Chili's 2002 Annual Report Download - page 56

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. SHAREHOLDERS’ EQUITY
(a) Stockholder Protection Rights Plan
The Company maintains a Stockholder Protection Rights Plan (the ‘‘Plan’’). Upon implementation of the
Plan, the Company declared a dividend of one right on each outstanding share of common stock. The rights are
evidenced by the common stock certificates, automatically trade with the common stock, and are not exercisable
until it is announced that a person or group has become an Acquiring Person, as defined in the Plan. Thereafter,
separate rights certificates will be distributed and each right (other than rights beneficially owned by any
Acquiring Person) will entitle, among other things, its holder to purchase, for an exercise price of $40, a number
of shares of Company common stock having a market value of twice the exercise price. The rights may be
redeemed by the Board of Directors for $0.01 per right prior to the date of the announcement that a person or
group has become an Acquiring Person.
(b) Preferred Stock
The Company’s Board of Directors is authorized to provide for the issuance of 1,000,000 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 26, 2002, no preferred shares were issued.
(c) Treasury Stock
In August 2001 and April 2002, the Board of Directors authorized increases in the stock repurchase plan of
an additional $100.0 million each, bringing the Company’s total share repurchase program to $410.0 million.
Pursuant to the Company’s stock repurchase plan, the Company repurchased approximately 5.1 million shares of
its common stock for $136.1 million during fiscal 2002, resulting in a cumulative repurchase total of
approximately 16.0 million shares of its common stock for $327.6 million. The Company’s stock repurchase plan
is used by the Company to offset the dilutive effect of stock option exercises, satisfy obligations under its savings
plans, and for other corporate purposes. The repurchased common stock is reflected as a reduction of
shareholders’ equity.
(d) Restricted Stock
Pursuant to shareholder approval in November 1999, the Company implemented the Executive Long-Term
Incentive Plan for certain key employees, one component of which is the award of restricted common stock.
During fiscal 2002 and 2001, respectively, approximately 100,000 and 57,000 shares of restricted common stock
were awarded, the majority of which vests over a three-year period. Unearned compensation was recorded as a
separate component of shareholders’ equity at the date of the award based on the market value of the shares and
is being amortized to compensation expense over the vesting period.
(e) Stock Split
On December 8, 2000, the Board of Directors declared a three-for-two stock split, effected in the form of a
50% stock dividend, to shareholders of record on January 3, 2001, payable on January 16, 2001. As a result of the
split, 39.2 million shares of common stock were issued on January 16, 2001. All references to number of shares
and per share amounts of common stock have been restated to reflect the stock split. Shareholders’ equity
accounts have been restated to reflect the reclassification of an amount equal to the par value of the increase in
issued common shares from the retained earnings account to the common stock account.
11. SAVINGS PLANS
The Company sponsors a qualified defined contribution retirement plan (‘‘Plan I’’) covering salaried and
hourly employees who have completed one year of service and have attained the age of twenty-one. Plan I allows
eligible employees to defer receipt of up to 20% of their compensation and 100% of their eligible bonuses, as
defined in the plan, and contribute such amounts to various investment funds. The Company matches in
Company common stock 25% of the first 5% a salaried employee contributes. Hourly employees do not receive
matching contributions. Employee contributions vest immediately while Company contributions vest 25%
annually beginning on the participant’s second anniversary of employment. In fiscal 2002, 2001, and 2000, the
Company contributed approximately $828,000, $788,000, and $731,000, respectively.
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