Choice Hotels Reports 2001 Recurring Diluted EPS Increases 14%

SILVER SPRING, Md. (February 20, 2002) - Choice Hotels International, Inc. (NYSE:CHH) today reported 2001 recurring net income of $55.6 million, or $1.25 recurring diluted earnings per share (EPS), compared to $58.4 million in recurring net income and $1.10 recurring diluted EPS reported for 2000.

The company reported recurring net income of $12.6 million for the fourth quarter 2001, compared to $14.8 million for fourth quarter 2000. Recurring diluted EPS was $0.29 for the fourth quarter 2001, an increase of 3.6% over $0.28 for 2000. Recurring net income and diluted EPS exclude the impact of certain previously announced charges for restructuring and asset impairment.

“Choice`s strong performance in such a challenging environment in 2001 speaks well for the soundness of our business model,” said Charles A. Ledsinger, Jr., president and chief executive officer. “Our continued ability to drive unit growth, a key ingredient in our overall strategy of size, scale and distribution, is a testament to the intense focus and dedication of our associates.”

He added, “In our domestic hotel franchising business, we enjoyed robust on-line unit growth of 2.6%, reaching 3,327 hotels at year end.”

Year-End & Fourth Quarter Performance
Recurring earnings before interest, taxes, depreciation and amortization (EBITDA) increased to $114.7 million for the year, an increase of 4.6 % over the $109.7 million for 2000. Recurring franchise EBITDA margins increased to 67.0% for 2001 from 65.6% for 2000.


The company reported royalty revenues of $140.2 million for 2001, compared to $137.7 million for 2000, an increase of 1.8%. For fourth quarter 2001, royalty revenues were $32.6 million, compared to $35.1 million for the same period in 2000. In addition, revenue from partner services increased 16.9% for the year, from $10.3 million in 2000 to $12.0 million in the year ended December 31, 2001.

Domestic revenue per available room (RevPAR) was $35.83 in 2001, compared to $36.72 for 2000. For fourth quarter 2001, RevPAR was $32.50, compared to $36.59 for the same period a year ago.

For the year 2001, the effective royalty rate increased 10 basis points from 3.85% to 3.95%. In fourth quarter 2001, the effective royalty increased from 3.89% to 3.99%.

2001 Unit Growth
In 2001, the total number of domestic Choice hotels on-line grew 2.6% to 3,327 from 3,244 for 2000. For the year, the total number of domestic hotel rooms increased 1.7% to 270,514 from 265,962 in 2000. Choiceexecuted 300 new domestic hotel franchise contracts in 2001 and opened a total of 225 domestic hotels. At the end of 2001, Choice had 462 hotels under development in its domestic hotel system, representing 36,406 rooms.

As of December 31, 2001, the total number of Choice hotels worldwide grew 3.5% to 4,545 from 4,392 as of the same date a year ago. This represents an increase of 3.5% in the number of rooms open of 362,549 from 350,351. At the end of 2001, Choice had 227 hotels under development in countries outside of the United States, representing 19,954 rooms.

First Quarter & Year 2002 Estimates: The company also announced that it expects first quarter 2002 recurring diluted EPS to be in the range of $0.16 to $0.17 and full year 2002 recurring diluted EPS in the range of $1.37 to $1.40. This forecast assumes full year RevPAR to be flat or increase up to 1% in 2002.

Impact of Fourth Quarter Charges: Net income for 2001, including charges related to an organizational realignment, an impairment in the value of Choice`s investment in Friendly Hotels plc (“Friendly”), an equity loss in the Friendly investment, and a tax valuation allowance associated with the Friendly investment, was $21.6 million or $0.48 diluted EPS, compared to $42.4 million in net income and $0.80 diluted EPS for 2000. For fourth quarter 2001, the company reported a net loss of $11.9 million or $0.28 diluted EPS, after the organizational restructuring, Friendly impairment and tax valuation allowance, compared to $2.5 million in net income and $0.05 diluted EPS for the same period a year ago.