Darden Restaurants Reports Fiscal 2016 Fourth Quarter And Full Year Results; Reports Positive Same-Restaurant Sales For All Brands

ORLANDO, Fla., June 30, 2016 (hospitalitybusinessnews.com) — Darden Restaurants, Inc., today reported its financial results for the fourth quarter and fiscal year ended May 29, 2016.  The fourth quarter of last year included an extra week of operations resulting in a 53 week fiscal 2015.

Fourth Quarter 2016 Financial Highlights Versus Same Fiscal Quarter Last Year

  • Due to the impact of the extra week of operations included in the fourth quarter of fiscal 2015, total sales from continuing operations decreased 4.7% to $1.79 billion; excluding the impact of the extra week, total sales from continuing operations increased 2.1%
  • Reported diluted net earnings per share from continuing operations increased 19.6% to $1.10 and increased 8.9% from last year’s adjusted diluted net earnings per share (13-week basis)*
  • The company repurchased approximately $45 million of its outstanding common stock
  • Same-restaurant sales increased 1.7% on a fiscal calendar basis
    (13-weeks ended May 29, 2016 vs. 13-weeks ended May 24, 2015)

 

+1.6% for Olive Garden

+1.5% for The Capital Grille

+1.4% for Yard House

+1.1% for LongHorn Steakhouse

+0.9% for Eddie V’s

+3.7% for Seasons 52

+5.4% for Bahama Breeze

 

  • On a comparable calendar basis, same-restaurant sales increased 2.6% for the quarter
    (13-weeks ended May 29, 2016 vs. 13-weeks ended May 31, 2015)

 

+2.4% for Olive Garden

+3.7% for The Capital Grille

+1.4% for Yard House

+2.2% for LongHorn Steakhouse

+2.7% for Eddie V’s

+5.0% for Seasons 52

+4.7% for Bahama Breeze

“I’m pleased with the results we achieved during the fourth quarter, which wrapped up a year of significant progress improving our operations and financial performance,” said CEO Gene Lee.  “These results reinforce our firm belief that our strategy is working as we continue to build guest loyalty by relentlessly focusing on our back-to-basics operating philosophy.  This focus, together with our competitive advantages, drove our strong performance for the year and increased shareholder value.”

Fiscal 2016 Financial Highlights Versus Fiscal 2015

  • Total sales from continuing operations increased 2.5% to $6.93 billion, which includes the impact of the extra week of operations in fiscal 2015; excluding the impact of the extra week, total sales from continuing operations increased 4.4%
  • Reported diluted net earnings per share from continuing operations increased 84.1% to $2.78
  • Adjusted diluted net earnings per share from continuing operations of $3.53 increased 37.9% (52-week basis)*
  • The company repurchased approximately $185 million of its outstanding common stock
  • Same-restaurant sales increased 3.3% for the year on both a fiscal and comparable calendar basis

 

+3.1% for Olive Garden

+3.9% for The Capital Grille

+2.3% for Yard House

+3.5% for LongHorn Steakhouse

+1.8% for Eddie V’s

+4.7% for Seasons 52

+4.8% for Bahama Breeze

Segment Performance Versus Same Fiscal Period Last Year
Segment profit represents sales, less costs for food and beverage, restaurant labor, restaurant expenses and marketing expenses.  Segment profit for fiscal 2016 includes the impact of additional rent expense related to the completion of our real estate strategy, primarily impacting Olive Garden and LongHorn Steakhouse.  The results for the three and twelve month periods ending May 31, 2015 include an additional week of operations.

Total Sales

Three Months Ended

Twelve Months Ended

($ millions)

05/29/16

05/31/15

% Change

05/29/16

05/31/15

% Change

Weeks in Period

13

14

13vs14

52

53

52vs53

Consolidated Darden

$

1,790.2

$

1,878.3

-4.7

%

$

6,933.5

$

6,764.0

2.5

%

Olive Garden

$

981.8

$

1,037.4

-5.4

%

$

3,838.6

$

3,789.6

1.3

%

LongHorn Steakhouse

$

413.2

$

438.1

-5.7

%

$

1,587.7

$

1,544.7

2.8

%

Fine Dining

$

131.6

$

137.2

-4.1

%

$

514.1

$

500.1

2.8

%

Other Business

$

263.6

$

265.6

-0.8

%

$

993.1

$

929.6

6.8

%

 

Segment Profit Margin %*

Three Months Ended

Twelve Months Ended

($ millions)

05/29/16

05/31/15

Basis Diff

05/29/16

05/31/15

Basis Diff

Olive Garden

19.3%

20.3%

(100)

19.8%

18.5%

130

LongHorn Steakhouse

19.0%

17.8%

120

17.3%

15.5%

180

Fine Dining

20.1%

20.0%

10

19.5%

19.0%

50

Other Business

18.9%

18.9%

16.9%

15.5%

140

* Incremental rent from real estate transactions in fiscal 2016 negatively impacted segment profit margin % by 230bps, 130bps, 10bps and 60bps for the three months ended 05/29/2016 and by 140bps, 90bps, 0bps and 30bps for the twelve months ended 05/29/16 for Olive Garden, LongHorn Steakhouse, Fine Dining, and Other Business segments, respectively.

