8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES

EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): October 30, 2008

CHOICE HOTELS INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Delaware	001-13393	52-1209792
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification Number)

10750 Columbia Pike, Silver Spring, Maryland	20901
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (301) 592-5000

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 7.01. Regulation FD Disclosure.

The Company is furnishing the following pursuant to Item 7.01, “Regulation FD Disclosure.”

On October 30, 2008, Choice Hotels International, Inc. posted a presentation on its website, www.choicehotels.com, which is scheduled to be presented on Thursday, October 30, 2008 in Boston, Massachusetts. The materials include certain non-GAAP financial measures. A reconciliation of those measures to the most directly related comparable GAAP measures is included in the presentation materials. The presentation materials are attached hereto as Exhibit 99.1.

Item 9.01. Financial Statements and Exhibits.

(c) Exhibit 99.1—Choice Hotels International, Inc. Presentation.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: October 30, 2008	/s/    David L. White
	David L. White
	Senior Vice President, Chief Financial Officer & Treasurer

EX-99.1

Stephen P. Joyce –

President and Chief Executive Officer

October 30, 2008

Exhibit 99.1

2

DISCLAIMER

Certain matters discussed in this presentation constitute forward-looking statements within the meaning of the federal

securities law.

Generally,

our

use

of

words

such

as

“expect,”

“estimate,”

“believe,”

“anticipate,”

“will,”

“forecast,”

“plan,”

project,”

“assume”

or similar words of futurity identify statements that are forward-looking and that we intend to be

included within

the

Safe

Harbor

protections

provided

by

Section

27A

of

the

Securities

Act

and

Section

21E

of

the

Securities Exchange Act of 1934.

Such

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

for

the

company’s

revenue,

earnings

and

other

financial

and

operational measures,

company

debt

levels,

payment

of

stock

dividends,

and

future

operations.

We

caution

you

not

to

place undue

reliance

on

any

forward-looking

statements,

which

are

made

as

of

the

date

of

this

presentation.

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,

2007,

filed

with

the

Securities

and

Exchange

Commission

on

February 29, 2008.

We undertake no obligation to publicly update or revise any forward-looking statement, whether as a

result of new information, future events or otherwise.

3

INVESTMENT THESIS

Strong, Growing, Fee-based Operating Business

–

Track record of predictable, profitable growth in variety of lodging and economic

environments

–

Track record of expanding market share

–

Long-term franchise contracts

Significant Growth Opportunities Remain

–

Organic, acquisitions, new concepts, brand extensions

–

International

Significant Free Cash Flow, Strong Capital Structure Create Opportunities to

Enhance Returns

–

Track record of share repurchases, dividends

–

Strong balance sheet with low financial leverage

4

ONE OF THE LARGEST HOTELIERS

Source: Smith Travel Research, May 2008

Market Share

11.3%

9.2%

5.7%      5.4%       5.2%      4.2%      1.9%      1.3%       1.2%         0.8%

4+ yr. bps

(03-08)

-120

160

70

110

70

-30

-60

10           10

0

Leading Gainer of Market Share (% of Hotels Open in U.S.)

0

2

4

6

8

10

12

14

Wyndham

Choice

IHG

Hilton

Marriott

Best

Western

Accor

Hyatt

Carlson

Starwood

2003

2004

2005

2006

2007

2008

5

MANY WELL RECOGNIZED & SEGMENTED

BRANDS

Limited Service

Full Service

Economy

Mid-Scale

Upscale

6

1/3

98%

89%

81%

95%

88%

SIGNIFICANT CORE COMPETENCIES DRIVE RESULTS

Brand Awareness & Reservations Delivery = Key Value Proposition For Hoteliers

–

$300 million+ in annual marketing & reservation fees

–

Choice Privileges has 7 million members (2 million new members in 2 years)

SELLING HOTEL ROOMS

Brand Awareness

All

Hotel Direct

Reservations

Choice Central

Reservation

Contribution

Source: Choice Internal Data, July 2008

7

EXCEPTIONAL DEVELOPMENT TEAMS

FOCUSED ON SELLING HOTEL FRANCHISES

3,834

4,048

4,211

4,445

2004

2005

2006

2007

9/30/08

639

720

792

770

552

400

550

700

850

2004

2005

2006

2007

9/30/08

TTM

$5

$10

$15

$20

$25

258

276

231

413

728

724

190

284

176

602

2004

2005

2006

2007

9/30/2008

Conversion

New Construction

Track record of unit growth across a range of industry and economic cycles

Domestic Franchises

Open

Franchise Development

(New Contracts Sold)

Domestic Pipeline

(#ENYO Contracts)

Executed

Contracts

$ in

Millions

Initial Fee Revenue

Deals

Source: Choice Internal Data, September 2008.

