Red Lobster 2009 Annual Report Download - page 60

58 Darden Restaurants, Inc. 2009 Annual Report
Notes to Consolidated Financial Statements
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.
Marketable securities are carried at fair value and consist of
$9.1 million of trading securities related to the RARE Supplemental
Deferred Compensation Plan and $29.5 million of available-for-sale
securities related to insurance funding requirements for our workers’
compensation and general liability claims. The following table
summarizes cost and market value for our securities that qualify as
available-for-sale as of May 31, 2009:
Gross Gross
Unrealized Unrealized Market
(In millions) Cost Gains Losses Value
Available-for-sale securities $28.9 $0.6 $ – $29.5
Earnings include insignificant realized gains and loss from
trading securities and from sales of available-for-sale securities.
At May 31, 2009, the scheduled maturities of our available-for-sale
securities are as follows:
Market
(In millions) Cost Value
Less than 1 year $ 2.1 $ 2.1
1 to 3 years 20.2 20.6
3 to 5 years 6.6 6.8
Total $28.9 $29.5
The carrying value and fair value of long-term debt at May 31,
2009 was $1.63 billion and $1.49 billion, respectively. The carrying
value and fair value of long-term debt at May 25, 2008 was $1.63 billion
and $1.62 billion, 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 2009, 2008 and 2007,
we purchased treasury stock totaling $144.9 million, $159.4 million
and $371.2 million, respectively. At May 31, 2009, a total of 152.1 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 31, May 25,
(In millions) 2009 2008
Foreign currency translation adjustment $ (3.7) $ (1.0)
Unrealized gains (losses) on marketable securities,
net of tax 0.3 –
Unrealized gains (losses) on derivatives, net of tax 1.1 4.5
SFAS No. 158 benefit plan funding position, net of tax (54.9) (24.2)
Total accumulated other comprehensive income (loss) $(57.2) $(20.7)