U.S. Same-Restaurant Sales Results – Fiscal Calendar Basis

Olive Garden

March

April

May

Q4

Same-Restaurant Sales

0.8%

0.2%

4.1%

1.6%

Same-Restaurant Traffic

0.3%

(2.4)%

1.7%

(0.1)%

Pricing

0.7%

0.7%

0.7%

0.7%

Menu-mix

(0.2)%

1.9%

1.7%

1.0%

 

LongHorn Steakhouse

March

April

May

Q4

Same-Restaurant Sales

0.0%

0.3%

3.1%

1.1%

Same-Restaurant Traffic

(5.4)%

(3.4)%

(0.1)%

(3.2)%

Pricing

1.8%

1.8%

1.8%

1.8%

Menu-mix

3.6%

1.9%

1.4%

2.5%

U.S. Same-Restaurant Sales Results – Comparable Calendar Basis

Olive Garden

March

April

May

Q4

Same-Restaurant Sales

1.7%

1.9%

3.8%

2.4%

Same-Restaurant Traffic

0.8%

(1.2)%

1.5%

0.4%

 

LongHorn Steakhouse

March

April

May

Q4

Same-Restaurant Sales

1.4%

1.7%

3.7%

2.2%

Same-Restaurant Traffic

(4.0)%

(2.0)%

0.4%

(2.0)%

Quarterly Dividend Increase
The Board of Directors increased the quarterly dividend to $0.56 per common share, which represents a 12% increase over the Company’s previous quarterly dividend of $0.50. The quarterly dividend is payable on August 1, 2016 to shareholders of record on July 11, 2016.

Share Repurchase Program
During the quarter, the Company repurchased approximately 0.7 million shares of its common stock for a total cost of approximately $45 million.  This leaves approximately $315 million remaining under the current $500 million repurchase authorization.

Fiscal 2017 Financial Outlook

  • Same-restaurant sales growth of 1.0% to 2.0%
  • New unit openings of 24 to 28 restaurants
  • Total capital spending of $310 to $350 million
  • Total inflation of 1.5% to 2.0%
  • Earnings per diluted share of $3.80 to $3.90
  • The EPS outlook reflects approximately 128.5 million diluted average common shares outstanding for the year

Fiscal Q4 Reported to Adjusted Earnings Reconciliation

Q4 2016

Q4 2015

% Change

Reported Diluted Net EPS from Continuing Operations

$1.10

$0.92

19.6%

Debt Retirement Costs

Real Estate Plan Implementation

-*

Strategic Action Plan and Other Costs

0.16

Adjusted Diluted Net EPS from Continuing Operations

$1.10

$1.08

1.9%

Remove 53rd Week Impact in Fiscal 2015

(0.07)

Adjusted Diluted Net EPS from Continuing Operations (13-Week Basis)

$1.10

$1.01

8.9%

*De minimis adjustments within the quarter netted to zero.

 

Annual Reported to Adjusted Earnings Reconciliation

2016

2015

% Change

Reported Diluted Net EPS from Continuing Operations

$2.78

$1.51

84.1%

Debt Retirement Costs

0.51

0.42

Real Estate Plan Implementation

0.26

Strategic Action Plan and Other Costs

(0.02)

0.70

Adjusted Diluted Net EPS from Continuing Operations

$3.53

$2.63

34.2%

Remove 53rd Week Impact in Fiscal 2015 (In Q4)

(0.07)

Adjusted Diluted Net EPS from Continuing Operations (52-Week Basis)

$3.53

$2.56

37.9%

 

DARDEN RESTAURANTS, INC.

NUMBER OF COMPANY-OWNED RESTAURANTS

5/29/16

5/31/15

Olive Garden1

843

846

LongHorn Steakhouse

481

480

Yard House

65

59

The Capital Grille

54

54

Bahama Breeze

37

36

Seasons 52

40

43

Eddie V’s

16

16

Darden Continuing Operations

1,536

1,534

1Includes six locations in Canada for all periods presented.

 

DARDEN RESTAURANTS, INC.

CONSOLIDATED STATEMENTS OF EARNINGS

(In millions, except per share data)

(Unaudited)

Three Months Ended

Twelve Months Ended

5/29/2016

5/31/2015

5/29/2016

5/31/2015

Sales

$

1,790.2

$

1,878.3

$

6,933.5

$

6,764.0

Costs and expenses:

Food and beverage

517.0

566.9

2,039.7

2,085.1

Restaurant labor

556.9

584.9

2,189.2

2,135.6

Restaurant expenses

308.4

295.1

1,163.5

1,120.8

Marketing expenses

63.4

65.5

238.0

243.3

General and administrative expenses

90.7

119.5

384.9

430.2

Depreciation and amortization

66.8

80.9

290.2

319.3

Impairments and disposal of assets, net

1.9

15.0

5.8

62.1

Total operating costs and expenses

$

1,605.1

$

1,727.8

$

6,311.3

$

6,396.4

Operating income

185.1

150.5

622.2

367.6

Interest, net

9.7

24.0

172.5

192.3

Earnings before income taxes

175.4

126.5

449.7

175.3

Income taxes

35.0

8.4

90.0

(21.1)