SIGNIFICANT CORE COMPETENCIES DRIVE RESULTS

4,661

8

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

$0

$50

$100

$150

$200

$250

$300

$350

CHH RevPAR

STR Chain Scale (Supply Weighted)

Industry RevPAR

Franchising Revenue

REVENUE GROWTH  IN +/-

REVPAR

ENVIRONMENTS

Source: Smith Travel Research, Choice Internal Data, December 2007

($ in millions)

9

EBITDA GROWTH IN +/-

LODGING

ENVIRONMENTS

$-

$5

$10

$15

$20

$25

$30

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

$-

$50

$100

$150

$200

$250

Industry Profits

Adjusted EBITDA

Source: Smith Travel Research, Choice Internal Data, December 2007

($ in millions)

($ in billions)

10

CAPITAL “LIGHT”

MODEL

GENERATES STRONG RETURNS

ON INVESTED CAPITAL

68.8%

62.9%

49.7%

36.7%

27.6%

14.7%

16.1%

15.2%

78.5%

19.5%

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

Source: Choice Internal Data, December 2007

11

TRACK RECORD OF STRONG

EARNINGS PER SHARE GROWTH

$0.40

$0.51

$0.51

$0.58

$0.76

$0.93

$1.07

$1.26

$1.49

$1.73

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

Source: Choice Internal Data, December 2007, Per Share Amounts Retroactively Adjusted For 2005 Stock Split

Adjusted Diluted Earnings Per Share

12

* Excludes cost of land

Conversion

$40,000+

$84,000+

$76,000+

$95,000+

$50

$70

$100+

Targeted Average Daily Rate

$61,000+

$54,000+

$80

DEVELOPMENT OPPORTUNITIES FOR

HOTELIERS AT VARIOUS PRICE POINTS

Estimated Per Room Investment*

New Construction

Source: Choice Internal Data, April 2008

$65,000+

13

CAMBRIA SUITES BRAND –

UPSCALE, SELECT

SERVICE MARKET OPPORTUNITY

•

All-suites brand

–

100% new construction

–

Guest suites 25% larger than standard

hotel rooms

–

Very attractive per-key development cost

–

Targeted ADR of $100-$150

•

71 contracts –

in 25+ states and Canada –

executed since January 2005 launch

•

8 properties open as of September 30,

2008

•

Positioned favorably against established

brands and new market entrants

Source: Choice Internal Data, September 2008

14

Source: Smith Travel Research, March 2008

SIGNIFICANT GROWTH OPPORTUNITIES

REMAIN IN LARGE CONVERSION MARKET

Domestic Hotels

2,060

1,897

1,703

1,540

1,479

1,448

899

802

665

641

528

390

369

347

257

169

226

297

831

847

Chart does not include 16,000+

independent

hotels in budget,

economy and

mid-scale segments

Best

Western

Other

(includes  

50+ brands)

Holiday Inn

Express

Motel

6

La Quinta

Fairfield

Inn

Red Roof

Inn

Knights

Inn

Super 8

Days

Inn

Hampton

Inn

Holiday Inn /

Holiday Inn

Select

Americas

Best Value

Inn

Travelodge

Howard

Johnson

Microtel

15

551 hotels 

22% of Comfort portfolio

372 hotels 

30% of Quality portfolio

121 hotels

41% of Clarion portfolio

16 hotels  

4% of Sleep Inn portfolio

INTERNATIONAL OPPORTUNITY

•

1,100+ properties

•

37 countries and territories on 5 continents

•

Large

global

“pure

hotel

franchising”

business

•

Track record of consistent, conservative growth

Source: Choice Internal Data, September 2008

16

ROYALTY FEE “LEVERS”

Domestic Royalty Impact

Estimated

Impact on ‘08

Royalties

Estimated

Impact on ‘08

Diluted EPS

1,2

RevPAR Improvement

1% =

$2,253,000

$0.02

5% =

$11,265,000

$0.11

New Franchise Growth

1% (47 units) =

$2,260,000

$0.02

5% (235 units) =

$11,300,000

$0.11

Improvement in

Royalty Rate

1 bps increase =

$496,000

$0.005

5 bps increase =

$2,480,000

$0.02

(1) Assumes outstanding diluted shares of 62,777,610

(2) Assumed tax rate of 37.75%

Source: Choice Internal Data, September 2008

17

WHY CHOICE?

