Darden Restaurants Reports 26% Increase in Second Quarter Diluted Net Earnings Per Share; Announces Quarterly Dividend of 32 Cents Per Share and Additional Share Repurchase Authorization

Second quarter sales from continuing operations were $1.73 billion, compared to $1.64 billion in the prior year, a 5.2% increase.  Same-restaurant sales for the quarter were up 2.0% at Olive Garden and 6.8% at LongHorn Steakhouse and down 1.6% at Red Lobster, representing a 1.4% increase on a combined basis.  This compares to an estimated 1.0% increase for the quarter in the Knapp-Track™ benchmark for U.S. same-restaurant sales, excluding Darden.

In addition to Darden's same-restaurant sales growth, the 5.2% increase in total sales from continuing operations for the quarter reflects the addition of 63 net new restaurants compared to the prior year and represents continued market share growth for the Company.

"Our results this quarter are a clear demonstration of Darden's earnings growth capability," said Clarence Otis, the Company's Chairman and Chief Executive Officer.  "The keys to our performance are strong brands, an effective and efficient support platform and well prepared and committed teams.  During the economic downturn, we continued to invest in strengthening each of these success drivers and in consistent expansion of our brands through new restaurant growth.  Darden successfully navigated an extended period of declining same-restaurant sales across the industry, delivering sustained earnings growth and steady growth in market share.  As the economy recovers and same-restaurant sales turn positive, we believe we are well positioned to generate meaningfully higher earnings growth while growing sales at a level that continues to build market share. This quarter provides compelling evidence of that positioning."

Highlights for the quarter ended November 28, 2010 include the following:

• Net earnings from continuing operations for the second quarter were $75.8 million, or 54 cents per diluted share on sales of $1.73 billion.  Last year, second quarter net earnings from continuing operations were $61.2 million, or 43 cents per diluted share, on sales of $1.64 billion.      

• Total second quarter sales from continuing operations of $1.73 billion represent a 5.2% increase over the prior year.  This reflects U.S. same-restaurant sales growth of 2.0% at Olive Garden and 6.8% at LongHorn Steakhouse, a same-restaurant sales decline of 1.6% at Red Lobster and the Company's operation of 63 net new restaurants compared to the prior year.

• The Company's Board of Directors declared a quarterly dividend of 32 cents per share on the Company's outstanding common stock.  The dividend is payable on February 1, 2011 to shareholders of record at the close of business on January 10, 2011.

• The Company purchased over 1.6 million shares of its common stock during the quarter.  Since commencing its repurchase program in December 1995, the Company has purchased 158.1 million shares for $3.18 billion.  

• The Board of Directors approved an additional share repurchase authorization totaling 25.0 million shares.  Combined with unused capacity from prior authorizations, the Company's available share repurchase authorization now totals 29.3 million shares, which is approximately 21% of the 137.3 million shares the Company had outstanding at the end of second quarter of fiscal 2011.  

OLIVE GARDEN'S second quarter sales of $828 million were 5.8% above prior year, driven by revenue from 33 net new restaurants and its U.S. same-restaurant sales increase of 2.0%.  For the quarter, on a percentage of sales basis, lower restaurant labor expenses, restaurant expenses, selling, general and administrative expenses and depreciation expenses were partially offset by increased food and beverage expenses.   The net result was an increase in returns and absolute operating profit for the quarter.

RED LOBSTER'S second quarter sales of $556 million were 1.1% below prior year, driven by a U.S. same-restaurant sales decrease of 1.6%, partially offset by revenue from two net new restaurants.  For the quarter, on a percentage of sales basis, lower food and beverage expenses, restaurant labor expenses and restaurant expenses were partially offset by increased selling, general and administrative expenses and depreciation expenses. Absolute operating profit and returns increased for the quarter.  

LONGHORN STEAKHOUSE'S second quarter sales of $224 million were 12.4% above prior year, driven by revenue from 17 net new restaurants and its same-restaurant sales increase of 6.8%.  For the quarter, on a percentage of sales basis, lower food and beverage expenses, restaurant labor expenses, restaurant expenses and depreciation expenses were partially offset by increased selling, general and administrative expenses, resulting in an increase in returns and absolute operating profit for the quarter.  

THE SPECIALTY RESTAURANT GROUP'S second quarter sales of $115 million were 18.9% above prior year driven by same-restaurant sales increases of 5.6% at The Capital Grille, 3.2% at Bahama Breeze and 3.8% at Seasons 52.  Additionally, sales growth reflected revenue from four new restaurants at The Capital Grille, one new restaurant at Bahama Breeze and seven new restaurants at Seasons 52.  The Capital Grille's second quarter sales of $66 million were 12.4% above the prior year.  Bahama Breeze's second quarter sales of $30 million were 8.2% above the prior year.  And Seasons 52's second quarter sales of $19 million were 85% above the prior year.

Fiscal 2011 Outlook

Darden affirmed that it continues to anticipate that diluted net earnings per share growth from continuing operations for fiscal 2011 will be approximately +14% to +17%, which is consistent with the Company's outlook at the beginning of the year.  This compares to reported diluted net earnings per share from continuing operations of $2.86 in fiscal 2010.  The Company also reported that its earnings expectations for the fiscal year are based on (1) blended U.S. same-restaurant sales in fiscal 2011 for Olive Garden, Red Lobster and LongHorn Steakhouse of approximately +2%; (2) the opening of approximately 70 to 75 net new restaurants in fiscal 2011; and (3) total sales growth of between +5% and +6% in fiscal 2011.  

Darden Restaurants, Inc., (NYSE: DRI) headquartered in Orlando, Fla., is the world's largest company-owned and operated full-service restaurant company with over $7.1 billion in annual sales and approximately 180,000 employees.  Darden is recognized for a culture that rewards caring for and responding to people. Our restaurant brands -- Red Lobster, Olive Garden, LongHorn Steakhouse, The Capital Grille, Bahama Breeze and Seasons 52 -- reflect the rich diversity of those who dine with us. Our brands are built on deep insights into what our guests want.


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