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CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
17. 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 |
 |
|
| |
2003 |
|
2002 |
|
2001 |
|
|
|
|
| |
(In millions, except per |
| |
share amounts) |
| Computation of Basic Earnings Per Share: |
| Net income |
$ |
71.9 |
|
$ |
60.8 |
|
$ |
14.3 |
|
|
|
|
|
| Weighted average shares outstanding—basic |
|
35.7 |
|
|
39.3 |
|
|
44.2 |
|
|
|
|
|
| Basic earnings per share |
$ |
2.01 |
|
$ |
1.55 |
|
$ |
0.32 |
|
|
|
|
|
|
|
|
|
|
| Computation of Diluted Earnings Per Share: |
| Net income for diluted earnings per share |
$ |
71.9 |
|
$ |
60.8 |
|
$ |
14.3 |
|
| Weighted average shares outstanding—basic |
|
35.7 |
|
|
39.3 |
|
|
44.2 |
|
| Effect of Dilutive Securities: |
|
|
|
|
|
|
|
|
|
| Employee stock option and restricted stock plan |
|
1.0 |
|
|
0.8 |
|
|
0.4 |
|
|
|
|
|
| Weighted average shares outstanding—diluted |
|
36.7 |
|
|
40.1 |
|
|
44.6 |
|
|
|
|
|
| Diluted earning per share |
$ |
1.96 |
|
$ |
1.52 |
|
$ |
0.32 |
|
|
|
|
|
|
|
|
|
|
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.
18. Leases
The Company enters into operating leases primarily for office space and computer equipment. Rental expense under non-cancelable operating leases was approximately $15.2 million, $12.9 million and $12.0 million for the years ended December 31, 2003, 2002 and 2001, respectively. The Company received sublease rental income related to computer equipment leased to franchisees totaling $10.2 million, $9.1 million and $7.6 million during the years ended December 31, 2003, 2002 and 2001, respectively. Future minimum lease payments are as follows:
| |
2004 |
|
2005 |
|
2006 |
|
2007 |
|
2008 |
|
Thereafter |
|
Total |
|
|
|
|
|
|
|
|
| |
(In thousands) |
| Minimum lease payments |
$ |
12,144 |
|
$ |
9,358 |
|
$ |
5,217 |
|
$ |
3,943 |
|
$ |
3,861 |
|
$ |
14,326 |
|
$ |
48,849 |
|
| Minimum sublease rentals |
|
(8,236 |
) |
|
(5,595 |
) |
|
(1,266 |
) |
|
— |
|
|
— |
|
|
— |
|
(15,097 |
) |
|
|
|
|
|
|
|
|
| |
$ |
3,908 |
|
$ |
3,763 |
|
$ |
3,951 |
|
$ |
3,943 |
|
$ |
3,861 |
|
$ |
14,326 |
|
$ |
33,752 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19. Reportable Segment Information
The Company has a single reportable segment encompassing its franchising business. Revenues from the franchising business include royalty fees, initial franchise and relicensing fees, marketing and reservation fees, partner services revenue and other revenue. The Company is obligated under its franchise agreements to provide marketing and reservation services appropriate for the successful operation of its systems. These services do not represent separate reportable segments as their operations are directly related to the Company’s franchising business. The revenues received from franchisees that are used to pay for part of the Company’s central on-going operations are included in franchising revenues and are offset by the related expenses paid for marketing and reservation activities to calculate franchising operating income. Corporate and other revenue consists of hotel
operations. The Company does not allocate interest and dividend income, interest expense or income taxes to its franchising segment.
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