Comfort Inn 2011 Annual Report Download - page 89

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Table of Contents
Deferred United States income taxes have not been recorded for temporary differences related to investments in certain foreign subsidiaries and corporate
joint ventures. These temporary differences consisted primarily of undistributed earnings considered permanently invested in operations outside the United
States. Determination of the deferred income tax liability on these unremitted earnings is not practicable because such liability, if any, is dependent on
circumstances existing if and when remittance occurs.
 
The Company recognizes compensation cost related to share-based payment transactions in the financial statements based on the fair value of the equity
or liability instruments issued. Compensation expense related to the fair value of share-based awards is recognized over the requisite service period based on an
estimate of those awards that will ultimately vest. The Company estimates the share-based compensation expense for awards that will ultimately vest at the
inception of the grant. Over the life of the grant, the estimate of share-based compensation expense for awards with performance and/or service requirements is
adjusted so that compensation cost is recognized only for awards that ultimately vest.
The Company has calculated a pool of income tax benefits that are available to absorb future income tax shortfalls that can result from the exercise or
maturity of stock awards. The Company has calculated its windfall pool under the short-cut method based on the actual income tax benefits received from
exercises and maturities of stock awards granted after October 15, 1997.
The Company has stock compensation plans pursuant to which it is authorized to grant stock-based awards of up to 4.6 million shares of the
Company’s common stock, of which 1.8 million shares remain available for grant as of December 31, 2011. The Company’s policy allows the issuance of
new or treasury shares to satisfy stock-based awards. Restricted stock, stock options, stock appreciation rights and performance share awards may be
granted to officers, key employees and non-employee directors with contractual terms set by the Compensation Committee of the Board of Directors.
Stock Options
The Company granted approximately 0.2 million, 0.3 million and 0.5 million options to certain employees of the Company at a fair value of
approximately $2.1 million, $2.6 million and $4.0 million during the years ended December 31, 2011, 2010 and 2009, respectively. The stock options
granted by the Company had an exercise price equal to the market price of the Company’s common stock on the date of grant. The fair value of the options
granted was estimated on the grant date using the Black-Scholes option-pricing model with the following weighted average assumptions:



Risk-free interest rate 
2.19%
1.82%
Expected volatility 
41.92%
39.71%
Expected life of stock option 
4.4 years
4.4 years
Dividend yield 
2.26%
2.74%
Requisite service period 
4 years
4 years
Contractual life 
7 years
7 years
Weighted average fair value of options granted (per option)  
$10.07
$7.41
The expected life of the options and volatility are based on the historical data and are not necessarily indicative of exercise patterns or actual volatility
that may occur. Historical volatility is calculated based on a period that corresponds to the expected life of the stock option. The dividend yield and the risk-
free rate of return are calculated on the grant date based on the then current dividend rate and the risk-free rate for the period corresponding to the expected life
of the stock option. Compensation expense related to the fair value of these awards is recognized straight-line over the requisite service period based on those
awards that ultimately vest.
The aggregate intrinsic value of stock options outstanding and exercisable at December 31, 2011 was $9.1 million and $5.6 million, respectively. The
total intrinsic value of options exercised during the year ended December 31, 2011, 2010 and 2009 was $2.8 million, $2.0 million and $12.6 million,
respectively.
The Company received $3.8 million, $2.5 million, and $9.2 million in proceeds from the exercise of 0.2 million, 0.1 million, and 0.8 million employee
stock options during the years ended December 31, 2011, 2010 and 2009, respectively.
87