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Choice Hotels Net Income Up 29% to $112.8 million for Full-year 2006; 
Of Its 10 Brands, the Mainstay Suites Brand Records Highest
Year End Occupancy of 69.4%
-
Brand Operating Statistics
New Domestic Hotel Franchise Contracts Up 13% To A Record  720 For Full-Year 2006; 30 Contracts Executed For New Cambria Suites Brand In 2006
 

SILVER SPRING, Md. (February 13, 2007) – Choice Hotels International, Inc., (NYSE:CHH) today reported the following highlights for the fourth quarter and full-year 2006:

  • Diluted earnings per share (“EPS”) for full-year 2006 were $1.68, up 27% compared to $1.32 for full-year 2005; Diluted EPS for fourth quarter 2006 were $0.37, a 16% increase compared to $0.32 for the same period in 2005.
  • Adjusted diluted EPS for full-year 2006 were $1.49, an 18% increase compared to $1.26 for full-year 2005; Adjusted diluted EPS for fourth quarter 2006 were $0.36, up 13% compared to $0.32 reported in the same period of the prior year.
  • Operating income increased 16% to $166.6 million for full-year 2006, as compared to $143.8 reported in the same period of the prior year.  Operating income for fourth quarter 2006 increased 10% to $39.9 million compared to $36.2 million reported for the same period in 2005.
  • Earnings before interest, taxes, depreciation and amortization ("EBITDA") for full-year 2006 increased 15% to $176 million from $153 million in 2005.  EBITDA for fourth quarter 2006 was $42.3 million, an increase of 10% compared to $38.5 million reported for the same period in 2005.
  • Franchising revenues and total revenues increased 14% for full-year 2006.  Franchising revenues increased 10% and total revenues increased 18% for fourth quarter 2006 compared to the same period of the prior year.
  • New domestic hotel franchise contracts for full-year 2006 increased 13% to a record 720.  Fourth quarter new domestic hotel franchise contracts increased 21% to 267 compared to fourth quarter 2005.
  • Domestic unit growth increased 4 percent for 2006.
  • Domestic system-wide revenue per available room (RevPAR) increased 6.1% for full-year 2006 and 3.7% for the fourth quarter.  Domestic RevPAR for the company’s midscale without food and beverage brands increased approximately 9% for 2006 and approximately 6% for the fourth quarter of 2006.
  • The domestic hotel pipeline of hotels under construction, awaiting conversion or approved for development increased more than 43% to 860 hotels representing 66,238 rooms; the worldwide pipeline increased 35% to 930 hotels representing 72,555 rooms.
  • Thirty domestic hotel contracts executed for the new upscale Cambria Suites brand during 2006, with 43 executed since the brand was introduced in 2005.
“2006 was another strong year for Choice Hotels, as we saw significant growth in domestic franchise contracts for both new construction and conversion hotels,” said Charles A. Ledsinger, Jr., vice chairman and chief executive officer.  “We are very pleased with Cambria Suites’ progress and the momentum we are seeing for the brand among hotel developers.   For 2007 and beyond, our solid operating model, prudent management of our strong portfolio of ten brands, and continued focus on both new construction and conversion markets positions Choice for continued long-term growth.”

Outlook for 2007

The company’s first quarter 2007 diluted EPS is expected to be $0.23. The company expects full year 2007 diluted EPS of $1.59.  Earnings before interest, taxes, depreciation and amortization (“EBITDA”) for full-year 2007 is expected to be approximately $186 million. These estimates include the following assumptions.

  • The company expects net domestic unit growth of approximately 4% in 2007;
  • RevPAR is expected to increase 2% for first quarter 2007 and 4% for full-year 2007;
  • The effective royalty rate is expected to increase 3 basis points for full-year 2007;
  • All figures assume the existing share count and assume an effective tax rate of 36.25%;
  • All figures assume approximately $3.6 million ($0.03 diluted EPS) in first-quarter 2007 and $4.5 million ($0.04 diluted EPS) for full-year 2007, respectively, of severance costs related to the previously announced termination of certain executive officers.
Adjusted Net Income and Diluted EPS

Net income and diluted earnings per share for the three and twelve months ended December 31, 2006 include a reduction of income tax expense related to reversal of provisions for certain income tax contingencies of approximately $0.2 million and $12.8 million, respectively. Net income and diluted earnings per share for the twelve months ended December 31, 2006 also include a loss of approximately $0.3 million ($0.2 million, net of the related tax effect) related to the extinguishment of debt. Those items represent diluted EPS of $0.01 and $0.19, net, for the three and twelve months ended December 31, 2006, respectively. Adjusted diluted EPS and adjusted net income for the three and twelve months ended December 31, 2006 exclude these items.

