Darden Restaurants Reports Fiscal 2017 Second Quarter Results

ORLANDO, Fla., Dec. 20, 2016 (hospitalitybusinessnews.com) — Darden Restaurants, Inc., today reported its financial results for the second quarter ended November 27, 2016.

Second Quarter 2017 Financial Highlights Versus Same Fiscal Quarter Last Year

  • Total sales from continuing operations increased 2.1% to $1.64 billion
  • Reported diluted net earnings per share from continuing operations increased 178.3% to $0.64 and increased 18.5% from last year’s adjusted diluted net earnings per share*
  • The Company repurchased approximately $19 million of its outstanding common stock during the quarter
  • Same-restaurant sales increased 1.7% for the quarter

+2.6% for Olive Garden

+1.2% for The Capital Grille

+0.7% for Yard House

+0.1% for LongHorn Steakhouse

+2.7% for Eddie V’s

-0.3% for Seasons 52

+2.6% for Bahama Breeze

*   See the “Non-GAAP Information” below for more details

“We had another strong quarter with same-restaurant sales growth significantly outperforming the casual dining industry benchmarks, especially at Olive Garden,” said CEO Gene Lee.  “We remain laser-focused on our operating philosophy rooted in food, service and atmosphere, and creating memorable experiences for our guests.”

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 2017 includes the impact of additional rent and other tax expense related to the completion of our real estate strategy, primarily impacting Olive Garden and LongHorn Steakhouse.

Q2 Sales

Q2 Segment Profit

Real Estate
Impact* $

($ in millions)

2017

2016

% Change

2017

2016

% Change

Consolidated Darden

$1,642.5

$1,608.8

2.1%

Olive Garden

$915.0

$892.3

2.5%

$153.5

$157.1

(2.3)%

(15.8)

LongHorn Steakhouse

$365.0

$365.1

—%

$52.4

$54.8

(4.4)%

(4.4)

Fine Dining

$128.6

$123.3

4.3%

$23.4

$22.4

4.5%

(0.1)

Other Business

$233.9

$228.1

2.5%

$34.6

$32.3

7.1%

(1.2)

YTD Sales

YTD Segment Profit

Real Estate
Impact* $

($ in millions)

2017

2016

% Change

2017

2016

% Change

Consolidated Darden

$3,356.9

$3,295.8

1.9%

Olive Garden

$1,876.2

$1,836.9

2.1%

$339.8

$349.1

(2.7)%

(37.8)

LongHorn Steakhouse

$751.3

$748.9

0.3%

$112.5

$111.9

0.5%

(10.2)

Fine Dining

$242.8

$236.5

2.7%

$40.2

$40.2

—%

(0.2)

Other Business

$486.6

$473.5

2.8%

$79.4

$76.1

4.3%

(2.7)

*Represents the incremental impact to segment profit of the fiscal 2016 real estate transactions, primarily rent expense.

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

Olive Garden

September

October

November

Q2

YTD

Same-Restaurant Sales

1.5%

4.5%

2.1%

2.6%

2.3%

Same-Restaurant Traffic

(0.7)%

1.7%

(0.9)%

0.0%

(0.5)%

Pricing

1.8%

1.1%

1.1%

1.4%

1.6%

Menu-mix

0.4%

1.7%

1.9%

1.2%

1.2%

LongHorn Steakhouse

September

October

November

Q2

YTD

Same-Restaurant Sales

(0.6)%

1.1%

(0.4)%

0.1%

0.4%

Same-Restaurant Traffic

(1.1)%

(1.3)%

(1.0)%

(1.1)%

(1.2)%

Pricing

1.6%

1.4%

1.4%

1.5%

1.7%

Menu-mix

(1.1)%

1.0%

(0.8)%

(0.3)%

(0.1)%

Share Repurchase Program
During the quarter, the Company repurchased approximately 0.3 million shares of its common stock for a total cost of approximately $19 million.  There is now approximately $485 million remaining under the current repurchase authorization.

Fiscal 2017 Financial Outlook
The Company reaffirmed its outlook for diluted net earnings per share of $3.87 to $3.97 and same-restaurant sales of approximately 1.0% to 2.0%.

Fiscal Q2 Reported to Adjusted Earnings Reconciliation

Q2 2017

Q2 2016

$’s in millions, except EPS

Earnings
Before
Income
Tax

Income
Tax
Expense
(Benefit)

Net
Earnings

Diluted
Net
Earnings
Per Share

Earnings
Before
Income
Tax

Income
Tax
Expense
(Benefit)

Net
Earnings

Diluted
Net
Earnings
Per Share

Reported Earnings from Continuing Operations

$107.0

$27.3

$79.7

$0.64

$24.4

$(5.7)

$30.1

$0.23

% Change vs Prior Year

178.3%

Adjustments:

Debt retirement costs

35.6

13.6

22.0

0.17

Real estate plan implementation

31.0

9.6

21.4

0.16

Strategic action plan and other costs

3.0

(3.0)

(0.02)

Adjusted Earnings from Continuing Operations

$107.0

$27.3

$79.7

$0.64

$91.0

$20.5

$70.5

$0.54

% Change vs Prior Year

18.5%

DARDEN RESTAURANTS, INC.

