Chili's 2002 Annual Report Download - page 54

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At June 26, 2002, the Company had entered into other lease agreements for restaurant facilities currently
under construction or yet to be constructed. Classification of these leases as capital or operating has not been
determined as construction of the leased properties has not been completed.
9. STOCK OPTION PLANS
The Company has adopted the disclosure-only provisions of SFAS No. 123. Had the Company adopted the
fair value based accounting method for stock compensation expense prescribed by SFAS No. 123, the Company’s
diluted net income per common and equivalent share would have been reduced to the pro forma amounts
indicated below (in thousands, except per share data):
2002 2001 2000
Net income—as reported........................ $152,713 $145,148 $117,840
Net income—pro forma......................... 137,803 132,963 108,503
Diluted net income per share—as reported........... 1.52 1.42 1.17
Diluted net income per share—pro forma............ 1.37 1.30 1.07
The weighted average fair value of option grants was $10.66, $10.90, and $7.25 during fiscal 2002, 2001 and
2000, respectively. The fair value is estimated using the Black-Scholes option-pricing model with the following
weighted average assumptions:
2002 2001 2000
Expected volatility .......................... 35.5% 34.1% 40.8%
Risk-free interest rate........................ 4.1% 5.9% 5.9%
Expected lives ............................. 5 years 5 years 5 years
Dividend yield ............................. 0.0% 0.0% 0.0%
The pro forma disclosures provided are not likely to be representative of the effects on reported net income
for future years due to future grants.
(a) 1983, 1992, and 1998 Employee Incentive Stock Option Plans
In accordance with the Incentive Stock Option Plans adopted in October 1983, November 1992, and
October 1998, options to purchase approximately 40.2 million shares of Company common stock may be granted
to officers, directors, and eligible employees, as defined. Options are granted at the market value of the
underlying common stock on the date of grant, are exercisable beginning one to two years from the date of grant,
with various vesting periods, and expire 10 years from the date of grant.
In October 1993, the 1983 Incentive Stock Option Plan (the ‘‘1983 Plan’’) expired. Consequently, no options
were granted under the 1983 Plan subsequent to fiscal 1993. Options granted prior to the expiration of the 1983
Plan remain exercisable through April 2003.
In October 1998, the 1998 Stock Option and Incentive Plan (the ‘‘1998 Plan’’) was adopted and no
additional options were granted under the 1992 Incentive Stock Option Plan (the ‘‘1992 Plan’’). Options granted
under the 1992 Plan prior to the adoption of the 1998 Plan remain exercisable through March 2008.
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