News Release Details

Darden Restaurants Reports 19% Increase in First Quarter Diluted Net Earnings Per Share; Announces Quarterly Dividend of 32 Cents Per Share

September 21, 2010

ORLANDO, Fla., Sept 21, 2010 /PRNewswire via COMTEX News Network/ -- Darden Restaurants, Inc. (NYSE: DRI) today reported sales and diluted net earnings per share for the fiscal first quarter ended August 29, 2010. In the first quarter, diluted net earnings per share from continuing operations increased 19% to 80 cents, versus 67 cents in the prior year.

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First quarter sales from continuing operations were $1.81 billion, compared to $1.73 billion in the prior year, a 4.2% increase. Blended same-restaurant sales for Olive Garden, Red Lobster and LongHorn Steakhouse were up 1.1% this quarter, which compares to an estimate of 0.0% for the Knapp-Track(TM) benchmark of U.S. same-restaurant sales, excluding Darden.

"We are pleased with our very strong financial performance this quarter and encouraged by the continued improvement in industry sales trends," said Clarence Otis, Chairman and Chief Executive Officer of Darden. "Same-restaurant sales results for the Knapp-Track(TM) benchmark were one percentage point better in this quarter than in our last fiscal quarter. And, on a blended basis, our three core brands once again exceeded the industry average. Though it's improving, the environment remains challenging. With our competitively strong brands and the talented people who drive them, we are confident we can continue to successfully handle the challenges. In fiscal 2011, we will remain focused on delivering another year of superior sales results and earnings growth while doing what's necessary to position ourselves for sustainable, long-term success."

Highlights for the quarter ended August 29, 2010 include the following:

  • Net earnings from continuing operations for the first quarter were $113.3 million, or 80 cents per diluted share on sales of $1.81 billion. Last year, first quarter net earnings from continuing operations were $95.0 million, or 67 cents per diluted share, on sales of $1.73 billion.
  • Total first quarter sales from continuing operations of $1.81 billion represent a 4.2% increase over the prior year.
  • In the first quarter, U.S. same-restaurant sales increased 2.7% at Olive Garden and 2.2% at LongHorn Steakhouse, and declined 1.7% at Red Lobster. These results compare to an estimate of 0.0% for the Knapp-Track(TM) benchmark of U.S. same-restaurant sales, excluding Darden.
  • 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 November 1, 2010 to shareholders of record at the close of business on October 8, 2010.
  • The Company purchased almost 2.4 million shares of its common stock during the quarter. Since commencing its repurchase program in December 1995, the Company has purchased 156.5 million shares for $3.11 billion, under authorizations totaling 162.4 million shares.

Operating Highlights

OLIVE GARDEN'S first quarter sales of $877 million were 6.8% above prior year, driven by revenue from 32 net new restaurants and its U.S. same-restaurant sales increase of 2.7%. For the quarter, on a percentage of sales basis, lower restaurant labor expenses, restaurant expenses and depreciation expenses were partially offset by increased food and beverage expenses and selling, general and administrative expenses. The net result was an increase in returns and absolute operating profit for the quarter.

RED LOBSTER'S first quarter sales of $600 million were 0.8% below prior year, driven by a U.S. same-restaurant sales decrease of 1.7%, partially offset by revenue from four 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 first quarter sales of $226 million were 6.8% above prior year, driven by revenue from 12 net new restaurants and its same-restaurant sales increase of 2.2%. For the quarter, on a percentage of sales basis, lower food and beverage expenses, restaurant labor expenses and depreciation expenses were partially offset by increased restaurant expenses and selling, general and administrative expenses, resulting in an increase in returns and absolute operating profit for the quarter.

