Red Lobster 2007 Annual Report Download - page 45

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Darden Restaurants, Inc. Annual Report 2007 43
Notes to Consolidated Financial Statements
$4.9 million to accrue for ongoing contractual operating lease
obligations, $3.9 million in other asset write-offs, $2.3 million in
employee termination benefits, $1.3 million in restaurant-level
closing costs, and $1.3 million in other costs. During fiscal 2008,
we expect to incur an additional $5.5 million in employee reten-
tion payments related to the remaining open locations and approxi-
mately $3.3 million in carrying costs on the closed locations.
For fiscal 2007, 2006 and 2005, all impairment charges and
disposal costs, along with the sales, costs and expenses and income
taxes attributable to these restaurants have been aggregated to a
single caption entitled losses from discontinued operations, net
of tax on our consolidated statements of earnings for all periods
presented. Losses from discontinued operations, net of taxes on our
accompanying consolidated statements of earnings are comprised
of the following:
Fiscal Year Ended
(in millions) May 27, 2007 May 28, 2006 May 29, 2005
Sales $ 357.9 $367.0 $300.4
Losses before income taxes $(288.6) $ (25.7) $ (17.6)
Income tax benefits 112.9 12.1 8.3
Net losses from discontinued operations $ (175.7) $ (13.6) $ (9.3)
The following is a detail of the assets and liabilities associated
with the restaurants reported as discontinued operations and classi-
fied as held for sale on our accompanying consolidated balance
sheet as of May 27, 2007 at fair value, with comparative carrying
amounts as of May 28, 2006:
May 27, 2007 May 28, 2006
Current assets $ 44.6 $ 12.5
Land, buildings and equipment, net 97.1 376.7
Other assets 2.3 4.6
Total assets $144.0 $393.8
Current liabilities $ 37.1 $ 32.3
Other liabilities 5.2 38.6
Total liabilities $ 42.3 $ 70.9
As of May 27, 2007, we had $7.2 million of accrued exit and
disposal costs, which are included in liabilities held for sale on the
accompanying consolidated balance sheet as of May 27, 2007 and
are expected to be paid in fiscal 2008.
Note3
Receivables, Net
Our accounts receivable is primarily comprised of receivables from
national storage and distribution companies with which we contract
to provide services that are billed to us on a per-case basis. In connec-
tion with these services, certain of our inventory items are conveyed
to these storage and distribution 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 consolidated
statements of earnings. Receivables from national storage and distri-
bution companies amounted to $19.3 million and $20.5 million at
May 27, 2007 and May 28, 2006, respectively. The allowance for
doubtful accounts associated with all of our receivables amounted
to $1.6 million at May 27, 2007 and $0.4 million at May 28, 2006.
Note4
Asset Impairment, Net
During fiscal 2007 we recorded $2.6 million of long-lived asset
impairment charges primarily related to the permanent closure of
one Red Lobster and one Olive Garden restaurant. During fiscal
2007 we also recorded $0.2 million of gains related to the sale of
previously impaired restaurants. During fiscal 2006 we recorded
$1.5 million of long-lived asset impairment charges primarily
related to the closing of three Red Lobster and two Olive Garden
restaurants. During fiscal 2006 we also recorded $0.2 million of
gains related to the sale of previously impaired restaurants. During
fiscal 2005 we recorded $4.8 million of long-lived asset impairment
charges primarily related to two Olive Garden and one Red Lobster
restaurant based on an evaluation of expected cash flows. These
restaurants continued to operate until their closure in fiscal 2006.
During fiscal 2005 we also recorded $2.8 million of gains related to
the sale of previously impaired restaurants. These costs are reported
as asset impairment, net in the accompanying consolidated state-
ments of earnings. Impairment charges were measured based on the
amount by which the carrying amount of these assets exceeded their
fair value. Fair value is generally determined based on appraisals or
sales prices of comparable assets and estimates of future cash flows.
Note2