Red Lobster 2014 Annual Report Download - page 35

Notes to Consolidated Financial Statements
Darden
2014 Annual Report 33
The following table presents the computation of basic and diluted
net earnings per common share:
Fiscal Year
(in millions, except per share data) 2014 2013 2012
Earnings from continuing operations $183.2 $237.3 $279.2
Earnings from discontinued operations 103.0 174.6 196.3
Net earnings $286.2 $411.9 $475.5
Average common shares
outstanding – Basic 131.0 129.0 130.1
Effect of dilutive stock-based
compensation 2.2 2.6 3.1
Average common shares
outstanding – Diluted 133.2 131.6 133.2
Basic net earnings per share:
Earnings from continuing operations $ 1.40 $ 1.84 $ 2.15
Earnings from discontinued operations 0.78 1.35 1.50
Net earnings $ 2.18 $ 3.19 $ 3.65
Diluted net earnings per share:
Earnings from continuing operations $ 1.38 $ 1.80 $ 2.10
Earnings from discontinued operations 0.77 1.33 1.47
Net earnings $ 2.15 $ 3.13 $ 3.57
Restricted stock and options to purchase shares of our common stock
excluded from the calculation of diluted net earnings per share because the
effect would have been anti-dilutive, are as follows:
Fiscal Year Ended
May 25, May 26, May 27,
(in millions) 2014 2013 2012
Anti-dilutive restricted stock
and options 4.2 2.8 2.6
COMPREHENSIVE INCOME
Comprehensive income 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, unrealized gains and
losses on our marketable securities classified as held for sale and recognition
of the funded status related to our pension and other postretirement plans.
See Note 13 – Stockholders’ Equity for additional information.
FOREIGN CURRENCY
The Canadian dollar is the functional currency for our Canadian restaurant
operations and the Malaysian ringgit is the functional currency for our
franchise and aquaculture activities based in Malaysia. Assets and liabilities
denominated in foreign currencies 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 other comprehensive income (loss). Aggregate cumulative translation
losses were $4.7 million and $1.8 million at May 25, 2014 and May 26,
2013, respectively. Gains and losses from foreign currency transactions
recognized in our consolidated statements of earnings were not significant
for fiscal 2014, 2013 or 2012.
SEGMENT REPORTING
As of May 25, 2014, we operated the Olive Garden, Red Lobster, LongHorn
Steakhouse, The Capital Grille, Yard House, Bahama Breeze, Seasons 52 and
Eddie V’s restaurant brands in North America as operating segments. The
brands operate principally in the U.S. within the full-service dining industry,
providing similar products to similar customers. The brands also possess
similar economic characteristics, resulting in similar long-term expected
financial performance characteristics. Sales from external customers are
derived principally from food and beverage sales. We do not rely on any
major customers as a source of sales. We believe we meet the criteria for
aggregating our operating segments into a single reporting segment.
RESEARCH AND DEVELOPMENT
We are currently researching and developing proprietary technology for
lobster aquaculture farming. We expense research and development costs
as incurred. Our lobster aquaculture expenditures were $13.5 million,
$6.3 million and $1.6 million in fiscal 2014, 2013 and 2012, respectively,
and were recorded in selling, general and administrative expenses in our
consolidated statements of earnings.
APPLICATION OF NEW ACCOUNTING STANDARDS
In May 2014, the FASB issued Accounting Standards Update (ASU) 2014-09,
Revenue from Contracts with Customers (Topic 606). This update provides
a comprehensive new revenue recognition model that requires a company to
recognize revenue to depict the transfer of goods or services to a customer
at an amount that reflects the consideration it expects to receive in exchange
for those goods or services. The guidance also requires additional disclosure
about the nature, amount, timing and uncertainty of revenue and cash flows
arising from customer contracts. This update is effective for annual and
interim periods beginning after December 15, 2016, which will require us
to adopt these provisions in the first quarter of fiscal 2018. Early application
is not permitted. This update permits the use of either the retrospective or
cumulative effect transition method. We are evaluating the effect this guidance
will have on our consolidated financial statements and related disclosures.
We have not yet selected a transition method nor have we determined the
effect of the standard on our ongoing financial reporting.