Earnings from continuing operations

$

140.4

$

118.1

$

359.7

$

196.4

Earnings (loss) from discontinued operations, net of tax expense
of $0.5, $22.4, $3.4 and $344.8, respectively

(0.8)

(12.8)

15.3

513.1

Net earnings

$

139.6

$

105.3

$

375.0

$

709.5

Basic net earnings per share:

Earnings from continuing operations

$

1.11

$

0.94

$

2.82

$

1.54

Earnings (loss) from discontinued operations

(0.01)

(0.11)

0.12

4.02

Net earnings

$

1.10

$

0.83

$

2.94

$

5.56

Diluted net earnings per share:

Earnings from continuing operations

$

1.10

$

0.92

$

2.78

$

1.51

Earnings (loss) from discontinued operations

(0.01)

(0.10)

0.12

3.96

Net earnings

$

1.09

$

0.82

$

2.90

$

5.47

Average number of common shares outstanding:

Basic

126.4

126.3

127.4

127.7

Diluted

128.2

128.4

129.3

129.7

 

DARDEN RESTAURANTS, INC.

CONSOLIDATED BALANCE SHEETS

(In millions)

5/29/2016

5/31/2015

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

274.8

$

535.9

Receivables, net

64.0

78.0

Inventories

175.4

163.9

Prepaid income taxes

46.1

18.9

Prepaid expenses and other current assets

76.4

69.4

Deferred income taxes

163.3

157.4

Assets held for sale

20.3

32.9

Total current assets

$

820.3

$

1,056.4

Land, buildings and equipment, net

2,041.6

3,215.8

Goodwill

872.3

872.4

Trademarks

574.6

574.6

Other assets

273.8

275.5

Total assets

$

4,582.6

$

5,994.7

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

241.9

$

198.8

Accrued payroll

135.1

141.1

Accrued income taxes

12.6

Other accrued taxes

49.1

51.5

Unearned revenues

360.4

328.6

Current portion of long-term debt

15.0

Other current liabilities

400.6

449.1

Total current liabilities

$

1,187.1

$

1,196.7

Long-term debt, less current portion

440.0

1,452.3

Deferred income taxes

255.2

341.8

Deferred rent

249.7

225.9

Other liabilities

498.6

444.5

Total liabilities

$

2,630.6

$

3,661.2

Stockholders’ equity:

Common stock and surplus

$

1,502.6

$

1,405.9

Retained earnings

547.5

1,026.0

Treasury stock

(7.8)

(7.8)

Accumulated other comprehensive income (loss)

(87.0)

(86.6)

Unearned compensation

(3.3)

(4.0)

Total stockholders’ equity

$

1,952.0

$

2,333.5

Total liabilities and stockholders’ equity

$

4,582.6

$

5,994.7

 

DARDEN RESTAURANTS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

Twelve Months Ended

5/29/2016

5/31/2015

Cash flows—operating activities

Net earnings

$

375.0

$

709.5

Earnings from discontinued operations, net of tax

(15.3)

(513.1)

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

Depreciation and amortization

290.2

319.3

Stock-based compensation expense

37.3

53.7

Change in current assets and liabilities and other, net

133.2

304.9

Net cash provided by operating activities of continuing operations

$

820.4

$

874.3

Cash flows—investing activities

Purchases of land, buildings and equipment

(228.3)

(296.5)

Proceeds from disposal of land, buildings and equipment

325.2

67.9

Increase in other assets

(21.5)

(6.5)

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

$

75.4

$

(235.1)

Cash flows—financing activities

Proceeds from issuance of common stock

99.3

159.7

Income tax benefits credited to equity

17.5

18.4

Special cash distribution from Four Corners Property Trust

315.0

Dividends paid

(268.2)

(278.9)

Repurchases of common stock

(184.8)

(502.3)

ESOP note receivable repayment

0.6

1.2

Repayments of short-term debt, net

(207.6)

Repayment of long-term debt

(1,096.8)

(1,065.9)

Principal payments on capital leases

(3.4)

(2.2)

Proceeds from financing lease obligation

93.1

Net cash used in financing activities of continuing operations

$

(1,120.8)

$

(1,784.5)

Cash flows—discontinued operations

Net cash used in operating activities of discontinued operations

(42.4)

(403.3)

Net cash provided by investing activities of discontinued operations

6.3

1,986.2

Net cash provided by (used in) discontinued operations

$

(36.1)

$

1,582.9

Increase (decrease) in cash and cash equivalents

(261.1)

437.6

Cash and cash equivalents – beginning of period

535.9

98.3

Cash and cash equivalents – end of period

$

274.8

$

535.9

 

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