CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

	December 31,				December 31,
	2004			2003
	(In thousands, except
	share amounts)
ASSETS
Current assets
Cash and cash equivalents	$	27,554		$	20,031
Receivables (net of allowance for doubtful accounts of $5,956 and $6,743,
respectively)		34,611			33,631
Deferred income taxes		2,252			1,957
Other current assets		4,212			3,613
Total current assets		68,629			59,232
Property and equipment, at cost, net		47,492			54,253
Goodwill		60,620			60,620
Franchise rights, net		32,102			35,383
Receivable—marketing and reservation fees		21,683			32,368
Other assets		31,862			25,416
Total assets	$	262,388		$	267,272
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current liabilities
Current portion of long-term debt	$	10,146		$	23,829
Accounts payable		30,718			29,740
Accrued expenses and other		59,238			46,065
Income taxes payable		989			2,577
Total current liabilities		101,091			102,211
Long-term debt		318,557			222,823
Deferred income taxes		6,974			21,562
Other liabilities		38,819			38,863
Total liabilities		465,441			385,459
Commitments and Contingencies
SHAREHOLDERS’ DEFICIT
Common stock, $0.01 par value; 160,000,000 shares authorized; 62,755,708 shares
issued; 32,312,433 and 34,745,853 shares outstanding at December 31, 2004 and
2003, respectively		323			347
Additional paid-in-capital		83,303			74,496
Accumulated other comprehensive income		1,400			1,138
Deferred compensation		(8,034	)		(2,641	)
Treasury stock (30,443,275 and 28,009,855 shares at December 31, 2004 and 2003,
respectively), at cost		(631,312	)		(496,510	)
Retained earnings		351,267			304,983
Total shareholders’ deficit		(203,053	)		(118,187	)
Total liabilities and shareholders’ deficit	$	262,388		$	267,272

The accompanying notes are an integral part of these consolidated financial statements.