SILVER SPRING, Md., July 26, 2012  -- Choice Hotels International, Inc., (NYSE: CHH) today reported the following highlights for the second quarter of 2012:

• Diluted earnings per share ("EPS") for the second quarter of 2012 of $0.55 compared to diluted EPS of $0.46 for the second quarter of 2011, a 20% increase.
• Earnings before interest, taxes, depreciation and amortization ("EBITDA") increased 14% to $53.6 million for the three months ended June 30, 2012, compared to $47.0 million for the three months ended June 30, 2011. Operating income increased 14% from $45.1 million for the three months ended June 30, 2011 to $51.6 million for the same period of 2012.
• Franchising revenues increased 6% to $77.8 million for the three months ended June 30, 2012 from $73.4 million for the same period of 2011. Total revenues increased 5% to $173.6 million for the three months ended June 30, 2012 compared to the same period of 2011.
• Domestic royalty fees for the three months ended June 30, 2012 increased $4.4 million to $59.8 million from $55.4 million in the three months ended June 30, 2011, an increase of 8%.
• Franchising margins increased from 61.2% for the three months ended June 30, 2011 to 65.9% for the same period of the current year.
• Worldwide unit growth increased 1.3 percent from June 30, 2011 comprised of domestic and international unit growth of 1.3 percent and 1.6 percent, respectively.
• Domestic system-wide revenue per available room ("RevPAR") increased 7.7% for the three months ended June 30, 2012 compared to the same period of 2011 as occupancy and average daily rates increased 250 basis points and 2.8 percent, respectively.
• The company executed 106 new domestic hotel franchise contracts for the three months ended June 30, 2012 compared to 69 new domestic hotel franchise contracts in the same period of the prior year, a 54% increase.
• The number of worldwide hotels under construction, awaiting conversion or approved for development as of June 30, 2012 was 453 hotels representing 37,380 rooms.

"We are very pleased with our results for the quarter. People are traveling, we are driving record traffic to our hotels and the development environment is improving. Our second quarter results, in fact, were highlighted by the 106 new domestic franchise agreements we executed in the second quarter of 2012, a 54% increase over the prior year," said Stephen P. Joyce, president and chief executive officer. "These results demonstrate our ability to attract owners to our family of eleven brands due to our size, scale and distribution which allow us to deliver guests and create opportunities for our franchisees to achieve exceptional returns on investment. We are also excited about our recent announcement of the declaration of a $600 million special cash dividend to shareholders which further illustrates our commitment and adds to our already strong history of returning value to our shareholders over time."

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.

Dividends

For the six months ended June 30, 2012, the company paid $21.4 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.

On July 26, 2012, the company announced that its board of directors declared a special cash dividend in the amount of $10.41 per share or approximately $600 million in the aggregate. The record date for the special cash dividend is August 20, 2012 and the special cash dividend will be paid on August 23, 2012. The company has been informed by the New York Stock Exchange that, in accordance with its rules, the ex-dividend date is expected to be August 24, 2012. Accordingly, stockholders who sell their shares on or before the payment date will not be entitled to receive the special cash dividend.

The special cash dividend is being paid with the proceeds from the company's recent offering of $400 million, 5.75% unsecured senior notes and its new senior secured credit facility. On June 27, 2012, the company issued unsecured senior notes in an aggregate principal amount of $400 million, in an underwritten, registered public offering. The notes will mature in July 2022 and bear a coupon rate of interest of 5.75%. Considering bond issuance costs, the company's effective interest cost related to these senior notes is approximately 5.94%.

On July 25, 2012, the company entered into a senior secured credit facility consisting of a $200 million revolving credit tranche and a $150 million term loan tranche, with a four year term. The company expects to utilize the proceeds from the term loan as well as approximately $50 million under the revolving credit tranche for payment of the special dividend. As a result of entering into the senior secured credit facility, the company's existing $300 million senior unsecured revolving credit facility was terminated.

