Red Lobster 2001 Annual Report Download - page 35

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company also maintains a credit facility which
expires in October 2004 with a consortium of banks
under which the Company can borrow up to $300,000.
The credit facility allows the Company to borrow at
interest rates that vary based on the prime rate, LIBOR,
or a competitively bid rate among the members of the
lender consortium, at the option of the Company. The
credit facility is available to support the Company’s
commercial paper borrowing program, if necessary.
The Company is required to pay a facility fee of 15 basis
points per annum on the average daily amount of loan
commitments by the consortium. The amount of inter-
est and the annual facility fee are subject to change based
on the Company’s achievement of certain debt ratings
and financial ratios, such as maximum debt-to-capital
ratios. Advances under the credit facility are unsecured.
At May 27, 2001, and May 28, 2000, no borrowings
were outstanding under this credit facility.
The aggregate maturities of long-term debt for
each of the five years subsequent to May 27, 2001, and
thereafter are $2,647 in 2002, $0 in 2003 through
2005, $300,000 in 2006, and $219,455 thereafter.
NOTE 9
FINANCIAL INSTRUMENTS
The Company has participated in the financial deriva-
tives markets to manage its exposure to interest rate fluc-
tuations. The Company had interest rate swaps with a
notional amount of $200,000 which it used to convert
variable rates on its long-term debt to fixed rates effective
May 30, 1995. The Company received the one-month
commercial paper interest rate and paid fixed-rate interest
ranging from 7.51 percent to 7.89 percent. The interest
rate swaps were settled during January 1996 at a cost to
the Company of $27,670. This cost is being recognized
as an adjustment to interest expense over the term of the
Company’s 10-year, 6.375 percent notes and 20-year,
7.125 percent debentures (see Note 8).
The following methods were used in estimating
fair value disclosures for significant financial instruments.
Cash equivalents and short-term debt approximate
their carrying amount due to the short duration of those
items. Long-term debt is based on quoted market prices
or, if market prices are not available, the present value of
the underlying cash flows discounted at the Company’s
incremental borrowing rates. The carrying amounts
and fair values of the Company’s significant financial
instruments are as follows:
May 27, 2001 May 28, 2000
Carrying Fair Carrying Fair
Amount Value Amount Value
Cash and cash
equivalents $ 61,814 $ 61,814 $ 26,102 $ 26,102
Short-term debt 12,000 12,000 115,000 115,000
Total long-term debt 520,574 513,392 306,586 284,835
NOTE 10
STOCKHOLDERS’ EQUITY
The Company’s Board of Directors has approved a
stock repurchase program that authorizes the Company
to repurchase up to 64.6 million shares of the Company’s
common stock. In 2001, 2000, and 1999, the Company
purchased treasury stock totaling $176,511, $202,105,
and $227,510, respectively. As of May 27, 2001, 52.5
million shares have been purchased under the program.
As a part of its stock repurchase program, the
Company issues equity put options from time to time
that entitle the holder to sell shares of the Company’s
common stock to the Company, at a specified price, if
the holder exercises the option. In 2000, the Company
issued put options for 1,750,000 shares for $1,814 in
premiums. At May 28, 2000, put options for 250,000
shares were outstanding. No put options were issued in
2001 or outstanding at May 27, 2001.
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2001
DARDEN RESTAURANTS