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News and Information Article
ORLANDO, Fla., Sept. 19 /-FirstCall/ -- Darden Restaurants,
Inc. (NYSE: DRI) today reported diluted net earnings per share for the
first quarter ended August 27, 2006. For the first quarter, diluted net
earnings per share were 59 cents, an 11% increase over the prior year, on
net earnings of $88.5 million. In the first quarter, the Company adopted
Statement of Financial Accounting Standards No. 123R "Share-Based Payment"
(SFAS 123R) on a modified prospective basis, which reduced diluted net
earnings per share by $0.02 in the quarter. Excluding the effect of
adopting SFAS 123R, diluted net earnings per share for the quarter
increased 15% over the prior year. The Company also reported that first
quarter sales increased 3.3% to $1.46 billion, driven primarily by
same-restaurant sales growth at Olive Garden and new restaurant growth at
Olive Garden and Smokey Bones.
(Logo: http://www.newscom.com/cgi-bin/prnh/20050203/FLTH026LOGO)
"Were proud of our results this quarter," said Clarence Otis, Chairman
and Chief Executive Officer of Darden. "They reflect competitively superior
performance in an economic environment that clearly has its share of
challenges because of the considerable consumer uncertainty that currently
exists. Our solid results in this environment are a testament to three
things - the strong trust and loyalty enjoyed by our established brands,
the disciplined plans weve developed to address challenges at our emerging
brands and the hard work and dedication of all the people in our
organization. We continue to be guided by our proven approach to the
business, which involves creating a great culture - where people strive to
nourish and delight everyone we serve - and leveraging that solid
foundation with a combination of strong leaders, effective brand management
and in-restaurant operations excellence."
Highlights include the following:
- Net earnings for the first quarter were $88.5 million, or 59 cents per
diluted share, on sales of $1.46 billion. Last year, net earnings were
$85.5 million, or 53 cents per diluted share, for the first quarter, on
sales of $1.41 billion. This fiscal year, the Company adopted SFAS
123R on a modified prospective basis, which reduced diluted net
earnings per share by $0.02 in the first quarter.
- Total sales of $1.46 billion represent a 3.3% increase over prior year.
- Olive Gardens U.S. same-restaurant sales increased 2.9% in the first
quarter, its 48th consecutive quarter of same-restaurant sales growth.
- Red Lobsters U.S. same-restaurant sales decreased 2.1% in the first
quarter, although it had improving results as the quarter progressed.
- Darden purchased 2.3 million shares of its common stock in the first
quarter.
- The Companys Board of Directors declared a semi-annual dividend of
23 cents per share, a 15% increase from the previous semi-annual
20 cents per share.
- The Company announced that it now expects annual diluted net earnings
per share growth of 10% to 12%, an increase from its previously stated
expectation of 9% to 10% diluted net earnings per share growth for the
fiscal year.
Operating Highlights
OLIVE GARDENS first quarter sales of $684.1 million were 6.3% above
prior year, driven primarily by revenue from 18 net new restaurants opened
and a U.S. same-restaurant sales increase of 2.9%. For the quarter, the
companys sales gains and lower food and beverage expenses as a percent of
sales, more than offset increased restaurant labor expenses, restaurant
expenses and selling, general, and administrative expenses as a percent of
sales. This resulted in a solid increase in operating profit for the
quarter.
RED LOBSTERS first quarter sales of $629.8 million were 0.7% below
prior year, primarily as a result of its U.S. same-restaurant sales
decrease of 2.1%. For the quarter, lower food and beverage expenses and
depreciation and amortization expense as a percent of sales were offset by
increased restaurant labor expenses, restaurant expenses and selling,
general, and administrative expenses as a percent of sales. As a result,
operating profit was essentially flat for the quarter.
BAHAMA BREEZES first quarter sales of $45.9 million were 1.2% above
prior year, driven by a same-restaurant sales increase of 1.2%. As a result
of progress the company has made to improve its cost structure, this sales
growth resulted in significant operating profit growth compared to prior
year.
