Comfort Inn 2007 Annual Report Download - page 84

CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)
Stock Options
The Company granted approximately 0.3 million, 0.2 million and 0.4 million options to officers of the Company at a
fair value of approximately $2.9 million, $2.8 million and $3.6 million during the years ended December 31, 2007, 2006
and 2005, respectively. The stock options granted by the Company had an exercise price equal to the average of the high
and low 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:
2007
2006 2005
Risk-free interest rate............................................................................................ 4.67% 4.69% 3.70%
Expected volatility ................................................................................................ 32.00% 32.09% 36.07%
Expected life of stock option ................................................................................ 4.5 years
4.3 years 5.5 years
Dividend yield....................................................................................................... 1.55% 1.07% 1.50%
Requisite service period........................................................................................ 4 years
4 years 5 years
Contractual life ..................................................................................................... 7 years 7 years 10 years
Weighted average fair value of options granted.................................................... $ 11.73 $ 14.82 $ 10.11
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. 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, 2007 was $43.4 million
and $38.1 million, respectively. The total intrinsic value of options exercised during the year ended December 31, 2007,
2006 and 2005 was $16.1 million, $42.8 million and $47.7 million, respectively.
The Company received $5.7 million, $8.5 million, and $14.2 million in proceeds from the exercise of 0.6 million,
1.0 million and 1.9 million employee stock options during the years ended December 31, 2007, 2006 and 2005,
respectively.
The following table summarizes information about stock options outstanding at December 31, 2007:
Options Outstanding
Options Exercisable
Range of Exercise Prices
Number
Outstanding at
December 31,
2007
Weighted Average
Remaining
Contractual Life
Weighted
Average
Exercise Price
Number
Exercisable
at December 31, 2007
Weighted
Average
Exercise Price
$ 0.00 to $ 4.87 .................................... 15,000 2.7 years $ 4.81 15,000 $ 4.81
$ 4.88 to $ 9.75 .................................... 853,595 1.5 years 7.28 853,595 7.28
$ 9.76 to $14.62 .................................... 859,647 4.7 years 10.41 662,210 10.48
$14.63 to $24.37 .................................... 20,000 6.1 years 20.75 12,000 20.75
$24.38 to $34.12 .................................... 314,863 7.1 years 29.92 120,592 29.92
$34.13 to $39.00 .................................... 85,000 6.6 years 37.38 — —
$39.01 to $43.87 .................................... 154,637 6.1 years 40.72 — —
$43.88 to $48.75 .................................... 180,534 5.1 years 48.74 45,130 48.74
2,483,276 4.1 years $ 17.46 1,708,527 $ 11.29
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