Darden Restaurants Reports Strong Third Quarter Results

ORLANDO, Fla., March 20, 2015 (hospitalitybusinessnews.com) — Darden Restaurants, Inc. today reported its financial results for the third quarter ended February 22, 2015.

Third Quarter 2015 Financial Highlights Versus Same Period a Year Ago

  • Total sales from continuing operations in the third quarter increased 6.9% to $1.73 billion
  • Adjusted earnings per diluted share* increased 39% to $0.99
  • On a GAAP basis, earnings per diluted share increased 55% to $1.01
  • Combined Darden comparable same-restaurant sales for the quarter were +3.6%:
    • +2.2% for Olive Garden
    • +5.4% for LongHorn Steakhouse
    • +5.4% for Yard House
    • +6.1% for The Capital Grille
    • +5.2% for Seasons 52
    • +3.2% for Bahama Breeze
    • +9.6% for Eddie V’s
  • The company projects fourth quarter earnings per diluted share of $0.91 to $0.94
  • The Board of Directors declared a regular dividend of $0.55 per share to be paid in the fourth quarter

* See the ‘Adjustments to Earnings Per Share’ section below for more details

“We delivered solid improvement in our financial results this quarter thanks to the hard work our teams are doing to grow same-restaurant sales and control costs,” said Darden CEO Gene Lee.  “Our strategy of getting back to basics and elevating the food, service, and atmosphere in our restaurants in order to deliver the best possible guest experience is driving these sales and profitability improvements.  I’m proud of the increased engagement and effort of our teams and the momentum we have created, but we still have progress to make.”

Adjustments to Earnings Per Share

  • Reported net earnings per diluted share from continuing operations for the third quarter were positively impacted by approximately $0.02. This includes approximately:
    • +5 cents of tax benefits related to the final disposition of our interest in the aquaculture investment
    • -2 cents related to impairments of excess land parcels held for sale
    • -1 cent for other strategic action costs associated with the evaluation of our real estate portfolio
  • Excluding adjustments, earnings per diluted share were $1.01

Fiscal 2015 Third Quarter Operating Summary Versus Same Period a Year Ago

  • Olive Garden grew total sales by 3.0% to $957 million
    • Added nine net new restaurants
    • Increased operating profit and profit as a percentage of sales
  • LongHorn grew total sales by 11.4% to $404 million
    • Added 25 net new restaurants
    • Increased operating profit and profit as a percentage of sales
  • Specialty Restaurants grew total sales by 14.7% to $367 million
    • Added 16 net new restaurants
    • Increased operating profit and profit as a percentage of sales

Fiscal Month U.S. Same-Restaurant Sales Results

Olive Garden

December

January

February

Same-Restaurant Sales

2.4%

2.5%

1.6%

Same-Restaurant Traffic

-0.8%

-1.1%

-3.0%

Pricing

1.6%

1.6%

1.8%

Menu-mix

1.6%

2.0%

2.8%

LongHorn Steakhouse

December

January

February

Same-Restaurant Sales

4.4%

9.2%

2.8%

Same-Restaurant Traffic

0.3%

5.4%

-1.8%

Pricing

2.1%

2.2%

2.0%

Menu-mix

2.0%

1.6%

2.6%

Note:  The Company estimates that less severe winter weather positively impacted these same-restaurant sales results by 210 basis points in fiscal December and 110 basis points in fiscal January and more severe winter weather negatively affected fiscal February same-restaurant sales by 30 basis points.

Fiscal 2015 Financial Outlook
The company projects fourth quarter earnings per diluted share of $0.91 to $0.94, an increase of between 69% and 74% from the fourth quarter of 2014 and has increased expectations for fiscal 2015.  The current projected range for annual adjusted earnings per diluted share is projected to be between $2.45 and $2.48 (or $1.50 and $1.53 on an unadjusted basis) an increase of between 43% and 45% from fiscal 2014, which reflects the impact of the accelerated share repurchase program on our annual weighted average share count.  This reflects the expectation that the Company’s combined U.S. same-restaurant sales growth this fiscal year will be 2.0% to 2.5% and the positive $0.05 per share impact of a 53rd operating week in the fiscal year.

