Chili's 2006 Annual Report Download - page 62

F-16
(n) 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 fixthe 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 28, 2006, no preferred shares were issued.
(o) 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 2006, 2005 and 2004
comprehensive income consists of net income and the unrealized portion of changes in the fair value of our
investments in mutual funds.
(p) Net Income Per Share
Basic earnings pershare is computed by dividingincome availableto 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 isincreased by the dilutive effect of stock options determined
using thetreasury stock method and convertible debt.We had approximately 590,000 stock options
outstanding at June 28, 2006 and 700,000 stock options outstanding at June 29, 2005 and June 30, 2004 that
were not included in the dilutive earnings per share calculation because the effect would have been
antidilutive. The components of basic and diluted earnings per share are as follows (in thousands, except
per share amounts):
2006 2005 2004
Income from continuing operations(w)..................... $213,950 $ 1 58,456 $ 1 52,183
Adjustment for interest onconvertible debt, net of tax....... —2,650 5,023
Income from continuing operations—as adjusted(x) ......... $213,950 $ 1 61,106 $ 1 57,206
Basic weighted average shares outstanding(y) ............... 85,844 88,530 96,072
Dilutive effect of stock options............................ 1,445 1,267 1,867
Dilutive effect of convertible debt.......................... —4,432 7,800
Diluted weighted average shares outstanding(z) ............. 87,289 94,229 105,739
Basic earnings per share from continuing operations(w)/(y) ...$ 2.49 $ 1.79 $ 1.58
Diluted earnings pershare from continuing operations(x)/(z) .$ 2.45 $ 1.71 $ 1.49
(q) Segment Reporting
Operating segments are components of an enterprise about which separate financial information is
available that isevaluated regularly by the chief operating decision maker in deciding how to allocate
resources and in assessing performance. We identify operating segments based on management
responsibility and believe we meet the criteria for aggregating operating segments into a single reporting
segment.
(r) 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