Net income and diluted earnings per share for the twelve months ended December 31, 2005 include additional income tax expense of approximately $1.2 million related to the Company's plan to repatriate approximately $23.5 million of foreign earnings pursuant to the American Jobs Creation Act. Net income and diluted earnings per share for the three and twelve months ended December 31, 2005 include a reduction of income tax expense related to the reversal of provisions for certain income tax contingencies of approximately $0.5 million and $4.9 million, respectively. Those items represent diluted EPS of less than $0.01, net, for the three months and $0.06, net, for the twelve months ended December 31, 2006. Adjusted diluted EPS and adjusted net income for the three and twelve months ended December 31, 2005 exclude these items.

Use of Free Cash Flow

The company has consistently used its free cash flow (cash flow from operations less capital expenditures) generated from its operations to return value to shareholders.  This is primarily achieved through share repurchases and dividends.

For the twelve months ended December 31, 2006, the company paid $35.4 million of cash dividends to shareholders.  The annual dividend rate per common share was increased 15% by the Board of Directors in September 2006 and is now $0.60.

The company has authorization to purchase up to an additional 5.1 million shares under the share repurchase program.  Repurchases will continue to be made in the open market and through privately negotiated transactions subject to market and other conditions. No minimum number of shares has been fixed. Since Choice announced its stock repurchase program on June 25, 1998, the company has repurchased 33.6 million shares of its common stock for a total cost of $711.9 million through February 13, 2007. Considering the effect of a two-for-one stock split in October 2005, the company has repurchased 66.6 million shares at an average price of $10.69 per share.

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.

Items Impacting Comparability

Acquisition of Suburban
During 2005, the company acquired Suburban Franchise Holding Company, Inc. (“Suburban”), which included 67 Suburban Extended Stay Hotel units open and operating in the United States. The results of operations for Suburban have been included in the company’s results of operations since September 28, 2005.
 

    Choice Hotels International, Inc.                                Exhibit 1
    Consolidated Statements of Income
    (Unaudited)

                                            Three Months Ended December 31,
                                                                  Variance
                                            2006      2005       $        %
    (In thousands, except per share
     amounts)

    REVENUES:

      Royalty fees                         $54,271   $49,120   $5,151     10%
      Initial franchise and relicensing
       fees                                  9,530     8,717      813      9%
      Brand solutions                        3,092     3,024       68      2%
      Marketing and reservation             74,307    58,629   15,678     27%
      Hotel operations                       1,163     1,079       84      8%
      Other                                  1,345     1,416      (71)    (5%)
          Total revenues                   143,708   121,985   21,723     18%

    OPERATING EXPENSES:

      Selling, general and administrative   26,316    23,987    2,329     10%
      Depreciation and amortization          2,370     2,282       88      4%
      Marketing and reservation             74,307    58,629   15,678     27%
      Hotel operations                         829       840      (11)    (1%)
          Total operating expenses         103,822    85,738   18,084     21%

    Operating income                        39,886    36,247    3,639     10%

    OTHER INCOME AND EXPENSES:
      Interest expense                       2,807     4,031   (1,224)   (30%)
      Interest and other investment income    (942)     (134)    (808)   603%
      Equity in net income of affiliates      (315)     (182)    (133)    73%
      Loss on extinguishment of debt             -         -        -      NM
      Other                                      -        (3)       3   (100%)
          Total other income and
           expenses, net                     1,550     3,712   (2,162)   (58%)

    Income before income taxes              38,336    32,535    5,801     18%
    Income taxes                            13,707    10,983    2,724     25%
    Net income                             $24,629   $21,552   $3,077     14%
 

    Weighted average shares outstanding-
     basic                                  65,728    64,360

    Weighted average shares outstanding-
     diluted                                67,171    66,360

    Basic earnings per share                 $0.37     $0.33    $0.04     12%

    Diluted earnings per share               $0.37     $0.32    $0.05     16%
 

                                            Twelve Months Ended December 31,
                                                                  Variance
                                             2006      2005      $        %
    (In thousands, except per share
     amounts)

