Compensation Plans

9 Months Ended

Jun. 25, 2011

Compensation Plans

Compensation Plans

16. Compensation Plans

Stock Option Plans

The grant-date fair value of employee stock options and similar instruments is estimated using the Black-Scholes option-pricing model with the following assumptions for grants issued in the thirty-nine weeks ended June 25, 2011: an expected life averaging 6 years; an average volatility of 52%; no dividend yield; and a risk-free interest rate averaging 2.4%. The weighted-average fair value of options granted during the thirty-nine weeks ended June 25, 2011 was $28.93 per share.

The grant-date fair value of employee stock options and similar instruments is estimated using the Black-Scholes option-pricing model with the following assumptions for grants issued in the thirty-nine weeks ended June 26, 2010: an expected life averaging 6 years; an average volatility of 53%; no dividend yield; and a risk-free interest rate averaging 2.8%. The weighted-average fair value of options granted during the thirty-nine weeks ended June 26, 2010 was $15.95 per share.

Employee Stock Purchase Plan

The grant-date fair value of employees' purchase rights under the Company's Employee Stock Purchase Plan is estimated using the Black-Scholes option-pricing model with the following assumptions for the purchase rights granted in the thirty-nine weeks ended June 25, 2011: an expected life averaging 6 months; an average volatility of 52%; no dividend yield; and a risk-free interest rate averaging 0.2%. The weighted-average fair values of purchase rights granted during the thirty-nine weeks ended June 25, 2011 was $14.05 per share.

For the purchase rights granted in the thirty-nine weeks ended June 26, 2010, the following assumptions were used: an expected life averaging 6 months; an average volatility of 41%; no dividend yield; and a risk-free interest rate averaging 0.3%. The weighted-average fair values of purchase rights granted during the thirty-nine weeks ended June 26, 2010 was $7.77 per share.

For the thirteen and thirty-nine weeks ended June 25, 2011, income before income taxes was reduced by a stock compensation expense of $3.0 million and $7.5 million, respectively.

For the thirteen and thirty-nine weeks ended June 26, 2010, income before income taxes was reduced by a stock compensation expense of $2.1 million and $5.9 million, respectively.

Employee Stock Ownership Plan

The Company maintained an Employee Stock Ownership Plan (the "ESOP"), which terminated at the end of the 2010 calendar year. The ESOP is qualified under sections 401(a) and 4975(e)(7) of the Internal Revenue Code. In the thirty-nine weeks ended June 26, 2010, the Company recorded compensation costs of $1.0 million to accrue for anticipated stock distributions under the ESOP. The Company recorded no compensation costs for the thirty-nine weeks ended June 25, 2011 and there were no unearned shares remaining in the ESOP at June 25, 2011.

Deferred Compensation Plan

The Company also maintains a Deferred Compensation Plan, which is not subject to the qualification requirements of Section 401(a) of the Internal Revenue Code and which allows participants to defer compensation until a future date. Only non-employee directors and certain highly compensated employees of the Company selected by the Company's board of directors are eligible to participate in the Plan. In the thirty-nine week periods ended June 25, 2011 and June 26, 2010, $167,000 and $120,000 of compensation expense was recorded under this Plan, respectively.