 Jefferies Gaming, Lodging, Media & Entertainment Conference May 8, 2006 Exhibit 99.1 * * * |
 2 Disclaimer Certain matters discussed in this presentation 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 herein, we refer you to the filings made by Choice with the Securities and Exchange Commission, including our report on Form 10-K for the period ended December 31, 2005. Additional corporate information may be found on the Choice Hotels’ Internet site, which may be accessed at www.choicehotels.com * |
 Company Profile * * * * |
 4 Company Profile One of the Largest Hotel Companies in the World More than 5,200 hotels open worldwide representing more than 425,000 rooms 722 hotels under development representing approximately 57,000 rooms Our Brands Cover Many Segments Source: Choice Internal Data as of March 2006. Limited Service Full Service Economy Mid-Price Upscale * |
 5 Company Profile (cont.) Core Competency Hotel Franchising Highest returning model in the industry (vs. management or ownership) High margin, high cash flow with low capital requirements Scaleable and predictable Provides profitable growth opportunities Highly skilled in this area * |
 6 Lodging Industry Lodging Industry Is A Large, Profitable & Permanent Fixture of the Economy Roughly 50,000 hotels representing approximately 4.5 million rooms in the U.S. Provides profitable growth opportunities -- Industry profits grew 23% to $21B in 2005 More than 30% of domestic hotel rooms (1.5 million) are independent (not affiliated with a chain) Choice Is One Of The Largest Participants In The Industry Only “pure-play” franchisor Choice branded properties represent approximately 7% of U.S. hotel market share Cendant (12%), Marriott (5%), Hilton (5%), IHG (5%) Source: Smith Travel Research and Choice Internal Data as of March 2006 and December 2005. * |
 7 Source: U.S. Census Bureau (2000 Census) and Choice Internal Data. Lodging Industry (cont.) -- Typical Guest Profile U.S. Hotel Choice Hotels' Population Industry Guests Household Income (mean) $57,000 $74,000 $67,000 Age (average years) 35 years 47 years 47 years Education (% college graduates) 24% 50% 45% Employment Professional/Executive/Manager 21% 48% 44% Other Employment 41% 31% 36% Retired/Homemaker/Student/Not Employed 38% 21% 20% Child in Household 33% 34% 37% Gender (ages 18+) (of travel party) (of travel party) Men (solo on trip) 49% 25% 26% Women (solo on trip) 51% 15% 10% Couple on Trip N/A 39% 44% With Children or Other Adults N/A 22% 20% |
 8 Domestic System Growth In Any Environment 3,039 3,123 3,244 3,327 3,482 3,636 3,834 4,048 2,500 2,700 2,900 3,100 3,300 3,500 3,700 3,900 4,100 1998 1999 2000 2001 2002 2003 2004 2005 Exceptional Franchise Sales Capabilities Source: Choice Internal Data as of December 2005. Domestic Franchises On-Line Investment Thesis +5.6% 250 300 350 400 450 500 550 600 650 700 2000 2001 2002 2003 2004 2005 $5.0 $7.0 $9.0 $11.0 $13.0 $15.0 $17.0 Deals Initial Fee Revenue Franchise Development Initial Fees $ in millions New Executed Contracts * |
 9 Strong & Growing Earnings Source: Choice Internal Data as of December 2005. See Supplemental. Investment Thesis (cont.) +18% Recurring EBITDA $0.58 $0.76 $0.93 $1.07 $1.26 $0.25 $0.50 $0.75 $1.00 $1.25 $1.50 2001 2002 2003 2004 2005 Adjusted Diluted EPS $108.7 $116.0 $125.2 $134.9 $152.8 $50 $65 $80 $95 $110 $125 $140 $155 $170 2001 2002 2003 2004 2005 +13% ….and EBITDA * |
 10 Superior Returns On Invested Capital Investment Thesis (cont.) 15.3% 15.9% 14.7% 10.4% 27.7% 36.9% 49.5% 69.1% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 1998 1999 2000 2001 2002 2003 2004 2005 ROIC Source: Bear Stearns March 2006 Equity Research – “U.S. Lodging – All Priced In – Our Current Thinking on the Sector” * |