 

Fiscal 2015 Reported to Adjusted Earnings Reconciliation

Q3

Q4E*

AnnualE*

Diluted Net EPS from Continuing Operations

$1.01

$0.91 – $0.94

$1.50 – $1.53

Red Lobster-Related Shared Support Costs

0.00

0.02

Other Strategic Action Plan Costs

0.01

0.12

Debt Breakage Costs

0.00

0.42

Asset Impairments and Other One-Time Costs

(0.03)

0.40

Adjusted Diluted Net EPS from Continuing Operations

$0.99

$0.91 – $0.94

$2.45 – $2.48

Adjusted FY15 EPS vs FY14 Adjusted EPS

$0.28

$0.37 – $0.40

$0.74 – $0.77

* Reflects the additional operating week vs FY14

Dividend Declared
Darden’s Board of Directors declared a regular quarterly cash dividend of $0.55 per share on the Company’s outstanding common stock.  The dividend is payable on May 1, 2015 to shareholders of record at the close of business on April 10, 2015.

 

 

Reported to Adjusted Earnings Reconciliation

Q3
2014

Q3
2015

%
Change

Diluted Net EPS from Continuing Operations

$0.65

$1.01

55%

Red Lobster-Related Shared Support Costs

$0.04

$0.00

Other Strategic Action Plan Costs

$0.01

$0.01

Asset Impairments and Other One-Time Costs

$0.01

($0.03)

Adjusted Diluted Net EPS from Continuing Operations

$0.71

$0.99

39%

 

DARDEN RESTAURANTS, INC.

NUMBER OF COMPANY-OWNED RESTAURANTS

2/22/15

2/23/14

839

Olive Garden USA

830

6

Olive Garden Canada

6

845

Total Olive Garden

836

478

LongHorn Steakhouse

453

55

The Capital Grille

53

36

Bahama Breeze

37

42

Seasons 52

38

15

Eddie V’s

13

57

Yard House

48

0

Other

4

1,528

Darden Continuing Operations

1,482

 

DARDEN RESTAURANTS, INC.

CONSOLIDATED STATEMENTS OF EARNINGS

(In millions, except per share data)

(Unaudited)

Three Months Ended

Nine Months Ended

2/22/2015

2/23/2014

2/22/2015

2/23/2014

Sales

$

1,730.9

$

1,618.5

$

4,885.7

$

4,635.5

Costs and expenses:

Cost of sales:

Food and beverage

530.7

485.5

1,518.2

1,386.6

Restaurant labor

535.6

508.9

1,550.7

1,491.9

Restaurant expenses

276.0

271.4

825.7

795.9

Total cost of sales (1)

$

1,342.3

$

1,265.8

$

3,894.6

$

3,674.4

Selling, general and administrative

134.2

154.2

484.6

494.3

Depreciation and amortization

79.6

76.3

238.4

226.0

Interest, net

23.3

33.1

168.3

98.8

Asset impairment, net

4.4

51.0

1.2

Total costs and expenses

$

1,583.8

$

1,529.4

$

4,836.9

$

4,494.7

Earnings before income taxes

147.1

89.1

48.8

140.8

Income tax (benefit) expense

18.7

2.5

(29.5)

5.9

Earnings from continuing operations

$

128.4

$

86.6

$

78.3

$

134.9

Earnings from discontinued operations, net of tax expense of $3.1, $9.4, $322.4 and $22.6, respectively

5.4

23.1

525.9

64.8

Net earnings

$

133.8

$

109.7

$

604.2

$

199.7

Basic net earnings per share:

Earnings from continuing operations

$

1.03

$

0.66

$

0.61

$

1.03

Earnings from discontinued operations

0.04

0.18

4.10

0.50

Net earnings

$

1.07

$

0.84

$

4.71

$

1.53

Diluted net earnings per share:

Earnings from continuing operations

$

1.01

$

0.65

$

0.60

$

1.02

Earnings from discontinued operations

0.04

0.17

4.04

0.48

Net earnings

$

1.05

$

0.82

$

4.64

$

1.50

Average number of common shares outstanding:

Basic

124.6

131.3

128.2

130.7

Diluted

126.9

133.4

130.1

132.9

(1) Excludes restaurant depreciation and amortization as follows:

$

73.8

$

70.8

$

219.8

$

209.8

 

DARDEN RESTAURANTS, INC.