    REVENUES:

      Royalty fees                         $211,645  $187,340  $24,305    13%
      Initial franchise and relicensing
       fees                                  29,629    25,388    4,241    17%
      Brand solutions                        13,945    13,382      563     4%
      Marketing and reservation             278,026   243,123   34,903    14%
      Hotel operations                        4,505     4,293      212     5%
      Other                                   6,912     3,873    3,039    78%
          Total revenues                    544,662   477,399   67,263    14%

    OPERATING EXPENSES:

      Selling, general and administrative    87,112    78,250    8,862    11%
      Depreciation and amortization           9,705     9,051      654     7%
      Marketing and reservation             278,026   243,123   34,903    14%
      Hotel operations                        3,194     3,225      (31)   (1%)
          Total operating expenses          378,037   333,649   44,388    13%

    Operating income                        166,625   143,750   22,875    16%

    OTHER INCOME AND EXPENSES:
      Interest expense                       14,098    15,325   (1,227)   (8%)
      Interest and other investment income   (2,041)   (1,094)    (947)   87%
      Equity in net income of affiliates     (1,052)     (803)    (249)   31%
      Loss on extinguishment of debt            342         -      342     NM
      Other                                       -      (420)     420  (100%)
          Total other income and
           expenses, net                     11,347    13,008   (1,661)  (13%)

    Income before income taxes              155,278   130,742   24,536    19%
    Income taxes                             42,491    43,177     (686)   (2%)
    Net income                             $112,787   $87,565  $25,222    29%
 

    Weighted average shares outstanding-
     basic                                   65,387    64,429

    Weighted average shares outstanding-
     diluted                                 67,050    66,336

    Basic earnings per share                  $1.72     $1.36    $0.36    26%

    Diluted earnings per share                $1.68     $1.32    $0.36    27%
 
 

    Choice Hotels International, Inc.                                Exhibit 2
    Consolidated Balance Sheets
 

    (In thousands)                                  December 31,  December 31,
                                                        2006          2005
                                                    (Unaudited)

    ASSETS

    Cash and cash equivalents                           $35,841      $16,921
    Accounts receivable, net                             41,694       37,155
    Deferred income taxes                                 1,790        2,616
    Other current assets                                  7,757        6,308
         Total current assets                            87,082       63,000

    Fixed assets and intangibles, net                   144,124      150,376
    Receivable -- marketing fees                          6,662       13,225
    Investments, employee benefit plans, at fair
     value                                               31,529       23,337
    Other assets                                         33,912       15,333

               Total assets                             303,309      265,271
 

    LIABILITIES AND SHAREHOLDERS' DEFICIT

    Current portion of long-term debt                       146          146
    Other current liabilities                           139,645      120,170
         Total current liabilities                      139,791      120,316

    Long-term debt                                      172,390      273,972
    Deferred compensation & retirement plan
     obligations                                         40,101       28,987
    Other liabilities                                    13,407        9,172

         Total liabilities                              365,689      432,447

         Total shareholders' deficit                    (62,380)    (167,176)

               Total liabilities and shareholders'
                deficit                                $303,309     $265,271
 
 

    Choice Hotels International, Inc.                                Exhibit 3
    Consolidated Statements of Cash Flows
    (Unaudited)
 

    (In thousands)                            Twelve months ended December 31,

                                                   2006              2005
    CASH FLOWS FROM OPERATING ACTIVITIES:

    Net income                                    $112,787           $87,565

    Adjustments to reconcile net income
     to net cash provided
     by operating activities:
      Depreciation and amortization                  9,705             9,051
      Gain on sale of assets                             -              (386)
      Provision for bad debts                         (163)              391
      Non-cash stock compensation and other
       charges                                      10,644             5,288
      Loss on extinguishment of debt                   342                 -
      Non-cash interest and other income            (1,576)             (294)
      Dividends received from equity method
       investees                                     1,095               681
      Equity in net income of affiliates            (1,052)             (803)

    Changes in assets and liabilities, net
     of acquisitions:
      Receivables                                   (3,007)           (2,415)
      Receivable - marketing and
       reservation fees, net                        19,049            19,393
      Accounts payable                               6,888             1,923
      Accrued expenses and other                    (7,631)           12,894
      Income taxes payable                           2,857            11,250
      Deferred income taxes                        (17,214)          (13,318)
      Deferred revenue                              15,036             8,822
      Other assets                                  (1,724)           (2,040)
      Other liabilities                              7,892            (4,414)