•

Highest returning model in the industry

•

Track record of profitable growth in a wide variety of economic conditions and

industry cycles

•

Substantial

size,

scale

and

distribution

–

difficult

to

duplicate

•

Highly-skilled and experienced management team

•

Focused on returning value to shareholders

18

Appendix

Appendix

Reconciliation of Non-GAAP

Financial Measurements to GAAP

19

DISCLAIMER

Adjusted franchising margins, adjusted earnings before interest

depreciation and amortization (EBITDA), adjusted net income, adjusted

diluted earnings per share, franchising revenues, net operating profits after

taxes (NOPAT), return on invested capital (ROIC) and 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 following

appendix which reconciles these measures to the comparable GAAP

measurement.

20

FRANCHISING REVENUES AND

ADJUSTED FRANCHISING MARGINS

($ amounts in thousands)

Year Ended

Year Ended

Year Ended

Year Ended

Year Ended

December 31,

December 31,

December 31,

December 31,

December 31,

2007

2006

2005

2004

2003

Total Revenues

615,494

$       

539,903

$    

472,098

$  

423,382

$     

380,357

$   

Adjustments:

     Marketing and Reservation 

(316,827)

(273,267)

(237,822)

(215,906)

(189,710)

     Product Sales

-

-

-

-

-

     Hotel Operations

(4,692)

(4,505)

(4,293)

(3,729)

(3,565)

Franchising Revenues

293,975

$       

262,131

$    

229,983

$  

203,747

$     

187,082

$   

Operating Income

185,199

$       

166,625

$    

143,750

$  

124,983

$     

113,946

$   

Adjustments

     Hotel Operations

(1,451)

(1,311)

(1,068)

(725)

(842)

     Executive Termination Benefits

3,690

-

-

-

-

     Product Sales

-

-

-

-

-

     Impairment of Friendly Investment

-

-

-

-

-

Net

187,438

$       

165,314

$    

142,682

$  

124,258

$     

113,104

$   

Adjusted Franchising Margin

63.8%

63.1%

62.0%

61.0%

60.5%

Source: Choice Internal Data, December  2007

21

Year Ended

Year Ended

Year Ended

Year Ended

Year Ended

($ amounts in thousands)

December 31,

December 31,

December 31,

December 31,

December 31,

2002

2001

2000

1999

1998

Total Revenues

365,562

$           

341,428

$           

352,841

$            

324,203

$           

165,474

$            

Adjustments:

     Marketing and Reservation 

(190,145)

(168,170)

(185,367)

(162,603)

-

     Product Sales

-

-

-

(3,871)

(20,748)

     Hotel Operations

(3,331)

(3,215)

(1,249)

-

(1,098)

Franchising Revenues

172,086

$           

170,043

$           

166,225

$            

157,729

$           

143,628

$            

Operating Income

104,700

$           

73,577

$             

92,427

$             

94,170

$             

85,151

$             

Adjustments

Hotel Operations

(385)

(714)

(640)

-

35

Executive Termination Benefits

-

-

-

-

-

Product Sales

-

-

-

12

(1,216)

Impairment of Friendly Investment

-

22,713

-

-

-

Net

104,315

$           

95,576

$             

91,787

$             

94,182

$             

83,970

$             

Adjusted Franchising Margin

60.6%

56.2%

55.2%

59.7%

58.5%

FRANCHISING REVENUES AND ADJUSTED

FRANCHISING MARGINS (CONTINUED)

Source: Choice Internal Data, December 2007

22

RETURN ON INVESTED CAPITAL

Source: Choice Internal Data, December  2007

Year Ended

Year Ended

Year Ended

Year Ended

Year Ended

Year Ended

Year Ended

Year Ended

Year Ended

Year Ended

($ in millions)

December 31,

December 31,

December 31,

December 31,

December 31,

December 31,

December 31,

December 31,

December 31,

December 31,

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

Operating Income (a)

