Red Lobster 2005 Annual Report Download - page 43

Notes to Consolidated Financial Statements
Financial Review 2005
Darden Restaurants 51
Stock Purchase/Loan Program
We have share ownership guidelines for our officers. To
assist them in meeting these guidelines, we implemented
the 1998 Stock Purchase/Option Award Loan Program
(Loan Program) in conjunction with our Stock Option and
Long-Term Incentive Plan of 1995. The Loan Program pro-
vided loans to our officers and awarded two options for
every new share purchased, up to a maximum total share
value equal to a designated percentage of the officer’s base
compensation. Loans are full recourse and interest bearing,
with a maximum principal amount of 75 percent of the value
of the stock purchased. The stock purchased is held on
deposit with us until the loan is repaid. The interest rate for
loans under the Loan Program is fixed and is equal to the
applicable federal rate for mid-term loans with semi-annual
compounding for the month in which the loan originates.
Interest is payable on a weekly basis. Loan principal is
payable in installments with 25 percent, 25 percent and
50 percent of the total loan due at the end of the fifth, sixth
and seventh years of the loan. Effective July 30, 2002,
and in compliance with the Sarbanes-Oxley Act of 2002,
we no longer issue new loans under the Loan Program.
We account for outstanding officer notes receivable as a
reduction of stockholders’ equity.
Stockholders’ Rights Plan
Under our Rights Agreement dated as of May 16, 2005,
each share of our common stock has associated with it one
right to purchase one-thousandth of a share of our Series
A Participating Cumulative Preferred Stock at a purchase
price of $120, subject to adjustment under certain circum-
stances to prevent dilution. The rights are exercisable when,
and are not transferable apart from our common stock
until, a person or group has acquired 15 percent or more, or
makes a tender offer for 15 percent or more, of our common
stock. If the specified percentage of our common stock is
then acquired, each right will entitle the holder (other than
the acquiring company) to receive, upon exercise, common
stock of either us or the acquiring company having a value
equal to two times the exercise price of the right. The rights
are redeemable by our Board of Directors under certain cir-
cumstances and expire on May 25, 2015.
Accumulated Other Comprehensive Income (Loss)
The components of accumulated other comprehensive
income (loss) are as follows:
May 29, May 30,
2005 2004
Foreign currency translation adjustment $(8,724) $(10,174)
Unrealized gains on derivatives, net of tax 345 587
Minimum pension liability adjustment, net of tax (497) (586)
Total accumulated other comprehensive
income (loss) $(8,876) $(10,173)
Reclassification adjustments associated with pre-tax
net derivative income (losses) realized in net earnings for
fiscal 2005, 2004 and 2003 amounted to $213, $(386) and
$994, respectively.
NOTE 12
Leases
An analysis of rent expense incurred under operating
leases is as follows:
Fiscal Year
2005 2004 2003
Restaurant minimum rent $62,116 $56,462 $48,121
Restaurant percentage rent 4,036 3,820 3,682
Restaurant equipment minimum rent 7 57 5,719
Restaurant rent averaging expense 7,636 7,522 9,482
Transportation equipment 3,083 2,514 2,665
Office equipment 1,200 1,302 1,138
Office space 1,129 1,286 1,713
Warehouse space 325 315 303
Total rent expense $79,532 $73,278 $72,823
The annual non-cancelable future lease commitments
for each of the five fiscal years subsequent to May 29,
2005 and thereafter are: $68,301 in 2006, $63,598 in 2007,
$56,112 in 2008, $48,112 in 2009, $40,352 in 2010 and
$143,068 thereafter, for a cumulative total of $419,543.