 11 Investment Thesis (cont.) Source: Bear Stearns March 2006 Equity Research – “U.S. Lodging – All Priced In – Our Current Thinking on the Sector” Disclaimer: Return on invested capital percentages are calculated by Bear Stearns’ lodging industry analysts in accordance with that firms’ methodologies. Please note that any calculations, opinions, estimates or forecasts regarding Choice Hotels International, Inc.'s performance made by Bear Stearns (and therefore the return on invested capital percentages) are theirs alone and do not represent calculations, opinions, forecasts or predictions of Choice Hotels International, Inc. or its management. Choice Hotels International, Inc. does not by its reference above or distribution imply its endorsement of or concurrence with such information, conclusions or recommendations. Company 1998 1999 2000 2001 2002 2003 2004 2005 Owners- Operators Hilton 6.1% 6.2% 5.8% 7.7% 7.9% 7.7% 8.2% 10.7% Starwood 8.4% 6.9% 9.2% 7.5% 8.1% 6.3% 6.8% 6.3% Orient Express International 9.1% 10.3% 11.1% 7.9% 6.5% 4.8% 4.9% 7.3% Host Marriott 10.8% 11.8% 11.3% 8.3% 10.7% 6.2% 6.6% 7.1% Sunstone Hotel Investors NA NA NA NA NA NA 7.6% 10.0% Highland Hospitality NA NA NA NA NA NA 2.6% 6.4% Owner/Operator Average 8.6% 8.8% 9.4% 7.8% 8.3% 6.2% 6.1% 8.0% Managers-Franchisers Marriott International 12.6% 11.2% 11.8% 8.5% 6.5% 6.4% 7.7% 8.5% Four Seasons 12.0% 9.1% 12.4% 7.0% 4.3% 1.6% 4.2% -2.7% Choice Hotels International 15.3% 15.9% 14.7% 10.4% 27.7% 36.9% 49.5% 69.1% Manager/Franchiser Average 13.3% 12.1% 13.0% 8.6% 12.8% 14.9% 20.5% 25.0% Overall Average 10.6% 10.2% 10.9% 8.2% 10.2% 10.0% 10.9% 13.6% ROIC Trends Since 1998 * |
 12 Investment Thesis (cont.) Management Focused on Creating Value Share repurchases – 66.6 million repurchased at $10.69 per share as of March 31, 2006; represents nearly $712 million since inception of program Dividends – Current quarterly cash dividend of $0.13/share; subject to board approval and business performance, expect to pay future dividends at comparable or increased rate in the future Equity Performance 5 year annualized share price appreciation in excess of 45% Source: Choice Internal Data as of March 2006. All share and per share amounts have been retroactively adjusted to reflect the 2 for 1 stock split effected in October 2005. * |
 13 Investment Thesis (cont.) Source: Copyright© 2006, Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. All rights reserved. www.researchdatagroup.com/S&P.htm * $100 invested on 12/31/00 in stock or index-including reinvestment of dividends. Fiscal year ending December 31. * COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* AMONG CHOICE HOTELS INTERNATIONAL, INC., THE NYSE COMPOSITE (US) INDEX AND THE S & P HOTELS, RESORTS & CRUISE LINES INDEX 0 100 200 300 400 500 600 700 12/00 6/01 12/01 6/02 12/02 6/03 12/03 6/04 12/04 6/05 12/05 D O L L A R S CHOICE HOTELS INTERNATIONAL, INC. NYSE COMPOSITE S & P HOTELS, RESORTS & CRUISE LINES |
 Choice Hotels – A Solid Foundation Built On Innovation * |
 15 A Solid Foundation Built On Innovation Rich History of Innovation “Good People” – Franchisees Recognize Choice Associates As Being “Well-Liked” & “Easy To Work With” Quality Courts – 1st Brand Name In Hospitality (1939) Wall-To-Wall Carpeting, In-Room Phones, Daily Linen Changes, 24-Hour Front Desk (1950’s) Pre-Paid Telephone Reservations (1960) 24/7 Toll Free Reservations Number (1970) Traveler Centric “3 Brand” Segmentation (1981) 1st Comfort Inn Opens (1981) “Sunburst” Reservations System (1983) Non-Smoking Rooms Standard (1984) Sleep Inn Introduction (1986) Source: Choice Internal Data as of March 2006. * |
