Jack In The Box 2010 Annual Report Download - page 69
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Table of Contents
We use a binomial-based model to determine the fair value of options granted. Valuation models require the input of highly subjective
assumptions, including the expected volatility of the stock price. The following weighted-average assumptions were used for stock
option grants in each year:
Risk-free interest rate 1.97% 3.01% 2.85%
Expected dividends yield 0.00% 0.00% 0.00%
Expected stock price volatility 38.65% 45.62% 45.74%
Expected life of options (in years) 4.46 5.23 4.38
In 2010, 2009 and 2008, 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 of the related options.
The dividend yield assumption is based on the Company’s history and expectations of dividend payouts.
The expected stock price volatility in all years 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 $6.54, $10.27 and $9.82 in 2010, 2009 and 2008, 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 $4.0 million, $4.4 million and $12.5 million in 2010, 2009 and 2008, respectively.
As of October 3, 2010, there was approximately $4.1 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 1.72 years.
Performance-vested stock awards 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 based on the fair
value of our stock on the date of grant and is reflected over the performance period with a reduction for estimated forfeitures. 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 2010:
Performance-vested stock awards outstanding at September 27, 2009 323,975 $ 15.53
Granted 225,440 19.19
Issued (47,545) 15.56
Canceled (161,560) 15.56
Forfeited (46,008) 16.40
Performance-vested stock awards outstanding at October 3, 2010 294,302 $ 18.18
Vested and subject to release at October 3, 2010 40,017 $ 15.32
As of October 3, 2010, there was approximately $1.8 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 1.8 years. The weighted-average grant date fair
value of awards granted was $19.19, $15.56 and $15.56 in 2010, 2009 and 2008, respectively. The total fair value of awards
that vested during 2010, 2009 and 2008 was
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