Statement Of Income Alternative
Statement Of Income Alternative (USD $) | ||||
In Millions, except Per Share data | 3 Months Ended
Feb. 28, 2010 | 3 Months Ended
Feb. 22, 2009 | 9 Months Ended
Feb. 28, 2010 | 9 Months Ended
Feb. 22, 2009 |
Sales | $1,874 | 1798.9 | 5249.3 | 5241.9 |
Cost of sales: | ||||
Food and beverage | 539.3 | 548.4 | 1510.9 | 1611.6 |
Restaurant labor | 613 | 569.1 | 1744.7 | 1675.3 |
Restaurant expenses | 277.9 | 276.5 | 802.8 | 841.5 |
Total cost of sales, excluding restaurant depreciation and amortization of $73.2, $67.5, $212.4 and $198.5, respectively | 1430.2 | 1,394 | 4058.4 | 4128.4 |
Selling, general and administrative | 169.5 | 159.7 | 510.7 | 476.9 |
Depreciation and amortization | 78.1 | 71.2 | 224.8 | 210.5 |
Interest, net | 20.8 | 25.5 | 69 | 80.7 |
Total costs and expenses | 1698.6 | 1650.4 | 4862.9 | 4896.5 |
Earnings before income taxes | 175.4 | 148.5 | 386.4 | 345.4 |
Income taxes | -40.6 | -40.4 | -95.4 | -96.3 |
Earnings from continuing operations | 134.8 | 108.1 | 291 | 249.1 |
(Losses) earnings from discontinued operations, net of tax (benefit) expense of $(0.3), $(0.4), $(1.3) and $0.1, respectively | -0.5 | -0.6 | -2.1 | 0.1 |
Net earnings | 134.3 | 107.5 | 288.9 | 249.2 |
Basic net earnings per share: | ||||
Earnings from continuing operations | 0.97 | 0.79 | 2.09 | 1.81 |
(Losses) earnings from discontinued operations | -0.01 | $0 | -0.01 | $0 |
Net earnings | 0.96 | 0.79 | 2.08 | 1.81 |
Diluted net earnings per share: | ||||
Earnings from continuing operations | 0.95 | 0.78 | 2.05 | 1.78 |
(Losses) earnings from discontinued operations | -0.01 | $0 | -0.01 | $0 |
Net earnings | 0.94 | 0.78 | 2.04 | 1.78 |
Average number of common shares outstanding: | ||||
Basic | 139.3 | 136.1 | 139 | 137.4 |
Diluted | 142.3 | 138.6 | 141.8 | 140.3 |
1_Statement Of Income Alternati
Statement Of Income Alternative (Parenthetical) (USD $) | ||||
In Millions | 3 Months Ended
Feb. 28, 2010 | 3 Months Ended
Feb. 22, 2009 | 9 Months Ended
Feb. 28, 2010 | 9 Months Ended
Feb. 22, 2009 |
Total cost of sales, restaurant depreciation and amortization | 73.2 | 67.5 | 212.4 | 198.5 |
(Losses) earnings from discontinued operations, tax (benefit) expense | -0.3 | -0.4 | -1.3 | 0.1 |
Statement Of Financial Position
Statement Of Financial Position Classified (USD $) | ||
In Millions | Feb. 28, 2010
| May. 31, 2009
|
Current assets: | ||
Cash and cash equivalents | 260.3 | 62.9 |
Receivables, net | 56 | 37.1 |
Inventories | 218.1 | 247 |
Prepaid income taxes | 0 | 53.2 |
Prepaid expenses and other current assets | 58.2 | 44.2 |
Deferred income taxes | 106.2 | 110.4 |
Total current assets | 698.8 | 554.8 |
Land, buildings and equipment, net of accumulated depreciation and amortization of $2,285.0 and $2,122.4, respectively | 3374.6 | 3306.7 |
Goodwill | 518.3 | 518.7 |
Trademarks | 454 | 454.4 |
Other assets | 196.7 | 190.6 |
Total assets | 5242.4 | 5025.2 |
Current liabilities: | ||
Accounts payable | 253.7 | 237 |
Short-term debt | 0 | 150 |
Accrued payroll | 157.6 | 138.3 |
Accrued income taxes | 34.2 | 0 |
Other accrued taxes | 66.2 | 60.2 |
Unearned revenues | 190 | 138.3 |
Current portion of long-term debt | 149.9 | 0 |
Other current liabilities | 398.8 | 372.3 |
Total current liabilities | 1250.4 | 1096.1 |
Long-term debt, less current portion | 1484.9 | 1632.3 |
Deferred income taxes | 278.1 | 297 |
Deferred rent | 166 | 154.6 |
Obligations under capital leases, net of current installments | 58 | 58.9 |
Other liabilities | 161.2 | 180.3 |
Total liabilities | 3398.6 | 3419.2 |
Stockholders' equity: | ||
Common stock and surplus | 2242.4 | 2183.1 |
Retained earnings | 2541.6 | 2357.4 |
Treasury stock | -2877.5 | -2864.2 |
Accumulated other comprehensive income (loss) | -50.9 | -57.2 |
Unearned compensation | -11.8 | (13) |
Officer notes receivable | 0 | -0.1 |
Total stockholders' equity | 1843.8 | 1,606 |
Total liabilities and stockholders' equity | 5242.4 | 5025.2 |
2_Statement Of Financial Positi
Statement Of Financial Position Classified (Parenthetical) (USD $) | ||
In Millions | Feb. 28, 2010
| May. 31, 2009
|
Land, buildings and equipment, accumulated depreciation and amortization | $2,285 | 2122.4 |
Statement Of Shareholders Equit
Statement Of Shareholders Equity And Other Comprehensive Income (USD $) | |||||||
