Red Lobster 2016 Annual Report Download - page 54

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DARDEN
50
POSTEMPLOYMENT SEVERANCE PLAN
We accrue for postemployment severance costs in our consolidated financial
statements and recognize actuarial gains and losses as well as prior service
credits related to our postemployment severance accrual as a component of
accumulated other comprehensive income (loss). As of May 29, 2016 and
May 31, 2015, $4.3 million and $2.3 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 $643.3 million at May 29, 2016,
and $610.9 million at May 31, 2015. Expense recognized in fiscal 2016,
2015 and 2014 was $15.1 million, $0.6 million and $0.7 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
compensated employees under the FlexComp plan totaled $194.0 million
and $209.6 million at May 29, 2016 and May 31, 2015, 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 29, 2016, the ESOP’s original debt to us had
a balance of $2.3 million with a variable rate of interest of 0.43 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 29, 2016, the Additional Loan had a balance of $1.2 million with a
variable interest rate of 0.63 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 2016, 2015 and 2014, the
ESOP used dividends received of $0.7 million, $1.1 million and $0.9 million,
respectively, and contributions received from us of $0.1 million, $0.0 million
and $0.0 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 29, 2016, the ESOP
shares included in the basic and diluted net earnings per share calculation
totaled 2.7 million shares, representing 2.2 million allocated shares and
0.5 million suspense shares.