CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT
AND COMPREHENSIVE INCOME
(In thousands, except share amounts)

	Common				Common								Accumulated
	Stock -			Stock -			Additional			Other
	Shares			Par			Paid-in-			Comprehensive			Deferred			Treasury			Comprehensive			Retained
	Outstanding			Value			Capital			Income (Loss)			Compensation			Stock			Income			Earnings			Total
Balance as of December 31, 2001		41,997,637		$	420		$	70,130		$	(354	)	$	(2,857	)	$	(311,053	)				$	179,175		$	(64,539	)
Comprehensive income
Net income		—			—			—			—			—			—		$	60,844			60,844			60,844
Other comprehensive income:
Foreign currency translation adjustments		—			—			—			—			—			—			341			—			341
Amortization of deferred gain on hedge, net of
taxes		—			—			—			—			—			—			(67	)		—			(67	)
Unrealized gain on available for sale securities,
net of taxes		—			—			—			—			—			—			122			—			122
Other comprehensive income		—			—			—			396			—			—			396			—			—
Comprehensive income																			$	61,240
Exercise of stock options		442,869			4			1,762			—			—			5,768						—			7,534
Issuance of restricted stock		109,894			1			—			—			(2,301	)		2,300						—			—
Stock compensation related to restructuring		—			—			1,208			—			—			—						—			1,208
Amortization of deferred compensation related to
restricted stock grants		—			—			—			—			1,666			—						—			1,666
Treasury purchases		(5,387,184	)		(54	)		—			—			—			(120,854	)					—			(120,908	)
Balance as of December 31, 2002		37,163,216		$	371		$	73,100		$	42		$	(3,492	)	$	(423,839	)				$	240,019		$	(113,799	)
Comprehensive income
Net income		—			—			—			—			—			—		$	71,863			71,863			71,863
Other comprehensive income:
Foreign currency translation adjustments		—			—			—			—			—			—			1,101			—			1,101
Amortization of deferred gain on hedge, net of
taxes		—			—			—			—			—			—			(67	)		—			(67	)
Unrealized gain on available for sale securities,
net of taxes		—			—			—			—			—			—			62			—			62
Other comprehensive income		—			—			—			1,096			—			—			1,096			—			—
Comprehensive income																			$	72,959
Exercise of stock options		462,522			5			198			—			—			7,845						—			8,048
Issuance and cancellation of restricted stock		7,428			—			(108	)		—			(72	)		180						—			—
Stock compensation related to stock options		—			—			1,306			—			—			—						—			1,306
Amortization of deferred compensation related to
restricted stock grants		—			—			—			—			923			—						—			923
Dividends declared		—			—			—			—			—			—						(6,899	)		(6,899	)
Treasury purchases		(2,887,313	)		(29	)		—			—			—			(80,696	)					—			(80,725	)
Balance as of December 31, 2003		34,745,853		$	347		$	74,496		$	1,138		$	(2,641	)	$	(496,510	)				$	304,983		$	(118,187	)
Comprehensive income
Net income		—			—			—			—			—			—		$	74,345			74,345			74,345
Other comprehensive income:
Foreign currency translation adjustments		—			—			—			—			—			—			188			—			188
Amortization of deferred gain on hedge, net of
taxes		—			—			—			—			—			—			(67	)		—			(67	)
Unrealized gain on available for sale
securities, net of taxes		—			—			—			—			—			—			141			—			141
Other comprehensive income		—			—			—			262			—			—			262			—			—
Comprehensive income																			$	74,607
Exercise of stock options		557,107			6			7,332			—			—			5,564						—			12,902
Issuance and cancellation of restricted stock		202,405			2			(43	)		—			(7,894	)		7,935						—			—
Stock compensation related to stock options		—			—			1,518			—			—			—						—			1,518
Amortization of deferred compensation related to
restricted stock grants		—			—			—			—			2,501			—						—			2,501
Dividends declared		—			—			—			—			—			—						(28,061	)		(28,061	)
Treasury purchases		(3,192,932	)		(32	)		—			—			—			(148,301	)					—			(148,333	)
Balance as of December 31, 2004		32,312,433		$	323		$	83,303		$	1,400		$	(8,034	)	$	(631,312	)				$	351,267		$	(203,053	)

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