Red Lobster 2016 Annual Report Download - page 33

DARDEN RESTAURANTS, INC. • 2016 ANNUAL REPORT 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DARDEN
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
OPERATIONS AND PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the
operations of Darden Restaurants, Inc. and its wholly owned subsidiaries
(Darden, the Company, we, us or our). We own and operate the Olive Garden®,
LongHorn Steakhouse®, The Capital Grille®, Yard House®, Bahama Breeze®,
Seasons 52®, and Eddie V’s Prime Seafood® and Wildfish Seafood Grille®
(collectively, “Eddie V’s”) restaurant brands located in the United States and
Canada. Through subsidiaries, we own and operate all of our restaurants
in the United States and Canada, except for 6 joint venture restaurants
managed by us and 18 franchised restaurants. We also have 32 franchised
restaurants in operation located in Latin America, the Middle East and
Malaysia. All significant intercompany balances and transactions have been
eliminated in consolidation.
BASIS OF PRESENTATION
On May 15, 2014, we entered into an agreement to sell Red Lobster and
certain related assets and associated liabilities and closed the sale on July 28,
2014. For fiscal 2016, 2015 and 2014, all gains and losses on disposition,
impairment charges and disposal costs, along with the sales, costs and
expenses and income taxes attributable to the discontinued locations, have
been aggregated in a single caption entitled “Earnings from discontinued
operations, net of tax expense” in our consolidated statements of earnings
for all periods presented. See Note 3 for additional information.
Unless otherwise noted, amounts and disclosures throughout these
notes to consolidated financial statements relate to our continuing operations.
FISCAL YEAR
We operate on a 52/53-week fiscal year, which ends on the last Sunday in
May. Fiscal 2016, which ended May 29, 2016, consisted of 52 weeks.
Fiscal 2015, which ended May 31, 2015, consisted of 53 weeks and fiscal
2014, which ended May 25, 2014, consisted of 52 weeks.
USE OF ESTIMATES
We prepare our consolidated financial statements in conformity with U.S.
generally accepted accounting principles. The preparation of these financial
statements requires us to make estimates 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.
CASH AND CASH EQUIVALENTS
Cash equivalents include highly liquid investments such as U.S. Treasury
bills, taxable municipal bonds and money market funds that have an original
maturity of three months or less. Amounts receivable from credit card com-
panies are also considered cash equivalents because they are both short
term and highly liquid in nature and are typically converted to cash within
three days of the sales transaction. The components of cash and cash
equivalents are as follows:
May 29, May 31,
(in millions) 2016 2015
Short-term investments $166.7 $455.5
Credit card receivables 81.1 77.8
Depository accounts 27.0 2.6
Total Cash and Cash Equivalents $274.8 $535.9
As of May 29, 2016, and May 31, 2015, we had cash and cash
equivalent accounts in excess of insured limits. We manage the credit risk
of our positions through utilizing multiple financial institutions and
monitoring the credit quality of those financial institutions that hold our
cash and cash equivalents.
RECEIVABLES, NET
Receivables, net of the allowance for doubtful accounts, represent their
estimated net realizable value. Provisions for doubtful accounts are recorded
based on historical collection experience and the age of the receivables.
Receivables are written off when they are deemed uncollectible. See Note 12.
INVENTORIES
Inventories consist of food and beverages and are valued at the lower of
weighted-average cost or market.
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.