In Millions | Common Stock And Surplus
| Retained Earnings
| Treasury Stock
| Accumulated Other Comprehensive Income (Loss)
| Unearned Compensation
| Officer Notes Receivable
| Total
|
Beginning Balance at May. 25, 2008 | 2074.9 | $2,096 | ($2,724) | -20.7 | ($17) | -0.1 | 1409.1 |
Comprehensive income: | |||||||
Net earnings | 249.2 | 249.2 | |||||
Other comprehensive income (loss): | |||||||
Foreign currency adjustment | -5.7 | -5.7 | |||||
Change in fair value of derivatives, net of tax of $0.1 in 2010 and $(8.3) in 2009 | -13.9 | -13.9 | |||||
Amortization of unrecognized net actuarial loss, net of tax of $0.3 in 2010 and $1.5 in 2009 | 2.5 | 2.5 | |||||
Total comprehensive income | 232.1 | ||||||
Cash dividends declared | -82.6 | -82.6 | |||||
Stock option exercises (1.3 shares in 2010 and 0.7 shares in 2009) | 12.7 | 0.9 | 13.6 | ||||
Stock-based compensation | 25.1 | 25.1 | |||||
ESOP note receivable repayments | 3.8 | 3.8 | |||||
Income tax benefits credited to equity | 4.5 | 4.5 | |||||
Purchases of common stock for treasury (0.5 shares in 2010 and 4.7 shares in 2009) | -132.7 | -132.7 | |||||
Issuance of treasury stock under Employee Stock Purchase Plan and other plans (0.2 shares in 2010 and 0.3 shares in 2009) | 4.1 | 1.6 | 5.7 | ||||
Ending Balance at Feb. 22, 2009 | 2121.3 | 2262.6 | -2854.2 | -37.8 | -13.2 | -0.1 | 1478.6 |
Beginning Balance at May. 31, 2009 | 2183.1 | 2357.4 | -2864.2 | -57.2 | (13) | -0.1 | 1,606 |
Comprehensive income: | |||||||
Net earnings | 288.9 | 288.9 | |||||
Other comprehensive income (loss): | |||||||
Foreign currency adjustment | 1.3 | 1.3 | |||||
Change in fair value of derivatives, net of tax of $0.1 in 2010 and $(8.3) in 2009 | 3.5 | 3.5 | |||||
Amortization of unrecognized net actuarial loss, net of tax of $0.3 in 2010 and $1.5 in 2009 | 1.5 | 1.5 | |||||
Total comprehensive income | 295.2 | ||||||
Cash dividends declared | -104.7 | -104.7 | |||||
Stock option exercises (1.3 shares in 2010 and 0.7 shares in 2009) | 21.6 | 2.1 | 23.7 | ||||
Stock-based compensation | 24.8 | 24.8 | |||||
ESOP note receivable repayments | 1.2 | 1.2 | |||||
Income tax benefits credited to equity | 8.5 | 8.5 | |||||
Purchases of common stock for treasury (0.5 shares in 2010 and 4.7 shares in 2009) | -16.5 | -16.5 | |||||
Issuance of treasury stock under Employee Stock Purchase Plan and other plans (0.2 shares in 2010 and 0.3 shares in 2009) | 4.4 | 1.1 | 5.5 | ||||
Repayment of officer notes | 0.1 | 0.1 | |||||
Ending Balance at Feb. 28, 2010 | 2242.4 | 2541.6 | -2877.5 | -50.9 | -11.8 | $0 | 1843.8 |
3_Statement Of Shareholders Equ
Statement Of Shareholders Equity And Other Comprehensive Income (Parenthetical) (USD $) | ||
In Millions | 9 Months Ended
Feb. 28, 2010 | 9 Months Ended
Feb. 22, 2009 |
Change in fair value of derivatives, tax | 0.1 | -8.3 |
Amortization of unrecognized net actuarial loss, tax | 0.3 | 1.5 |
Stock option exercises, shares | 1.3 | 0.7 |
Purchases of common stock for treasury, shares | 0.5 | 4.7 |
Issuance of treasury stock under Employee Stock Purchase Plan and other plans, shares | 0.2 | 0.3 |
Statement Of Cash Flows Indirec
Statement Of Cash Flows Indirect (USD $) | ||||
In Millions | 3 Months Ended
Feb. 28, 2010 | 3 Months Ended
Feb. 22, 2009 | 9 Months Ended
Feb. 28, 2010 | 9 Months Ended
Feb. 22, 2009 |
Cash flows-operating activities | ||||
Net earnings | 134.3 | 107.5 | 288.9 | 249.2 |
Losses (earnings) from discontinued operations, net of tax | 0.5 | 0.6 | 2.1 | -0.1 |
Adjustments to reconcile net earnings to cash flows: | ||||
Depreciation and amortization | 78.1 | 71.2 | 224.8 | 210.5 |
Asset impairment | 1.1 | 0 | 3.9 | 1.1 |
Amortization of loan costs | 0.9 | 0.8 | 2.5 | 2.7 |
Stock-based compensation expense | 14.7 | 13.1 | 37.7 | 30.2 |
Change in current assets and liabilities | 247.2 | 109.6 | 231.1 | -17.1 |
Contributions to postretirement plan | -0.3 | -0.3 | -1.1 | -0.9 |
(Gain) loss on disposal of land, buildings and equipment | -0.7 | 3.4 | -1.1 | 4.3 |
Change in cash surrender value of trust owned life insurance | -2.4 | -0.2 | -8.7 | 23.6 |
Deferred income taxes | -19.2 | 10.9 | -14.7 | 16.4 |
Change in deferred rent | 3.7 | 4.4 | 11.3 | 12 |
Change in other liabilities | -16.9 | 10.5 | -27.5 | 9.5 |