SMOKEY BONES first quarter sales of $88.1 million were 7.7% above
prior year, based primarily on new restaurant growth, partially offset by
an 8.6% decrease in same-restaurant sales for the quarter. As previously
indicated, the company is undertaking a meaningful repositioning of the
brand to increase breadth of appeal. With the focus on repositioning, new
restaurant openings are being limited to five restaurants in fiscal year
2007.
"We are pleased to deliver solid operating results in this challenging
environment," said Drew Madsen, President and Chief Operating Officer of
Darden. "Olive Gardens remarkable consistency in delivering
industry-leading performance is a tribute to the team and the brand they
have created. Red Lobster continues to improve all aspects of their
business as they prepare for future unit growth. Bahama Breeze is
succeeding in becoming more broadly appealing and profitable as evidenced
by this quarters results. And, Smokey Bones is addressing several key
issues - particularly its barbecue focus - and is moving ahead with plans
to reposition the brand to make it more broadly appealing. We recognize
there are often challenges in our dynamic industry, but with the
outstanding people at Darden operating these great brands, we are capable
of producing competitively superior results in any environment."
Other Actions
Darden continued the buyback of its common stock, purchasing 2.3
million shares in the first quarter. Since commencing its repurchase
program in December 1995, the Company has purchased 134.8 million shares
for $2.3 billion under authorizations totaling 162.4 million shares.
Dardens Board of Directors declared an increase in the cash dividend
to 23 cents per share on the Companys outstanding common stock. The
dividend is payable on November 1, 2006 to shareholders of record at the
close of business on October 10, 2006. Based on this 23-cent semi-annual
dividend declaration, the Companys indicated annual dividend is 46 cents
per share. Previously, the Company had paid a semi-annual dividend of 20
cents per share.
Fiscal August 2007 U.S. Same-Restaurant Sales Results
Darden reported U.S. same-restaurant sales for the four-week August
fiscal month ended August 27, 2006. This period is the last month of
Dardens fiscal 2007 first quarter.
Same-restaurant sales at Olive Garden increased approximately 2% for
fiscal August, which reflected an approximate 1% increase in check average
and an approximate 1% increase in guest counts. The check average increase
was a result of a 2% increase in pricing and a 1% decrease from menu mix
changes. Last year, same-restaurant sales at Olive Garden were up 7% to 8%
for fiscal August.
Same-restaurant sales at Red Lobster increased 1% to 2% for fiscal
August, which reflected a 2% to 3% increase in check average and a 1%
decrease in guest counts. The check average increase was a result of an
approximate 2% increase in pricing and a 1% increase from menu mix changes.
Last year, same- restaurant sales at Red Lobster were up 3% to 4% for
fiscal August.
Fiscal 2007 Revised Outlook
Darden reiterated that it expects combined U.S. same-restaurant sales
growth in fiscal 2007 of between 2% and 4% for Red Lobster and Olive
Garden, and that it expects to open approximately 40 net new restaurants.
As a result, the Company expects total sales growth of between 6% and 7% in
fiscal 2007. Including the adoption of SFAS 123R in the first quarter of
fiscal 2007, the Company now anticipates that diluted net earnings per
share growth will be 10% to 12% in fiscal 2007, an increase from its
previous expectation of 9% to 10% diluted net earnings per share growth in
fiscal 2007.
Darden Restaurants, Inc., headquartered in Orlando, FL, owns and
operates over 1,400 Red Lobster, Olive Garden, Bahama Breeze, Smokey Bones
and Seasons 52 restaurants with annual sales of $5.7 billion.
Forward-looking statements in this news release are made under the Safe
Harbor provisions of the Private Securities Litigation Reform Act of 1995.