     NET CASH PROVIDED BY OPERATING ACTIVITIES*    153,928           133,588

    CASH FLOWS FROM INVESTING ACTIVITIES:

    Investment in property and equipment            (7,707)          (11,504)
    Acquisitions, net of cash acquired                (826)           (7,314)
    Purchases of investments                       (10,515)           (8,929)
    Proceeds from sales of investments               3,728             3,539
    Issuance of notes receivable                    (2,433)           (2,667)
    Collection of notes receivable                     868               462
    Proceeds from disposition of assets                  -             2,811
    Other items, net                                  (446)             (929)

     NET CASH USED IN INVESTING ACTIVITIES         (17,331)          (24,531)

    CASH FLOWS FROM FINANCING ACTIVITIES:

    Principal payments of long-term debt              (146)             (150)
    Net repayments pursuant to revolving
     credit facility                              (101,500)          (55,129)
    Debt issuance costs                               (477)             (193)
    Excess tax benefits from stock-based
     compensation                                   12,699                 -
    Purchase of treasury stock                      (1,365)          (49,154)
    Dividends paid                                 (35,386)          (30,241)
    Proceeds from exercise of stock options          8,498            14,213

     NET CASH USED IN FINANCING ACTIVITIES        (117,677)         (120,654)

    Net change in cash and cash equivalents         18,920           (11,597)
    Cash and cash equivalents at beginning of
     period                                         16,921            28,518

    CASH AND CASH EQUIVALENTS AT END OF PERIOD     $35,841           $16,921
 

    * Net cash provided by operating activities for the twelve months ended
      December 31, 2005 includes approximately $9.9 million of excess
      tax benefits related to stock-based compensation.  Effective January 1,
      2006, the Company began reporting these excess tax benefits as
      cash flows from financing activities as a result of the adoption of
      Statement of Financial Accounting Standards No. 123R
      "Accounting for Stock-Based Compensation."
 
 

CHOICE HOTELS INTERNATIONAL, INC.            EXHIBIT 4
                      SUPPLEMENTAL OPERATING INFORMATION
                            DOMESTIC HOTEL SYSTEM
                                 (UNAUDITED)

                                             For the Twelve Months Ended
                                                  December 31, 2006

                                           Average Daily
                                               Rate     Occupancy    RevPAR

    Comfort Inn                               $73.08      63.0%      $46.06
    Comfort Suites                             82.93      67.0%       55.59
    Sleep                                      66.44      62.4%       41.43
       Midscale without Food & Beverage        74.18      63.7%       47.26

    Quality                                    66.89      55.3%       37.01
    Clarion                                    78.98      51.2%       40.41
       Midscale with Food & Beverage           69.76      54.3%       37.87

    Econo Lodge                                53.09      47.7%       25.31
    Rodeway                                    51.66      45.8%       23.66
       Economy                                 52.83      47.3%       24.99

    MainStay                                   67.26      69.4%       46.66

    Total Domestic System*                    $69.71      58.0%      $40.46
 

                                             For the Twelve Months Ended
                                                  December 31, 2005

                                          Average Daily
                                               Rate     Occupancy    RevPAR

    Comfort Inn                               $68.84      61.7%      $42.45
    Comfort Suites                             77.51      66.3%       51.36
    Sleep                                      62.52      61.0%       38.16
       Midscale without Food & Beverage        69.68      62.4%       43.51

    Quality                                    64.86      54.6%       35.41
    Clarion                                    74.62      52.5%       39.15
       Midscale with Food & Beverage           67.41      54.0%       36.41

    Econo Lodge                                50.95      48.2%       24.56
    Rodeway                                    49.91      46.7%       23.31
       Economy                                 50.78      48.0%       24.35

    MainStay                                   64.76      65.7%       42.54

    Total Domestic System*                    $66.24      57.6%      $38.15
 

                                                        Change

                                            Average Daily
                                                 Rate     Occupancy   RevPAR

    Comfort Inn                                  6.2%      130 bps      8.5%
    Comfort Suites                               7.0%       70 bps      8.2%
    Sleep                                        6.3%      140 bps      8.6%
       Midscale without Food & Beverage          6.5%      130 bps      8.6%