Income tax benefits from exercise of converted options credited to goodwill | 0.3 | 0 | 0.5 | 0 |
Other, net | 0.8 | 2.6 | 2.9 | 2.5 |
Net cash provided by operating activities of continuing operations | 442.1 | 334.1 | 752.6 | 543.9 |
Cash flows-investing activities | ||||
Purchases of land, buildings and equipment | -109.7 | -125.2 | -324.1 | (423) |
Proceeds from disposal of land, buildings and equipment (including assets held for disposal) | 2.5 | 1 | 11.3 | 4 |
Purchases of marketable securities | -15.5 | 0 | -15.5 | -25.1 |
Proceeds from the sale of marketable securities | 11.1 | 11.3 | 12.8 | 11.3 |
Increase in other assets | -2.5 | -1.9 | -5.2 | -1.9 |
Net cash used in investing activities of continuing operations | -114.1 | -114.8 | -320.7 | -434.7 |
Cash flows-financing activities | ||||
Proceeds from issuance of common stock | 20 | 7.7 | 28.6 | 18.8 |
Dividends paid | -34.8 | -27.2 | -104.7 | -82.6 |
Purchases of treasury stock | -14.3 | -5.9 | -16.5 | -132.7 |
Income tax benefits credited to equity | 6.6 | 1.3 | 8.5 | 4.5 |
(Repayments of) proceeds from short-term debt, net | -102.3 | -139.1 | (150) | 144.7 |
ESOP note receivable repayment | 0.3 | 0.9 | 1.2 | 3.8 |
Principal payments on capital leases | -0.3 | -0.2 | -0.9 | -0.7 |
Repayment of long-term debt | -0.3 | -0.9 | -1.2 | -3.8 |
Net cash used in financing activities of continuing operations | -125.1 | -163.4 | (235) | (48) |
Cash flows - discontinued operations | ||||
Net cash (used in) provided by operating activities of discontinued operations | -0.4 | 0.1 | (1) | -1.6 |
Net cash provided by investing activities of discontinued operations | 0.9 | 0 | 1.5 | 4.5 |
Net cash provided by discontinued operations | 0.5 | 0.1 | 0.5 | 2.9 |
Increase in cash and cash equivalents | 203.4 | 56 | 197.4 | 64.1 |
Cash and cash equivalents - beginning of period | 56.9 | 62.9 | 43.2 | |
Cash and cash equivalents - end of period | 260.3 | 107.3 | 260.3 | 107.3 |
Cash flows from changes in current assets and liabilities | ||||
Receivables, net | -8.4 | -11.3 | -18.9 | 19.1 |
Inventories | 33.3 | 14.3 | 28.9 | -93.1 |
Prepaid expenses and other current assets | 5.6 | 5.6 | -8.2 | -6.3 |
Accounts payable | 38.6 | -4.5 | 36.1 | 29.5 |
Accrued payroll | 33.2 | 16.8 | 19.3 | -3.3 |
Accrued income taxes | 39.7 | -7.2 | 87.4 | 4.3 |
Other accrued taxes | 11.3 | 2.9 | 6 | 2.8 |
Unearned revenues | 65 | 52.3 | 52 | 25.7 |
Other current liabilities | 28.9 | 40.7 | 28.5 | 4.2 |
Change in current assets and liabilities | 247.2 | 109.6 | 231.1 | -17.1 |
Basis of Presentation
Basis of Presentation | |
9 Months Ended
Feb. 28, 2010 | |
Basis of Presentation | Note 1. Basis of Presentation Darden Restaurants, Inc. (we, our or the Company) owns and operates full-service dining restaurants in the United States and Canada under the trade names Red Lobster, Olive Garden, LongHorn Steakhouse, The Capital Grille, Bahama Breeze, Seasons 52, and The Old Grist Mill Tavern. We have prepared these consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally presented in annual financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal recurring nature. Operating results for the quarter and nine months ended February28, 2010 are not necessarily indicative of the results that may be expected for the fiscal year ending May30, 2010. These statements should be read in conjunction with the consolidated financial statements and related notes to consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended May31, 2009. The accounting policies used in preparing these consolidated financial statements are the same as those described in our Form 10-K. 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. During the first quarter of fiscal 2010, we sold Hemenways Seafood Grille Oyster Bar to a third party for $0.8 million and recognized a loss of $0.1 million. Unless otherwise noted, amounts and disclosures throughout the notes to consolidated financial statements relate to our continuing operations. |
Supplemental Cash Flow Informat
Supplemental Cash Flow Information | |
9 Months Ended
Feb. 28, 2010 | |
Supplemental Cash Flow Information | Note 2. Supplemental Cash Flow Information (in millions) Quarter Ended Nine Months Ended February28,2010 February22,2009 February28,2010 February22,2009 Interest paid, net of amounts capitalized $ 11.3 $ 12.5 $ 57.6 $ 66.1 Income taxes paid 31.8 21.2 36.2 58.8 |
