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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended
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May 25, 2025
Accounting Policies [Abstract] |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation 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®, Cheddar’s Scratch Kitchen®, Chuy’s®, Yard House®, Ruth’s Chris Steak House® (“Ruth’s Chris”), The Capital Grille®, Seasons 52®, Eddie V’s Prime Seafood® (Eddie V’s), Bahama Breeze®, and The Capital Burger® 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 5 restaurants we manage through joint venture or other contractual agreements and 85 franchised restaurants. We also have 69 franchised restaurants located in Canada, Latin America, the Caribbean, Asia, and the Middle East. All significant intercompany balances and transactions have been eliminated in consolidation. On October 11, 2024, we completed our acquisition of Chuy’s Holdings Inc. (Chuy’s), a Delaware corporation, for $37.50 per share in cash. See Note 2, Acquisition of Chuy’s. During the fourth quarter of fiscal 2025, we entered into an Asset Purchase Agreement (APA) with Recipe Unlimited Corporation (“Recipe”). Pursuant to the APA, we agreed to sell the assets of all eight Olive Garden restaurants located in Canada and certain operating liabilities related thereto, and Recipe agreed to purchase such assets and liabilities and franchise the operations of the restaurants as part of their current franchise portfolio. The APA was signed on April 25, 2025 for an agreed upon sale price of 60.0 million Canadian dollars less the assumption of certain liabilities as part of the transaction. At closing, Darden and Recipe entered into an area development and franchise agreement, pursuant to which Recipe will operate under the Olive Garden tradename and will pay royalties for use of the tradename. The sale successfully closed in the first quarter of fiscal 2026, and the gain on the sale will be evaluated and recognized in the first quarter of 2026. All assets and liabilities related to this transaction have been classified as held for sale and are primarily included within prepaid expenses and other current assets and other current liabilities on our consolidated balance sheet. In our June 2025 earnings call, we announced the decision to explore strategic alternatives for the Bahama Breeze brand, which includes 28 locations owned and operated by Darden and one franchise location. We will be exploring a sale of the brand or conversions of some or all of these locations to other Darden brands. The Bahama Breeze assets did not meet the criteria to be classified as held for sale as of the end of fiscal 2025. For fiscal 2025, 2024 and 2023, all gains and losses on disposition, impairment charges and disposal costs, along with the sales, costs and expenses and income taxes attributable to the sale of Red Lobster, have been classified as discontinued locations, and have been aggregated in a single caption entitled “Losses from discontinued operations, net of tax benefit” in our consolidated statements of earnings for all periods presented. Neither the pending sale of our eight Olive Garden Canada restaurants nor our recent announcement to explore strategic alternatives for Bahama Breeze meet the requirements to be classified as discontinued operations. Fiscal Year We operate on a 52/53-week fiscal year, which ends on the last Sunday in May. Fiscal 2025, which ended May 25, 2025, consisted of 52 weeks. Fiscal 2024, which ended May 26, 2024, consisted of 52 weeks and fiscal 2023, which ended May 28, 2023, consisted of 52 weeks. Use of Estimates We prepare our consolidated financial statements in conformity with U.S. generally accepted accounting principles (GAAP). 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 bank deposits and money market funds that have an original maturity of three months or less. Amounts receivable from credit card companies 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:
(in millions) | May 25, 2025 |  | May 26, 2024
Short-term investments | $ | 21.3 |  |  | $ | 2.8 |
Credit card receivables | 176.8 |  |  | 153.0 |
Depository accounts | 41.9 |  |  | 39.0 |
Total cash and cash equivalents | $ | 240.0 |  |  | $ | 194.8 |
As of May 25, 2025, and May 26, 2024, 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. We had restricted cash of $14.5 million as of May 25, 2025 and $25.3 million as of May 26, 2024, which represents cash held as security for a standby letter of credit. Restricted cash is included in Prepaid Expenses and Other Current Assets on the balance sheet. See Note 16, Commitments and Contingencies. 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 for additional information. Inventories Inventories consist of food and beverages and are valued at the lower of weighted-average cost or net realizable value. 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 3 to 30 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 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 20 years also using the straight-line method. See Note 5 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 net book value associated 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 Ended
(in millions) | May 25, 2025 |  | May 26, 2024 |  | May 28, 2023
Depreciation and amortization on buildings and equipment | $ | 496.1 |  |  | $ | 435.1 |  |  | $ | 367.4 |
Losses on replacement of equipment | 3.9 |  |  | 3.0 |  |  | 2.2 |