$85.2

$94.2

$92.4

$96.3

$104.7

$113.9

$125.0

$143.8

$166.6

$185.2

Tax Rate(a)

41.7%

39.5%

39.0%

35.0%

36.5%

36.1%

35.1%

33.0%

27.4%

36.0%

After-Tax Operating Income

49.7

57.0

56.4

62.6

66.5

72.8

81.1

96.3

121.0

118.5

+ Depreciation & Amortization

6.7

7.7

11.6

12.5

11.3

11.2

9.9

9.1

9.7

8.6

- Maintenance CAPEX

6.7

7.7

11.6

12.5

11.3

11.2

9.9

9.1

9.7

8.6

Net Op. Profit After-tax (NOPAT)

$49.7

$57.0

$56.4

$62.6

$66.5

$72.8

$81.1

$96.3

$121.0

$118.5

Total Assets

398.2

464.7

484.1

321.2

316.8

267.3

263.4

265.3

303.3

328.4

- Current Liabilities

64.7

88.7

93.8

71.2

84.3

102.2

102.1

120.3

139.8

147.5

Invested Capital

333.6

375.9

390.3

250.0

232.5

165.1

161.3

145.0

163.5

180.9

Return on Average Invested Capital

15.2%

16.1%

14.7%

19.5%

27.6%

36.7%

49.7%

62.9%

78.5%

68.8%

(a) Operating income and tax rate for the year ended December 31, 2001 have been adjusted to exclude the effect

of a $22.7 million (pre-tax) impairment charge related to the write-off of the company’s investment in Friendly Hotels.

23

FREE CASH FLOWS

Year Ended

Year Ended

Year Ended

Year Ended

Year Ended

Year Ended

December 31,

December 31,

December 31,

December 31,

December 31,

December 31,

($ in thousands)

2007

2006

2005

2004

2003

2002

Net Cash Provided by Operating Activities

146,135

$          

153,928

$       

133,588

$       

108,908

$       

115,304

$       

99,018

$         

Net Cash Provided(Used) by Investing Activities

(21,260)

(17,331)

(24,531)

(14,544)

27,784

(14,683)

Free Cash Flows

124,875

$          

136,597

$       

109,057

$       

94,364

$         

143,088

$       

84,335

$         

Source: Choice Internal Data, December  2007

24

FREE CASH FLOWS

(CONTINUED)

Year Ended

Year Ended

Year Ended

Year Ended

December 31,

December 31,

December 31,

December 31,

($ in thousands)

2001

2000

1999

1998

Net Cash Provided by Operating Activities

101,712

$       

53,879

$         

65,040

$         

38,952

$         

Net Cash Provided(Used) by Investing Activities

87,738

(16,617)

(36,031)

(9,056)

Free Cash Flows

189,450

$       

37,262

$         

29,009

$         

29,896

$         

Source: Choice Internal Data, December  2007

25

ADJUSTED EBITDA

Source: Choice Internal Data, December 2007

Year Ended

Year Ended

Year Ended

Year Ended

Year Ended

($ in thousands)

December 31,

December 31,

December 31,

December 31,

December 31,

2007

2006

2005

2004

2003

Operating Income

185,199

$        

166,625

$      

143,750

$      

124,983

$      

113,946

$    

Adjustments

Executive Termination Benefits

3,690

-

-

-

-

Product Sales

-

-

-

-

-

Impairment of Friendly investment

-

-

-

-

-

Depreciation and Amortization

8,637

9,705

9,051

9,947

11,225

Adjusted EBITDA

197,526

$        

176,330

$      

152,801

$      

134,930

$      

125,171

$    

26

ADJUSTED EBITDA

(CONTINUED)

Year Ended

Year Ended

Year Ended

Year Ended

Year Ended

Year Ended

($ in thousands)

December 31,

December 31,

December 31,

December 31,

December 31,

December 31,

2002

2001

2000

1999

1998

1997

Operating Income

104,700

$         

73,577

$           

92,427

$           

94,170

$           

85,151

$           

77,068

$           

Adjustments

Executive Termination Benefits

-

-

-

-

-

-

Product Sales

-

-

-

12

(1,216)

(1,037)

