Red Lobster 2002 Annual Report Download - page 43

DARDEN RESTAURANTS
This is the Bottom Line
Components of net periodic benefit cost (income) are as follows:
Defined Benefit Plans Post-Retirement Benefit Plan
2002 2001 2000 2002 2001 2000
Service cost $ 3,586 $ 3,488 $ 3,091 $291 $246 $260
Interest cost 7,145 6,255 5,509 500 447 396
Expected return on plan assets (12,416) (11,589) (10,652) –––
Amortization of unrecognized
transition asset (642) (642) (642) –––
Amortization of unrecognized prior
service cost (456) (456) (456) 18 18 18
Recognized net actuarial loss (gain) 1,104 213 1,405 –(18) –
Net periodic benefit cost (income) $ (1,679) $ (2,731) $ (1,745) $809 $693 $674
Notes to Consolidated Financial Statements
Great Food and Beverage 40 Produce Great Results in 2002
Defined Contribution Plan
The Company has a defined contribution plan covering most
employees age 21 and older. The Company matches contribu-
tions for participants with at least one year of service at up to
six percent of compensation, based on Company performance.
The match ranges from a minimum of $0.25 up to $1.00 for
each dollar contributed by the participant. The plan had net
assets of $442,030 at May 26, 2002, and $363,610 at May 27,
2001. Expense recognized in fiscal 2002, 2001, and 2000 was
$1,593, $3,358, and $3,729, respectively. Employees classified
as "highly compensated" under the Internal Revenue Code are
ineligible to participate in this plan. Amounts payable to highly
compensated employees under a separate, non-qualified
deferred compensation plan totaled $66,241 and $53,763 as
of May 26, 2002 and May 27, 2001, respectively.
The defined contribution plan includes an Employee Stock
Ownership Plan (ESOP). This ESOP originally borrowed
$50,000 from third parties, with guarantees by the Company,
and borrowed $25,000 from the Company at a variable interest
rate. The $50,000 third party loan was refinanced in 1997 by a
commercial bank’s loan to the Company and a corresponding
loan from the Company to the ESOP. Compensation expense
is recognized as contributions are accrued. In addition to
matching plan participant contributions, Company contribu-
tions to the plan are also made to pay certain employee
incentive bonuses. Fluctuations in the Company’s stock price
impact the amount of expense to be recognized. Contributions
to the plan, plus the dividends accumulated on allocated and
unallocated shares held by the ESOP, are used to pay principal,
interest, and expenses of the plan. As loan payments are made,
common stock is allocated to ESOP participants. In fiscal
2002, 2001, and 2000, the ESOP incurred interest expense
of $1,258, $3,086, and $3,436, respectively, and used dividends
received of $735, $415, and $941, respectively, and contribu-
tions received from the Company of $5,166, $9,224, and
$9,385, respectively, to pay principal and interest on its debt.
Company shares owned by the ESOP are included in aver-
age common shares outstanding for purposes of calculating net
earnings per share. At May 26, 2002, the ESOP’s debt to the
Company had a balance of $39,140 with a variable rate of inter-
est of 2.17 percent; $22,240 of the principal balance is due to
be repaid no later than December 2007, with the remaining
$16,900 due to be repaid no later than December 2014. The
number of Company common shares within the ESOP at
May 26, 2002, approximates 13,460,000 shares, representing
4,682,000 allocated shares, 197,000 committed-to-be-released
shares, and 8,581,000 suspense shares.
NOTE 15 STOCK PLANS
The Company maintains three principal stock option and stock
grant plans: the Amended and Restated Stock Option and
Long-Term Incentive Plan of 1995 (1995 Plan); the Restaurant
Management and Employee Stock Plan of 2000 (2000 Plan);
and the Stock Plan for Directors (Director Plan). All of the
plans are administered by the Compensation Committee of
the Board of Directors. The 1995 Plan provides for the issuance
of up to 33,300,000 common shares in connection with the
granting of non-qualified stock options, restricted stock, or
RSUs to key employees. Restricted stock and RSUs may be
granted under the plan for up to 2,250,000 shares. The 2000
Plan provides for the issuance of up to 5,400,000 common
shares out of the Company’s treasury in connection with the
granting of non-qualified stock options and restricted stock
or RSUs to key employees, excluding directors and Section