    Quality                                      3.1%       70 bps      4.5%
    Clarion                                      5.8%     -130 bps      3.2%
       Midscale with Food & Beverage             3.5%       30 bps      4.0%

    Econo Lodge                                  4.2%      -50 bps      3.1%
    Rodeway                                      3.5%      -90 bps      1.5%
       Economy                                   4.0%      -70 bps      2.6%

    MainStay                                     3.9%      370 bps      9.7%

    Total Domestic System*                       5.2%       40 bps      6.1%
 

                                             For the Three Months Ended
                                                  December 31, 2006

                                          Average Daily
                                               Rate     Occupancy    RevPAR

    Comfort Inn                               $73.14      63.5%      $46.46
    Comfort Suites                             82.35      66.1%       54.42
    Sleep                                      66.04      62.5%       41.29
       Midscale without Food & Beverage        74.04      63.9%       47.30

    Quality                                    65.79      54.6%       35.89
    Clarion                                    78.38      51.0%       39.98
       Midscale with Food & Beverage           68.79      53.7%       36.91

    Econo Lodge                                52.74      47.6%       25.10
    Rodeway                                    49.79      43.4%       21.61
       Economy                                 52.18      46.7%       24.38

    MainStay                                   66.91      72.8%       48.74

    Total Domestic System*                    $69.27      57.8%      $40.04
 

                                             For the Three Months Ended
                                                  December 31, 2005

                                          Average Daily
                                               Rate     Occupancy    RevPAR

    Comfort Inn                               $68.81      63.4%      $43.65
    Comfort Suites                             77.28      68.2%       52.70
    Sleep                                      62.68      62.0%       38.88
       Midscale without Food & Beverage        69.68      64.1%       44.69

    Quality                                    63.47      55.1%       34.95
    Clarion                                    75.70      53.9%       40.80
       Midscale with Food & Beverage           66.57      54.8%       36.46

    Econo Lodge                                50.83      47.9%       24.35
    Rodeway                                    48.01      44.7%       21.47
       Economy                                 50.37      47.3%       23.85

    MainStay                                   65.55      68.1%       44.64

    Total Domestic System*                    $65.99      58.5%      $38.60
 

                                                        Change

                                            Average Daily
                                                 Rate     Occupancy   RevPAR

    Comfort Inn                                  6.3%       10 bps      6.4%
    Comfort Suites                               6.6%     -210 bps      3.3%
    Sleep                                        5.4%       50 bps      6.2%
       Midscale without Food & Beverage          6.3%      -20 bps      5.8%

    Quality                                      3.7%      -50 bps      2.7%
    Clarion                                      3.5%     -290 bps     (2.0%)
       Midscale with Food & Beverage             3.3%     -110 bps      1.2%

    Econo Lodge                                  3.8%      -30 bps      3.1%
    Rodeway                                      3.7%     -130 bps      0.7%
       Economy                                   3.6%      -60 bps      2.2%

    MainStay                                     2.1%      470 bps      9.2%

    Total Domestic System*                       5.0%      -70 bps      3.7%
 

    * Amounts exclude Suburban activity because comparable pre-acquisition
      data is not available
 

                              For the Quarter Ended     For the Year Ended
                             12/31/2006  12/31/2005   12/31/2006  12/31/2005

    System-wide effective
     royalty rate              4.13%       4.08%        4.10%       4.08%
 
 

                       CHOICE HOTELS INTERNATIONAL, INC.             EXHIBIT 5
                   SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA
                                 (UNAUDITED)
 

                                         December 31, 2006  December 31, 2005

                                           Hotels   Rooms    Hotels   Rooms

    Comfort Inn                            1,415   110,877   1,428   111,598
    Comfort Suites                           433    33,976     411    32,251
    Sleep                                    327    24,575     319    24,205
        Midscale without Food & Beverage   2,175   169,428   2,158   168,054

    Quality                                  736    72,054     660    66,316
    Clarion                                  162    23,945     153    23,554
        Midscale with Food & Beverage        898    95,999     813    89,870

    Econo Lodge                              816    49,679     805    49,763
    Rodeway                                  233    14,168     180    11,051
         Economy                           1,049    63,847     985    60,814

    MainStay                                  29     2,183      27     2,047
    Suburban                                  60     7,984      65     8,568
         Extended Stay                        89    10,167      92    10,615