Stock-Based Compensation
Stock-Based Compensation | |
9 Months Ended
Feb. 28, 2010 | |
Stock-Based Compensation | Note 3. Stock-Based Compensation We grant stock options for a fixed number of shares to certain employees and directors with an exercise price equal to the fair value of the shares at the date of grant. We also grant restricted stock, restricted stock units, and performance stock units with a fair value determined based on our closing stock price on the date of grant. In addition, we also grant cash settled stock units and cash settled performance stock units, which are classified as liabilities and are marked to market as of the end of each fiscal period. The weighted-average fair value of stock options granted and the related assumptions used in the Black-Scholes option pricing model as of February28, 2010 and February22, 2009, were as follows: Stock Options Granted DuringtheNineMonthsEnded February28,2010 February22,2009 Weighted-average fair value $ 10.72 $ 10.65 Risk-free interest rate 2.96 % 3.46 % Expected volatility of stock 40.6 % 34.4 % Dividend yield 2.84 % 2.10 % Expected option life 6.6years 6.4years The following table presents a summary of our stock-based compensation activity for the nine months ended February28, 2010: (in millions) Stock Options RestrictedStock/ RestrictedStockUnits DardenStock Units Performance Stock Units Outstanding beginning of period 15.2 1.0 1.2 0.7 Awards granted 1.8 0.1 0.8 0.3 Awards exercised (1.3 ) (0.3 ) (0.3 ) Awards forfeited (0.2 ) (0.1 ) (0.1 ) Outstanding end of period 15.5 0.8 1.6 0.9 During the quarters and nine months ended February28, 2010 and February22, 2009, we recognized expense from stock-based compensation as follows: (in millions) Quarter Ended Nine Months Ended February28,2010 February22,2009 February28,2010 February22,2009 Stock options $ 5.3 $ 6.5 $ 14.8 $ 15.9 Restricted stock/restricted stock units 2.6 2.1 7.4 6.9 Darden stock units 5.0 3.5 9.3 4.6 Performance stock units 1.4 0.4 3.6 0.4 Employee stock purchase plan 0.4 0.4 1.3 1.2 Director compensation program/other 0.2 1.3 1.2 $ 14.7 $ 13.1 $ 37.7 $ 30.2 |
Income Taxes
Income Taxes | |
9 Months Ended
Feb. 28, 2010 | |
Income Taxes | Note 4. Income Taxes The effective income tax rate for the quarter and nine months ended February 28, 2010 was 23.2 percent and 24.7 percent, respectively, compared to an effective income tax rate of 27.2 percent and 27.9 percent for the quarter and nine months ended February22, 2009, respectively. The decrease in the effective income tax rate during the third quarter and for the first nine months of fiscal 2010 is primarily attributable to the impact of market driven changes in the value of our trust owned life insurance that are excluded for tax purposes and favorable resolution of prior year tax matters expensed in prior years. Included in our remaining balance of unrecognized tax benefits is $2.6 million related to tax positions for which it is reasonably possible that the total amounts could materially change within the next twelve months based on the outcome of examinations or as a result of the expiration of the statute of limitations for specific jurisdictions. |
Long-Term Debt
Long-Term Debt | |
9 Months Ended
Feb. 28, 2010 | |
Long-Term Debt | Note 5. Long-Term Debt We maintain a $750.0 million revolving credit facility under a Credit Agreement (Revolving Credit Agreement) dated September20, 2007 with Bank of America, N.A. (BOA), as administrative agent, and the lenders (Revolving Credit Lenders) and other agents party thereto. The Revolving Credit Agreement is a senior unsecured credit commitment to the Company and contains customary representations, affirmative and negative covenants (including limitations on liens and subsidiary debt, and a maximum consolidated lease adjusted total debt to total capitalization ratio of 0.75 to 1.00) and events of default usual for credit facilities of this type. As of February28, 2010, we were in compliance with the covenants under the Revolving Credit Agreement. The Revolving Credit Agreement matures on September20, 2012, and the proceeds may be used for commercial paper back-up, working capital and