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 1 to 10 years. The cost of capitalized software and related accumulated amortization was as follows:
(in millions) | May 25, 2025 |  | May 26, 2024
Capitalized software | $ | 314.8 |  |  | $ | 292.2 |
Accumulated amortization | (231.8) |  |  | (216.5) |
Capitalized software, net of accumulated amortization | $ | 83.0 |  |  | $ | 75.7 |
We have other definite-lived intangible assets, including assets related to the value of reacquired franchise rights resulting from our acquisitions that are included as a component of other assets and definite-lived intangible liabilities related to the value of below-market agreements 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:
(in millions) | May 25, 2025 |  | May 26, 2024
Definite-lived intangible assets | $ | 30.7 |  |  | $ | 30.7 |
Accumulated amortization | (16.4) |  |  | (14.5) |
Definite-lived intangible assets, net of accumulated amortization | $ | 14.3 |  |  | $ | 16.2 |
Definite-lived intangible liabilities | $ | (3.0) |  |  | $ | (3.0) |
Accumulated amortization | 2.4 |  |  | 2.1 |
Definite-lived intangible liabilities, net of accumulated amortization | $ | (0.6) |  |  | $ | (0.9) |
Amortization expense from continuing operations associated with capitalized software and other definite-lived intangibles included in depreciation and amortization in our accompanying consolidated statements of earnings was as follows:
| Fiscal Year Ended
(in millions) | May 25, 2025 |  | May 26, 2024 |  | May 28, 2023
Amortization expense - capitalized software | $ | 18.2 |  |  | $ | 22.9 |  |  | $ | 18.6 |
Amortization expense - other definite-lived intangibles | 1.8 |  |  | 1.9 |  |  | 1.8 |
Based on the net book values of our definite-lived intangible assets and liabilities at May 25, 2025, we expect amortization of capitalized software and other definite-lived intangible assets will be approximately $25.0 million annually for fiscal 2026 through 2030. 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. Liquor Licenses The costs of obtaining non-transferable liquor licenses that are directly issued by local government agencies for nominal fees are expensed as incurred. The costs of purchasing transferable liquor licenses through open markets in jurisdictions with a limited number of authorized liquor licenses are capitalized as indefinite-lived intangible assets and included in other assets. Liquor licenses are reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying amount may not be recoverable. Annual liquor license renewal fees are expensed over the renewal term. Goodwill and Intangible Assets Our goodwill and trademark balances are allocated as follows:
| Goodwill |  | Trademarks
(in millions) | May 25, 2025 |  | May 26, 2024 |  | May 25, 2025 |  | May 26, 2024
Olive Garden | $ | 30.2 |  |  | $ | 30.2 |  |  | $ | 0.7 |  |  | $ | 0.7 |
LongHorn Steakhouse | 49.3 |  |  | 49.3 |  |  | 307.8 |  |  | 307.8 |
Cheddar’s Scratch Kitchen | 165.1 |  |  | 165.1 |  |  | 230.1 |  |  | 230.1 |
Chuy’s | 268.4 |  |  | — |  |  | 198.4 |  |  | — |
Yard House | 369.2 |  |  | 369.2 |  |  | 109.3 |  |  | 109.3 |
Ruth’s Chris | 353.6 |  |  | 353.6 |  |  | 341.7 |  |  | 341.7 |
The Capital Grille | 401.6 |  |  | 401.6 |  |  | 147.4 |  |  | 147.4 |
Seasons 52 | — |  |  | — |  |  | 0.5 |  |  | 0.5 |
Eddie V’s | 22.0 |  |  | 22.0 |  |  | 10.5 |  |  | 10.5 |
Total | $ | 1,659.4 |  |  | $ | 1,391.0 |  |  | $ | 1,346.4 |  |  | $ | 1,148.0 |
We have eleven reporting units, eight of which have goodwill and nine of which have trademarks. Goodwill and trademarks are not subject to amortization and have been assigned to reporting units for purposes of impairment testing. The reporting units are our restaurant brands. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include, among others: a significant decline in our expected future cash flows; a sustained, significant decline in our stock price and market capitalization; a significant adverse change in legal factors or in the business climate; unanticipated competition; the testing for recoverability of a significant asset group within a reporting unit; and slower growth rates. Any adverse change in these factors could have a significant impact on the recoverability of these assets and could have a material impact on our consolidated financial statements. We review our goodwill and trademarks for impairment annually, as of the first day of our fourth fiscal quarter, or more frequently if indicators of impairment exist. During fiscal 2025, we elected to perform a qualitative assessment for our annual review of goodwill and trademarks to determine whether or not indicators of impairment exist. In considering the qualitative approach related to goodwill, we evaluated factors including, but not limited to, macro-economic conditions, market and industry conditions, commodity cost fluctuations, competitive environment, share price performance, results of prior impairment tests, operational stability, the overall financial performance of the reporting units and the impacts of discount rates. As it relates to trademarks, we evaluate similar factors from the goodwill assessment, in addition to impacts of royalty rates. As a result of the qualitative assessment, no indicators of impairment were identified, and no additional indicators of impairment were identified through the end of our fourth fiscal quarter that would require us to test further for impairment. We evaluate the useful lives of our other intangible assets to determine