The senior secured credit facility is secured by a first priority pledge of equity by certain wholly-owned subsidiaries and contains customary financial covenants, including with respect to restrictions on liens, incurring indebtedness, making investments, restricted payments and effecting mergers and/or asset sales. In addition, the senior secured credit facility imposes certain financial maintenance covenants. The company may elect to have borrowings under the senior secured credit facility bear interest at (i) a base rate plus a margin ranging from 100 to 325 basis points based on the company's total leverage ratio or (ii) LIBOR plus a margin ranging from 200 to 425 basis points based on the company's total leverage ratio.

Share Repurchases

During the three months ended June 30, 2012, the company purchased approximately 0.2 million shares of its common stock at an average price of $37.39 for a total cost of $7.0 million under the share repurchase program. During the six months ended June 30, 2012, the company repurchased 0.5 million shares for a total cost of $19.9 million at an average price of $37.02 and has authorization to purchase up to an additional 1.4 million shares under this program. We expect to continue making repurchases under our share repurchase program 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 45.3 million shares of its common stock for a total cost of $1.1 billion through June 30, 2012. Considering the effect of a two-for-one stock split in October 2005, the company had repurchased 78.3 million shares through June 30, 2012 under the share repurchase program at an average price of $13.89 per share.

Other

Our board of directors previously 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 strategic markets. Over the next several years, we expect to continue to opportunistically deploy capital pursuant to these programs to promote growth of our emerging brands. The amount and timing of the investment in these programs will be 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.

Outlook for 2012
The company's third quarter 2012 diluted EPS is expected to be $0.61. The company expects full-year 2012 diluted EPS to range between $1.91 and $1.94. EBITDA for full-year 2012 are expected to range between $201.0 million and $203.5 million. These estimates include the following assumptions:

• The company expects net domestic unit growth to range between flat and a 1% increase in 2012;
• RevPAR is expected to increase approximately 5% for third quarter of 2012 and increase between 6% and 7% for full-year 2012;
• The effective royalty rate is expected to remain flat for full-year 2012;
• All figures assume the existing share count and an effective tax rate of 34.0% for the third quarter and 33.8% for full-year 2012.
• Diluted EPS guidance for full-year 2012 reflects the impact of increased borrowing costs to be incurred as the result of the declaration of a $600 million special cash dividend to be paid in the third quarter of 2012 which is expected to total approximately $14 million or $0.16 per share.

Conference Call
Choice will conduct a conference call on Friday, July 27, 2012 at 9:30 a.m. EST to discuss the company's second quarter 2012 results. The dial-in number to listen to the call is 1-866-730-5767, and the access code is 51535988. International callers should dial 1-857-350-1591 and enter the access code 51535988. The conference call also will be Webcast simultaneously via the company's Web site, www.choicehotels.com. Interested investors and other parties wishing to access the call via the Webcast should go to the Web site and click on the Investor Info link. The Investor Information page will feature a conference call microphone icon to access the call.

The call will be recorded and available for replay beginning at 12:00 p.m. EST on Friday, July 27, 2012 through Monday, August 27, 2012 by calling 1-888-286-8010 and entering access code 76425859. The international dial-in number for the replay is 1-617-801-6888, access code 76425859. In addition, the call will be archived and available on www.choicehotels.com via the Investor Info link.

About Choice Hotels
Choice Hotels International, Inc. franchises approximately 6,200 hotels, representing more than 495,000 rooms, in the United States and more than 30 other countries and territories. As of June 30, 2012, more than 375 hotels were under construction, awaiting conversion or approved for development in the United States, representing more than 30,000 rooms, and 75 hotels, representing approximately 6,700 rooms, were under construction, awaiting conversion or approved for development in 15 other countries and territories. The company's Comfort Inn, Comfort Suites, Quality, Sleep Inn, Clarion, Cambria Suites, MainStay Suites, Suburban Extended Stay Hotel, Econo Lodge and Rodeway Inn brands serve guests worldwide. In addition, via its Ascend Collection membership program, travelers have upscale lodging options at historic, boutique and unique hotels.

Additional corporate information may be found on the Choice Hotels International, Inc. web site, which may be accessed at www.choicehotels.com.

