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

2013-03-25
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  • Darden Restaurants Declares a Quarterly Dividend of 50 Cents Per Share

    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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