|
Changes in the fair value of derivatives that
are highly effective and that are designated and qualify as
cash flow hedges are recorded in other comprehensive income
until earnings are affected by the variability in cash flows
of the designated hedged item. Where applicable, the Company
discontinues hedge accounting prospectively when it is determined
that the derivative is no longer effective in offsetting changes
in the cash flows of the hedged item or the derivative is
terminated. Any changes in the fair value of a derivative
where hedge accounting has been discontinued or is ineffective
are recognized in earnings. Cash flows related to derivatives
are included in operating activities.
Non-capital expenditures associated with opening
new restaurants are expensed as incurred.
Production costs of commercials and programming are charged
to operations in the fiscal year the advertising is first
aired. The costs of other advertising, promotion, and marketing
programs are charged to operations in the fiscal year incurred.
Advertising expense amounted to $187,950, $177,998, and $165,590,
in fiscal 2002, 2001, and 2000, respectively.
SFAS No. 123, “Accounting for Stock-Based Compensation,”
encourages the use of a fair-value method of accounting for
stock-based awards under which the fair value of stock options
is determined on the date of grant and expensed over the vesting
period. As allowed by SFAS No.123, the Company has elected
to account for its stock-based compensation plans under an
intrinsic value method that requires compensation expense
to be recorded only, if on the date of grant, the current
market price of the Company’s common stock exceeds the
exercise price the employee must pay for the stock. The Company’s
policy is to grant stock options at the fair market value
of the underlying stock at the date of grant. The Company
has adopted the disclosure requirements of SFAS No.123.
Restricted stock and restricted stock unit
(RSU) awards are recognized as unearned compensation, a component
of stockholders’ equity, based on the fair market value
of the Company’s common stock on the award date. These
amounts are amortized to compensation expense over the vesting
period using assumed forfeiture rates for different types
of awards. Compensation expense is adjusted in future periods
if actual forfeiture rates differ from initial estimates.
Basic net earnings per share is computed by dividing
net earnings by the weighted-average number of common shares
outstanding for the reporting period. Diluted net 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. Outstanding stock
options issued by the Company represent the only dilutive
effect reflected in diluted weighted-average shares outstanding.
Options do not impact the numerator of the diluted net earnings
per share computation.
Options to purchase 161,220, 3,618,900, and
5,379,300 shares of common stock were excluded from the calculation
of diluted net earnings per share for fiscal 2002, 2001, and
2000, respectively, because their exercise prices exceeded
the average market price of common shares for the period.
Comprehensive income includes net earnings and other comprehensive
income items that are excluded from net earnings under accounting
principles generally accepted in the United States of America.
Other comprehensive income items include foreign currency
translation adjustments, the effective unrealized portion
of changes in the fair value of cash flow hedges, and amounts
associated with minimum pension liability adjustments.
The Canadian dollar is the functional currency for
the Company’s Canadian restaurant operations. Assets
and liabilities denominated in Canadian dollars are translated
into U.S. dollars using the exchange rates in effect at the
balance sheet date. Results of operations are translated using
the average exchange rates prevailing throughout the period.
Translation gains and losses are reported as a separate component
of accumulated other comprehensive income in stockholders’
equity. Gains and losses from foreign currency transactions,
which amounted to $33 and $1, respectively, are included in
the consolidated statements of earnings for each period.
continued>
|
