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CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
SFAS No. 148 “Accounting for Stock-Based Compensation – Transition and Disclosures,” requires companies to provide additional note disclosures about employee stock-based compensation plans based on a fair value method of accounting.
For purposes of the pro forma disclosure included in the stock based compensation section of Note 1, compensation cost for the Company’s stock option plan was determined based on the fair value at the grant dates for awards under those plans consistent with the method of SFAS No. 123. The fair value of each option grant has been estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants in 2003, 2002 and 2001:
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2003 |
|
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2002 |
|
|
2001 |
|
 |
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| Risk-free interest rate |
2.57% |
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3.58% |
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5.03% |
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| Volatility |
39.69% |
|
35.43% |
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43.3% |
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| Expected Lives |
6 years |
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6 years |
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10 years |
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| Dividend Yield |
0% |
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0% |
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0% |
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Stock Repurchase Program.
The Company announced a stock repurchase program on June 25, 1998. Treasury stock is carried at cost in the accompany consolidated financial statements. Through December 31, 2003, the Company had repurchased 29.3 million shares of its common stock at a total cost of $514.8 million, including 2.9 million shares of common stock at a total cost of $80.4 million during the year ended December 31, 2003. During 2003, the Company repurchased 1.0 million shares at a total cost of $24.8 million from the Company’s largest shareholder, affiliates and related parties. During 2002, the Company repurchased 1.7 million shares at a total cost of $41.7 million from the Company’s largest shareholder, affiliates and related parties.
In the fourth quarter 2003, the Company declared an initial cash dividend of $0.20 per share representing $6.9 million in the aggregate. The dividends were paid in January 2004.
In the first quarter 2004, the Company declared a cash dividend of $0.20 per share payable April 26, 2004 to shareholders of record on April 12, 2004.
The Company paid approximately $298,385 and $41,000 to and received approximately $121,040 and $104,000 from corporations owned or controlled by family members of the Company’s largest shareholder related to the lease of personal and real property during 2003 and 2002.
On February 19, 1998, the Board of Directors adopted a shareholder rights plan under which a dividend of one preferred stock purchase right was distributed for each outstanding share of the Company’s common stock to shareholders of record on April 3, 1998. Each right will entitle the holder to buy 1 / 100 th of a share of a newly issued series of a junior participating preferred stock of the Company at an exercise price of $75 per share. The rights will be exercisable, subject to certain exceptions, 10 days after a person or a group acquires beneficial ownership of 10% or more of the Company’s common stock. Shares owned by a person or group on February 19, 1998, and held continuously thereafter are exempt for purposes of determining beneficial ownership under the rights plan. The rights will be non-voting and will expire on January 31, 2008, unless exercised or previously redeemed by the Company for $.001 each. If the Company is involved in a merger or certain other business combinations not approved by the Board of Directors, each right will entitle its holder, other than the acquiring person or group, to purchase common stock of either the Company or the acquiror having a value of twice the exercise price of the right.
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