Financial Review 2004 Notes to  Consolidated Financial Statements Foreign Currency  Use of Estimates Segment Reporting Reclassifications Comprehensive Income (Loss) Net Earnings Per Share The weighted-average assumptions used in the Black Scholes  model were as follows: Restricted stock and restricted stock unit (RSU) awards are  recognized as unearned compensation, a component of stockhold- ers’ equity, based on the fair market value of our common stock  on the award date. These amounts are amortized to compensa- tion expense, using the straight-line method, over the vesting  period using assumed forfeiture rates for different types of awards.  Compensation expense is adjusted in future periods if actual forfeiture rates differ from initial estimates. Basic net earnings per share are computed by dividing net earnings  by the weighted-average number of common shares outstanding  for the reporting period. Diluted net earnings per share reflect the  potential dilution that could occur if securities or other contracts  to issue common stock were exercised or converted into common  stock. Outstanding stock options issued by us represent the only  dilutive effect reflected in diluted weighted-average shares out- standing. Options do not impact the numerator of the diluted net  earnings per share computation. Options to purchase 4,643,389 shares, 3,952,618 shares, and  161,220 shares of common stock were excluded from the calcula- tion of diluted net earnings per share for fiscal 2004, 2003, and  2002, respectively, because their exercise prices exceeded the average market price of common shares for the period.  Comprehensive income (loss) includes net earnings and other  comprehensive income (loss) items that are excluded from net  earnings under U.S. generally accepted accounting principles.  Other comprehensive income (loss) items include foreign currency  translation adjustments, the effective unrealized portion of changes  in the fair value of cash flow hedges, and amounts associated with  minimum pension liability adjustments. Certain reclassifications, including the reclassification of asset  impairment charges and credits from selling, general, and admin- istrative expenses, have been made to prior year amounts to con- form to current year presentation. As of May 30, 2004, we operated 1,325 Red Lobster, Olive Garden,  Bahama Breeze, Smokey Bones Barbeque & Grill and Seasons 52  restaurants in North America as part of a single operating segment.  The restaurants operate principally in the U.S. within the casual  dining industry, providing similar products to similar customers.  The restaurants also possess similar pricing structures, resulting in  similar long-term expected financial performance characteristics.  Revenues from external customers are derived principally from  food and beverage sales. We do not rely on any major customers as  a source of revenue. We believe we meet the criteria for aggregat- ing our operations into a single reporting segment. The preparation of financial statements in conformity with U.S.  generally accepted accounting principles requires us to make esti- mates and assumptions that affect the reported amounts of assets  and liabilities and disclosure of contingent assets and liabilities  at the date of the financial statements, and the reported amounts  of sales and expenses during the reporting period. Actual results  could differ from those estimates. The Canadian dollar is the functional currency for our Canadian  restaurant operations. Assets and liabilities denominated in  Canadian dollars are translated into U.S. dollars using the exchange  rates in effect at the balance sheet date. Results of operations are  translated using the average exchange rates prevailing throughout  the period. Translation gains and losses are reported as a separate  component of accumulated other comprehensive income (loss)  in stockholders’ equity. Aggregate cumulative translation losses  were $9,960 and $10,354 at May 30, 2004, and May 25, 2003,  respectively. Gains (losses) from foreign currency transactions,  which amounted to $(53), $(105), and $33, are included in the  consolidated statements of earnings for fiscal 2004, 2003, and  2002, respectively.  Darden Restaurants  41 Stock Options Granted in Fiscal Year 2004  2003  2002 Risk-free interest rate  2.62%  4.37%   4.50% Expected volatility of stock  30.0%   30.0%   30.0% Dividend yield  0.2%  0.2%   0.1% Expected option life  6.0 years  6.0 years 6.0 years