 16 Brand Portfolio Built Over 5 Decades Organic Innovation Acquisitions 1940’s 1980’s 1990’s Scale & Distribution Created By Focus On Core Competencies -- Selling Franchises, Selling Hotel Rooms, Servicing Hotel Operators A Solid Foundation Built On Innovation (Cont.) Source: Choice Internal Data as of March 2006. * |
 17 7 500 575 675 900 1,962 3,244 0 1,000 2,000 3,000 4,000 1940 1950 1960 1970 1980 1990 2000 Domestic Franchises On-Line By Decade Source: On-Line Franchise Numbers For 1950 through 1980 Are Estimates From Choice Internal Data. A Solid Foundation Built On Innovation (Cont.) * |
 18 Re-Imaging Flagship Brand Acquiring & Launching New Products Creating Leading Edge Technology A Solid Foundation Built On Innovation (Cont.) * |
 Vision and Mission * |
 20 Vision and Mission Our Vision: To generate the highest return on investment of any hotel franchise Our Mission: Deliver a franchise success system of strong brands, exceptional services, vast consumer reach, and size, scale and distribution that delivers guests, satisfies guests, and reduces costs for our hotel owners Our Passion: Customer Profitability * |
 21 Strategy & Management Philosophy Strategy & Franchise Success System Clearly Articulated And Centered Around Core Competencies & Growth 2006 Strategic Initiatives • Strategically Grow Our Existing Brands • Enter New Markets • Improve Brands, Brand Recognition, & Property Performance • Improve Business Delivery • Maximize Shareholder Returns Guest Satisfaction Brand Growth & Equity Increase Business Delivery Reduce Costs Strong Brands Vast Consumer Reach Exceptional Services Size, Scale & Distribution Franchise Success System Brand and Hotel Performance Guest Satisfaction Brand Growth & Equity Increase Business Delivery Reduce Costs Strong Brands Vast Consumer Reach Exceptional Services Size, Scale & Distribution Franchise Success System Brand and Hotel Performance • Shareholders • Franchisees • Guests • Employees • Franchise Success System * |
 2006 Focus * |
 23 Strategically Grow Existing Brands Optimize Development Organization Continue to Align With Brand Strategies Diversify and Develop New Customers * |
 24 Achieve Growth In New Market Segments Cambria Suites Suburban Extended Stay Hotels Build Capabilities in Upscale and Other Segments Grow Internationally Corporate Development Transactions That Improve Our Core Business Investments in Synergistic Businesses * |
 25 Cambria Suites Limited Service, Upscale, All-suites Brand 100% new construction Rooms 25% larger than competition at similar per key cost Targeted ADR of $110-$125 Primary audience is corporate traveler – secondary focus on leisure 23 Contracts Signed (10 in Q1 2006) – First Properties Opening This Winter Ideal Location is Medium or Large Cities Significant Interest from Mixed-Use Developers Based on Value and Design Contracts To Date Include: Akron/Canton Aurora, CO (Denver) Avondale, AZ (Phoenix) Baltimore Boise Columbus Fort Collins Fort Myers Green Bay, WI Madison, WI Savannah Scottsdale Source: Choice Internal Data as of March 2006. * |
 26 Suburban Extended Stay Hotels Acquired 2005 64 Franchises, nearly 8,500 rooms Economy Extended Stay Segment Targeted Construction Cost Per Key - $35K Total Investment - $4-$5 million Targeted Unlevered Return – 10% - 12% Targeted Average Weekly Rate of $200+ Extended Stay Demand -- +4.9% in 2004 (faster than 4.6% reported by STR for overall US hotel industry) Extended Stay Hotel Supply -- +2.4% in 2004; 5 year projected supply growth of 8% Complements MainStay Suites Mid-Scale Brand Significant Interest from Developers Based on Value and Design Franchises Located In 11 States Including: Alabama Florida Georgia Kentucky Louisiana Mississippi North Carolina South Carolina Tennessee Texas Virginia Source: Third Party Research; Choice Internal Data as of March 2006. * |