Certain important factors could cause results to differ materially from
those anticipated by the forward-looking statements including the impact of
intense competition, changing economic or business conditions, the price
and availability of food, ingredients and utilities, labor and insurance
costs, increased advertising and marketing costs, higher-than-anticipated
costs to open or close restaurants, litigation, unfavorable publicity, a
lack of suitable locations, government regulations, a failure to achieve
growth objectives, weather, risks associated with our plans to improve
financial performance at Bahama Breeze and to reposition Smokey Bones and
other factors discussed from time to time in reports filed by the Company
with the Securities and Exchange Commission.
DARDEN RESTAURANTS, INC.
NUMBER OF RESTAURANTS
08/27/06 08/28/05
652 Red Lobster USA 650
31 Red Lobster Canada 31
683 Total Red Lobster 681
578 Olive Garden USA 560
6 Olive Garden Canada 6
584 Total Olive Garden 566
32 Bahama Breeze 32
127 Smokey Bones 110
5 Seasons 52 3
1,431 Total Restaurants 1,392
DARDEN RESTAURANTS, INC.
FIRST QUARTER FY 2007 FINANCIAL HIGHLIGHTS
(In Millions, Except per Share Data)
(Unaudited)
13 Weeks Ended
8/27/2006 8/28/2005
Sales $1,455.9 $1,409.2
Net earnings $88.5 $85.5
Net earnings per share:
Basic $0.61 $0.56
Diluted $0.59 $0.53
Average number of common shares outstanding:
Basic 144.9 153.3
Diluted 150.3 160.4
DARDEN RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(In Thousands, Except per Share Data)
(Unaudited)
13 Weeks Ended
8/27/2006 8/28/2005
Sales $1,455,874 $1,409,167
Costs and expenses:
Cost of sales:
Food and beverage 417,554 419,195
Restaurant labor 470,094 449,159
Restaurant expenses 223,676 214,694
Total cost of sales (1) $1,111,324 $1,083,048
Selling, general and administrative 142,311 132,972
Depreciation and amortization 56,744 54,138
Interest, net 10,268 10,948
Asset impairment, net 4,650 63
Total costs and expenses $1,325,297 $1,281,169
Earnings before income taxes 130,577 127,998
Income taxes (42,034) (42,484)
Net earnings $88,543 $85,514
Net earnings per share:
Basic $0.61 $0.56
Diluted $0.59 $0.53
Average number of common shares outstanding:
Basic 144,900 153,300
Diluted 150,300 160,400
(1) Excludes restaurant depreciation and
amortization as follows: $52,647 $50,420
DARDEN RESTAURANTS, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)
8/27/2006 5/28/2006
ASSETS
Current assets:
Cash and cash equivalents $45,551 $42,334
Receivables, net 61,838 37,111
Inventories, net 208,653 198,723
Prepaid expenses and other current assets 38,371 29,889
Deferred income taxes 71,887 69,550
Total current assets $426,300 $377,607
Land, buildings and equipment, net 2,449,324 2,446,035
Other assets 184,551 186,528
Total assets $3,060,175 $3,010,170
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities:
Accounts payable $195,709 $213,239
Short-term debt 80,000 44,000
Accrued payroll 94,933 123,176
Accrued income taxes 96,868 64,792
Other accrued taxes 49,238 46,853
Unearned revenues 86,048 100,761
Current portion of long-term debt 149,966 149,948
Other current liabilities 283,768 283,309
Total current liabilities $1,036,530 $1,026,078
Long-term debt, less current portion 493,855 494,653
Deferred income taxes 86,704 90,573
Deferred rent 136,989 138,530
Other liabilities 41,503 30,573
Total liabilities $1,795,581 $1,780,407
Stockholders equity:
Common stock and surplus $1,813,267 $1,806,367
Retained earnings 1,773,285 1,684,742
Treasury stock (2,293,524) (2,211,222)
Accumulated other comprehensive income
(loss) (4,968) (5,570)
Unearned compensation (23,123) (44,186)
Officer notes receivable (343) (368)
Total stockholders equity $1,264,594 $1,229,763
Total liabilities and
stockholders equity $3,060,175 $3,010,170
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