Red Lobster 2008 Annual Report Download - page 67

Notes to Consolidated Financial Statements
DARDEN RESTAURANTS, INC. 63
NOTE 12
FINANCIAL INSTRUMENTS
The fair values of cash equivalents, accounts receivable, accounts
payable and short-term debt approximate their carrying amounts
due to their short duration.
The carrying value and fair value of long-term debt at
May 25, 2008 was $1.63 billion and $1.62 billion, respectively.
The carrying value and fair value of long-term debt at May 27,
2007 was $491.6 million and $496.3 million, respectively. The
fair value of long-term debt is determined based on market
prices or, if market prices are not available, the present value
of the underlying cash flows discounted at our incremental
borrowing rates.
NOTE 13
STOCKHOLDERS’ EQUITY
TREASURY STOCK
On June 16, 2006, our Board of Directors authorized an
additional share repurchase authorization totaling 25.0 million
shares in addition to the previous authorization of 137.4 million
shares, bringing our total authorizations to 162.4 million.
In fiscal 2008, 2007 and 2006, we purchased treasury stock
totaling $159.4 million, $371.2 million and $434.2 million,
respectively. At May 25, 2008, a total of 147.0 million shares
had been repurchased under the authorizations. The
repurchased common stock is reflected as a reduction of
stockholders’ equity.
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 provided 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, respectively. 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 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 per
share, subject to adjustment under certain circumstances 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 circumstances and
expire on May 25, 2015.
ACCUMULATED OTHER
COMPREHENSIVE INCOME (LOSS)
The components of accumulated other comprehensive
income (loss) are as follows:
May 25, May 27,
(in millions) 2008 2007
Foreign currency translation adjustment $ (1.0) $ (4.3)
Unrealized gains (losses) on derivatives, net of tax 4.5 3.8
SFAS No. 158 benefit plan funding position,
net of tax (24.2) (32.3)
Total accumulated other comprehensive
income (loss) $(20.7) $(32.8)
Reclassification adjustments associated with pre-tax net
derivative gains (losses) realized in net earnings for fiscal 2008,
2007 and 2006 amounted to ($1.8) million, ($1.3) million and
$5.0 million, respectively. The amortization of the unrecognized
net actuarial loss component of our fiscal 2009 net periodic
benefit cost for the defined benefit plans and postretirement
benefit plan is expected to be approximately $0.4 million and
$0.6 million, respectively.