Red Lobster 2015 Annual Report Download - page 36

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DARDEN
MARKETABLE SECURITIES
Available-for-sale securities are carried at fair value. Classification of
marketable securities as current or noncurrent is dependent upon manage-
ment’s intended holding period, the security’s maturity date, or both. Unrealized
gains and losses, net of tax, on available-for-sale securities are carried in
accumulated other comprehensive income (loss) within the consolidated
financial statements and are reclassified into earnings when the securities
mature or are sold.
LAND, BUILDINGS AND EQUIPMENT, NET
Land, buildings and equipment are recorded at cost less accumulated
depreciation. Building components are depreciated over estimated useful
lives ranging from 7 to 40 years using the straight-line method. Leasehold
improvements, which are reflected on our consolidated balance sheets as a
component of buildings in land, buildings and equipment, net, are amortized
over the lesser of the expected lease term, including cancelable option periods,
or the estimated useful lives of the related assets using the straight-line
method. Equipment is depreciated over estimated useful lives ranging from
2 to 15 years also using the straight-line method. See Note 5 – Land, Buildings
and Equipment, Net for additional information. Gains and losses on the
disposal of land, buildings and equipment are included in impairments and
disposal of assets, net while the write-off of undepreciated book value asso-
ciated with the replacement of equipment in the normal course of business
is recorded as a component of restaurant expenses in our accompanying
consolidated statements of earnings. Depreciation and amortization expense
from continuing operations associated with buildings and equipment and
losses on replacement of equipment were as follows:
Fiscal Year
(in millions) 2015 2014 2013
Depreciation and amortization
on buildings and equipment $305.0 $296.3 $271.0
Losses on replacement of equipment 5.5 4.4 4.6
CAPITALIZED SOFTWARE COSTS AND
OTHER DEFINITE-LIVED INTANGIBLES
Capitalized software, which is a component of other assets, is recorded at
cost less accumulated amortization. Capitalized software is amortized using
the straight-line method over estimated useful lives ranging from 3 to 10
years. The cost of capitalized software and related accumulated amortization
was as follows:
May 31, May 25,
(in millions) 2015 2014
Capitalized software $148.0 $132.6
Accumulated amortization (80.4) (70.9)
Capitalized software, net of
accumulated amortization $ 67.6 $ 61.7
We have other definite-lived intangible assets, including assets related
to the value of below-market leases resulting from our acquisitions, that are
included as a component of other assets on our consolidated balance sheets.
We also have definite-lived intangible liabilities related to the value of above-
market leases resulting from our acquisitions, that are included in other
liabilities on our consolidated balance sheets. Definite-lived intangibles
are amortized on a straight-line basis over estimated useful lives of 1 to
20 years. The cost and related accumulated amortization was as follows:
May 31, May 25,
(in millions) 2015 2014
Other definite-lived intangibles $ 15.1 $ 15.5
Accumulated amortization (7.3) (6.3)
Other definite-lived intangible assets,
net of accumulated amortization $ 7.8 $ 9.2
Below-market leases $ 29.2 $ 29.2
Accumulated amortization (11.5) (9.6)
Below-market leases, net of
accumulated amortization $ 17.7 $ 19.6
Above-market leases $(21.4) $(21.4)
Accumulated amortization 6.4 4.9
Above-market leases, net of
accumulated amortization $(15.0) $(16.5)
Amortization expense from continuing operations associated with
capitalized software and other definite-lived intangibles included in deprecia-
tion and amortization in our accompanying consolidated statements of earnings
was as follows:
Fiscal Year
(in millions) 2015 2014 2013
Amortization expense –
capitalized software $13.3 $7.0 $6.3
Amortization expense –
other definite-lived intangibles 1.0 1.1 1.0
Amortization expense from continuing operations associated with above-
and-below-market leases included in restaurant expenses as a component
of rent expense in our consolidated statements of earnings was as follows:
Fiscal Year
(in millions) 2015 2014 2013
Restaurant expense –
below-market leases $ 1.8 $ 1.8 $ 1.8
Restaurant expense –
above-market leases (1.4) (1.4) (1.2)
Amortization of capitalized software and other definite-lived
intangible assets will be approximately $16.1 million annually for
fiscal 2016 through 2020.
TRUST-OWNED LIFE INSURANCE
We have a trust that purchased life insurance policies covering certain of our
officers and other key employees (trust-owned life insurance or TOLI). The
trust is the owner and sole beneficiary of the TOLI policies. The policies were
purchased to offset a portion of our obligations under our non-qualified
deferred compensation plan. The cash surrender value for each policy is
included in other assets while changes in cash surrender values are included
in general and administrative expenses.