if they are definite or indefinite-lived. A determination on useful life requires significant judgments and assumptions regarding the future effects of obsolescence, demand, competition, other economic factors (such as the stability of the industry, legislative action that results in an uncertain or changing regulatory environment and expected changes in distribution channels), the level of required maintenance expenditures and the expected lives of other related groups of assets. Impairment or Disposal of Long-Lived Assets Land, buildings and equipment, operating lease right-of-use assets and certain other assets, including definite-lived intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to the future undiscounted net cash flows expected to be generated by the assets. Identifiable cash flows are measured at the lowest level for which they are largely independent of the cash flows of other groups of assets and liabilities, generally at the restaurant level. If such assets are determined to be impaired, the recognized impairment is measured by the amount by which the carrying amount of the assets exceeds their fair value. Fair value is generally determined based on appraisals, sales prices of comparable assets or discounted future net cash flows expected to be generated by the assets. Restaurant sites and certain other assets to be disposed of are reported at the lower of their carrying amount or fair value, less estimated costs to sell, and are included in assets held for sale on our consolidated balance sheets when certain criteria are met. These criteria include, among other factors, the requirement that the likelihood of disposing of these assets within one year is probable. Assets not meeting the “held for sale” criteria remain in land, buildings and equipment until their disposal is probable within one year. We account for exit or disposal activities, including restaurant closures, in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 420, Exit or Disposal Cost Obligations. Such costs include the cost of disposing of the assets as well as other facility-related expenses from previously closed restaurants. These costs are generally expensed as incurred. See Note 4 for additional information. For restaurants operated under non-cancellable leases, on the date we commit to a plan to either abandon the related right-of-use (ROU) asset or sublease the underlying asset, we evaluate the ROU asset for potential impairment and determine the go-forward accounting based on the requirements in FASB ASC Topic 842, Leases. Insurance Accruals Through the use of insurance program deductibles and self-insurance, we retain a significant portion of expected losses under our workers’ compensation and general liability programs. Accrued liabilities have been recorded based on our estimates of the anticipated ultimate costs to settle all claims, both reported and not yet reported. Revenue Recognition Sales, as presented in our consolidated statements of earnings, includes the sale of food and beverage products, royalties from our franchised restaurants and royalties from the sale of consumer product goods. Revenue from restaurant sales is recognized when food and beverage products are sold and is presented net of discounts, coupons, employee meals and complimentary meals. Revenue is presented net of sales tax. Sales taxes collected from customers are included in other accrued taxes on our consolidated balance sheets until the taxes are remitted to governmental authorities. During the second quarter of fiscal 2025, we entered into an exclusive multi-year delivery arrangement with Uber Technologies, Inc. (Uber). The agreement enables our guests to order delivery via Darden restaurant channels, with delivery handled by Uber. During fiscal 2025, we rolled the program out to nearly all Olive Garden locations and began the rollout to Cheddar’s Scratch Kitchen. Revenue from orders through Company-owned platforms includes delivery fees and is recognized when the delivery partner transfers the order to the guest as the Company controls the delivery. For these sales, the Company receives payment directly from the guest at the time of sale. For all delivery sales, the Company is considered the principal and recognizes revenue on a gross basis. Franchise royalties, which are a percentage of net sales of franchised restaurants, are recognized as revenue in the period the related sales occur. Revenue from area development and franchise fees are recognized as the performance obligations are satisfied over the term of the franchise agreement, which is generally 10 years. Advertising contributions, which are a percentage of net sales of franchised restaurants, are recognized in the period the related sales occur. Additionally, franchisee purchases of our inventory through our distribution network are recognized as revenue in the period the purchases are made. Revenue from the sale of consumer packaged goods includes ongoing royalty fees based on a percentage of licensed retail product sales and is recognized upon the sale of product by our licensed manufacturers to retail outlets. Unearned Revenues Unearned revenues primarily represent our liability for gift cards that have been sold but not yet redeemed. We recognize sales from our gift cards when the gift card is redeemed by the customer. Although there are no expiration dates or dormancy fees for our gift cards, based on our analysis of our historical gift card redemption patterns, we can reasonably