Red Lobster 2007 Annual Report Download - page 57

N
Darden Restaurants, Inc. Annual Report 2007 55
Notes to Consolidated Financial Statements
The following table presents a summary of our stock option activity as of and for the fiscal year ended May 27, 2007:
Weighted-Average Weighted-Average Aggregate
Options Exercise Price Remaining Intrinsic Value
(in millions) Per Share Contractual Life (Years) (in millions)
Outstanding beginning of period 18.2 $ 19.15
Options granted 1.7 36.26
Options exercised (3.6) 14.15
Options cancelled (0.2) 27.72
Outstanding end of period 16.1 $ 21.93 5.42 $ 376.5
Exercisable 10.5 $ 17.82 4.11 $ 289.8
Note17
During fiscal 2007, we recognized $15.8 million ($9.5 million
net of tax) in stock-based compensation expense from continuing
operations related to stock options. The weighted-average fair value
of non-qualified stock options granted during fiscal 2007, 2006 and
2005 used in computing compensation expense in fiscal 2007 and
pro-forma compensation expense in fiscal 2006 and 2005 was
$13.87, $10.68 and $7.75, respectively. The total intrinsic value of
options exercised during fiscal 2007, 2006 and 2005 was $97.8
million, $86.6 million and $110.9 million, respectively. Cash received
from option exercises during fiscal 2007 and 2006 was $50.9 million
and $55.6 million, respectively. We settle employee stock option
exercises with authorized but unissued shares of Darden common
stock or treasury shares we have acquired through our ongoing
share repurchase program.
As of May 27, 2007, there was $27.8 million of unrecognized
compensation cost related to unvested stock options granted
under our stock plans. This cost is expected to be recognized over a
weighted-average period of 2.0 years. The total fair value of stock
options that vested during fiscal 2007 was $16.9 million.
Restricted stock and RSUs are granted at a value equal to the
market price of our common stock on the date of grant. Restrictions
lapse with regard to restricted stock, and RSUs are settled in shares,
at the end of their vesting periods, which is generally four years.
During fiscal 2007, 2006 and 2005, we recognized $5.2 million
($3.2 million net of tax), $7.0 million ($4.3 million net of tax) and
$7.2 million ($4.4 million net of tax), respectively, in stock-based
compensation expense from continuing operations related to
restricted stock and RSUs.
The following table presents a summary of our restricted stock
and RSU activity as of and for the fiscal year ended May 27, 2007:
Weighted-Average
Shares Grant Date Fair
(in millions) Value Per Share
Outstanding beginning of period 1.4 $ 25.06
Shares granted 0.1 35.82
Shares vested (0.2) 23.56
Shares cancelled (0.1) 27.43
Outstanding end of period 1.2 $ 25.98
As of May 27, 2007, there was $16.3 million of unrecognized
compensation cost related to unvested restricted stock and RSUs
granted under our stock plans. This cost is expected to be recognized
over a weighted-average period of 2.0 years. The total fair value of
restricted stock and RSUs that vested during fiscal 2007, 2006, and
2005 was $5.4 million, $5.2 million and $4.1 million, respectively.
Darden stock units are granted at a value equal to the market
price of our common stock on the date of grant and generally will
be settled in cash at the end of their vesting periods, which range
between four and five years, at the then market price of our
common stock. Compensation expense is measured based on the
market price of our common stock each period and is amortized
over the vesting period. During fiscal 2007, 2006 and 2005, we recog-
nized $5.6 million ($3.5 million net of tax), $4.2 million ($2.6 million
net of tax) and $1.9 million ($1.2 million net of tax), respectively, in
stock-based compensation expense from continuing operations
related to Darden stock units. We also entered into equity forward
contracts to hedge the risk of changes in future cash flows associated
with the unvested unrecognized Darden stock units granted during
the first quarters of fiscal 2007, 2006 and 2005 (see Note 10 – Derivative
Instruments and Hedging Activities for additional information).