Red Lobster 2010 Annual Report Download - page 67

Darden stock units are granted at a value equal to the market price of
our common stock on the date of grant and 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, is amortized over the
vesting period and the vested portion is carried as a liability in our accompa-
nying consolidated balance sheets. We also entered into equity forward
contracts to hedge the risk of changes in future cash flows asso ciated with
the unvested, unrecognized Darden stock units granted during fiscal 2010,
2009฀and฀2008฀(see฀Note฀10฀–฀Derivative฀Instruments฀and฀Hedging฀Activities฀
for additional information).
The following table presents a summary of our Darden stock unit activity
as of and for the fiscal year ended May 30, 2010:
Units Weighted-Average
(in millions) Fair Value Per Unit
Outstanding beginning of period 1.2 $36.17
Units granted 0.8 32.22
Units vested (0.3) 32.97
Units canceled (0.1) 34.95
Outstanding end of period 1.6 $42.90
Based on the value of our common stock as of May 30, 2010, there was
$28.1 million of unrecognized compensation cost related to Darden stock
units granted under our incentive plans. This cost is expected to be recognized
over a weighted-average period of 2.5 years. Darden stock units with a fair
value of $6.5 million vested during fiscal 2010.
The following table presents a summary of our performance stock unit
activity as of and for the fiscal year ended May 30, 2010:
Units Weighted-Average
(in millions) Fair Value Per Unit
Outstanding beginning of period 0.7 $38.33
Units granted 0.4 33.44
Units vested (0.0) 33.54
Units canceled (0.2) 36.62
Outstanding end of period 0.9 $37.66
The performance stock units issued before fiscal 2010 vest over a period
of five years following the date of grant, where zero percent to 150 percent of
one-fifth (20 percent) of the grant is earned or forfeited at the end of each
year in the vesting period. Performance stock units issued during fiscal 2010
and subsequent will cliff vest 3 years from the date of grant, where zero
percent to 150 percent of the entire grant is earned or forfeited at the end of
3 years. The number of units that actually vests will be determined for each
year based on the achievement of Company performance criteria set forth in
the award agreement and may range from zero percent to 150.0 percent of
the annual target. These awards issued before fiscal 2010 may be settled in
cash or shares of common stock at the election of the Company on the date
of grant. The performance stock unit grants for fiscal 2007 and 2008 were
designated as equity settled awards, while the fiscal 2009 grant was desig-
nated as a cash-settled award. All awards issued during fiscal 2010 and
subsequent will be cash settled awards. Holders will receive one share of
common stock or its equivalent in cash for each performance stock unit that
vests. For equity-settled awards, compensation expense is measured based
on grant date fair value and amortized over the vesting period. Cash-settled
awards are measured based on the market price of our common stock each
period, are amortized over the vesting period and the vested portion is carried
as a liability in our accompanying consolidated balance sheets. As of May 30,
2010, there was $16.8 million of unrecognized compensation cost related to
unvested performance stock units granted under our stock plans. This cost is
expected to be recognized over a weighted-average period of 2.4 years. The
total fair value of performance stock units that vested in fiscal 2010 was
$0.1 million.
We maintain an Employee Stock Purchase Plan to provide eligible
employees who have completed one year of service (excluding senior officers
subject to Section 16(b) of the Securities Exchange Act of 1934, and certain
other employees who are employed less than full time or own five percent or
more of our capital stock or that of any subsidiary) an opportunity to invest
up to $5.0 thousand per calendar quarter to purchase shares of our common
stock, subject to certain limitations. Under the plan, up to an aggregate of
3.6 million shares are available for purchase by employees at a purchase
price that is 85.0 percent of the fair market value of our common stock on
either the first or last trading day of each calendar quarter, whichever is lower.
Cash received from employees pursuant to the plan during fiscal 2010, 2009
and 2008 was $7.1 million, $6.6 million and $6.6 million, respectively.
DARDEN RESTAURANTS, INC. | 2010 ANNUAL REPORT 65
Notes to Consolidated Financial Statements
Darden