Red Lobster 2015 Annual Report Download - page 59

DARDEN RESTAURANTS, INC. | 2015 ANNUAL REPORT 55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DARDEN
POSTEMPLOYMENT SEVERANCE PLAN
We accrue for postemployment severance costs in our consolidated
financial statements and recognize actuarial gains and losses related to
our postemployment severance accrual as a component of accumulated
other comprehensive income (loss). As of May 31, 2015 and May 25, 2014,
$2.5 million and $3.1 million, respectively, of unrecognized actuarial losses
related to our postemployment severance plan were included in accumulated
other comprehensive income (loss) on a net of tax basis.
DEFINED CONTRIBUTION PLAN
We have a defined contribution (401(k)) plan covering most employees age
21 and older. We match contributions for participants with at least one year
of service up to 6 percent of compensation, based on our performance. The
match ranges from a minimum of $0.25 to $1.20 for each dollar contributed
by the participant. The plan had net assets of $610.9 million at May 31, 2015
and $729.1 million at May 25, 2014. Expense recognized in fiscal 2015,
2014 and 2013 was $0.6 million, $0.7 million and $0.9 million, respectively.
Employees classified as “highly compensated” under the IRC are not eligible
to participate in this plan. Instead, highly compensated employees are eligible
to participate in a separate non-qualified deferred compensation (FlexComp)
plan. This plan allows eligible employees to defer the payment of part of their
annual salary and all or part of their annual bonus and provides for awards that
approximate the matching contributions and other amounts that participants
would have received had they been eligible to participate in our defined
contribution and defined benefit plans. Amounts payable to highly compen-
sated employees under the FlexComp plan totaled $209.6 million and
$228.8 million at May 31, 2015 and May 25, 2014, respectively. These
amounts are included in other current liabilities.
The defined contribution plan includes an Employee Stock Ownership
Plan (ESOP). The ESOP borrowed $16.9 million from us at a variable rate of
interest in July 1996. At May 31, 2015, the ESOP’s original debt to us had a
balance of $3.0 million with a variable rate of interest of 0.18 percent and is
due to be repaid no later than December 2019. At the end of fiscal 2005, the
ESOP borrowed an additional $1.6 million (Additional Loan) 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 that time.
At May 31, 2015, the Additional Loan had a balance of $1.3 million with a
variable interest rate of 0.28 percent and is due to be repaid no later than
December 2018. Compensation expense is recognized as contributions
are accrued. Fluctuations in our stock price impact the amount of expense
to be recognized. Contributions to the plan, plus the dividends accumulated
on 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 each of the fiscal years 2015, 2014 and
2013, the ESOP used dividends received of $1.1 million, $0.9 million and
$1.0 million, respectively, and contributions received from us of $0.0 million,
$0.0 million and $0.1 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 with the
exception of those shares acquired under the Additional Loan which 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. The ESOP shares acquired under the Additional Loan are not
considered outstanding until they are committed to be released and, therefore,
unreleased shares have been excluded for purposes of calculating basic
and diluted net earnings per share. As of May 31, 2015, the ESOP shares
included in the basic and diluted net earnings per share calculation totaled
3.0 million shares, representing 2.4 million allocated shares and 0.6 million
suspense shares.