Red Lobster 2016 Annual Report Download - page 38

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DARDEN
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NET EARNINGS PER SHARE
Basic net earnings per share are computed by dividing net earnings by the
weighted-average number of common shares outstanding for the reporting
period. Diluted net earnings per share reflect the potential dilution that could
occur if securities or other contracts to issue common stock were exercised
or converted into common stock. Outstanding stock options, restricted stock
and equity-settled performance stock units granted by us represent the only
dilutive effect reflected in diluted weighted-average shares outstanding.
These stock-based compensation instruments do not impact the numerator
of the diluted net earnings per share computation.
The following table presents the computation of basic and diluted net
earnings per common share:
Fiscal Year
(in millions, except per share data) 2016 2015 2014
Earnings from continuing operations $359.7 $196.4 $183.2
Earnings from discontinued operations 15.3 513.1 103.0
Net earnings $375.0 $709.5 $286.2
Average common shares
outstanding – Basic 127.4 127.7 131.0
Effect of dilutive stock-based
compensation 1.9 2.0 2.2
Average common shares
outstanding – Diluted 129.3 129.7 133.2
Basic net earnings per share:
Earnings from continuing operations $ 2.82 $ 1.54 $ 1.40
Earnings from discontinued operations 0.12 4.02 0.78
Net earnings $ 2.94 $ 5.56 $ 2.18
Diluted net earnings per share:
Earnings from continuing operations $ 2.78 $ 1.51 $ 1.38
Earnings from discontinued operations 0.12 3.96 0.77
Net earnings $ 2.90 $ 5.47 $ 2.15
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 29, May 31, May 25,
(in millions) 2016 2015 2014
Anti-dilutive restricted stock and options 0.3 0.1 4.2
FOREIGN CURRENCY
The Canadian dollar is the functional currency for our Canadian restaurant
operations and the Malaysian ringgit is the functional currency for our
franchises 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 $1.2 million and
$1.7 million at May 29, 2016 and May 31, 2015, respectively. Net losses
from foreign currency transactions recognized in our consolidated statements
of earnings were $1.8 million and $1.4 million for fiscal 2016 and 2015,
respectively, and was not significant for fiscal 2014.
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, 2017, which requires us to adopt
these provisions in the first quarter of fiscal 2019. Early adoption is 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.
In July 2015, the FASB issued ASU 2015-11, Simplifying the
Measurement of Inventory (Topic 330). This update requires inventory within
the scope of the standard to be measured at the lower of cost and net
realizable value. Net realizable value is defined as the estimated selling
prices in the ordinary course of business, less reasonably predictable costs
of completion, disposal, and transportation. 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
adoption is permitted. We do not expect the adoption of this guidance to
have a material impact on our consolidated financial statements.
In November 2015, the FASB issued ASU 2015-17, Balance Sheet
Classification of Deferred Taxes (Topic 740). This update requires that
deferred tax liabilities and assets be classified as noncurrent in a classified
balance sheet. 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 adoption is permitted.
Other than the revised balance sheet presentation of deferred tax liabilities
and assets, we do not expect the adoption of this guidance to have a
material impact on our consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842).
This update requires a lessee to recognize on the balance sheet a liability to
make lease payments and a corresponding right-of-use asset. The guidance
also requires certain qualitative and quantitative disclosures about the amount,
timing and uncertainty of cash flows arising from leases. This update is
effective for annual and interim periods beginning after December 15, 2018,
which will require us to adopt these provisions in the first quarter of fiscal
2020 using a modified retrospective approach. Early adoption is permitted.
We have not yet selected a transition date nor have we determined the effect
of the standard on our ongoing financial reporting.
In March 2016, the FASB issued ASU 2016-09, Compensation – Stock
Compensation (Topic 718). This update was issued as part of the FASB’s
simplification initiative and affects all entities that issue share-based payment
awards to their employees. The amendments in this update cover such areas
as the recognition of excess tax benefits and deficiencies, the classification
of those excess tax benefits on the statement of cash flows, an accounting
policy election for forfeitures, the amount an employer can withhold to cover
income taxes and still qualify for equity classification and the classification of
those taxes paid on the statement of cash flows. 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. This
guidance will be applied either prospectively, retrospectively or using a