 |
Notes to Consolidated Financial Statements (continued)
Pre-Opening Expenses
Non-capital expenditures associated with opening new restaurants are expensed as incurred.
Advertising
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 period incurred. Advertising expense amounted to $203,393, $187,154, and $177,998, in fiscal 2003, 2002 and 2001, respectively.
Stock-Based Compensation
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, we have elected to account for our 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 our common stock exceeds the exercise price the employee must pay for the stock. Our policy is to grant stock options at the fair market value of our underlying stock at the date of grant. Accordingly, no compensation expense has been recognized for stock options granted under any of our stock plans because the exercise price of all options granted was equal to the current market value of our stock on the grant date. Had we determined compensation expense for our stock options based on the fair value at the grant date as prescribed under SFAS No. 123, our net earnings and net earnings per share would have been reduced to the pro forma amounts indicated in the following table:
| |
Fiscal Year |
| |
2003 |
2002 |
2001 |
|
| Net earnings, as reported |
$ |
232,260 |
|
$ |
237,788 |
|
$ |
197,000 |
|
| Add: Stock-based compensation |
|
|
|
|
|
|
|
|
|
| expense included in reported |
|
|
|
|
|
|
|
|
|
| net earnings, net of related |
|
|
|
|
|
|
|
|
|
| tax effects |
|
2,642 |
|
|
2,695 |
|
|
2,565 |
|
| Deduct: Total stock-based |
|
|
|
|
|
|
|
|
|
| compensation expense |
|
|
|
|
|
|
|
|
|
| determined under fair value based |
|
|
|
|
|
|
|
|
|
| method for all awards, |
|
|
|
|
|
|
|
|
|
| net of related tax effects |
|
(19,801 |
) |
|
(18,386 |
) |
|
(15,023 |
) |
|
| Pro forma |
$ |
215,101 |
|
$ |
222,097 |
|
$ |
184,542 |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
| Basic net earnings per share |
|
|
|
|
|
|
|
|
|
| As reported |
$ |
1.36 |
|
$ |
1.36 |
|
$ |
1.10 |
|
| Pro forma |
$ |
1.26 |
|
$ |
1.27 |
|
$ |
1.03 |
|
| Diluted net earnings per share |
|
|
|
|
|
|
|
|
|
| As reported |
$ |
1.31 |
|
$ |
1.30 |
|
$ |
1.06 |
|
| Pro forma |
$ |
1.22 |
|
$ |
1.21 |
|
$ |
0.99 |
|
|
|
|
|
To determine pro forma net earnings, reported net earnings have been adjusted for compensation expense associated with stock options granted that are expected to eventually vest.
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 our common stock on the award date. These amounts are amortized to compensation expense, using the straight-line method, 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.
Net Earnings Per Share
Basic net earnings per share are computed by dividing net earnings by the weighted-average number of common shares outstanding for the reporting period. Diluted net earnings per share reflect 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 us 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.
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|
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|