THE SPECIALTY RESTAURANT GROUP'S first quarter sales of $107 million were 11.7% above prior year driven by same-restaurant sales increases of 2.7% at The Capital Grille and 5.8% at Seasons 52 offset by a same-restaurant sales decrease of 0.1% at Bahama Breeze. Additionally, sales growth was driven by revenue from three new restaurants each at The Capital Grille and Seasons 52 and one new restaurant at Bahama Breeze. The Capital Grille's first quarter sales of $54 million were 8.7% above the prior year results. Bahama Breeze's first quarter sales of $37 million were 4.4% above the prior year results. Seasons 52's first quarter sales of $16 million were 51% above the prior year results.

Fiscal June, July and August 2010 U.S. Same-Restaurant Sales Results

Darden reported that U.S. same-restaurant sales for the fiscal months of June, July and August were as follows:

    Olive Garden            June       July       August
                            ----       ----       ------
    Same-Restaurant Sales        +1.0%      +4.4%       +3.1%
    Same-Restaurant Traffic      -1.3%      +2.6%       +1.3%
    Pricing                      +1.4%      +1.7%       +1.7%
    Menu-mix                     +0.9%      +0.1%       +0.1%





    Red Lobster             June       July       August *
                            ----       ----       --------
    Same-Restaurant Sales        -2.8%      +1.0%        -2.9%
    Same-Restaurant Traffic      -5.2%      -2.6%        -6.4%
    Pricing                      +1.5%      +1.4%        +1.4%
    Menu-mix                     +0.9%      +2.1%        +2.0%





    LongHorn Steakhouse     June       July       August
                            ----       ----       ------
    Same-Restaurant Sales        +0.2%      +2.1%       +4.9%
    Same-Restaurant Traffic      -2.4%      -0.8%       +2.6%
    Pricing                      +2.4%      +2.5%       +2.5%
    Menu-mix                     +0.2%      +0.4%       -0.2%


* Note: The Company estimates that Red Lobster's August same-restaurant sales results were adversely affected by approximately 300 basis points due to a shift in the timing of its "Endless Shrimp" promotion, which began two weeks later than the prior fiscal year. The start of the "Endless Shrimp" promotion shifted to the second quarter this fiscal year, compared to starting in the final week of the first quarter in the prior fiscal year.

Fiscal 2011 Outlook

Darden affirmed that it continues to anticipate, as previously reported, that reported diluted net earnings per share growth from continuing operations for fiscal 2011 will be approximately +14% to +17%. This compares to reported diluted net earnings per share from continuing operations of $2.86 in fiscal 2010. The Company reported that its earnings expectations for the fiscal year are based on (1) blended U.S. same-restaurant sales in fiscal 2011 for Red Lobster, Olive Garden and LongHorn Steakhouse of approximately +2% to +3%; (2) the opening of approximately 70 to 75 net new restaurants in fiscal 2011; and (3) total sales growth in fiscal 2011 of between +5.5% and +6.5%. Each of these estimates is consistent with the Company's outlook disclosed at the beginning of the year.

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. For more information, please visit www.darden.com.

Forward-looking statements in this news release regarding our expected diluted net earnings per share growth and U.S. same-restaurant sales for the fiscal year, total sales growth, stock repurchases, new restaurant growth and all other statements that are not historical facts, including without limitation statements concerning our future economic performance, plans or objectives, are made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Any forward-looking statements speak only as of the date on which such statements are made, and we undertake no obligation to update such statements to reflect events or circumstances arising after such date. We wish to caution investors not to place undue reliance on any such forward-looking statements. By their nature, forward-looking statements involve risks and uncertainties that could cause actual results to materially differ from those anticipated in the statements. The most significant of these uncertainties are described in Darden's Form 10-K, Form 10-Q and Form 8-K reports (including all amendments to those reports). These risks and uncertainties include food safety and food-borne illness concerns, litigation, unfavorable publicity, federal, state and local regulation of our business including health care reform, labor and insurance costs, technology failures, health concerns including virus outbreaks, the intensely competitive nature of the restaurant industry, factors impacting our ability to drive sales growth, the impact of the indebtedness we incurred in the RARE acquisition, our plans to expand our newer brands like Bahama Breeze and Seasons 52, a lack of suitable new restaurant locations, higher-than-anticipated costs to open, close or remodel restaurants, increased advertising and marketing costs, a failure to develop and recruit effective leaders, the price and availability of key food products and utilities, shortages or interruptions in the delivery of food and other products, volatility in the market value of derivatives, general macroeconomic factors including unemployment and interest rates, severe weather conditions, disruptions in the financial markets, a possible impairment in the carrying value of our goodwill or other intangible assets, a failure of our internal controls over financial reporting, and other factors and uncertainties discussed from time to time in reports filed by Darden with the Securities and Exchange Commission.