estimate the amount of gift cards for which redemption is remote, which is referred to as “breakage.” We recognize breakage within sales for unused gift card amounts in proportion to actual gift card redemptions. The estimated value of gift cards expected to remain unused is recognized over the expected period of redemption as the remaining gift card values are redeemed, generally over a period of 12 years. Utilizing this method, we estimate both the amount of breakage and the time period of redemption. If actual redemption patterns vary from our estimates, actual gift card breakage income may differ from the amounts recorded. We update our estimates of our redemption period and our breakage rate periodically and apply that rate prospectively to gift card redemptions. Discounts for gift cards sold by third parties are recorded to unearned revenues and are recognized as a reduction to sales over a period that approximates redemption patterns. Food and Beverage Costs Food and beverage costs include inventory, warehousing, related purchasing and distribution costs, and gains and losses on certain commodity derivative contracts. Vendor allowances received in connection with the purchase of a vendor’s products are recognized as a reduction of the related food and beverage costs as earned. For certain contracts, advance payments are made by the vendors based on estimates of volume to be purchased from the vendors and the terms of the agreement. As we make purchases from the vendors each period, we recognize the pro rata portion of allowances earned as a reduction of food and beverage costs for that period. Differences between estimated and actual purchases are settled in accordance with the terms of the agreements. Vendor agreements are generally for a period of one year or more. Pre-payments received from vendors are initially recorded as long-term liabilities. Amounts expected to be earned within one year are recorded as current liabilities. Certain agreements require payments in arrears and are recorded as current receivables. Income Taxes We provide for federal and state income taxes currently payable as well as for those deferred because of temporary differences between reporting income and expenses for financial statement purposes versus tax purposes. Federal income tax credits are recorded as a reduction of income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period that includes the enactment date. Interest recognized on reserves for uncertain tax positions is included in income tax expense in our consolidated statements of earnings. A corresponding liability for accrued interest is included as a component of other current liabilities on our consolidated balance sheets. Interest accrued for refunds due from the taxing jurisdiction is recognized as a reduction to tax expense and a component of taxes payable. Penalties, when incurred, are recognized in general and administrative expenses. FASB ASC Topic 740, Income Taxes, requires that a position taken or expected to be taken in a tax return be recognized (or derecognized) in the financial statements when it is more likely than not (i.e., a likelihood of more than 50 percent) that the position would be sustained upon examination by tax authorities. A recognized tax position is then measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. See Note 13 for additional information. Derivative Instruments and Hedging Activities We enter into derivative instruments for risk management purposes only, including derivatives designated as hedging instruments as required by FASB ASC Topic 815, Derivatives and Hedging, and those utilized as economic hedges. We use financial and commodities derivatives to manage interest rate, compensation and commodity and foreign exchange pricing risks inherent in our business operations. Our use of derivative instruments is currently limited to interest rate hedges, equity forward contracts, commodity swaps and foreign exchange forwards. These instruments are generally structured as hedges of the variability of cash flows related to forecasted transactions (cash flow hedges). However, we do at times enter into instruments designated as fair value hedges to reduce our exposure to changes in fair value of the related hedged item. We do not enter into derivative instruments for trading or speculative purposes, where changes in the cash flows or fair value of the derivative are not expected to offset changes in cash flows or fair value of the hedged item. All derivatives are recognized on the balance sheet at fair value. For those derivative instruments for which we intend to elect hedge accounting, on the date the derivative contract is entered into, we document all relationships between hedging instruments and hedged items, as well as our risk-management objective and strategy for undertaking the various hedge transactions. This process includes linking all derivatives designated as cash flow hedges to specific assets and liabilities on the consolidated balance sheet or to specific forecasted transactions. We also formally assess, both at the hedge’s inception and on an ongoing basis, whether the derivatives used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items. 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. 