Darden Restaurants Reports Third Quarter Diluted Net Earnings Per Share of $1.02

 

 

Declares a Quarterly Dividend of 50 Cents Per Share

Darden Restaurants

Darden Restaurants, Inc. (NYSE: DRI) today reported diluted net earnings per share and sales for the third quarter ended February 24, 2013.

Headlines for the quarter include the following:

  • Third quarter diluted net earnings per share from continuing operations were $1.02, an 18% decrease from the $1.25 per diluted share in the third quarter of last year. Earnings from continuing operations in this year's third quarter were $134.5 million and sales were $2.26 billion, which compare to earnings from continuing operations of $164.1 million and sales of $2.16 billion in the third quarter last year.
  • Third quarter total sales from continuing operations of $2.26 billion represent an increase of 4.6% compared to the third quarter of last year.  The increase reflects a same-restaurant sales increase of 2.3% for the Company's Specialty Restaurant Group, incremental sales from the acquisition of 40 Yard House restaurants on August 29, 2012 and the addition and operation of another 108 net new restaurants compared to the third quarter last year, offset by a combined same-restaurant sales decline of -4.6% for Olive Garden, Red Lobster and LongHorn Steakhouse.  In the third quarter, U.S. same-restaurant sales decreased -1.6%, -4.1% and -6.6% for LongHorn Steakhouse, Olive Garden and Red Lobster, respectively.  In the third quarter, the Company estimates that winter weather adversely affected same-restaurant sales results by approximately 90 basis points.
  • The Company estimated that costs associated with the acquisition of Yard House USA, Inc., which was completed on August 29, 2012, the beginning of this year's second quarter, adversely affected diluted net earnings per share for this year's third quarter by approximately two cents.
  • Darden's Board of Directors declared a quarterly dividend of 50 cents per share.

Operating Headlines

OLIVE GARDEN'S third quarter sales of $962 million were 0.6% higher than the prior year, driven by revenue from 42 net new restaurants offset by a -4.1% decrease in U.S. same-restaurant sales.  For the quarter, on a percentage of sales basis, higher food and beverage expenses, restaurant labor expenses, restaurant expenses, selling, general and administrative expenses and depreciation expense resulted in a decrease for the quarter in both operating profit and operating profit as a percentage of sales. 

RED LOBSTER'S third quarter sales of $669 million were -6.0% lower than the prior year as a result of a U.S. same-restaurant sales decrease of -6.6% that was partially offset by revenue from three net new restaurants.  For the quarter, on a percentage of sales basis, lower food and beverage expenses were more than offset by higher restaurant labor expenses, restaurant expenses, selling, general and administrative expenses and depreciation expense, which resulted in a decrease for the quarter in both operating profit and operating profit as a percentage of sales. 

LONGHORN STEAKHOUSE'S third quarter sales of $332 million were 6.9% higher than the prior year, driven by revenue from 42 net new restaurants offset by a U.S. same-restaurant sales decrease of -1.6%. For the quarter, on a percentage of sales basis, higher food and beverage expenses, restaurant labor expenses, restaurant expenses, selling, general and administrative expenses and depreciation expense resulted in a decline for the quarter in both operating profit and operating profit as a percentage of sales.

THE SPECIALTY RESTAURANT GROUP'S third quarter sales of $287 million were 61.1% higher than the prior year, driven by the addition of the 40 Yard House restaurants purchased on August 29, 2012 plus three new Yard House restaurants, three net new restaurants at The Capital Grille, five net new restaurants at Bahama Breeze and seven net new restaurants at Seasons 52; same-restaurant sales increases of 4.1% at The Capital Grille, 2.3% at Eddie V's, 0.4% at Seasons 52 and slightly offset by a same-restaurant sales decline of -0.3% at Bahama Breeze.

Fiscal 2013 December, January and February U.S. Same-Restaurant Sales Results

Darden reported U.S. same-restaurant sales for the fiscal months of December, January and February as follows:

Olive Garden

December

January

February

Same-Restaurant Sales

-2.5%

-0.6%

-9.1%

Same-Restaurant Traffic      

-3.7%

-0.9%

-7.0%

Pricing

2.3%

2.1%

1.2%

Menu-mix

-1.2%

-1.7%

-3.4%

Red Lobster

December

January

February

Same-Restaurant Sales

-7.1%

-5.2%

-7.5%

Same-Restaurant Traffic          

-5.5%

-1.7%

-6.0%

Pricing

1.2%

1.3%

1.2%

Menu-mix

-2.8%

-4.8%

-2.7%

LongHorn Steakhouse

December

January

February

Same-Restaurant Sales

-3.6%

2.5%

-3.0%

Same-Restaurant Traffic      

-4.4%

0.1%

-2.9%

Pricing

2.0%

2.0%

2.0%

Menu-mix

-1.3%

0.4%

-2.2%

Note: The Company estimates that winter weather adversely affected results by approximately 110 basis points in December and 150 basis points in February.  There was no adverse weather impact in January.