    Domestic Franchises                    4,211   339,441   4,048   329,353

    International Franchises               1,165    97,944   1,162    97,703

    Total Franchises                       5,376   437,385   5,210   427,056
 

                                                       Variance

                                            Hotels   Rooms      %        %

    Comfort Inn                              (13)     (721)   (0.9%)   (0.6%)
    Comfort Suites                            22     1,725     5.4%     5.3%
    Sleep                                      8       370     2.5%     1.5%
        Midscale without Food & Beverage      17     1,374     0.8%     0.8%

    Quality                                   76     5,738    11.5%     8.7%
    Clarion                                    9       391     5.9%     1.7%
        Midscale with Food & Beverage         85     6,129    10.5%     6.8%

    Econo Lodge                               11       (84)    1.4%    (0.2%)
    Rodeway                                   53     3,117    29.4%    28.2%
         Economy                              64     3,033     6.5%     5.0%

    MainStay                                   2       136     7.4%     6.6%
    Suburban                                  (5)     (584)   (7.7%)   (6.8%)
         Extended Stay                        (3)     (448)   (3.3%)   (4.2%)

    Domestic Franchises                      163    10,088     4.0%     3.1%

    International Franchises                   3       241     0.3%     0.2%

    Total Franchises                         166    10,329     3.2%     2.4%
 
 

                       CHOICE HOTELS INTERNATIONAL, INC.             EXHIBIT 6
                      SUPPLEMENTAL INFORMATION BY BRAND
                  DEVELOPMENT RESULTS -- NEW HOTEL CONTRACTS
                                 (UNAUDITED)
 

                                      For the Twelve         For the Twelve
                                       Months Ended           Months Ended
                                    December 31, 2006      December 31, 2005

                                 New                     New
                               Construc- Conver-       Construc- Conver-
                                 tion     sion   Total   tion     sion   Total

    Comfort Inn                    67       65     132     53       56     109
    Comfort Suites                 98        3     101     89        5      94
    Sleep                          58        1      59     55        2      57
         Midscale without
          Food & Beverage         223       69     292    197       63     260

    Quality                         6      143     149      5      148     153
    Clarion                         2       26      28      4       31      35
         Midscale with Food
          & Beverage                8      169     177      9      179     188

    Econo Lodge                     1       80      81      4       85      89
    Rodeway                         3      105     108      -       75      75
         Economy                    4      185     189      4      160     164

    MainStay                        9        1      10     14        -      14
    Suburban                       14        8      22      -        -       -
         Extended Stay             23        9      32     14        -      14

    Cambria Suites                 30        -      30     13        -      13

    Total Domestic System         288      432     720    237      402     639
 

                                                      % Change

                                               New
                                           Construction  Conversion  Total

    Comfort Inn                                 26%          16%       21%
    Comfort Suites                              10%         (40%)       7%
    Sleep                                        5%         (50%)       4%
         Midscale without Food & Beverage       13%          10%       12%

    Quality                                     20%          (3%)      (3%)
    Clarion                                    (50%)        (16%)     (20%)
         Midscale with Food & Beverage         (11%)         (6%)      (6%)

    Econo Lodge                                (75%)         (6%)      (9%)
    Rodeway                                      NM          40%       44%
         Economy                                 0%          16%       15%

    MainStay                                   (36%)          NM      (29%)
    Suburban                                     NM           NM        NM
         Extended Stay                          64%           NM      129%

    Cambria Suites                             131%           NM      131%

    Total Domestic System                       22%           7%       13%
 
 

                                       For the Three         For the Three
                                       Months Ended           Months Ended
                                     December 31, 2006      December 31, 2005

                                 New                     New
                               Construc- Conver-       Construc- Conver-
                                 tion     sion   Total   tion     sion   Total

    Comfort Inn                    29       22      51    18        16      34
    Comfort Suites                 43        -      43    49         1      50
    Sleep                          31        -      31    19         1      20
         Midscale without
          Food & Beverage         103       22     125    86        18     104

    Quality                         1       43      44     1        36      37
    Clarion                         1        4       5     2        16      18
         Midscale w/ Food
          & Beverage                2       47      49     3        52      55

    Econo Lodge                     1       37      38     -        24      24
    Rodeway                         1       32      33     -        28      28
         Economy                    2       69      71     -        52      52

    MainStay                        4        -       4     4         -       4
    Suburban                        5        3       8     -         -       -
         Extended Stay              9        3      12     4         -       4

