Chili's 2004 Annual Report Download - page 47

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The weighted average fair value of option grants was $11.38, $10.76, and $10.66
during fiscal 2004, 2003, and 2002, respectively. The fair value is estimated
using the Black-Scholes option-pricing model with the following weighted average
assumptions:
2004 2003 2002
Expected volatility 33.0% 34.0% 35.5%
Risk-free interest rate 3.4% 3.0% 4.1%
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.
(l) 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 2004 and 2003 comprehensive income consists of
net income and the unrealized portion of changes in the fair value of the
Company’s investments in mutual funds. Fiscal 2002 comprehensive income
consists of net income and the effective unrealized portion of changes in the
fair value of the Company’s cash flow hedges.
(m) Net Income Per Share
Basic earnings per share is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding for the
reporting period. Diluted earnings per share reflects the potential dilution that
could occur if securities or other contracts to issue common stock were exercised
or converted into common stock. For the calculation of diluted net income per
share, the basic weighted average number of shares is increased by the dilutive
effect of stock options determined using the treasury stock method. The Company
had approximately 700,000, 1.4 million, and 1.9 million stock options outstanding
at June 30, 2004, June 25, 2003, and June 26, 2002, respectively, that were not
included in the dilutive earnings per share calculation because the effect would
have been antidilutive. The Company’s contingently convertible debt securities
are not considered for purposes of diluted earnings per share unless the required
conversion criteria have been met.
(n) Segment Reporting
Operating segments are components of an enterprise about which separate
financial information is available that is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and in assessing
performance. The Company identifies operating segments based on management
responsibility and believes it meets the criteria for aggregating its operating
segments into a single reporting segment.
(o) Use of Estimates
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the reported amounts of
revenues and costs and expenses during the reporting period. Actual results could
differ from those estimates.