 27 Improve Our Brands and Property Performance Stronger Property-Level Support Improve Property Management Systems Improve Brand Consistency Improve Guest Experience * |
 28 Improve Brand Recognition and Business Delivery Marketing and Reservations Programs Revenue Management Services Drive Reservations to Central Channels * |
 Strategy * |
 30 Guest Satisfaction Brand Growth & Equity Increase Business Delivery Reduce Costs Strong Brands Vast Consumer Reach Exceptional Services Size, Scale & Distribution Franchise Success System Brand and Hotel Performance Guest Satisfaction Brand Growth & Equity Increase Business Delivery Reduce Costs Strong Brands Vast Consumer Reach Exceptional Services Size, Scale & Distribution Franchise Success System Brand and Hotel Performance Build Strong Brands Among World’s Most Recognizable Hotel Brands Improved Brand Consistency and Quality Improved ROI for Owners Significantly Enhanced Franchise Sales Capability * |
 31 Guest Satisfaction Brand Growth & Equity Increase Business Delivery Reduce Costs Strong Brands Vast Consumer Reach Exceptional Services Size, Scale & Distribution Franchise Success System Brand and Hotel Performance Guest Satisfaction Brand Growth & Equity Increase Business Delivery Reduce Costs Strong Brands Vast Consumer Reach Exceptional Services Size, Scale & Distribution Franchise Success System Brand and Hotel Performance Vast Consumer Reach $50+ Million Marketing and Advertising Plan Creates brand awareness and loyalty Drives traffic Enhanced Loyalty Program Over 4 million members +$2 billion hotel program revenue to date Strong Direct Sales Capability $700 million in revenue Source: Choice Internal Data as of December 2005. * |
 32 Guest Satisfaction Brand Growth & Equity Increase Business Delivery Reduce Costs Strong Brands Vast Consumer Reach Exceptional Services Size, Scale & Distribution Franchise Success System Brand and Hotel Performance Guest Satisfaction Brand Growth & Equity Increase Business Delivery Reduce Costs Strong Brands Vast Consumer Reach Exceptional Services Size, Scale & Distribution Franchise Success System Brand and Hotel Performance Vast Consumer Reach (cont.) State-of-the-Art Reservations System – All Channels $1.3 billion room revenue booked in 2005 – 31% delivery Strong Synergies with Internet Distribution Channels New Internet Channels Strengthen Franchise • Increase distribution • Improve placement • Decrease complexity • Lower cost • Increase yield Source: Choice Internal Data as of December 2005. * |
 33 Guest Satisfaction Brand Growth & Equity Increase Business Delivery Reduce Costs Strong Brands Vast Consumer Reach Exceptional Services Size, Scale & Distribution Franchise Success System Brand and Hotel Performance Guest Satisfaction Brand Growth & Equity Increase Business Delivery Reduce Costs Strong Brands Vast Consumer Reach Exceptional Services Size, Scale & Distribution Franchise Success System Brand and Hotel Performance Exceptional Services Complete Life-Cycle Service Offering Nationwide Footprint of Field-Based Employees State-of-the-Art Training Capabilities Operational and Yield Management Technology Purchasing Assistance Generates more than $13 million in annual revenue and lowers owner costs Full Complement of Hands-On Services Improve Profitability and Create Loyalty Source: Choice Internal Data as of December 2005. * |
