Red Lobster 2016 Annual Report Download - page 40

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DARDEN
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Earnings from discontinued operations, net of taxes in our accompanying
consolidated statements of earnings are comprised of the following:
Fiscal Year Ended
May 29, May 31, May 25,
(in millions)
2016 2015 2014
Sales $ — $ 400.4 $2,472.1
Costs and expenses:
Restaurant and marketing expenses 1.8 353.0 2,134.1
Depreciation and amortization — 0.2 124.6
Other income and expenses (1) (20.5) (810.7) 78.1
Earnings before income taxes 18.7 857.9 135.3
Income tax expense 3.4 344.8 32.3
Earnings from discontinued
operations, net of tax $ 15.3 $ 513.1 $ 103.0
(1) Amounts for fiscal years 2016 and 2015 primarily relate to the gain recognized on the sale
of Red Lobster.
Assets classified as held for sale on our accompanying consolidated
balance sheets as of May 29, 2016, consisted of land, buildings and equip-
ment with carrying amounts of $20.3 million primarily related to excess land
parcels adjacent to our corporate headquarters. Assets classified as held
for sale on our accompanying consolidated balance sheets as of May 31,
2015 consisted of land, buildings and equipment with carrying amounts of
$32.9 million related to Red Lobster properties subject to landlord consents
and excess land parcels adjacent to our corporate headquarters.
NOTE 4
IMPAIRMENTS AND DISPOSAL OF ASSETS, NET
Impairments and disposal of assets, net, in our accompanying consolidated
statements of earnings are comprised of the following:
Fiscal Year
(in millions) 2016 2015 2014
Restaurant impairments $ 9.2 $49.4 $11.5
Disposal gains (5.9) (4.2) (1.9)
Other 2.5 16.9 6.8
Impairments and disposal of assets, net $ 5.8 $62.1 $16.4
Restaurant impairments for fiscal 2016 and 2015 were primarily related
to underperforming restaurants and restaurant assets involved in individual
sale-leaseback transactions. Restaurant impairments for fiscal 2014 were
primarily related to underperforming restaurants.
Disposal gains for fiscal 2016 and 2015 were primarily related to
the sale of land parcels and sale-leaseback transactions. Disposal gains for
fiscal 2014 were primarily related to the sale of land parcels.
Other impairment charges for fiscal 2016 primarily related to a
cost-method investment and the expected disposal of excess land parcels
adjacent to our corporate headquarters which are held for sale. During fiscal
2015, other impairment charges related to the expected disposal of excess
land parcels adjacent to our corporate headquarters, our lobster aquaculture
project and a corporate airplane in connection with the closure of our avia-
tion department. Other impairment charges for fiscal 2014 primarily related
to a corporate airplane in connection with its expected sale.
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 discounted future cash flows. These amounts are
included in impairments and disposal of assets, net as a component of
earnings from continuing operations in the accompanying consolidated
statements of earnings.
NOTE 5
LAND, BUILDINGS AND EQUIPMENT, NET
The components of land, buildings and equipment, net, are as follows:
(in millions) May 29, 2016 May 31, 2015
Land $ 133.1 $ 633.5
Buildings 2,297.1 3,338.9
Equipment 1,318.5 1,439.1
Assets under capital leases 71.9 72.0
Construction in progress 40.0 36.9
Total land, buildings and equipment $ 3,860.6 $ 5,520.4
Less accumulated depreciation and
amortization (1,788.3) (2,277.7)
Less amortization associated with
assets under capital leases (30.7) (26.9)
Land, buildings and equipment, net $ 2,041.6 $ 3,215.8
NOTE 6
SEGMENT INFORMATION
We manage our restaurant brands, Olive Garden, LongHorn Steakhouse,
The Capital Grille, Yard House, Bahama Breeze, Seasons 52 and Eddie V’s in
North America as operating segments. The brands operate principally in the
U.S. within full-service dining. We aggregate our operating segments into
reportable segments based on a combination of the size, economic charac-
teristics and sub-segment of full-service dining within which each brand
operates. We have four reportable segments: (1) Olive Garden, (2) LongHorn
Steakhouse, (3) Fine Dining and (4) Other Business.
The Olive Garden segment includes the results of our company-owned
Olive Garden restaurants in the U.S. and Canada. The LongHorn Steakhouse
segment includes the results of our company-owned LongHorn Steakhouse
restaurants in the U.S. The Fine Dining segment aggregates our premium
brands that operate within the fine-dining sub-segment of full-service dining
and includes the results of our company-owned The Capital Grille and
Eddie V’s restaurants in the U.S. The Other Business segment aggregates
our remaining brands and includes the results of our company-owned
Yard House, Seasons 52 and Bahama Breeze restaurants in the U.S. This
segment also includes results from our franchises and consumer-packaged
goods sales.
External sales are derived principally from food and beverage sales.
We do not rely on any major customers as a source of sales, and the
customers and long-lived assets of our reportable segments are
predominantly in the U.S. There were no material transactions among
reportable segments.