Forward-Looking Statements
Certain matters discussed in this press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Generally, our use of words such as "expect," "estimate," "believe," "anticipate," "will," "forecast," "plan"," project," "assume" or similar words of futurity identify such forward-looking statements. These forward-looking statements are based on management's current beliefs, assumptions and expectations regarding future events, which in turn are based on information currently available to management. Such statements may relate to projections of the company's revenue, earnings and other financial and operational measures, company debt levels, ability to repay outstanding indebtedness, payment of dividends, and future operations, among other matters. We caution you not to place undue reliance on any such forward-looking statements. Forward-looking statements do not guarantee future performance and involve known and unknown risks, uncertainties and other factors.

Several factors could cause actual results, performance or achievements of the company to differ materially from those expressed in or contemplated by the forward-looking statements. Such risks include, but are not limited to, changes to general, domestic and foreign economic conditions; operating risks common in the lodging and franchising industries; changes to the desirability of our brands as viewed by hotel operators and customers; changes to the terms or termination of our contracts with franchisees; our ability to keep pace with improvements in technology utilized for reservations systems and other operating systems; fluctuations in the supply and demand for hotels rooms; and our ability to manage effectively our indebtedness. These and other risk factors are discussed in detail in the Risk Factors section of the company's Form 10-K for the year ended December 31, 2011, filed with the Securities and Exchange Commission on February 29, 2012 and our quarterly reports filed on Form 10-Q. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Statement Concerning Non-GAAP Financial Measurements Presented in Exhibit 8
Adjusted diluted EPS, EBITDA, franchising revenues and franchising margins are non-GAAP financial measurements. This information should not be considered as an alternative to any measure of performance as promulgated under accounting principles generally accepted in the United States ("GAAP"), such as diluted earnings per share, operating income, total revenues and operating margins. The company's calculation of these measurements may be different from the calculations used by other companies and therefore comparability may be limited. The company has included an exhibit accompanying this release that reconciles these measures to the comparable GAAP measurement. We discuss management's reasons for reporting these non-GAAP measures below.

Earnings Before Interest, Taxes, Depreciation and Amortization: EBITDA reflects earnings excluding the impact of interest expense, tax expense, depreciation and amortization. Our management considers EBITDA to be an indicator of operating performance because it can be used to measure our ability to service debt, fund capital expenditures, and expand our business. EBITDA is a commonly used measure of performance in our industry. In addition, it is used by analysts, lenders, investors and others, as well as by us, to facilitate comparisons between the company and its competitors because it excludes certain items that can vary widely across different industries or among companies within the same industry.

Franchising Revenues and Margins: The company reports franchising revenues and margins which exclude marketing and reservation revenues and hotel operations. Marketing and reservation activities are excluded from revenues and operating margins since the company is required by its franchise agreements to use these fees collected for marketing and reservation activities. Cumulative reservation and marketing system fees not expended are recorded as a liability on the company's financial statements and are carried over to the next fiscal year and expended in accordance with the franchise agreements. Cumulative marketing and reservation expenditures in excess of system fees collected for marketing and reservation activities are recorded as a receivable on the company's financial statements. In addition, the company has the contractual authority to require that the franchisees in the system at any given point repay the company for any deficits related to marketing and reservation activities. Hotel operations are excluded since they do not reflect the most accurate measure of the company's core franchising business. These non-GAAP measures are a commonly used measure of performance in our industry and facilitate comparisons between the company and its competitors.

Adjusted Diluted EPS: The company's management uses adjusted diluted EPS, which excludes a reduction in the carrying amount of land held for sale resulting in a loss of $1.8 million included in other gains and losses during the six months ended June 30, 2011. This amount represented net income of $1.1 million and diluted EPS of $0.02 for the six months ended June 30, 2011. The company utilizes this non-GAAP measure to enable investors to perform meaningful comparisons of past, present and future operating results and as a means to emphasize the results of on-going operations.

Choice Hotels, Choice Hotels International, Comfort Inn, Comfort Suites, Quality, Sleep Inn, Clarion, Cambria Suites, MainStay Suites, Suburban Extended Stay Hotel, Econo Lodge, Rodeway Inn and Ascend Collection are proprietary trademarks and service marks of Choice Hotels International.

© 2012 Choice Hotels International, Inc. All rights reserved.