Red Lobster 2011 Annual Report Download - page 70

Notes to Consolidated Financial Statements
Darden
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Darden Restaurants, Inc.
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unallocated shares held by the ESOP, are used to pay principal, interest and
expenses of the plan. As loan payments are made, common stock is allocated to
ESOP participants. In fiscal 2011, 2010 and 2009, the ESOP incurred interest
expense of $0.1 million, $0.1 million and $0.3 million, respectively, and used
dividends received of $1.4 million, $1.6 million and $1.8 million, respectively,
and contributions received from us of $0.1 million, $0.2 million and $2.4 million,
respectively, to pay principal and interest on our debt.
ESOP shares are included in weighted-average common shares outstanding
for purposes of calculating net earnings per share. At May 29, 2011, the ESOP’s
debt to us had a balance of $8.0 million with a variable rate of interest of 0.55
percent and is due to be repaid no later than December 2014. The number of our
common shares held in the ESOP at May 29, 2011 approximated 5.3 million
shares, representing 3.8 million allocated shares and 1.5 million suspense shares.
At the end of fiscal 2005, the ESOP borrowed $1.6 million from us at a variable
interest rate and acquired an additional 0.05 million 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 0.55 percent at May 29, 2011, is due to be repaid
no later than December 2018. The shares acquired under this loan are accounted
for in accordance with FASB ASC Subtopic 718-40, 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 outstanding 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, 2011. The fair value of these shares at May 29,
2011 was $2.2 million.
NOTE 18
STOCK-BASED COMPENSATION
We maintain two active stock option and stock grant plans under which new
awards may still be issued, known as the Darden Restaurants, Inc. 2002 Stock
Incentive Plan (2002 Plan) and the RARE Hospitality International, Inc. Amended
and Restated 2002 Long-Term Incentive Plan (RARE Plan). We also have four
other stock option and stock grant plans under which we no longer can grant
new awards, although awards outstanding under the plans may still vest and be
exercised in accordance with their terms: the Stock Plan for Directors (Director
Stock฀Plan);฀the฀Director฀Compensation฀Plan;฀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 18.3 million common shares in connection with the
granting of non-qualified stock options, incentive stock options, stock apprecia-
tion rights, restricted stock, restricted stock units (RSUs), stock awards and
other stock-based awards including performance stock units and Darden stock
units to key employees and non-employee directors. The RARE Plan provides for
the issuance of up to 3.9 million common shares in connection with the granting
of non-qualified stock options, incentive stock options and restricted stock to
employees. Awards under the RARE Plan are only permitted to be granted to
employees who were employed by RARE as of the date of acquisition and continued
their employment with the Company. The Director Stock Plan provided for the
issuance of up to 0.375 million common shares out of our treasury in connection
with the granting of non-qualified stock options, restricted stock and RSUs to
non-employee directors. No new awards could be granted under the Director
Stock Plan after September 30, 2000. The Director Compensation Plan provided for
the issuance of 0.1 million common shares out of our treasury to non-employee
directors of the Board. No new awards may be granted under the Director
Compensation Plan after September 30, 2005. The 1995 Plan provided for the
issuance of up to 33.3 million common shares in connection with the granting of
non-qualified stock options, restricted stock or RSUs to key employees. The 2000
Plan provided for the issuance of up to 5.4 million shares of common stock out
of our treasury as non-qualified stock options, restricted stock or RSUs. Under all
of these plans, stock options are granted at a price equal to the fair value of the
shares at the date of grant for terms not exceeding ten years and have various
vesting periods at the discretion of the Compensation Committee. Outstanding
options generally vest over one to four years. Restricted stock and RSUs granted
under the 1995 Plan, the 2000 Plan and the 2002 Plan generally vest over periods
ranging from three to five years and no sooner than one year from the date of
grant. Performance Stock Units granted under the 2002 Plan generally vest over
a three-year period, and vested amounts may range from 0.0 to 150.0 percent
of targeted amounts depending on the achievement of certain sales and diluted
net earnings per share performance measures. Darden stock units granted
under the 2002 Plan generally vest over a five-year period, with no performance
vesting feature.
On December 15, 2005, the Board of Directors approved the Director
Compensation Program, effective as of October 1, 2005, for Non-Employee Directors.
The Director Compensation Program provides for payments to non-employee
directors of: (a) an annual retainer and meeting fees for special Board meetings
and฀committee฀meetings;฀(b)฀an฀additional฀annual฀retainer฀for฀the฀Lead฀Director฀
and฀committee฀chairs;฀and฀(c)฀an฀annual฀award฀of฀common฀stock฀with฀a฀fair฀value฀
of $0.1 million on the date of grant upon election or re-election to the Board.
Directors may elect to have their cash compensation paid in any combination of
current or deferred cash, common stock or salary replacement options. Deferred
cash compensation may be invested on a tax-deferred basis in the same manner
as deferrals under our non-qualified deferred compensation plan. Prior to the
date of grant, directors may elect to have their annual stock award paid in the
form of common stock or cash, or a combination thereof, or deferred. To the
extent directors elect to receive cash or cash settled awards, the value of the
awards are carried as a liability on our consolidated balance sheet at fair value
until such time as it is settled. All stock options and other stock or stock-based
awards that are part of the compensation paid or deferred pursuant to the Director
Compensation Program are awarded under the 2002 Plan.
Stock-based compensation expense included in continuing operations was
as follows:
Fiscal Year
(in millions)
2011 2010 2009
Stock options $20.7 $20.2 $20.4
Restricted stock/restricted stock units 9.9 10.2 9.4
Darden stock units 17.1 13.1 8.4
Performance stock units 15.6 6.8 0.4
Employee stock purchase plan 1.9 1.8 1.6
Director compensation program/other 1.4 1.4 1.3
$66.6 $53.5 $41.5