Red Lobster 2005 Annual Report Download - page 48

Notes to Consolidated Financial Statements
Financial Review 2005
56 Darden Restaurants
At the end of fiscal 2005, the ESOP borrowed $1,606
from us at a variable interest rate and acquired an additional
50,000 shares of our common stock, which were held in
suspense within the ESOP at May 29, 2005. The loan, which
had a variable interest rate of 3.42 percent at May 29, 2005,
is due to be repaid no later than December 2018. The shares
acquired under this loan are accounted for in accordance
with Statement of Position (SOP) 93-6, “Employers Account-
ing for Employee Stock Ownership Plans.” Fluctuations in
our stock price are recognized as adjustments to common
stock and surplus when the shares are committed to be
released. These ESOP shares are not considered outstand-
ing until they are committed to be released and, therefore,
have been excluded for purposes of calculating basic and
diluted net earnings per share at May 29, 2005. The fair
value of these shares at May 29, 2005 was $1,624.
NOTE 16
Stock Plans
We maintain two active stock option and stock grant
plans under which new awards may still be issued: the 2002
Stock Incentive Plan (2002 Plan) and the Stock Plan for
Directors (Director Stock Plan). We also have two other stock
option and stock grant plans under which we no longer can
make new awards, although awards outstanding under the
plans may still vest and be exercised in accordance with
their terms: the Stock Option and Long-Term Incentive Plan
of 1995 (1995 Plan) and the Restaurant Management and
Employee Stock Plan of 2000 (2000 Plan). All of the plans
are administered by the Compensation Committee of the
Board of Directors. The 2002 Plan provides for the issuance
of up to 8,550,000 common shares in connection with the
granting of non-qualified stock options, incentive stock
options, stock appreciation rights, stock awards, restricted
stock, RSUs, stock awards and other stock-based awards to
key employees and non-employee directors. Up to 1,700,000
shares may be granted under the plan as restricted stock
and RSUs. The Director Stock Plan provides for the issu-
ance of up to 375,000 common shares out of our treasury
in connection with the granting of non-qualified stock options,
restricted stock and RSUs to non-employee directors. The
1995 Plan provided 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. No new awards could be made under the 1995
Plan after September 30, 2004. The 2000 Plan provided for
the issuance of up to 5,400,000 shares of common stock out
of our treasury as non-qualified stock options, restricted
stock, or RSUs. As noted above, no new awards may be
made under the 1995 Plan and the 2000 Plan, although
awards outstanding under those plans may still vest and be
exercised in accordance with their terms. Under all of the
plans, stock options are granted at a price equal to the fair
value of the shares at the date of grant, for terms not exceed-
ing ten years and have various vesting periods at the discre-
tion of the Compensation Committee. Outstanding options
generally vest over one to four years. Restricted stock and
RSUs granted under the 1995, 2000 and 2002 Plans generally
vest over periods ranging from three to five years and no
sooner than one year from the date of grant. The restricted
period for certain grants may be accelerated based on per-
formance goals established by the Compensation Committee.
We also maintain the Compensation Plan for Non-
Employee Directors. This plan provides that non-employee
directors may elect to receive their annual retainer and meet-
ing fees in any combination of cash, deferred cash, or our
common shares and authorizes the issuance of up to 105,981
common shares out of our treasury for this purpose. The
common shares are issued under the plan at a value equal
to the market price in consideration of foregone retainer
and meeting fees.
The per share weighted-average fair value of stock
options granted during fiscal 2005, 2004 and 2003 was
$7.75, $6.83 and $9.01, respectively.