capital expenditures, the refinancing of certain indebtedness as well as general corporate purposes. The Revolving Credit Agreement also contains a sub-limit of $150.0 million for the issuance of letters of credit. The borrowings and letters of credit obtained under the Revolving Credit Agreement may be denominated in U.S. Dollars, Euro, Sterling, Yen, Canadian Dollars and each other currency approved by the Revolving Credit Lenders. The Company may elect to increase the commitments under the Revolving Credit Agreement by up to $250.0 million (to an aggregate amount of up to $1.0 billion), subject to the Company obtaining commitments from new and existing lenders for the additional amounts. Loans under the Revolving Credit Agreement bear interest at a rate of LIBOR plus a margin determined by reference to a ratings-based pricing grid, or the base rate (which is defined as the higher of the BOA prime rate or the Federal Funds rate plus 0.500 percent). Assuming a BBB equivalent credit rating level, the applicable margin under the Revolving Credit Agreement will be 0.350 percent. We may also request that loans under the Revolving Credit Agreement be made at interest rates offered by one or more of the Revolving Credit Lenders, which may vary from the LIBOR or base rate, for up to $100.0 million of borrowings. The Revolving Credit Agreement requires that we pay a facility fee on the total amount of such facility (ranging from 0.070 percent to 0.175 percent, based on our credit ratings) and, in the event that the outstanding amounts under the applicable Revolving Credit Agreement exceeds 50 percent of the aggregate commitments under such Revolving Credit Agreement, a utilization fee on the total amount outstanding under such facility (ranging from 0.050 percent to 0.150 percent, based on our credit ratings). As of February28, 2010, we had no outstanding balances under the Revolving Credit Agreement. As of February28, 2010, $54.3 million of letters of credit were outstanding, which are backed by this facility. Lehman Brothers Holdings Inc. and certain of its subsidiaries (Lehman Brothers) have filed for bankruptcy protection. A subsidiary of Lehman Brothers is one of the Revolving Credit Lenders with a commitment of $50.0 million, and has d |
Net Earnings per Share
Net Earnings per Share | |
9 Months Ended
Feb. 28, 2010 | |
Net Earnings per Share | Note 6. Net Earnings per Share Outstanding stock options and restricted stock granted by us represent the only dilutive effect reflected in diluted weighted average shares outstanding. Options and restricted stock do not impact the numerator of the diluted net earnings per share computation. Restricted stock and options to purchase 3.4million and 10.2million shares of our common stock were excluded from the calculation of diluted net earnings per share for the quarters ended February28, 2010 and February22, 2009, respectively, because the effect would have been anti-dilutive. Restricted stock and options to purchase 6.8million and 8.2million shares of our common stock were excluded from the calculation of diluted net earnings per share for the nine months ended February28, 2010 and February22, 2009, respectively, for the same reason. |
Stockholders' Equity
Stockholders' Equity | |
9 Months Ended
Feb. 28, 2010 | |
Stockholders' Equity | Note 7. Stockholders Equity Pursuant to the authorization of our Board of Directors to repurchase up to 162.4million shares of our common stock in accordance with applicable securities laws, we repurchased 0.4million and 0.5 million shares of our common stock for $14.3 million and $16.5 million during the quarter and nine months ended February28, 2010, respectively, resulting in a cumulative repurchase of 152.6million shares as of February28, 2010. |
Retirement Plans
Retirement Plans | |
9 Months Ended
Feb. 28, 2010 | |