                     DARDEN RESTAURANTS, INC.
                      NUMBER OF RESTAURANTS


            8/29/10                                       8/30/09
            -------                                       -------
                666  Red Lobster USA                          661
                 28  Red Lobster Canada                        29
                 --  ------------------
                694  Total Red Lobster                        690

                721  Olive Garden USA                         689
                  6  Olive Garden Canada                        6
                  -  -------------------
                727  Total Olive Garden                       695

                334  LongHorn Steakhouse                      322

                 41  The Capital Grille                        38

                 25  Bahama Breeze                             24

                 11  Seasons 52                                 8

                  -  Other                                      1
                ---                                           ---

              1,832  Total Restaurants                      1,778




                         DARDEN RESTAURANTS, INC.
                   CONSOLIDATED STATEMENTS OF EARNINGS
                   (In millions, except per share data)
                               (Unaudited)


                                                          13 Weeks Ended

                                                   8/29/2010       8/30/2009
                                                   ---------       ---------


    Sales                                           $1,806.7        $1,734.0
    Costs and expenses:
      Cost of sales:
         Food and beverage                             507.5           500.3
         Restaurant labor                              578.8           568.0
         Restaurant expenses                           279.1           267.4
                                                       -----           -----
           Total cost of sales (1)                  $1,365.4        $1,335.7
      Selling, general and administrative              180.9           171.4
      Depreciation and amortization                     76.7            72.9
      Interest, net                                     24.6            23.7
                                                        ----
           Total costs and expenses                 $1,647.6        $1,603.7
    Earnings before income taxes                       159.1           130.3
    Income taxes                                       (45.8)          (35.3)
                                                       -----           -----
    Earnings from continuing operations               $113.3           $95.0
    Losses from discontinued operations, net
     of tax benefit of $0.1 and $0.4,
     respectively                                       (0.2)           (0.7)


    Net earnings                                      $113.1           $94.3
                                                      ======           =====


    Basic net earnings per share:
    Earnings from continuing operations                $0.82           $0.68
    Losses from discontinued operations                   --              --
    Net earnings                                       $0.82           $0.68

    Diluted net earnings per share:
    Earnings from continuing operations                $0.80           $0.67
    Losses from discontinued operations                   --              --
    Net earnings                                       $0.80           $0.67

    Average number of common shares
     outstanding:
    Basic                                              138.6           138.7
    Diluted                                            141.7           141.3

    (1) Excludes restaurant depreciation and
     amortization as follows:                          $71.7           $69.5



 

                          DARDEN RESTAURANTS, INC.
                        CONSOLIDATED BALANCE SHEETS
                               (In millions)



                                                         8/29/2010  5/30/2010
                                                         ---------  ---------
    ASSETS                                             (Unaudited)
    Current assets:
        Cash and cash equivalents                            $77.5     $248.8
        Receivables, net                                      47.0       53.2
        Inventories                                          210.0      220.8
        Prepaid income taxes                                    --        1.5
        Prepaid expenses and other current assets             57.9       52.4
        Deferred income taxes                                111.3      101.8
                                                             -----      -----
            Total current assets                            $503.7     $678.5
     Land, buildings and equipment, net                    3,444.2    3,403.7
     Goodwill                                                517.3      517.3
     Trademarks                                              454.0      454.0
     Other assets                                            190.7      193.9
            Total assets                                  $5,109.9   $5,247.4
                                                          ========   ========

