Chili's 2008 Annual Report Download - page 55

BRINKER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
2005. We record compensation expense using a graded-vesting schedule over the vesting period, or to the
date on which retirement eligibility is achieved, if shorter (non-substantive vesting period approach).
Certain employees are eligible to receive stock options, performance shares, restricted stock and
restricted stock units, while non-employee members of the Board of Directors are eligible to receive stock
options, restricted stock and restricted stock units. Performance shares represent a right to receive shares
of common stock upon satisfaction of performance goals or other specified metrics at the end of a
three-year cycle. Performance shares are paid out in common stock and will be fully vested upon issuance.
The fair value of performance shares is determined on the date of grant based on a Monte Carlo
simulation model. The fair value of restricted stock and restricted stock units are based on our closing
stock price on the date of grant.
Stock-based compensation expense totaled approximately $15.6 million, $29.9 million and
$32.2 million for fiscal 2008, 2007 and 2006, respectively. The total income tax benefit recognized in the
consolidated statements of income related to stock-based compensation was approximately $6.1 million,
$10.5 million and $7.7 million during fiscal 2008, 2007 and 2006, respectively.
The weighted average fair values of option grants were $7.18, $7.37 and $7.65 during fiscal 2008, 2007
and 2006, respectively. The fair value of stock options is estimated using the Black-Scholes option-pricing
model with the following weighted average assumptions:
2008 2007 2006
Expected volatility ............................ 23.6% 26.1% 28.8%
Risk-free interest rate ......................... 4.2% 4.6% 4.2%
Expected lives ............................... 5 years 5 years 5 years
Dividend yield ............................... 1.2% 1.1% 1.0%
Expected volatility and the expected life of stock options are based on historical experience. The
risk-free rate is based on the yield of a five-year Treasury Note.
(p) Preferred Stock
Our Board of Directors is authorized to provide for the issuance of 1.0 million preferred shares with a
par value of $1.00 per share, in one or more series, and to fix the voting rights, liquidation preferences,
dividend rates, conversion rights, redemption rights, and terms, including sinking fund provisions, and
certain other rights and preferences. As of June 25, 2008, no preferred shares were issued.
(q) Shareholders’ Equity
Our Board of Directors has authorized a total of $2,060.0 million of share repurchases. Pursuant to
our stock repurchase plan, we repurchased approximately 9.1 million shares of our common stock for
$240.3 million during fiscal 2008. As of June 25, 2008, approximately $59.8 million was available under our
share repurchase authorizations. The repurchased common stock is reflected as a reduction of
shareholders’ equity.
(r) Comprehensive Income
Comprehensive income is defined as the change in equity of a business enterprise during a period
from transactions and other events and circumstances from non-owner sources. Fiscal 2008 comprehensive
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