Retirement Plans | Note 8. Retirement Plans Components of net periodic benefit cost are as follows: (in millions) Defined Benefit Plans Postretirement Benefit Plan Quarter Ended Quarter Ended February28, 2010 February22, 2009 February28, 2010 February22, 2009 Service cost $ 1.4 $ 1.6 $ 0.5 $ 0.2 Interest cost 3.0 2.5 0.2 0.4 Expected return on plan assets (4.1 ) (4.1 ) Amortization of unrecognized prior service cost Recognized net actuarial loss 0.2 0.1 0.2 0.1 Net periodic benefit cost $ 0.5 $ 0.1 $ 0.9 $ 0.7 (in millions) DefinedBenefitPlans PostretirementBenefitPlan Nine Months Ended Nine Months Ended February 28, 2010 February 22, 2009 February 28, 2010 February 22, 2009 Service cost $ 4.2 $ 4.6 $ 1.5 $ 0.6 Interest cost 8.9 7.4 0.6 1.2 Expected return on plan assets (12.3 ) (12.2 ) Amortization of unrecognized prior service cost 0.1 Recognized net actuarial loss 0.7 0.3 0.7 0.4 Net periodic benefit cost $ 1.5 $ 0.2 $ 2.8 $ 2.2 |
Derivative Instruments and Hedg
Derivative Instruments and Hedging Activities | |
9 Months Ended
Feb. 28, 2010 | |
Derivative Instruments and Hedging Activities | Note 9. Derivative Instruments and Hedging Activities We enter into derivative instruments for risk management purposes only, including derivatives designated as hedging instruments as required by the Derivatives and Hedging Topic of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC), and those utilized as economic hedges. We use interest rate-related derivative instruments to manage our exposure to fluctuations of interest rates, as well as commodities derivatives to manage our exposure to commodity price fluctuations. We also use equity-related derivative instruments to manage our exposure on cash compensation arrangements indexed to the market price of our common stock. By using these instruments, we expose ourselves, from time to time, to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes us, which creates credit risk for us. We minimize this credit risk by entering into transactions with high quality counterparties. We currently do not have any provisions in our agreements with counterparties that would require either party to hold or post collateral in the event that the market value of the related derivative instrument exceeds a certain limit. As such, the maximum amount of loss due to counterparty credit risk we would incur at February28, 2010, if counterparties to the derivative instruments failed completely to perform, would approximate the values of derivative instruments currently recognized as assets in our consolidated balance sheet. Market risk is the adverse effect on the value of a financial instrument that results from a change in interest rates, commodity prices, or the market price of our common stock. We minimize this market risk by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken. Natural Gas Commodity Contracts We enter into natural gas futures and swap contracts to reduce the risk of variability in cash flows associated with fluctuations in the price of natural gas during the fiscal year. For a certain portion of our natural gas purchases, changes in the price we pay for natural gas is highly correlated with changes in the market price of natural gas. For these natural gas purchases, we designate natural gas futures and swap derivative contracts as cash flow hedging instruments. To the extent these derivatives are effective in offsetting the variability of the hedged cash flows, changes in the derivatives fair value are not included in current earnings but are included in accumulated other comprehensive income (loss), net of tax. These changes in fair value are subsequently reclassified into earnings as a component of restaurant expenses when the natural gas is purchased and used by us in our operations. Ineffectiveness measured in the hedging relationship is recorded currently in earnings in the period it occurs. We were party to natural gas futures and swap contracts designated as effective cash flow hedging instruments with notional values of $6.2 milli |
Fair Value Measurements
Fair Value Measurements | |
9 Months Ended
Feb. 28, 2010 | |