     LIABILITIES AND STOCKHOLDERS' EQUITY
     Current liabilities:
        Accounts payable                                    $261.2     $246.4
        Short-term debt                                        6.0         --
        Accrued payroll                                      128.4      161.8
        Accrued income taxes                                  42.2        1.0
        Other accrued taxes                                   61.6       62.0
        Unearned revenues                                    146.5      167.2
        Current portion long-term debt                        75.0      225.0
        Other current liabilities                            427.2      391.2
                                                             -----      -----
            Total current liabilities                     $1,148.1   $1,254.6
     Long-term debt, less current portion                  1,409.8    1,408.7
     Deferred income taxes                                   257.0      268.6
     Deferred rent                                           174.0      170.1
     Obligations under capital leases, net of
      current installments                                    57.3       57.6
     Other liabilities                                       193.3      193.8
                                                             -----      -----
            Total liabilities                             $3,239.5   $3,353.4
                                                          --------   --------

     Stockholders' equity:
        Common stock and surplus                          $2,311.5   $2,297.9
        Retained earnings                                  2,690.6    2,621.9
        Treasury stock                                    (3,038.5) (2,943.5)
        Accumulated other comprehensive income
         (loss)                                              (82.3)     (71.1)
        Unearned compensation                                (10.9)     (11.2)
                                                                        -----
            Total stockholders' equity                    $1,870.4   $1,894.0
                                                          --------   --------
            Total liabilities and stockholders' equity    $5,109.9   $5,247.4
                                                          ========   ========




                           DARDEN RESTAURANTS, INC.
               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (In millions)
                                 (Unaudited)


                                                            13 Weeks Ended
                                                          8/29/10     8/30/09
                                                          -------     -------

    Cash flows-operating activities
    Net earnings                                           $113.1       $94.3
    Losses from discontinued operations, net of tax           0.2         0.7
    Adjustments to reconcile net earnings to cash
     flows:
    Depreciation and amortization                            76.7        72.9
    Stock-based compensation expense                         13.2         9.8
    Change in current assets and liabilities and
     other, net                                              11.7         0.2
                                                             ----         ---
    Net cash provided by operating activities of
     continuing operations                                 $214.9      $177.9
                                                           ------      ------

    Cash flows-investing activities
    Purchases of land, buildings and equipment             (113.2)      (95.7)
    Proceeds from disposal of land, buildings and
     equipment                                                4.3         5.4
    Increase in other assets                                 (0.8)       (1.9)
                                                             ----        ----
    Net cash used in investing activities of
     continuing operations                                $(109.7)     $(92.2)
                                                          -------      ------

    Cash flows-financing activities
    Proceeds from issuance of common stock                    5.7         4.0
    Dividends paid                                          (44.4)      (34.7)
    Purchases of treasury stock                             (95.6)       (2.0)
    Income tax benefits credited to equity                    0.8         1.0
    Proceeds from issuance (repayments) of short-
     term debt, net                                           6.0       (36.8)
    ESOP note receivable repayment                            0.3         0.3
    Principal payments on capital leases                     (0.4)       (0.3)
    Repayment of long-term debt                            (150.3)       (0.3)
                                                           ------        ----
    Net cash used in financing activities of
     continuing operations                                $(277.9)     $(68.8)
                                                          -------      ------

    Cash flows - discontinued operations
    Net cash used in operating activities of
     discontinued operations                                 (0.1)       (0.4)
    Net cash provided by investing activities of
     discontinued operations                                  1.5          --
                                                              ---         ---
    Net cash provided by (used in) discontinued
     operations                                              $1.4       $(0.4)
                                                             ----       -----

    (Decrease) increase  in cash and cash
     equivalents                                           (171.3)       16.5
    Cash and cash equivalents - beginning of period         248.8        62.9
                                                            -----        ----

    Cash and cash equivalents - end of period               $77.5       $79.4
                                                            =====       =====



SOURCE Darden Restaurants, Inc.: Financial

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