Red Lobster 2005 Annual Report Download - page 39

Notes to Consolidated Financial Statements
Financial Review 2005
Darden Restaurants 47
NOTE 2
Accounts Receivable
Our accounts receivable is primarily comprised of receiv-
ables from national storage and distribution companies with
which we contract to provide services that are billed to us on
a per-case basis. In connection with these services, certain of
our inventory items are conveyed to these storage and distri-
bution companies to transfer ownership and risk of loss prior
to delivery of the inventory to our restaurants. We reacquire
these items when the inventory is subsequently delivered to
our restaurants. These transactions do not impact the con-
solidated statements of earnings. Receivables from national
storage and distribution companies amounted to $20,296
and $20,276 at May 29, 2005 and May 30, 2004, respectively.
The allowance for doubtful accounts associated with all of
our receivables amounted to $400 and $350 at May 29, 2005
and May 30, 2004, respectively.
NOTE 3
Restructuring and Asset Impairment Activities
Asset impairment charges related to the decision to
relocate or rebuild certain restaurants amounted to $900,
$5,667 and $4,876 in fiscal 2005, 2004 and 2003, respec-
tively. Asset impairment credits related to assets sold that
were previously impaired amounted to $2,786, $1,437 and
$594 in fiscal 2005, 2004 and 2003, respectively. During fiscal
2005, we also recorded charges of $6,407 for the write-down
of carrying value of two Olive Garden restaurants, one Red
Lobster restaurant and one Smokey Bones restaurant. The
Smokey Bones restaurant was closed subsequent to fiscal
2005 while the two Olive Garden restaurants and one Red
Lobster restaurant continued to operate. All impairment
amounts are included in asset impairment and restructur-
ing charges in the consolidated statements of earnings.
During fiscal 2004, we recorded pre-tax asset impair-
ment charges of $36,526 for long-lived asset impairments
associated with the closing of six Bahama Breeze restau-
rants and the write-down of the carrying value of four other
Bahama Breeze restaurants, one Olive Garden restaurant and
one Red Lobster restaurant, which continued to operate.
We also recorded a restructuring charge of $1,112 primarily
related to severance payments made to certain restaurant
employees and exit costs associated with the closing of the
six Bahama Breeze restaurants in accordance with SFAS
No. 146, “Accounting for Costs Associated with Exit or
Disposal Activities.” Below is a summary of the restructur-
ing costs for fiscal 2005:
Balance at Cash Balance at
May 29, 2004 Additions Payments May 30, 2005
One-time termination
benefits $ 49 $ – $ (49) $ –
Lease termination costs – – – –
Other exit costs 311 – (311) –
$360 $ – $(360) $ –
The results of operations for all restaurants closed in
fiscal 2005, 2004 and 2003 are not material to our consoli-
dated results of operations and, therefore, have not been
presented as discontinued operations.
NOTE 4
Land, Buildings and Equipment, Net
The components of land, buildings and equipment, net,
are as follows:
May 29, May 30,
2005 2004
Land $ 565,965 $ 545,191
Buildings 2,306,342 2,138,376
Equipment 1,036,143 1,008,133
Construction in progress 107,750 87,655
Total land, buildings and equipment 4,016,200 3,779,355
Less accumulated depreciation (1,664,746) (1,528,739)
Net land, buildings and equipment, net $ 2,351,454 $ 2,250,616