17. Earnings Per Share

The following table illustrates the reconciliation of the earnings and number of shares used in the basic and diluted earnings per share calculations.

The effect of dilutive securities is computed using the treasury stock method and average market prices during the period. In 2000 and 1999, the Company excluded 2,725,696 and 206,031, respectively, anti-dilutive options from the computation of diluted earnings per share.

18. Leases

Rental expense under non-cancelable operating leases was approximately $5.1 million, $3.9 million and $1.7 million for the years ended December 31, 2000, 1999 and 1998, respectively. The Company paid office rent of $51,662 and $977,500 to Sunburst for the years ended December 31, 1999 and 1998, respectively, based on the portion of total space occupied by the Company. Future minimum lease payments are as follows:

During 1998, the Company recorded an extraordinary gain for the early extinguishment of debt associated with a capitalized lease obligation. The Company retired $13.7 million in debt and removed related assets of $1.8 million from the consolidated balance sheets. Accordingly, an extraordinary gain of $7.2 million was recognized, after income tax expense of $4.7 million, or $0.12 per diluted share.

19. Reportable Segment Information

The Company has a single reportable segment encompassing its franchising business. Franchising revenues are comprised of royalty fees, initial franchise and relicensing fees, and partner services revenue and other. Marketing and reservation fees and expenses are excluded from reportable segment information as such fees and associated expenses are reported net. Corporate and other revenue consists of the operations of three MainStay hotels, product sales and European hotel operations. The Company does not allocate interest income, interest expense or income taxes to its franchising segment.