    Cambria Suites                 10        -      10     5         -       5

    Total Domestic System         126      141     267    98       122     220
 

                                                      % Change

                                               New
                                           Construction  Conversion  Total

    Comfort Inn                                 61%          38%       50%
    Comfort Suites                             (12%)       (100%)     (14%)
    Sleep                                       63%        (100%)      55%
         Midscale without Food & Beverage       20%          22%       20%

    Quality                                      0%          19%       19%
    Clarion                                    (50%)        (75%)     (72%)
         Midscale w/ Food & Beverage           (33%)        (10%)     (11%)

    Econo Lodge                                  NM          54%       58%
    Rodeway                                      NM          14%       18%
         Economy                                 NM          33%       37%

    MainStay                                     0%           NM        0%
    Suburban                                     NM           NM        NM
         Extended Stay                         125%           NM      200%

    Cambria Suites                             100%           NM      100%

    Total Domestic System                       29%          16%       21%
 
 

                       CHOICE HOTELS INTERNATIONAL, INC.             Exhibit 7
            DOMESTIC HOTEL PIPELINE OF HOTELS UNDER CONSTRUCTION,
               AWAITING CONVERSION OR APPROVED FOR DEVELOPMENT
                                 (UNAUDITED)
 

    A hotel in the domestic pipeline does not always result in an open and
    operating hotel due to various factors.
 

                                                     December 31, 2006
                                                           Units

                                                             New
                                             Conversion  Construction   Total

    Comfort Inn                                   56         124         180
    Comfort Suites                                 3         233         236
    Sleep Inn                                      -         123         123
       Midscale without Food & Beverage           59         480         539

    Quality                                       76          10          86
    Clarion                                       11           4          15
         Midscale with Food & Beverage            87          14         101

    Econo Lodge                                   41           5          46
    Rodeway                                       66           3          69
         Economy                                 107           8         115

    MainStay                                       -          33          33
    Suburban                                       5          24          29
         Extended Stay                             5          57          62

    Cambria Suites                                 -          43          43

                                                 258         602         860
 

                                                     December 31, 2005
                                                           Units

                                                             New
                                              Conversion Construction   Total

    Comfort Inn                                   41          85         126
    Comfort Suites                                 2         165         167
    Sleep Inn                                      1          88          89
       Midscale without Food & Beverage           44         338         382

    Quality                                       54          12          66
    Clarion                                       13           4          17
         Midscale with Food & Beverage            67          16          83

    Econo Lodge                                   41           9          50
    Rodeway                                       35           -          35
         Economy                                  76           9          85

    MainStay                                       1          29          30
    Suburban                                       2           9          11
         Extended Stay                             3          38          41

    Cambria Suites                                 -          12          12

                                                 190         413         603
 

                                                       Variance

                                                          New
                                          Conversion  Construction   Total

                                          Units    %   Units   %   Units   %

    Comfort Inn                             15    37%    39   46%    54   43%
    Comfort Suites                           1    50%    68   41%    69   41%
    Sleep Inn                               (1) -100%    35   40%    34   38%
       Midscale without Food & Beverage     15    34%   142   42%   157   41%

    Quality                                 22    41%    (2) -17%    20   30%
    Clarion                                 (2)  -15%     -    0%    (2) -12%
         Midscale with Food & Beverage      20    30%    (2) -13%    18   22%

    Econo Lodge                              -     0%    (4) -44%    (4)  -8%
    Rodeway                                 31    89%     3    NM    34   97%
         Economy                            31    41%    (1) -11%    30   35%

    MainStay                                (1) -100%     4   14%     3   10%
    Suburban                                 3   150%    15  167%    18  164%
         Extended Stay                       2    67%    19   50%    21   51%

    Cambria Suites                           -     NM    31  258%    31  258%

                                            68    36%   189   46%   257   43%
 
 

                       CHOICE HOTELS INTERNATIONAL, INC.             EXHIBIT 8
                 SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION
                                 (UNAUDITED)
 

    CALCULATION OF FRANCHISING REVENUES AND FRANCHISING MARGINS

                                      Three Months Ended      Year Ended
    (dollar amounts in thousands)        December 31,        December 31,

                                        2006      2005      2006      2005
      Franchising Revenues:

      Total Revenues                  $143,708  $121,985  $544,662  $477,399
      Adjustments:
           Marketing and reservation
            revenues                   (74,307)  (58,629) (278,026) (243,123)
           Hotel Operations             (1,163)   (1,079)   (4,505)   (4,293)
      Franchising Revenues             $68,238   $62,277  $262,131  $229,983

      Franchising Margins:

      Operating Margin:

      Total Revenues                  $143,708  $121,985  $544,662  $477,399
      Operating Income                 $39,886   $36,247  $166,625  $143,750
           Operating Margin               27.8%     29.7%     30.6%     30.1%

      Franchising Margin:

      Franchising Revenues             $68,238   $62,277  $262,131  $229,983

      Operating Income                 $39,886   $36,247  $166,625  $143,750
      Less: Hotel Operations               334       239     1,311     1,068
                                       $39,552   $36,008  $165,314  $142,682

           Franchising Margins            58.0%     57.8%     63.1%     62.0%
 

    CALCULATION OF ADJUSTED NET INCOME AND ADJUSTED DILUTED
    EARNINGS PER SHARE (EPS)

    (In thousands, except per share      Three Months Ended     Year Ended
     amounts)                               December 31,       December 31,

                                           2006     2005      2006     2005

    Net Income                            $24,629  $21,552  $112,787  $87,565
    Adjustments:
      Loss on Debt Extinguishment Costs         -        -       217        -
      Resolution of Provisions for Income
       Tax Contingencies                     (210)    (454)  (12,791)  (4,855)
      Income Tax Expense Incurred Due to
       Foreign Earnings Repatriation            -        -         -    1,192
    Adjusted Net Income                   $24,419  $21,098  $100,213  $83,902

    Weighted average shares outstanding-
     diluted                               67,171   66,360    67,050   66,336

    Diluted Earnings Per Share              $0.37    $0.32     $1.68    $1.32
    Adjustments:
      Loss on Debt Extinguishment Costs         -        -         -        -
      Resolution of Provisions for Income
       Tax Contingencies                    (0.01)   (0.00)    (0.19)   (0.08)
      Income Tax Expense Incurred Due to
       Foreign Earnings Repatriation            -        -         -     0.02
    Adjusted Diluted Earnings Per Share
     (EPS)                                  $0.36    $0.32     $1.49    $1.26
 

    EBITDA Reconciliation

    (in millions)
                                                Year       Year
                                                Ended      Ended      Full-
                                              December   December     Year
                          Q4 2006   Q4 2005   31, 2006   31, 2005     2007
                          Actuals   Actuals    Actuals    Actuals    Outlook*

      Operating Income
       (per GAAP)           $39.9     $36.2     $166.6     $143.7     $176.2
      Depreciation and
       amortization           2.4       2.3        9.7        9.1        9.8
      Earnings before
       interest, taxes,
       depreciation &
       amortization (non-
       GAAP) ("EBITDA")     $42.3     $38.5     $176.3     $152.8     $186.0
 

      * Full Year 2007 Operating income and EBITDA include approximately $4.5
        million of severance costs related to the previously announced
        termination certain executive officers.

About Choice Hotels
Choice Hotels International franchises more than 5,300 hotels, representing more than 435,000 rooms, in the United States and more than 40 countries and territories.  As of December 31, 2006, 860 hotels are under development in the United States, representing 66,238 rooms, and an additional 70 hotels, representing 6,317 rooms, are under development in more than 15 countries and territories.  The company’s Cambria Suites, Comfort Inn, Comfort Suites, Quality, Clarion, Sleep Inn, Econo Lodge, Rodeway Inn, MainStay Suites and Suburban Extended Stay Hotel brands serve guests worldwide.

Certain matters discussed in this press release may constitute forward-looking statements within the meaning of the federal securities law. 

Contact:

David White
Chief Financial Officer
(301) 592-5117

Anne Madison
Vice President
Corporate Communications
(301) 592-6723

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Also See: Choice Hotels Reports Full Year 2005 Net Income of $87.6 million Compared to Prior Year Net Income of $74.3 million; Executes 639 New Domestic Hotel Franchise Contracts / Hotel Operating Stats / February 2006
Choice Hotels Reports Full Year 2004 Net Income of $74.3 million Compared to Prior Year Net Income of $71.9 million; Executes 552 New Domestic Hotel Franchise Contracts / Hotel Operating Statistics / February 2005

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