|
CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Stock Options.
A summary of the stock option activity under the Company’s stock option plan is as follows as of December 31, 2004, 2003 and 2002:
| |
2004 |
|
2003 |
|
2002 |
 |
|
|
|
| |
|
|
Weighted |
|
|
Weighted |
|
|
Weighted |
| |
|
Average |
|
Average |
|
Average |
| Fixed Options |
Shares |
Exercise Price |
Shares |
Exercise Price |
Shares |
Exercise Price |
|
|
|
|
|
|
|
| Outstanding at beginning of year |
3,295,740 |
|
$ |
16.34 |
|
3,111,991 |
|
$ |
15.03 |
|
3,095,589 |
|
$ |
13.56 |
|
| Granted |
|
10,000 |
|
$ |
41.49 |
|
|
686,967 |
|
$ |
20.52 |
|
|
601,895 |
|
$ |
21.53 |
|
| Exercised |
(557,107 |
) |
$ |
15.13 |
|
|
(462,522 |
) |
$ |
13.58 |
|
|
(442,869 |
) |
$ |
13.01 |
|
| Cancelled |
(28,426 |
) |
$ |
19.11 |
|
|
(40,696 |
) |
$ |
18.79 |
|
|
(142,624 |
) |
$ |
16.83 |
|
|
|
|
|
|
|
|
| Outstanding at end of year |
2,720,207 |
|
$ |
16.65 |
|
|
3,295,740 |
|
$ |
16.34 |
|
|
3,111,991 |
|
$ |
15.03 |
|
|
|
|
|
|
|
|
| Options exercisable at year end |
1,634,075 |
|
$ |
14.49 |
|
|
1,673,129 |
|
$ |
13.71 |
|
|
1,533,471 |
|
$ |
12.96 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted average fair value of |
| options granted during the year |
|
|
|
$ |
13.99 |
|
|
|
|
$ |
8.65 |
|
|
|
|
$ |
8.95 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes information about stock options outstanding at December 31, 2004:
| |
Options Outstanding |
|
Options Exercisable |
|
|
|
| |
Number |
|
Weighted Average |
|
Weighted |
Number |
|
Weighted |
| |
Outstanding at |
Remaining |
Average |
Exercisable |
Average |
| Range of Exercise Prices |
12/31/04 |
Contractual Life |
Exercise Price |
at 12/31/04 |
Exercise Price |
|
|
|
|
|
|
| $ 5.01 to $ 9.00 |
|
12,000 |
|
|
5.7 years |
|
$ |
7.82 |
|
|
— |
|
|
— |
|
| $ 9.01 to $13.00 |
|
896,634 |
|
|
3.2 years |
|
$ |
12.09 |
|
|
877,259 |
|
$ |
12.12 |
|
| $13.01 to $17.65 |
|
712,440 |
|
|
4.6 years |
|
$ |
15.64 |
|
|
523,905 |
|
$ |
15.54 |
|
| $17.66 to $30.00 |
|
1,089,133 |
|
|
7.5 years |
|
$ |
20.94 |
|
|
232,911 |
|
$ |
21.04 |
|
| $30.01 to $41.49 |
|
10,000 |
|
|
9.1 years |
|
$ |
41.49 |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
| |
|
2,720,207 |
|
|
5.3 years |
|
$ |
16.65 |
|
|
1,634,075 |
|
$ |
14.49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 2004, 2003 and 2002:
| |
2004 |
|
2003 |
|
2002 |
|
|
|
|
| Risk-free interest rate |
|
3.03 |
% |
|
2.57 |
% |
|
3.58 |
% |
| Volatility |
|
37.97 |
% |
|
39.69 |
% |
|
35.43 |
% |
| Expected Lives |
|
6 years |
|
|
6 years |
|
|
6 years |
|
| Dividend Yield |
|
1.93 |
% |
|
0 |
% |
|
0 |
% |
Stock Repurchase Program.
The Company announced a stock repurchase program on June 25, 1998 to increase returns to its shareholders. Treasury stock activity is recorded at cost in the accompanying consolidated financial statements.
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