Note: The Company estimates that winter weather adversely affected results by approximately 110 basis points in December and 150 basis points in February.  There was no adverse weather impact in January.

Other Actions

Darden's Board of Directors declared a quarterly cash dividend of 50 cents per share on the Company's outstanding common stock. The dividend is payable on May 1, 2013 to shareholders of record at the close of business on April 10, 2013.

Fiscal 2013 Financial Outlook

Darden affirmed its financial outlook for fiscal 2013.  The Company anticipates total sales growth for the year of between +6% and +7%, which reflects combined U.S. same-restaurant sales for the year for Red Lobster, Olive Garden and LongHorn Steakhouse that is expected to be between -1.5% to -2.5%, incremental sales starting in fiscal September from the acquisition of Yard House and the addition of approximately 105 net new restaurants this year, not including the initial 40 Yard House restaurants in operation when the acquisition was completed.  The Company expects diluted net earnings per share from continuing operations for fiscal 2013 to be between $3.06 to $3.22, which includes approximately 9 cents of transaction and closing costs associated with the purchase of Yard House. 

Darden Restaurants, Inc., (NYSE: DRI), the world's largest full-service restaurant company, owns and operates more than 2,000 restaurants that generate over $8.0 billion in annual sales. Headquartered in Orlando, Fla., and employing more than 190,000 people, Darden is recognized for a culture that rewards caring for and responding to people. In 2013, Darden was named to the FORTUNE "100 Best Companies to Work For" list for the third year in a row and is the only full-service restaurant company to ever appear on the list. Our restaurant brands – Red Lobster, Olive Garden, LongHorn Steakhouse, Bahama Breeze, Seasons 52, The Capital Grille, Eddie V's and Yard House – reflect the rich diversity of those who dine with us. Our brands are built on deep insights into what our guests want. 

DARDEN RESTAURANTS, INC.

NUMBER OF COMPANY-OWNED RESTAURANTS

02/24/13

02/26/12

678

Red Lobster USA

675

27

Red Lobster Canada

27

705

Total Red Lobster

702

812

Olive Garden USA

770

6

Olive Garden Canada

6

818

Total Olive Garden

776

416

LongHorn Steakhouse

374

48

The Capital Grille

45

33

Bahama Breeze

28

28

Seasons 52

21

11

Eddie V's

11

43

Yard House

-

5

Other

2

2,107

Total Restaurants

1,959

 

 

DARDEN RESTAURANTS, INC.

 

CONSOLIDATED STATEMENTS OF EARNINGS

(In millions, except per share data)

(Unaudited)

Three Months Ended

Nine Months Ended

2/24/2013

2/26/2012

2/24/2013

2/26/2012

Sales

$

2,258.2

$

2,159.7

$

6,253.0

$

5,933.2

Costs and expenses:

Cost of sales:

Food and beverage

695.1

661.7

1,921.5

1,828.5

Restaurant labor

709.0

657.2

1,971.5

1,864.6

Restaurant expenses

348.2

308.4

977.8

901.2

Total cost of sales (1)

$

1,752.3

$

1,627.3

$

4,870.8

$

4,594.3

Selling, general and administrative

199.8

198.0

634.1

568.3

Depreciation and amortization

101.0

88.9

292.8

258.8

Interest, net

31.9

27.7

92.7

74.5

Total costs and expenses

$

2,085.0

$

1,941.9

$

5,890.4

$

5,495.9

Earnings before income taxes

173.2

217.8

362.6

437.3

Income taxes

(38.7)

(53.7)

(83.3)

(112.3)

Earnings from continuing operations

$

134.5

$

164.1

$

279.3

$

325.0

Losses from discontinued operations, net of tax benefit  

         of $0.2, $0.0, $0.4 and $0.4, respectively

(0.1)

(0.5)

(0.7)

Net earnings

$

134.4

$

164.1

$

278.8

$

324.3

Basic net earnings per share:

Earnings from continuing operations

$

1.04

$

1.28

$

2.17

$

2.49

Losses from discontinued operations

(0.01)

Net earnings

$

1.04

$

1.28

$

2.17

$

2.48

Diluted net earnings per share:

Earnings from continuing operations

$

1.02

$

1.25

$

2.13

$

2.43

Losses from discontinued operations

(0.01)

(0.01)

Net earnings

$

1.02

$

1.25

$

2.12

$

2.42

Average number of common shares outstanding:

Basic

129.3

128.0

128.7

130.7

Diluted

131.5

130.9

131.4

133.8

(1) Excludes restaurant depreciation and amortization as follows:

$

95.8

$

83.2

$

277.2

$

242.2

 

DARDEN RESTAURANTS, INC.

CONSOLIDATED BALANCE SHEETS

(In millions)

2/24/2013

5/27/2012

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

103.9

$

70.5

Receivables, net

68.1

71.4

Inventories

432.6

404.1

Prepaid income taxes

12.7

12.2

Prepaid expenses and other current assets

82.5

74.9

Deferred income taxes

153.6

124.5

Total current assets

$

853.4

$

757.6

Land, buildings and equipment, net

4,335.0

3,951.3

Goodwill

904.5

538.6

Trademarks

574.2

464.9

Other assets

290.7

231.8

Total assets

$

6,957.8

$

5,944.2

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

324.8

$

260.7

Short-term debt

216.9

262.7

Accrued payroll

135.5

154.3

Accrued income taxes

12.9

Other accrued taxes

69.7

60.4

Unearned revenues

315.4

231.7

Current portion of long-term debt

349.9

Other current liabilities

460.2

454.4

Total current liabilities

$

1,535.4

$

1,774.1

Long-term debt, less current portion

2,502.4

1,453.7

Deferred income taxes

369.9

312.9

Deferred rent

223.4

204.4

Obligations under capital leases, net of current installments   

53.0

54.4

Other liabilities

323.4

302.7

Total liabilities

$

5,007.5

$

4,102.2

Stockholders' equity:

Common stock and surplus

$

1,184.5

$

2,518.8

Retained earnings

930.9

3,172.8

Treasury stock

(8.5)

(3,695.8)

Accumulated other comprehensive income (loss)

(150.3)

(146.6)

Unearned compensation

(6.3)

(7.2)

Total stockholders' equity

$

1,950.3

$

1,842.0

Total liabilities and stockholders' equity

$

6,957.8

$

5,944.2

 

DARDEN RESTAURANTS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

Nine Months Ended

2/24/2013

2/26/2012

Cash flows—operating activities

Net earnings

$

278.8

$

324.3

Losses from discontinued operations, net of tax benefit

0.5

0.7

Adjustments to reconcile net earnings from continuing operations to cash flows:  

Depreciation and amortization

292.8

258.8

Stock-based compensation expense

36.0

41.3

Change in current assets and liabilities and other, net

81.9

(74.6)

Net cash provided by operating activities of continuing operations

$

690.0

$

550.5

Cash flows—investing activities

Purchases of land, buildings and equipment

(518.5)

(483.4)

Proceeds from disposal of land, buildings and equipment

3.3

Cash used in business acquisitions, net of cash acquired

(577.4)

(58.6)

Increase in other assets

(23.0)

(21.1)

Net cash used in investing activities of continuing operations

$

(1,118.9)

$

(559.8)

Cash flows—financing activities

Proceeds from issuance of common stock

49.4

45.1

Income tax benefits credited to equity

10.4

12.0

Dividends paid

(193.2)

(168.6)

Repurchases of common stock

(52.4)

(357.0)

ESOP note receivable repayment

0.9

1.5

Proceeds from issuance of short-term debt, net

(45.7)

102.2

Repayment of long-term debt

(350.9)

(1.5)

Principal payments on capital leases

(1.2)

(1.2)

Proceeds from issuance of long-term debt

1,050.0

400.0

Payment of debt issuance costs

(7.4)

(5.1)

Net cash provided by financing activities of continuing operations

$

459.9

$

27.4

Cash flows—discontinued operations

Net cash used in operating activities of discontinued operations

(0.3)

(0.4)

Net cash provided by investing activities of discontinued operations

2.7

0.3

Net cash provided by (used in) discontinued operations

$

2.4

$

(0.1)

Increase in cash and cash equivalents

33.4

18.0

Cash and cash equivalents - beginning of period

70.5

70.5

Cash and cash equivalents - end of period

$

103.9

$

88.5

 



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