Jack In The Box 2008 Annual Report Download - page 74

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including the expected volatility of the stock price. The following weighted-average assumptions were used for
stock option grants in each year:
2008 2007 2006
Risk-free interest rate ........................................ 2.85% 4.20% 4.12%
Expected dividends yield ..................................... 0.00% 0.00% 0.00%
Expected stock price volatility ................................. 45.74% 37.85% 34.88%
Expected life of options (in years) .............................. 4.38 4.65 5.92
In 2008, 2007, and 2006, the risk-free interest rate was determined by a yield curve of risk-free rates based on
published U.S. Treasury spot rates in effect at the time of grant and has a term equal to the expected life.
The dividend yield assumption is based on the Company’s history and expectations of dividend payouts.
The expected stock price volatility in 2008, 2007 and the fourth quarter of 2006, represents an average of the
implied volatility and the Company’s historical volatility.
The expected life of the options represents the period of time the options are expected to be outstanding and is
based on historical trends.
The weighted-average grant-date fair value of options granted was $9.82, $11.20, and $10.21 in 2008, 2007,
and 2006, respectively. The intrinsic value of stock options is defined as the difference between the current market
value and the grant price. The total intrinsic value of stock options exercised was $12.5 million, $47.6 million, and
$33.7 million in 2008, 2007, and 2006, respectively.
As of September 28, 2008, there was approximately $17.5 million of total unrecognized compensation cost
related to stock options granted under our stock incentive plans. That cost is expected to be recognized over a
weighted-average period of 2.0 years.
Performance-vested stock awards — We began granting performance-vested stock awards to certain
employees in fiscal 2005. Performance awards represent a right to receive a certain number of shares of common
stock upon achievement of performance goals at the end of a three-year period. The expected cost of the shares is
being reflected over the performance period and is reduced for estimated forfeitures. The expected cost for all
awards granted is based on the fair value of our stock on the date of grant, reduced for estimated forfeitures, as it is
our intent to settle these awards with shares of common stock.
The following is a summary of performance-vested stock award activity for fiscal 2008:
Shares
Weighted-
Average
Grant Date
Fair Value
Performance-vested stock awards outstanding at September 30, 2007 ...... 523,848 $22.02
Granted ................................................. —
Issued .................................................. (133,873) 15.20
Forfeited ................................................ (60,316) 24.70
Performance-vested stock awards outstanding at September 28, 2008 ...... 329,659 $24.30
Vested and subject to release at September 28, 2008 .................. 68,939 $16.91
As of September 28, 2008, there was approximately $2.6 million of total unrecognized compensation cost
related to performance-vested stock awards. That cost is expected to be recognized over a weighted-average period
of 1.64 years. The total fair value of awards that vested as of September 28, 2008, the end of the second three-year
F-28
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)