Fair Value Measurements | Note 10. Fair Value Measurements The fair values of cash equivalents, accounts receivable, accounts payable and short-term debt approximate their carrying amounts due to their short duration. The following table summarizes the fair values of financial instruments measured at fair value on a recurring basis at February28, 2010: Items Measured at Fair Value (in millions) Fair Value of assets (liabilities)at February28, 2010 Quotedpricesin activemarketfor identical assets (liabilities) (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Longterm investments (1 ) $ 31.9 $ 10.3 $ 21.6 $ Commodities futures and swaps (2 ) (0.7 ) (0.7 ) Equity forwards (3 ) 0.2 0.2 Interest rate locks and swaps (4 ) 1.0 1.0 Total $ 32.4 $ 10.3 $ 22.1 $ (1) The fair value of our long-term investments is based on the closing market prices of the investments when applicable, or, alternatively, valuations utilizing market data and other observable inputs, inclusive of the risk of nonperformance. (2) The fair value of our commodities futures and swaps is based on the closing futures market prices of the contracts, inclusive of the risk of nonperformance. (3) The fair value of our equity forwards is based on the closing market value of Darden stock, inclusive of the risk of nonperformance. (4) The fair value of our interest rate lock and swap agreements is based on the present value of expected future cash flows, inclusive of the risk of nonperformance, using a discount rate appropriate for the duration. The carrying value and fair value of long-term debt, including the amounts included in current liabilities, at February28, 2010 was $1.63 billion and $1.67 billion, respectively. The carrying value and fair value of long-term debt at May31, 2009 was $1.63 billion and $1.49 billion, respectively. The fair value of long-term debt is determined based on market prices or, if market prices are not available, the present value of the underlying cash flows discounted at our incremental borrowing rates. |
Commitments and Contingencies
Commitments and Contingencies | |
9 Months Ended
Feb. 28, 2010 | |
Commitments and Contingencies | Note 11. Commitments and Contingencies As collateral for performance on contracts and as credit guarantees to banks and insurers, we are contingently liable for guarantees of subsidiary obligations under standby letters of credit. At February28, 2010 and May31, 2009, we had $97.3 million and $104.5 million, respectively, of standby letters of credit related to workers compensation and general liabilities accrued in our consolidated financial statements. At February28, 2010 and May31, 2009, $21.2 million and $19.2 million, respectively, of standby letters of credit related to contractual operating lease obligations and other payments. All standby letters of credit are renewable annually. At February28, 2010 and May31, 2009, we had $9.4 million and $8.8 million, respectively, of guarantees associated with leased properties that have been assigned to third parties. These amounts represent the maximum potential amount of future payments under the guarantees. The fair value of these potential payments discounted at our pre-tax cost of capital at February28, 2010 and May31, 2009, amounted to $6.8 million and $6.3 million, respectively. We did not accrue for the guarantees, as the likelihood of the third parties defaulting on the assignment agreements was deemed to be less than probable. In the event of default by a third party, the indemnity and default clauses in our assignment agreements govern our ability to recover from and pursue the third party for damages incurred as a result of its default. We do not hold any third-party assets as collateral related to these assignment agreements, except to the extent that the assignment allows us to repossess the building and personal property. These guarantees expire over their respective lease terms, which range from fiscal 2011 through fiscal 2021. We are subject to private lawsuits, administrative proceedings and claims that arise in the ordinary course of our business.A number of these lawsuits, proceedings and claims may exist at any given time. These matters typically involve claims from guests, employees and others related to operational issues common to the restaurant industry, and can also involve infringement of, or challenges to, our trademarks. While the resolution of a lawsuit, proceeding or claim may have an impact on our financial results for the period in which it is resolved, we believe that the final disposition of the lawsuits, proceedings and claims in which we are currently involved, either individually or in the aggregate, will not have a material adverse effect on our financial position, results of operations or liquidity.The following is a brief description of the more significant of these matters. In view of the inherent uncertainties of litigation, the outcome of any unresolved matter described below cannot be predicted at this time, nor can the amount of any potential loss be reasonably estimated. Like other restaurant companies and retail employers, in a few states we have been faced with allegations of purported class-wide wage and hour violations. In April 2009, a former Red Lobster employee filed a purported class action in New York state court, alleging wage |