CONSOLIDATED BALANCE SHEETS

(In millions)

2/22/2015

5/25/2014

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

436.2

$

98.3

Receivables, net

64.0

83.8

Inventories

172.8

196.8

Prepaid income taxes

15.5

10.9

Prepaid expenses and other current assets

73.5

72.3

Deferred income taxes

174.5

124.0

Assets held for sale

45.4

1,390.3

Total current assets

$

981.9

$

1,976.4

Land, buildings and equipment, net

3,288.5

3,381.0

Goodwill

872.4

872.5

Trademarks

574.6

574.6

Other assets

285.5

296.2

Total assets

$

6,002.9

$

7,100.7

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

186.0

$

233.1

Short-term debt

207.6

Accrued payroll

125.7

125.7

Accrued income taxes

116.3

Other accrued taxes

49.1

64.5

Unearned revenues

379.8

299.7

Current portion of long-term debt

15.0

15.0

Other current liabilities

478.9

457.4

Liabilities associated with assets held for sale

215.5

Total current liabilities

$

1,350.8

$

1,618.5

Long-term debt, less current portion

1,461.7

2,481.4

Deferred income taxes

321.0

286.1

Deferred rent

221.0

206.2

Obligations under capital leases, net of current installments

50.1

52.0

Other liabilities

360.5

299.6

Total liabilities

$

3,765.1

$

4,943.8

Stockholders’ equity:

Common stock and surplus

$

1,338.8

$

1,302.2

Retained earnings

989.0

995.8

Treasury stock

(7.8)

(7.8)

Accumulated other comprehensive income (loss)

(77.8)

(128.1)

Unearned compensation

(4.4)

(5.2)

Total stockholders’ equity

$

2,237.8

$

2,156.9

Total liabilities and stockholders’ equity

$

6,002.9

$

7,100.7

 

DARDEN RESTAURANTS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

Nine Months Ended

2/22/2015

2/23/2014

Cash flows—operating activities

Net earnings

$

604.2

$

199.7

Earnings from discontinued operations, net of tax

(525.9)

(64.8)

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

Depreciation and amortization

238.4

226.0

Stock-based compensation expense

41.3

33.2

Change in current assets and liabilities and other, net

198.0

112.3

Net cash provided by operating activities of continuing operations

$

556.0

$

506.4

Cash flows—investing activities

Purchases of land, buildings and equipment

(230.1)

(337.5)

Proceeds from disposal of land, buildings and equipment

24.8

1.6

Increase in other assets

(3.5)

(14.0)

Net cash used in investing activities of continuing operations

$

(208.8)

$

(349.9)

Cash flows—financing activities

Proceeds from issuance of common stock

107.1

43.8

Income tax benefits credited to equity

9.1

9.5

Dividends paid

(209.3)

(215.7)

Repurchases of common stock

(502.3)

(0.5)

ESOP note receivable repayment

0.8

0.7

(Repayments) proceeds from issuance of short-term debt, net

(207.6)

17.0

Repayment of long-term debt

(1,065.9)

Payment of debt issuance costs

(1.4)

Principal payments on capital leases

(1.7)

(1.5)

Proceeds from financing lease obligation

93.1

Net cash used in financing activities of continuing operations

$

(1,776.7)

$

(148.1)

Cash flows—discontinued operations

Net cash (used in) provided by operating activities of discontinued operations

(216.6)

160.3

Net cash provided by (used in) investing activities of discontinued operations

1,984.0

(129.9)

Net cash provided by discontinued operations

$

1,767.4

$

30.4

Increase in cash and cash equivalents

337.9

38.8

Cash and cash equivalents – beginning of period

98.3

88.2

Cash and cash equivalents – end of period

$

436.2

$

127.0

 

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