Impairment of Friendly investment

-

22,713

-

-

-

-

Depreciation and Amortization

11,251

12,452

11,623

7,687

6,710

9,173

Adjusted EBITDA

115,951

$         

108,742

$         

104,050

$         

101,869

$         

90,645

$           

85,204

$           

Source: Choice Internal Data, December 2007

27

ADJUSTED DILUTED EARNINGS PER SHARE

Year Ended

December 31,

2003

71,863

$                  

-

-

-

-

(3,383)

-

68,480

$                  

73,349

0.98

$                      

-

-

-

-

(0.05)

-

0.93

$                      

Source: Choice Internal Data, December 2007

Year Ended

Year Ended

Year Ended

Year Ended

December 31,

December 31,

December 31,

December 31,

(In thousands, except per share amounts)

2007

2006

2005

2004

Net Income

111,301

$               

112,787

$               

87,565

$                  

74,345

$                  

Adjustments:

Loss(Gain) on Extinguishment of Debt

-

217

-

433

Executive Termination Benefits, Net of Taxes

2,310

-

-

-

Resolution of Provisions for Income Tax Contingencies

(349)

(12,791)

(4,855)

(1,182)

Income Tax Expense Incurred Due to Foreign Earnings Repatriation

-

-

1,192

-

Loss(Gain) on Sunburst Note Transactions

-

-

-

-

Impairment of and Equity Losses in Friendly Hotels PLC Investment

-

-

-

-

Adjusted Net Income

113,262

$               

100,213

$               

83,902

$                  

73,596

$                  

Weighted Average Shares Outstanding-Diluted

65,331

67,050

66,336

69,000

Diluted Earnings Per Share

1.70

$                      

1.68

$                      

1.32

$                      

1.08

$                      

Adjustments:

Loss(Gain) on Extinguishment of Debt

-

-

-

0.01

Executive Termination Benefits, Net of Taxes

0.04

-

-

-

Resolution of Provisions for Income Tax Contingencies

(0.01)

(0.19)

(0.08)

(0.02)

Income Tax Expense Incurred Due to Foreign Earnings Repatriation

-

-

0.02

-

Loss(Gain) on Sunburst Note Transactions

-

-

-

-

Impairment of and Equity Losses in Friendly Hotels PLC Investment

-

-

-

-

Adjusted Diluted Earnings Per Share (EPS)

1.73

$                      

1.49

$                      

1.26

$                      

1.07

$                      

28

ADJUSTED DILUTED EARNINGS PER SHARE

(CONTINUED)

Year Ended

Year Ended

Year Ended

Year Ended

Year Ended

December 31,

December 31,

December 31,

December 31,

December 31,

(In thousands, except per share amounts)

2002

2001

2000

1999

1998

Net Income

60,844

$               

14,327

$               

42,445

$               

57,155

$               

55,305

$               

Adjustments:

Loss(Gain) on Extinguishment of Debt

-

-

-

-

(7,232)

Executive Termination Benefits, Net of Taxes

-

-

-

-

-

Resolution of Provisions for Income Tax Contingencies

-

-

-

-

-

Income Tax Expense Incurred Due to Foreign Earnings Repatriation

-

-

-

-

-

Loss(Gain) on Sunburst Note Transactions

-

-

4,721

-

-

Impairment of and Equity Losses in Friendly Hotels PLC Investment

-

37,166

7,532

-

-

Adjusted Net Income

60,844

$               

51,493

$               

54,698

$               

57,155

$               

48,073

$               

Weighted Average Shares Outstanding-Diluted

80,114

89,144

106,506

111,334

119,096

Diluted Earnings Per Share

0.76

$                     

0.16

$                     

0.40

$                     

0.51

$                     

0.46

$                     

Adjustments:

Loss(Gain) on Extinguishment of Debt

-

-

-

-

(0.06)

Executive Termination Benefits, Net of Taxes

-

-

-

-

-

Resolution of Provisions for Income Tax Contingencies

-

-

-

-

-

Income Tax Expense Incurred Due to Foreign Earnings Repatriation

-

-

-

-

-

Loss(Gain) on Sunburst Note Transactions

-

-

0.04

-

-

Impairment of and Equity Losses in Friendly Hotels PLC Investment

-

0.42

0.07

-

-

Adjusted Diluted Earnings Per Share (EPS)

0.76

$                     

0.58

$                     

0.51

$                     

0.51

$                     

0.40

$                     

Source: Choice Internal Data, December 2007