*  Adjusted diluted earnings per share (“EPS”) for first quarter 2010 were $0.27 compared to $0.27 for the same period of the prior year. Diluted EPS were $0.26 for first quarter 2010 compared to $0.27 for first quarter 2009. Adjusted diluted EPS for first quarter 2010 exclude certain special items, as described below, totaling $0.01.
  * Excluding special items, adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) were $26.4 million for the three months ended March 31, 2010, compared to $30.3 million for the same period of 2009. Operating income for the three months ended March 31, 2010 and 2009 were $23.8 million and $27.8 million, respectively.
  * Franchising revenues declined 6% from $51.0 million for the three months ended March 31, 2009 to $47.7 million for the same period of 2010. Total revenues for the three months ended March 31, 2010 declined 6% compared to the same period of 2009.
  * Interest and other investment income for the three months ended March 31, 2010 improved by approximately $1.9 million from the same period of the prior year primarily due to the appreciation in the fair value of investments held in the company’s non-qualified employee benefit plans during the current period compared to a decline in the fair value of these investments in the same period of the prior year.
  * Domestic unit and room growth increased 2.9 percent and 2.4 percent, respectively, from March 31, 2009.
  * Domestic system-wide revenue per available room (“RevPAR”) declined 10.3% for the first quarter of 2010 compared to the same period of 2009.
  * The effective royalty rate increased 8 basis points to 4.34% for the three months ended March 31, 2010 compared to 4.26% for the same period of the prior year.
  * The company executed 55 new domestic hotel franchise contracts for the three months ended March 31, 2010, a decline of 8% compared to the 60 contracts executed in the same period of the prior year.
  * The number of domestic hotels under construction, awaiting conversion or approved for development declined 27% from March 31, 2009 to 657 hotels representing 52,483 rooms; the worldwide pipeline declined 25% from March 31, 2009 to 759 hotels representing 60,704 rooms.

“While the domestic RevPAR and franchise sales environment remained challenging during the first quarter, the company’s overall franchise sales results and recent RevPAR trends indicate some stabilization in this environment,” said Stephen P. Joyce, president and chief executive officer. “As the domestic RevPAR and hotel transaction environment improves, we believe that Choice will remain a top choice for hotel developers, on account of our well-known family of brands, our ability to deliver guests to our franchisees’ hotels and our range of centralized support services designed to enhance our franchisees’ profitability.”

Special Items

During the three months ended March 31, 2010, the company recorded employee termination benefits of approximately $0.4 million representing adjusted diluted EPS of $0.01 for the three months ended March 31, 2010.

During the three months ended March 31, 2009, the company recorded employee termination benefits of approximately $0.4 million representing adjusted diluted EPS of $0.00 for the three months ended March 31, 2009.

Outlook for 2010

The company’s second quarter 2010 diluted EPS is expected to be at least $0.42. The company expects full-year 2010 diluted EPS to be between $1.68 and $1.72. Adjusted EBITDA for full-year 2010 are expected to be between $166 million and $170 million. These estimates include the following assumptions:

  * The company expects net domestic unit growth of approximately 2% in 2010;
  * RevPAR is expected to decline approximately 2% for second quarter of 2010 and decline between 1% and 3% for full-year 2010;
  * The effective royalty rate is expected to increase 6 basis points for full-year 2010;
  * All figures assume the existing share count and an effective tax rate of 35.8% for the second quarter and full-year 2010;
  * Projections assume that the company’s existing credit facility remains in place for full-year 2010.

Use of Free Cash Flow

The company has historically used its free cash flow (cash flow from operations less capital expenditures) to return value to shareholders, primarily through share repurchases and dividends.

For the three months ended March 31, 2010 the company paid $10.9 million of cash dividends to shareholders. The current quarterly dividend rate per common share is $0.185, subject to declaration by our board of directors.

During the three months ended March 31, 2010, the company purchased approximately 0.2 million shares of its common stock at an average price of $31.75 for a total cost of $6.9 million under the share repurchase program and has authorization to purchase up to an additional 3.6 million shares under this program. We expect to continue making repurchases in the open market and through privately negotiated transactions, subject to market and other conditions. No minimum number of share repurchases has been fixed. Since Choice announced its stock repurchase program on June 25, 1998, the company has repurchased 43.1 million shares of its common stock for a total cost of $1 billion through March 31, 2010. Considering the effect of a two-for-one stock split in October 2005, the company had repurchased 76.1 million shares through March 31, 2010 under the share repurchase program at an average price of $13.33 per share.

Our Board has authorized us to enter into programs which permit us to offer financing, investment and guaranty support to qualified franchisees as well as to acquire and resell real estate to incent franchise development for certain brands in top markets. We expect to opportunistically deploy this capital over the next several years. Our annual investment in these programs is dependent on market and other conditions. Notwithstanding these programs, the company expects to continue to return value to its shareholders through a combination of share repurchases and dividends, subject to market and other conditions.