 34 Guest Satisfaction Brand Growth & Equity Increase Business Delivery Reduce Costs Strong Brands Vast Consumer Reach Exceptional Services Size, Scale & Distribution Franchise Success System Brand and Hotel Performance Guest Satisfaction Brand Growth & Equity Increase Business Delivery Reduce Costs Strong Brands Vast Consumer Reach Exceptional Services Size, Scale & Distribution Franchise Success System Brand and Hotel Performance Size, Scale, and Distribution Lowers Costs and Increases Revenues for Owners Enables Highly-Valued Capabilities Brand awareness National marketing Reservations Services Technologies Franchising Model is Difficult to Duplicate Scale required to generate reasonable returns for shareholders Capital required to generate scale Scale is a barrier to entry * |
 Profitably Grow & Maximize Returns * |
 36 Business Focus Profitably Grow Improve brand performance – ROI to owners (business delivery, reduced operating and development costs, products, marketing, services) Introduce new concepts (product design/innovation) Increase distribution (franchise development) Maximize Financial Returns and Create Value for Shareholders Capital allocation – focus on returns Capital structure – prudent leverage to maximize returns S&P upgraded credit rating to BBB from BBB- in early 2005 Share repurchases Dividends * |
 37 Maximize Returns 1960 bps 49.5% 69.1% ROIC 15.6% 66.7% 22.9% 100 bps Change $94.4 $6.9 $108.1 61.0% 2004 $109.1 $11.5 $132.9 62.0% 2005 Year Ended December 31, After-Tax Free Cash Flow CAPEX Cash Flow From Operations Franchising Margins ($ in millions) High Margins, After-Tax Free Cash Flow, and Returns on Capital Source: Choice Internal Financial Data, December 2005 and Bear Stearns March 2006 Equity Research – “U.S. Lodging – All Priced In – Our Current Thinking on the Sector” See Supplemental. * |
 38 Strong Financial Results $170.0 $172.1 $187.1 $203.7 $230.0 $160.0 $170.0 $180.0 $190.0 $200.0 $210.0 $220.0 $230.0 $240.0 2001 2002 2003 2004 2005 Franchising Revenues ($ in millions) Source: Choice Internal Data, December 2005. See Supplemental. + 13% CAGR = 7.9% * |
 39 Strong Financial Results Unit Growth In Any Environment Source: Choice Internal Data, December 2005. 2,500 2,700 2,900 3,100 3,300 3,500 3,700 3,900 4,100 1997 1998 1999 2000 2001 2002 2003 2004 2005 Domestic System Size CAGR = 4.4% * |
 40 Strong Financial Results $108.7 $116.0 $125.2 $134.9 $152.8 $90 $100 $110 $120 $130 $140 $150 $160 2001 2002 2003 2004 2005 Recurring EBITDA ($ in millions) Source: Choice Internal Data, December 2005. See Supplemental. CAGR = 8.9% + 13% * |
 41 Strong Financial Results $0.58 $0.76 $0.93 $1.07 $1.26 $0.25 $0.50 $0.75 $1.00 $1.25 $1.50 2001 2002 2003 2004 2005 Adjusted Diluted EPS Source: Choice Internal Data, December 2005. See Supplemental. Per share amounts retroactively adjusted for 2 for 1 stock split in October 2005. CAGR = 21.4% + 18% * |
 42 Strong Financial Results Source: Choice Internal Data, December 2005. 250 300 350 400 450 500 550 600 650 700 1999 2000 2001 2002 2003 2004 2005 $5.0 $7.0 $9.0 $11.0 $13.0 $15.0 $17.0 Deals Initial Fee Revenue Franchise Development (New Contracts Sold) $ in millions Executed Contracts * |
 43 171 164 243 138 188 287 0 50 100 150 200 250 300 350 Limited Service Full Service Economy 2004 2005 2005 Year End Development Results Source: Choice Internal Data, December 2005. 16% Franchise Sales Improvement (552 to 639 deals) Strong Financial Results * |