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. To the extent our derivatives are effective in offsetting the variability of the hedged cash flows, and otherwise meet the cash flow hedge accounting criteria required by FASB ASC Topic 815, 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 will be reclassified into earnings at the time of the forecasted transaction. Ineffectiveness measured in the hedging relationship is recorded currently in earnings in the period in which it occurs. To the extent our derivatives are effective in mitigating changes in fair value, and otherwise meet the fair value hedge accounting criteria required by FASB ASC Topic 815, gains and losses in the derivatives’ fair value are included in current earnings, as are the gains and losses of the related hedged item. To the extent the hedge accounting criteria are not met, the derivative contracts are utilized as economic hedges, and changes in the fair value of such contracts are recorded currently in earnings in the period in which they occur. Cash flows related to derivatives are included in operating activities. See Note 8 for additional information. Leases The majority of our restaurant locations, as well as our restaurant support center, are subject to a lease. We evaluate our leases at the commencement of the lease to determine the classification as an operating or finance lease. Upon adoption of FASB ASC Topic 842, we recognized operating and finance lease liabilities based on the present value of minimum lease payments over the remaining expected lease term and corresponding right-of-use assets. We recognize lease expense related to operating leases on a straight-line basis. Amortization expense and interest expense related to finance leases are included in depreciation and amortization and interest, net, respectively, in our consolidated statements of earnings. Sale-leasebacks are transactions through which we sell assets (such as restaurant properties) at fair value and subsequently lease them back. The resulting leases qualify and are accounted for as operating leases. Failed sale-leaseback transactions are generally classified as finance leases and result in retention of the “sold” assets within land, buildings and equipment with a finance lease liability equal to the amount of proceeds received recorded as a component of other liabilities on our consolidated balance sheets. Within the provisions of certain of our leases, there are rent holidays and escalations in payments over the base lease term, as well as renewal periods. The effects of the holidays and escalations have been reflected in lease expense on a straight-line basis for operating leases over the expected lease term. The lease term commences on the date when we have the right to control the use of the leased property, which is typically before lease payments are due under the terms of the lease. Many of our leases have renewal periods totaling 5 to 20 years, exercisable at our option, and require payment of property taxes, insurance and maintenance costs in addition to the lease payments. At lease inception, we include option periods that we are reasonably certain to exercise as failure to renew the lease would impose an economic penalty either from the loss of our investment in leasehold improvements or future cash flows from operating the restaurant. The consolidated financial statements reflect the same lease term for amortizing leasehold improvements as we use to determine finance versus operating lease classifications. Variable lease expense is generally based on sales levels and is accrued at the point in time we determine that it is probable that such sales levels will be achieved. Landlord allowances are recorded as an adjustment to the right-of-use assets. Gains and losses on sale-leaseback transactions are recognized immediately. We elected the practical expedient to not separate lease and non-lease components for real estate leases entered into after adoption. See Note 11 for additional information. Pre-Opening Expenses Non-capital expenditures associated with opening new restaurants are expensed as incurred; these costs consist of expense incurred before the opening of a new, relocated or converted restaurant and include occupancy, labor, travel, training, food, beverage and other initial supplies and expenses. These costs are reported as pre-opening costs in our consolidated statements of earnings. Advertising Production costs of commercials are expensed in the fiscal period the advertising is first aired while the costs of programming and other advertising, promotion and marketing programs are expensed as incurred. These costs are reported as marketing expenses in our consolidated statements of earnings. Stock-Based Compensation We recognize the cost of employee service received in exchange for awards of equity instruments based on the grant date fair value of those awards. We recognize compensation expense, net of estimated forfeitures, on a straight-line basis over the employee service period for awards granted. We utilize the Black-Scholes option pricing model to estimate the fair value of stock option awards. The dividend yield has been estimated based upon our historical results and expectations for changes in dividend rates. The expected volatility was determined using historical stock prices. The risk-free interest rate was the rate available on zero coupon U.S. government obligations with a term approximating the expected life of each grant. The expected life was estimated based on the exercise history of previous grants, taking into consideration the remaining contractual period for outstanding awards. We utilize a Monte Carlo simulation to estimate the fair value of our market-based equity-settled performance awards. The dividend yield assumes reinvestment of dividends. The expected volatility was determined using historical stock prices. The risk-free interest rate was the rate available on zero coupon U.S. government obligations with a term approximating the expected life of each grant. The expected life was estimated based on the performance measurement period for outstanding awards. See Note 15 for further information. 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 units 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 Ended
