|
CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
In December 1999, the Company entered into an interest rate swap agreement to fix certain of its variable rate debt in order to reduce the Company’s exposure to fluctuations in interest rates. On March 3, 2000, the interest rate swap agreement was settled resulting in a deferred gain. In accordance with SFAS 133, the unamortized gain was reclassified in 2001 to other comprehensive income and is being amortized over the original life of the related debt as a reduction of interest expense. In each of 2004, 2003 and 2002, the Company recorded approximately $67,000, net of taxes, of amortization related to this deferred gain.
16. Earnings Per Share
The following table reconciles the number of shares used in the basic and diluted earnings per share calculations.
| |
Years Ended December 31, |
 |
|
| |
2004 |
|
2003 |
|
2002 |
|
|
|
|
| |
(In thousands, except |
| |
per share amounts) |
| Computation of Basic Earnings Per Share: |
| Net income |
$ |
74.3 |
|
$ |
71.9 |
|
$ |
60.8 |
|
|
|
|
|
| Weighted average shares outstanding-basic |
|
33.2 |
|
|
35.7 |
|
|
39.3 |
|
|
|
|
|
| Basic earnings per share |
$ |
2.24 |
|
$ |
2.01 |
|
$ |
1.55 |
|
|
|
|
|
|
|
|
|
|
| Computation of Diluted Earnings Per Share: |
| Net income for diluted earnings per share |
$ |
74.3 |
|
$ |
71.9 |
|
$ |
60.8 |
|
| Weighted average shares outstanding-basic |
|
33.2 |
|
|
35.7 |
|
|
39.3 |
|
| Effect of Dilutive Securities: |
|
|
|
|
|
|
|
|
|
| Employee stock option and restricted stock plan |
|
1.3 |
|
|
1.0 |
|
|
0.8 |
|
|
|
|
|
| Weighted average shares outstanding-diluted |
|
34.5 |
|
|
36.7 |
|
|
40.1 |
|
|
|
|
|
| Diluted earnings per share |
$ |
2.15 |
|
$ |
1.96 |
|
$ |
1.52 |
|
|
|
|
|
|
|
|
|
|
The effect of dilutive securities is computed using the treasury stock method and average market prices during the period. In 2002, the Company excluded 50,000 anti-dilutive options from the computation of diluted earnings per share.
17. Leases
The Company enters into operating leases primarily for office space and computer equipment. Rental expense under non-cancelable operating leases was approximately $12.8 million, $15.2 million and $12.9 million for the years ended December 31, 2004, 2003 and 2002, respectively. The Company received sublease rental income related to computer equipment leased to franchisees totaling $8.8 million, $10.2 million and $9.1 million during the years ended December 31, 2004, 2003 and 2002, respectively. Future minimum lease payments are as follows:
| |
2005 |
|
2006 |
|
2007 |
|
2008 |
|
2009 |
|
Thereafter |
|
Total |
|
|
|
|
|
|
|
|
| |
(In thousands) |
| Minimum lease payments |
$ |
10,842 |
|
$ |
6,429 |
|
$ |
3,878 |
|
$ |
3,884 |
|
$ |
3,943 |
|
$ |
14,056 |
|
$ |
43,032 |
|
| Minimum sublease rentals |
|
(7,171 |
) |
|
(2,642 |
) |
|
(45 |
) |
|
— |
|
|
— |
|
|
— |
|
|
(9,858 |
) |
|
|
|
|
|
|
|
|
| |
$ |
3,671 |
|
$ |
3,787 |
|
$ |
3,833 |
|
$ |
3,884 |
|
$ |
3,943 |
|
$ |
14,056 |
|
$ |
33,174 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