 44 2005 Units 2004 Units % Change 2005 Units 2004 Units % Change 2005 Units 2004 Units % Change Comfort Inn 53 38 39.5% 56 71 -21.1% 109 109 0.0% Comfort Suites 89 79 12.7% 5 5 0.0% 94 84 11.9% MainStay 14 16 -12.5% 0 1 -100.0% 14 17 -17.6% Sleep 55 33 66.7% 2 0 NM 57 33 72.7% Subtotal 211 166 27.1% 63 77 -18.2% 274 243 12.8% Clarion 4 2 100.0% 31 28 10.7% 35 30 16.7% Quality 5 8 -37.5% 148 133 11.3% 153 141 8.5% Subtotal 9 10 -10.0% 179 161 11.2% 188 171 9.9% Econo Lodge 4 4 0.0% 85 97 -12.4% 89 101 -11.9% Rodeway 0 2 -100% 75 35 114.3% 75 37 102.7% Subtotal 4 6 -33.3% 160 132 21.2% 164 138 18.8% Cambria 13 0 NM 0 0 NM 13 0 NM Total 237 182 30.2% 402 370 8.6% 639 552 15.8% NEW CONSTRUCTION TOTAL CONVERSION Year End Development Results Source: Choice Internal Data, December 2005. Strong Financial Results * |
 45 Source: Choice Internal Data as of March 2006. See Supplemental. 1 st Quarter Performance (Dollars in thousands, except per share amounts) 2006 2005 % Change Financial Franchising Revenues 50,462 $ 41,205 $ 22.5% Franchising Margins 59.1% 53.7% 540 bps Cash Flow From Operations 24,283 $ 16,867 $ 44.0% EBITDA (in thousands) 32,422 $ 24,624 $ 31.7% Diluted EPS 0.26 $ 0.18 $ 44.4% RevPAR* 31.23 $ 28.54 $ 9.4% Development (Domestic) Units On-line 4,070 3,868 5.2% Rooms On-line 329,934 312,630 5.5% Executed Contracts (Excludes Relicencings and 120 103 16.5% Assumptions) Franchised Hotels Under Development 653 399 63.7% Three-Months Ended March 31, * Amounts exclude Suburban activity from January 1, 2006 through March 31, 2006 because comparable pre-acquisition data for Q1 2005 is not available. * |
 Create Value * |
 47 Create Value Management Focused on Creating Value Share repurchases – 66.6 million repurchased at $10.69 per share as of March 31, 2006; represents nearly $712 million since inception of program Dividends – Current quarterly cash dividend of $0.13/share; subject to board approval and business performance, expect to pay future dividends at comparable or increased rate in the future Equity Performance 5 year annualized share price appreciation in excess of 45% Source: Choice Internal Data as of March 2006. All share and per share amounts have been retroactively adjusted to reflect the 2 for 1 stock split effected in October 2005. * |
 48 Closing Comments Strong Earnings Per Share, EBITDA, and Cash Flow Growth Proven Earnings Stability Even through Industry/ Economic Downturns Pure-Play Franchise Focus, Highest Returning “Model” in the Industry High Operating Margins Significant Free Cash Flow Experienced Management Team Focused on Shareholder Value * |
 Supplemental * |
 50 $2,360,000 $472,000 $9,595,000 $1,919,000 $8,955,000 $1,791,000 Estimated Impact on Royalties $0.02 $0.004 $0.09 $0.02 $0.08 $0.02 Estimated Impact on Diluted EPS 1,2 5 bps increase = 1 bps increase = Improvement in Royalty Rate 5% (200 units)= 1% (40 units) = 5% = 1% = Growth New Franchise Improvement RevPAR Revenue Driver (1) Assumes Outstanding Diluted Shares of 66,727,799 (2) Assumed tax rate of 37.75% Source: Choice Internal Analysis Continuing Cash Flow Potential Multiple Revenue Levers (Unaudited) * |
 51 Brand Targets Conversion New Construction $29,000 $32,500 $52,000 $45,500 $67,000 $45 $65 $100+ Targeted Average Daily/Weekly Rate Source: Choice Internal Data as of December 2005. *Excludes cost of land. $47,000 $38,500 $80 * |
 52 Recurring EBITDA (Unaudited) Source: Choice Internal Data, March 2006 & December 2005. March 31 March 31 2006 2005 2005 2004 2003 2002 2001 Operating Income 30,073 $ 22,299 $ 143,750 $ 124,983 $ 113,946 $ 104,700 $ 73,577 $ Adjustments Depreciation and Amortization 2,349 2,325 9,051 9,947 11,225 11,251 12,452 EBITDA 32,422 $ 24,624 $ 152,801 $ 134,930 $ 125,171 $ 115,951 $ 86,029 $ Adjustments Impairment of Friendly Hotels plc investment - - - - - - 22,713 Recurring EBITDA 32,422 $ 24,624 $ 152,801 $ 134,930 $ 125,171 $ 115,951 $ 108,742 $ Twelve Months Ended December 31, Three Months Ended |
