Red Lobster 2003 Annual Report Download - page 48

46 DARDEN RESTAURANTS
We granted restricted stock and RSUs during fiscal 2003,
2002, and 2001 totaling 275,610, 428,280, and 563,306 shares,
respectively. The per share weighted-average fair value of the awards
granted in fiscal 2003, 2002, and 2001 was $26.53, $17.10, and
$10.67, respectively. After giving consideration to assumed forfeiture
rates and subsequent forfeiture adjustments, compensation expense
recognized in net earnings for awards granted in fiscal 2003, 2002,
and 2001 amounted to $3,579, $4,392, and $4,164, respectively.
NOTE 15
Employee Stock Purchase Plan
We maintain the Darden Restaurants Employee Stock Purchase
Plan to provide eligible employees who have completed one year
of service (excluding senior officers subject to Section 16(b) of the
Securities Exchange Act of 1934) an opportunity to purchase
shares of our common stock, subject to certain limitations. Under
the plan, employees may elect to purchase shares at the lower of
85 percent of the fair market value of our common stock as of
the first or last trading days of each quarterly participation period.
During fiscal 2003, 2002, and 2001, employees purchased shares
of common stock under the plan totaling 261,409, 284,576,
and 328,338, respectively. As of May 25, 2003, an additional
778,456 shares are available for issuance.
No compensation expense has been recognized for shares
issued under the plan. The impact of recognizing compensation
expense for purchases made under the plan in accordance with the
fair value method specified in SFAS No. 123 is less than $800 and
has no impact on reported basic or diluted net earnings per share.
NOTE 16
Commitments and Contingencies
We make trade commitments in the course of our normal opera-
tions. As of May 25, 2003, and May 26, 2002, we were contin-
gently liable for approximately $8,301 and $9,786, respectively,
under outstanding trade letters of credit issued in connection
with purchase commitments. These letters of credit have terms
of one month or less and are used to collateralize our obligations
to third parties for the purchase of inventories.
As collateral for performance on contracts and as credit
guarantees to banks and insurers, we were contingently liable
for guarantees of subsidiary obligations under standby letters of
credit. As of May 25, 2003, and May 26, 2002, we had $41,442
and $30,000, respectively, of standby letters of credit related to
workers’ compensation and general liabilities accrued in our
consolidated financial statements. As of May 25, 2003, and
May 26, 2002, we had $7,503 and $8,608, respectively, of standby
letters of credit related to contractual operating lease obligations
and other payments. All standby letters of credit are renewable
annually. As of May 25, 2003, and May 26, 2002, we had other
commercial commitments of $2,250 and $0, respectively.
As of May 25, 2003 and May 26, 2002, we had $4,254
and $5,463, respectively, of guarantees associated with third-
party sublease or assignment obligations. These amounts repre-
sent the maximum potential amount of future payments under
the guarantees. The fair value of these potential payments
discounted at our pre-tax cost of capital at May 25, 2003 and
May 26, 2002 amounted to $2,935 and $3,769, respectively.
We did not accrue for the guarantees, as the likelihood of the
third parties defaulting on the sublease or assignment
agreements was less than probable. In the event of default by a
third party, the indemnity and/or default clauses in our sublease
and assignment agreements govern our ability to recover from
and pursue the third party for damages incurred as a result of its
default. We do not hold any third-party assets as collateral
related to these sublease or assignment agreements, except to
the extent that the sublease or assignment allows us to repossess
the building and personal property. These guarantees expire
over their respective lease terms, which range from fiscal 2004
through fiscal 2012.
We are involved in litigation arising from the normal course
of business. In our opinion, this litigation is not expected to
materially impact our consolidated financial statements.
Darden Restaurants
Notes To Consolidated Financial Statements