Cracker Barrel 2010 Annual Report Download - page 48

options. is lease period is consistent with the period over
which leasehold improvements are amortized.
e interest rates for capital leases vary from 5% to 10%.
Amortization of capital leases is included with depreciation
expense.
Advertising – e Company expenses the costs of
producing advertising the rst time the advertising takes
place. Net advertising expense was $45,239, $42,371 and
$42,160 for 2010, 2009 and 2008, respectively. Rent expense
under operating leases for billboards was $25,558, $25,950
and $25,177 for 2010, 2009 and 2008, respectively.
e following is a schedule by year of the future
minimum rental payments required under operating leases
for advertising billboards as of July 30, 2010:
Year
2011 $ 19,577
2012 7,532
2013 3,424
2014 43
Total $ 30,576
Share-based compensation – e Company has compen-
sation plans for employees and non-employee directors that
authorize the granting of stock options, nonvested stock and
other types of awards consistent with the purpose of the
plans (see Note 12). e number of shares authorized for
future issuance under the Company’s plans as of July 30,
2010 totals 701,726. Stock options granted under these plans
are granted with an exercise price equal to the market price
of the Company’s stock on the grant date; those option
awards generally vest at a cumulative rate of 33% per year
beginning on the rst anniversary of the grant date and
expire ten years from the date of grant.
e fair value of each option award is estimated on the
date of grant using a binomial laice-based option valuation
model, which incorporates ranges of assumptions for
inputs as shown in the following table. e assumptions are
as follows:
• eexpectedvolatilityisablendofimpliedvolatilitybased
on market-traded options on the Company’s common
stock and historical volatility of the Company’s stock over
the contractual life of the options.
• eCompanyuseshistoricaldatatoestimateoption
exercise and employee termination behavior within the
valuation model; separate groups of employees that have
similar historical exercise behavior are considered
separately for valuation purposes. e expected life of
options granted is derived from the output of the option
valuation model and represents the period of time the
options are expected to be outstanding.
• erisk-freeinterestrateisbasedontheU.S.Treasuryyield
curve in eect at the time of grant for periods within the
contractual life of the option.
• eexpecteddividendyieldisbasedontheCompany’s
current dividend yield as the best estimate of projected
dividend yield for periods within the contractual life of
the option.
Year Ended
July 30, 2010 July 31, 2009 August 1, 2008
Dividend yield range 2.5% 2.59% - 5.35% 1.8% - 2.2%
Expected volatility 47% 43% - 61% 31% - 34%
Risk-free interest
rate range 0.4% - 5.1% 0.5% - 5.4% 2.9% - 5.0%
Expected term
(in years) 6.8 6.7 - 6.9 6.3
Nonvested stock grants consist of the Company’s common
stock and generally vest over 2-5 years. All nonvested stock
grants are time vested except the nonvested stock grants
of one executive that are based upon the achievement of
strategic goals. If any performance goals are not met, no
compensation cost is ultimately recognized and, to the extent
previously recognized, compensation cost is reversed.
During 2008, based on the Company’s determination that
performance goals would not be achieved for one
executive’s nonvested stock grants, the Company reversed
approximately $3,508 of share-based compensation expense.
During 2010 and 2009, the Company did not have any
similar reversals.
Generally, the fair value of each nonvested stock grant is
equal to the market price of the Company’s stock at the date
of grant reduced by the present value of expected dividends
to be paid prior to the vesting period, discounted using an
appropriate risk-free interest rate. Certain nonvested stock
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