 53 Calculation of Adjusted Net Income and Adjusted Diluted Earnings Per Share (EPS) (Unaudited) Source: Choice Internal Data, March 2006 & December 2005. (In thousands, except per share amounts) March 31 March 31 2006 2005 2005 2004 2003 2002 2001 Net Income 17,665 $ 11,999 $ 87,565 $ 74,345 $ 71,863 $ 60,844 $ 14,327 $ Adjustments: Debt Extinguishment Costs - - - 433 - - - Reversal of Provisions for Income Tax Contingencies - - (4,855) (1,182) - - - Income Tax Expense Incurred Due to Foreign Earnings Repatriation - - 1,192 - - - - Loss(Gain) on Sunburst Note Transactions - - - - (3,383) - - Impairment of and Equity Losses in Friendly Hotels PLC Investment - - - - - - 37,166 Adjusted Net Income 17,665 $ 11,999 $ 83,902 $ 73,596 $ 68,480 $ 60,844 $ 51,493 $ Weighted Average Shares Outstanding-Diluted 66,728 66,643 66,336 69,000 73,349 80,114 89,144 Diluted Earnings Per Share 0.26 $ 0.18 $ 1.32 $ 1.08 $ 0.98 $ 0.76 $ 0.16 $ Adjustments: Debt Extinguishment Costs - - - 0.01 - - - Reversal of Provisions for Income Tax Contingencies - - (0.08) (0.02) - - - Income Tax Expense Incurred Due to Foreign Earnings Repatriation - - 0.02 - - - - Loss(Gain) on Sunburst Note Transactions - - - - (0.05) - - Impairment of and Equity Losses in Friendly Hotels PLC Investment - - - - - - 0.42 Adjusted Diluted Earnings Per Share (EPS) 0.26 $ 0.18 $ 1.26 $ 1.07 $ �� 0.93 $ 0.76 $ 0.58 $ Three Months Ended Twelve Months Ended December 31, * |
 54 Calculation of Franchising Revenues and Margins (Unaudited) Source: Choice Internal Data, March 2006 & December 2005. (1) Marketing and reservation revenues are excluded as these represent contractual pass-throughs and are not profitable components of the company’s business. (Dollar amounts in thousands) March 31 March 31 2006 2005 2005 2004 2003 2002 2001 Franchising Revenues and Margins Total Revenues 109,418 $ 91,168 $ 477,399 $ 428,208 $ 385,866 $ 365,562 $ 341,428 $ Adjustments: Marketing and Reservation (1) (57,976) (49,043) (243,123) (220,732) (195,219) (190,145) (168,170) Hotel Operations (980) (920) (4,293) (3,729) (3,565) (3,331) (3,215) Franchising Revenues 50,462 $ 41,205 $ 229,983 $ 203,747 $ 187,082 $ 172,086 $ 170,043 $ Operating Income 30,073 $ 22,299 $ 143,750 $ 124,983 $ Adjustment: Hotel Operations (235) (172) (1,068) (725) Net 29,838 $ 22,127 $ 142,682 $ 124,258 $ Franchising Margins 59.1% 53.7% 62.0% 61.0% Three Months Ended Twelve Months Ended December 31, |
 55 Calculation of After-Tax Free Cash Flows (Unaudited) (In thousands) December 31, December 31, 2005 2004 Net Cash Provided by Operating Activities 132,907 $ 108,080 $ Acquisition of Suburban, net of cash acquired (7,314) - Investment in property and equipment (11,504) (6,859) Issuance of notes receivable (2,667) (2,264) (Purchases) sales of investments, net (5,390) (4,158) Proceeds from disposition of assets 2,811 - Other items, net 214 (435) Total Adjustments: (23,850) (13,716) After-Tax Free Cash Flow 109,057 $ 94,364 $ Twelve Months Ended Source: Choice Internal Data, December 2005. |
 56 Non-GAAP Financial Measures Recurring EBITDA, adjusted net income, adjusted diluted earnings per share, franchising revenues and margins and after-tax free cash flows are non-GAAP financial measurements. These financial measurements are presented as supplemental disclosures because they are used by management in reviewing and analyzing the company’s performance. 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 operating income, net income, diluted earnings per share, total revenues or net cash provided by operating activities. The calculation of these non-GAAP measures may be different from the calculation by other companies and therefore comparability may be limited. The company has included the preceding exhibits which reconcile these measures to the comparable GAAP measurement. * |