Application of New Accounting S
Application of New Accounting Standards | |
9 Months Ended
Feb. 28, 2010 | |
Application of New Accounting Standards | Note 12. Application of New Accounting Standards In July 2009, the FASB issued SFAS No.168, FASB Accounting Standards Codification, as the single source of authoritative nongovernmental U.S. GAAP. As a result, all existing accounting standard documents have been superseded. All other accounting literature not included in the ASC will be considered non-authoritative. The ASC did not change GAAP but instead combined all authoritative guidance into a comprehensive, topically organized structure. Upon adoption of the ASC, this statement is now codified in FASB ASC Topic 105, Generally Accepted Accounting Principles. This statement is effective for interim and annual periods ending after September15, 2009, which required us to adopt this statement during the second fiscal quarter of 2010. The adoption of this Statement did not impact the consolidated financial statements but does require that all references to authoritative accounting literature be referenced in accordance with the FASB ASC. We have included reference to previously issued accounting guidance as it was originally issued with reference to the ASC Topic or Subtopic where the respective guidance has been codified within the FASB ASC. In December 2007, the FASB issued SFAS No.141R, Business Combinations, which has been codified into the Business Combinations Topic (Topic 805) of the FASB ASC. Topic 805 provides companies with principles and requirements on how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, liabilities assumed, and any noncontrolling interest in the acquiree as well as the recognition and measurement of goodwill acquired in a business combination. Topic 850 also requires certain disclosures to enable users of the financial statements to evaluate the nature and financial effects of the business combination. Acquisition costs associated with the business combination will generally be expensed as incurred. The provisions in Topic 805 are effective for business combinations occurring in fiscal years beginning after December15, 2008, which required us to adopt these provisions for business combinations occurring in fiscal 2010 and thereafter. This guidance was adopted at the beginning of fiscal 2010 and will be implemented for any future business combinations entered into after the effective date. The adoption did not have a significant impact on our consolidated financial statements. In June 2008, the FASB issued FASB Staff Position (FSP) EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities, which has been codified into the Earnings Per Share Topic of the FASB ASC, within Subtopic 260-10. Subtopic 260-10 provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. The two-class method is an earnings allocation method for computing earnings per share when an entitys capital structure includes either two or more classes of common stock or |
Subsequent Event
Subsequent Event | |
9 Months Ended
Feb. 28, 2010 | |
Subsequent Event | Note 13. Subsequent Event On March17, 2010, the Board of Directors declared a cash dividend of 25 cents per share to be paid May3, 2010 to all shareholders of record as of the close of business on April9, 2010. |
Document Information
Document Information | |
9 Months Ended
Feb. 28, 2010 | |
Document Type | 10-Q |
Amendment Flag | false |
Document Period End Date | 2010-02-28 |
Entity Information
Entity Information | ||
9 Months Ended
Feb. 28, 2010 | Mar. 15, 2010
| |
Trading Symbol | DRI | |
Entity Registrant Name | DARDEN RESTAURANTS INC | |
Entity Central Index Key | 0000940944 | |
Current Fiscal Year End Date | --05-29 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 140,594,867 |