Red Lobster 2016 Annual Report Download - page 55

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DARDEN
DARDEN RESTAURANTS, INC. • 2016 ANNUAL REPORT 51
NOTE 15
STOCK-BASED COMPENSATION
In September 2015, our shareholders approved the Darden Restaurants, Inc.
2015 Omnibus Incentive Plan (2015 Plan). All equity grants subject to
ASC Topic 718 after the date of approval are made under the 2015 Plan.
No further equity grants after that date are permitted under the Darden
Restaurants, Inc. 2002 Stock Incentive Plan, the RARE Hospitality
International, Inc. Amended and Restated 2002 Long-Term Incentive Plan
or any other prior stock option and/or stock grant plans (collectively, the
Prior Plans). The 2015 Plan and the Prior Plans are administered by the
Compensation Committee of the Board of Directors. The 2015 Plan provides
for the issuance of up to 7.6 million common shares in connection with the
granting of non-qualified stock options, incentive stock options, stock
appreciation rights, restricted stock, restricted stock units (RSUs), stock
awards and other stock-based awards including performance stock units
and Darden stock units to employees, consultants and non-employee
directors. There are outstanding awards under the Prior Plans that may still
vest and be exercised in accordance with their terms. As of May 29, 2016,
approximately 6.6 million shares may be issued under outstanding awards
that were granted under the Prior Plans. Pursuant to the provisions of our
stock plans, in connection with the separation of Four Corners (see Note 2)
we made certain adjustments to the exercise price and number of our share-
based compensation awards, with the intention of preserving the intrinsic
value of the awards immediately prior to the separation. These adjustments
are reflected in the activity tables that follow. The separation-related adjust-
ments did not have a material impact on either compensation expense or the
potentially dilutive securities to be considered in the calculation of diluted
earnings per share of common stock.
Stock-based compensation expense included in continuing operations
was as follows:
Fiscal Year
(in millions) 2016 2015 2014
Stock options (1) $ 7.8 $20.9 $19.3
Restricted stock/restricted stock units 1.6 2.0 0.9
Darden stock units 15.9 13.3 12.3
Cash-settled performance stock units (2) 6.5 14.5 2.5
Equity-settled performance stock units 2.7 — —
Employee stock purchase plan 1.1 1.3 1.8
Director compensation program/other 1.7 1.7 1.9
$37.3 $53.7 $38.7
(1) The higher expense in fiscal 2015 and fiscal 2014 is primarily attributable to the
workforce reduction efforts (see Note 16) and a change in mix of equity awards granted.
(2) The higher expense in fiscal 2015 is primarily attributable to the workforce reduction
efforts (see Note 16) and the impact of improved financial performance.
The weighted-average fair value of non-qualified stock options and the
related assumptions used in the Black-Scholes model to record stock-based
compensation are as follows:
Stock Options
Granted in Fiscal Year
2016 2015 2014
Weighted-average fair value (1) $12.72 $ 9.41 $10.71
Dividend yield 3.3% 4.5% 4.4%
Expected volatility of stock 28.0% 37.3% 39.6%
Risk-free interest rate 1.9% 2.1% 1.9%
Expected option life (in years) 6.5 6.5 6.4
Weighted-average exercise price
per share (1) $64.85 $40.43 $42.93
(1) Weighted-averages were adjusted for the impact of the separation of Four Corners.