Comfort Inn 2002 Annual Report Download - page 41

CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Included in the accompanying consolidated balance sheet as follows:
December 31,
2002 2001
Current net deferred tax assets ................................ $ 2,229 $ 1,888
Non-current net deferred tax liabilities .......................... (47,734) (35,159)
Net deferred tax liability ..................................... (45,505) (33,271)
No provision has been made for U.S. federal deferred income taxes on approximately $12 million of
accumulated and undistributed earnings of foreign subsidiaries at December 31, 2002 since these earnings are
considered to be permanently invested in foreign operations.
A reconciliation of income tax expense at the statutory rate to income tax expense included in the
accompanying consolidated statements of income follows:
Years ended December 31,
2002 2001 2000
(In thousands, except Federal income
tax rate)
Federal income tax rate .......................... 35% 35% 35%
Federal taxes at statutory rate ...................... $33,536 $15,896 $24,354
State income taxes, net of federal tax benefit ......... 1,068 1,120 1,269
Unrealized tax benefits ........................... —12,737 —
Other ......................................... 370 1,337 1,514
Income tax expense ......................... $34,974 $31,090 $27,137
A certain amount of the Company’s capital loss carryforwards (which are included in the foreign operations
deferred tax asset) are not expected to be realized at this time. Accordingly, a valuation allowance of
$12.7 million was established in 2001.
14. Capital Stock
The Company has stock option plans for which it is authorized to grant options to purchase up to 9.3 million
shares of the Company’s common stock, of which 1.4 million shares remain available for grant as of
December 31, 2002. Stock options may be granted to officers, key employees and non-employee directors with
an exercise price not less than the fair market value of the common stock on the date of grant.
In 2002, the Company granted key employees and non-employee directors 109,894 restricted shares of
common stock with a fair value of $2.3 million on the date of grant, all of which vest over five years. In 2001, the
Company granted key employees and non-employee directors 155,515 restricted shares of common stock with a
fair value of $2.3 million on the date of grant. The shares vest over a three to five year period with 10,015 shares
vesting over a three year period and 145,500 shares vesting over a five year period. In 2000, the Company
granted key employees and non-employee directors 14,052 restricted shares of common stock with a fair value of
$0.2 million on the date of grant. The shares vest over a three year period. A total of 9,130 and 11,850 shares of
restricted stock were forfeited in 2001 and 2000, respectively. The Company incurred compensation expense
totaling $1.7 million, $0.7 million and $0.8 million related to the vesting of restricted stock during the years
ended December 31, 2002, 2001 and 2000, respectively. The Company also recorded $0.3 million of
compensation expense related to the vesting of restricted stock as part of its 2001 restructuring accrual related to
46,064 shares.
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