NUMBER OF COMPANY-OWNED RESTAURANTS

11/27/16

11/29/15

Olive Garden1

842

844

LongHorn Steakhouse

485

479

Yard House

65

62

The Capital Grille

56

54

Bahama Breeze

36

37

Seasons 52

40

42

Eddie V’s

17

16

Darden Continuing Operations

1,541

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

Six Months Ended

11/27/2016

11/29/2015

11/27/2016

11/29/2015

Sales

$

1,642.5

$

1,608.8

$

3,356.9

$

3,295.8

Costs and expenses:

Food and beverage

478.1

482.1

971.3

984.9

Restaurant labor

538.1

523.8

1,083.9

1,059.8

Restaurant expenses

305.3

278.0

609.0

549.9

Marketing expenses

57.1

58.3

120.8

123.9

General and administrative expenses

79.5

101.9

167.2

199.0

Depreciation and amortization

67.8

75.3

134.6

156.4

Impairments and disposal of assets, net

0.1

7.7

(7.7)

6.0

Total operating costs and expenses

$

1,526.0

$

1,527.1

$

3,079.1

$

3,079.9

Operating income

116.5

81.7

277.8

215.9

Interest, net

9.5

57.3

19.4

79.7

Earnings before income taxes

107.0

24.4

258.4

136.2

Income tax expense (benefit)

27.3

(5.7)

67.6

25.1

Earnings from continuing operations

$

79.7

$

30.1

$

190.8

$

111.1

Earnings (loss) from discontinued operations, net of tax expense
(benefit) of $(0.6), $0.2, $(1.3) and $3.2, respectively

(0.2)

13.1

(1.1)

18.5

Net earnings

$

79.5

$

43.2

$

189.7

$

129.6

Basic net earnings per share:

Earnings from continuing operations

$

0.65

$

0.23

$

1.54

$

0.87

Earnings (loss) from discontinued operations

0.11

(0.01)

0.14

Net earnings

$

0.65

$

0.34

$

1.53

$

1.01

Diluted net earnings per share:

Earnings from continuing operations

$

0.64

$

0.23

$

1.52

$

0.86

Earnings (loss) from discontinued operations

0.10

(0.01)

0.14

Net earnings

$

0.64

$

0.33

$

1.51

$

1.00

Average number of common shares outstanding:

Basic

123.1

128.1

124.0

127.7

Diluted

124.9

129.9

125.8

129.7

DARDEN RESTAURANTS, INC.

CONSOLIDATED BALANCE SHEETS

(In millions) 

11/27/2016

5/29/2016

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

116.8

$

274.8

Receivables, net

69.8

64.0

Inventories

183.6

175.4

Prepaid income taxes

44.6

46.1

Prepaid expenses and other current assets

82.2

76.4

Deferred income taxes

173.1

163.3

Assets held for sale

13.3

20.3

Total current assets

$

683.4

$

820.3

Land, buildings and equipment, net

2,056.9

2,041.6

Goodwill

872.3

872.3

Trademarks

575.2

574.6

Other assets

274.1

273.8

Total assets

$

4,461.9

$

4,582.6

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

249.6

$

241.9

Accrued payroll

109.0

135.1

Other accrued taxes

48.9

49.1

Unearned revenues

336.2

360.4

Other current liabilities

407.6

400.6

Total current liabilities

$

1,151.3

$

1,187.1

Long-term debt, less current portion

440.5

440.0

Deferred income taxes

260.8

255.2

Deferred rent

266.1

249.7

Other liabilities

489.8

498.6

Total liabilities

$

2,608.5

$

2,630.6

Stockholders’ equity:

Common stock and surplus

$

1,522.9

$

1,502.6

Retained earnings

424.4

547.5

Treasury stock

(7.8)

(7.8)

Accumulated other comprehensive income (loss)

(83.3)

(87.0)

Unearned compensation

(2.8)

(3.3)

Total stockholders’ equity

$

1,853.4

$

1,952.0

Total liabilities and stockholders’ equity

$

4,461.9

$

4,582.6

DARDEN RESTAURANTS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

Six Months Ended

11/27/2016

11/29/2015

Cash flows—operating activities

Net earnings

$

189.7

$

129.6

(Earnings) losses from discontinued operations, net of tax

1.1

(18.5)

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

Depreciation and amortization

134.6

156.4

Stock-based compensation expense

18.0

17.3

Change in current assets and liabilities and other, net

(49.1)

(94.2)

Net cash provided by operating activities of continuing operations

$

294.3

$

190.6

Cash flows—investing activities

Purchases of land, buildings and equipment

(135.3)

(122.2)

Proceeds from disposal of land, buildings and equipment

6.9

311.4

Purchases of capitalized software and changes in other assets, net

(12.3)

(9.7)

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

$

(140.7)

$

179.5

Cash flows—financing activities

Proceeds from issuance of common stock

46.0

62.1

Income tax benefits credited to equity

8.3

12.0

Special cash distribution from Four Corners Property Trust

315.0

Dividends paid

(139.5)

(140.6)

Repurchases of common stock

(214.7)

(0.4)

ESOP note receivable repayment

0.5

0.4

Repayment of long-term debt

(270.0)

Principal payments on capital and financing leases

(1.8)

(1.6)

Net cash used in financing activities of continuing operations

$

(301.2)

$

(23.1)

Cash flows—discontinued operations

Net cash used in operating activities of discontinued operations

(10.4)

(31.6)

Net cash provided by investing activities of discontinued operations

6.3

Net cash used in discontinued operations

$

(10.4)

$

(25.3)

Increase (decrease) in cash and cash equivalents

(158.0)

321.7

Cash and cash equivalents – beginning of period

274.8

535.9

Cash and cash equivalents – end of period

$

116.8

$

857.6

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