Papa Johns 2008 Annual Report Download - page 97

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90
19. Equity Compensation (continued)
We recorded stock-based employee compensation expense of $2.6 million in 2008, $4.9 million in 2007
and $4.7 million in 2006. The total income tax benefit recognized in the income statement for share-
based compensation arrangements was $930,000 in 2008, $1.8 million in 2007 and $1.7 million in 2006.
At December 28, 2008, there was $3.5 million of unrecognized compensation cost related to nonvested
option awards and restricted stock, of which the Company expects to recognize $2.3 million in 2009,
$1.0 million in 2010 and $200,000 in 2011.
Stock Options
Options exercised included 260,000 shares in 2008, 765,000 shares in 2007 and 1.0 million shares in
2006. The total intrinsic value of the options exercised during 2008, 2007 and 2006 was $2.8 million,
$10.4 million and $18.5 million, respectively. Cash received upon the exercise of stock options was $4.6
million, $12.2 million and $15.2 million during 2008, 2007 and 2006, respectively, and the related tax
benefits realized were approximately $1.0 million, $3.9 million and $6.8 million during the
corresponding periods.
Information pertaining to option activity during 2008 is as follows (number of options and aggregate
intrinsic value in thousands):
Weighted
Weighted Average
Number Average Remaining Aggregate
of Exercise Contractual Intrinsic
Options Price Term Value
Outstanding at December 30, 2007 2,339 $24.31
Granted 618 26.31
Exercised (260) 17.78
Cancelled (68) 27.52
Outstanding at December 28, 2008 2,629 $25.34 2.63 $1,539
Vested or expected to vest at December 28, 2008 2,598 $25.33 2.66 $1,399
Exercisable at December 28, 2008 1,622 $23.00 1.80 $1,539
The following is a summary of the significant assumptions used in estimating the fair value of options
granted in 2008, 2007 and 2006:
2008 2007 2006
Assumptions (weighted average):
Risk-free interest rate 2.7% 4.7% 4.9%
Expected dividend yield 0.0% 0.0% 0.0%
Expected volatility 0.30 0.28 0.27
Expected term (in years) 3.8 3.5 3.5
The risk-free interest rate for the periods within the contractual life of an option is based on the U.S.
Treasury yield curve in effect at the time of grant. The estimated volatility is based on the historical
volatility of our stock and other factors. The expected term of options represents the period of time that
options granted are expected to be outstanding.
The weighted average grant-date fair value of options granted during 2008, 2007 and 2006 was $7.07,
$8.98 and $8.95, respectively. The Company granted 618,000, 582,000 and 612,000 options in 2008,
2007 and 2006, respectively.