Total liabilities and
               shareholders' equity             $484,121          $464,658


                         Choice Hotels International
                 Supplemental Operating Information by Brand
                            Domestic Hotel System
                                 (Unaudited)

                                         For the Quarter     For the Year
                                              Ended              Ended
                                           December 31,      December 31,
                                           2000     1999     2000     1999

  COMFORT INN
       Hotels                              1,291    1,246    1,291    1,246
       Rooms                             100,988   97,592  100,988   97,592
       Avg. Daily Rate (ADR)              $62.00   $58.95   $62.03   $59.09
       Occupancy %                         63.4%    64.1%    63.2%    64.2%
       RevPAR                             $39.29   $37.79   $39.18   $37.91
       Effective Royalty Rate              4.31%    4.28%    4.27%    4.21%

  COMFORT SUITES
       Hotels                                277      224      277      224
       Rooms                              21,773   18,135   21,773   18,135
       Avg. Daily Rate (ADR)              $71.50   $69.14   $71.89   $69.70
       Occupancy %                         65.6%    65.9%    66.0%    66.7%
       RevPAR                             $46.87   $45.57   $47.47   $46.48
       Effective Royalty Rate              4.64%    4.60%    4.64%    4.57%

  QUALITY
       Hotels                                436      431      436      431
       Rooms                              49,191   49,331   49,191   49,331
       Avg. Daily Rate (ADR)              $63.07   $60.22   $64.05   $61.58
       Occupancy %                         57.7%    56.9%    57.6%    57.8%
       RevPAR                             $36.38   $34.28   $36.86   $35.58
       Effective Royalty Rate              3.46%    3.43%    3.44%    3.41%

  CLARION
       Hotels                                114      112      114      112
       Rooms                              18,537   18,815   18,537   18,815
       Avg. Daily Rate (ADR)              $80.71   $78.68   $81.37   $75.10
       Occupancy %                         58.2%    59.6%    58.8%    59.1%
       RevPAR                             $46.98   $46.90   $47.86   $44.41
       Effective Royalty Rate              2.71%    2.44%    2.57%    2.30%

  SLEEP
       Hotels                                261      224      261      224
       Rooms                              20,158   17,199   20,158   17,199
       Avg. Daily Rate (ADR)              $55.85   $54.10   $55.82   $54.01
       Occupancy %                         59.1%    59.3%    59.6%    60.1%
       RevPAR                             $32.99   $32.07   $33.25   $32.45
       Effective Royalty Rate              3.88%    3.82%    3.85%    3.82%

  MAINSTAY
       Hotels                                 34       29       34       29
       Rooms                               3,099    2,681    3,099    2,681
       Avg. Daily Rate (ADR)              $65.91   $59.99   $63.69   $58.87
       Occupancy %                         70.1%    69.2%    70.0%    66.0%
       RevPAR                             $46.17   $41.53   $44.59   $38.88
       Effective Royalty Rate              1.18%    3.58%    1.23%    3.50%

  ECONO LODGE
       Hotels                                684      691      684      691
       Rooms                              42,611   43,754   42,611   43,754
       Avg. Daily Rate (ADR)              $45.77   $43.89   $46.33   $44.77
       Occupancy %                         53.1%    52.8%    52.9%    53.8%
       RevPAR                             $24.32   $23.19   $24.51   $24.08
       Effective Royalty Rate              3.86%    3.84%    3.84%    3.82%

  RODEWAY
       Hotels                                147      166      147      166
       Rooms                               9,605   10,613    9,605   10,613
       Avg. Daily Rate (ADR)              $46.57   $44.96   $48.25   $45.66
       Occupancy %                         50.7%    49.5%    50.3%    50.0%
       RevPAR                             $23.60   $22.26   $24.25   $22.83
       Effective Royalty Rate              2.87%    2.98%    2.79%    2.79%

  TOTAL CHOICE - DOMESTIC
       Hotels                              3,244    3,123    3,244    3,123
       Rooms                             265,962  258,120  265,962  258,120
       Avg. Daily Rate (ADR)              $61.10   $58.40   $61.45   $58.46
       Occupancy %                         59.9%    59.8%    59.8%    60.2%
       RevPAR                             $36.59   $34.94   $36.72   $35.17
       Effective Royalty Rate              3.89%    3.86%    3.85%    3.80%

SOURCE: Choice Hotels International

Contact: John Hawkins, Corporate Communications, 301-592-5075; or Joe
Squeri, Chief Financial Officer, 301-592-5006, both of Choice Hotels
International