(in millions, except per share data) | May 25, 2025 |  | May 26, 2024 |  | May 28, 2023
Earnings from continuing operations | $ | 1,051.0 |  |  | $ | 1,030.5 |  |  | $ | 983.5 |
Losses from discontinued operations | (1.4) |  |  | (2.9) |  |  | (1.6) |
Net earnings | $ | 1,049.6 |  |  | $ | 1,027.6 |  |  | $ | 981.9 |
Weighted average common shares outstanding – Basic | 117.5 |  |  | 119.9 |  |  | 121.9 |
Effect of dilutive stock-based compensation | 0.9 |  |  | 0.9 |  |  | 1.0 |
Weighted average common shares outstanding – Diluted | 118.4 |  |  | 120.8 |  |  | 122.9 |
Basic net earnings per share: |  |  |  |  |
Earnings from continuing operations | $ | 8.94 |  |  | $ | 8.59 |  |  | $ | 8.07 |
Losses from discontinued operations | (0.01) |  |  | (0.02) |  |  | (0.01) |
Net earnings | $ | 8.93 |  |  | $ | 8.57 |  |  | $ | 8.06 |
Diluted net earnings per share: |  |  |  |  |
Earnings from continuing operations | $ | 8.88 |  |  | $ | 8.53 |  |  | $ | 8.00 |
Losses from discontinued operations | (0.02) |  |  | (0.02) |  |  | (0.01) |
Net earnings | $ | 8.86 |  |  | $ | 8.51 |  |  | $ | 7.99 |
Stock options, restricted stock units and equity-settled performance stock units excluded from the calculation of diluted net earnings per share because the effect would have been anti-dilutive, are as follows:
| Fiscal Year Ended
(in millions) | May 25, 2025 |  | May 26, 2024 |  | May 28, 2023
Anti-dilutive stock-based compensation awards | 0.1 |  |  | 0.1 |  |  | 0.3 |
Foreign Currency The Canadian dollar is the functional currency for our Canadian restaurant operations. 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 gains (losses) were $4.6 million at May 25, 2025 and May 26, 2024, respectively. Net gains (losses) from foreign currency transactions recognized in our consolidated statements of earnings were $0.0 million for fiscal 2025, 2024 and 2023, respectively. Recently Issued Accounting Standards Adopted As of May 25, 2025, we adopted Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The adoption of ASU 2023-07 did not impact the Company’s results of operations, cash flow, or financial condition. See Note 6 for the Company’s segment disclosures. Recently Issued Accounting Standards Not Yet Adopted In December 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which updates income tax disclosures related to the rate reconciliation and requires disclosure of income taxes paid by jurisdiction. The amendment also provides further disclosure comparability. The amendments are effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied prospectively; however, retrospective application is permitted. Management is currently evaluating this ASU to determine its impact on the Company’s disclosures. We plan to adopt in the fourth quarter of fiscal 2026. In March 2024, the U.S. Securities and Exchange Commission (SEC) adopted its final rules intended to enhance and standardize climate-related disclosures in registration statements and annual reports. The new rules will require disclosure of material climate-related risks, including disclosure of Board of Directors’ oversight and risk management activities, the material impacts of these risks to the Company and the quantification of material impacts to the Company as a result of severe weather events and other natural conditions. The rules also require disclosure of material greenhouse gas emissions and any material climate-rated targets and goals. The new rules will be effective for annual reporting periods beginning in fiscal year 2026, except for the greenhouse gas emissions disclosures which will be effective for annual reporting periods beginning in fiscal year 2027. On April 4, 2024, the SEC issued a voluntary stay on its final rules until legal challenges to the rules are addressed, and on March 27, 2025, the SEC voted to end its defense of the rules requiring disclosure of climate-related risk and greenhouse gas emissions and withdrew from the litigation. The Company continues to monitor the status of these rules. In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires detailed disclosure amounts for purchases of inventory, employee compensation, depreciation, and intangible asset amortization in each relevant expense caption on the income statement. The ASU requires companies to include amounts already required by GAAP in the same disclosure, provide a qualitative description of remaining amounts not separately disaggregated, and disclose the total selling expenses along with the definition of selling expenses in annual reports. The amendment is effective for fiscal years beginning after December 15, 2026. Early adoption is permitted. The amendment should be applied prospectively; however, retrospective application is permitted. Management is currently evaluating this ASU to determine its impact on the Company’s disclosures. We plan to adopt in in fiscal 2028.

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