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DRI · DARDEN RESTAURANTS INC

32 filings

10-K

DRI 10-K Annual Reports

DARDEN RESTAURANTS INC - 32 annual reports

Filing record · 2016–202610-K1210-Q338-K98

2026
DARDEN RESTAURANTS INC Annual Report, Year Ended May 31, 2026
Darden Restaurants, Inc. (DRI) reported strong performance in fiscal year 2026, with total sales reaching $13.21 billion, a 9.4% increase from the previous year. This growth was driven by a combination of a 53-week fiscal year, a 4.5% increase in same-restaurant sales across its major brands, and the addition of 43 net new restaurants. Diluted earnings per share from continuing operations saw a significant rise of 17.6% to $10.44. The company successfully managed its cost structure, with operating income increasing by 16.2%. Key strategic initiatives included the sale of eight Olive Garden restaurants in Canada and the decision to close approximately half of its Bahama Breeze locations, with plans to convert the remainder to other Darden brands. The company also completed the integration of its acquisition of Chuy’s. Looking ahead, Darden projects fiscal year 2027 sales between $13.60 billion and $13.75 billion, driven by continued same-restaurant sales growth and the opening of 75-80 new restaurants.
Jul 24, 2026
2025
DARDEN RESTAURANTS INC Annual Report, Year Ended May 25, 2025
Darden Restaurants, Inc. (DRI) reported robust performance for fiscal year 2025, showcasing a 6.0% increase in total sales to $12.08 billion, driven by a 2.0% same-restaurant sales growth and strategic acquisitions, most notably Chuy's Holdings, Inc. Diluted earnings per share from continuing operations saw a 4.1% rise to $8.88. The company's diversified brand portfolio, including Olive Garden and LongHorn Steakhouse, continues to be a key driver of growth, with plans for further expansion in fiscal year 2026, targeting 60-65 new restaurant openings. Financially, DRI maintained a strong liquidity position with significant operating cash flow and access to a substantial revolving credit facility. The company also continued its commitment to shareholder returns through dividends and share repurchases. Strategic initiatives such as exploring alternatives for the Bahama Breeze brand and divesting Canadian Olive Garden locations indicate a focus on optimizing the brand portfolio for future profitability and growth. The company also successfully managed inflationary pressures, with a slight decrease in food and beverage costs as a percentage of sales.
Jul 18, 2025
2024
DARDEN RESTAURANTS INC Annual Report, Year Ended May 26, 2024
Darden Restaurants, Inc. (DRI) reported solid performance for fiscal year 2024, with total sales reaching $11.39 billion, an increase of 8.6% from the prior year. This growth was driven by a blended same-restaurant sales increase of 1.6% and the integration of 80 net new Ruth's Chris restaurants along with 37 other new company-owned locations. Diluted earnings per share from continuing operations saw a healthy increase of 6.6% to $8.53. The company continues to execute its growth strategy, marked by the acquisition of Ruth's Chris Steak House in June 2023 and the recent announcement of the agreement to acquire Chuy's Holdings, Inc. in July 2024. Darden has a robust outlook for fiscal year 2025, projecting sales growth of 3.5% to 4.5%, supported by planned openings of 45-50 new restaurants. The company also highlighted its commitment to operational excellence, talent management, and brand strength across its diverse portfolio of restaurants.
Jul 19, 2024
2023
DARDEN RESTAURANTS INC Annual Report, Year Ended May 28, 2023
Darden Restaurants, Inc. reported solid performance in its fiscal year ended May 28, 2023, demonstrating resilience despite ongoing macroeconomic challenges. Total sales increased by 8.9% to $10.49 billion, driven by a 6.8% increase in same-restaurant sales and the addition of 47 net new company-owned restaurants. Diluted earnings per share from continuing operations saw an 8.1% rise to $8.00. The company continues to strategically expand its portfolio, recently completing the acquisition of Ruth's Hospitality Group, Inc. (Ruth's Chris Steak House) in June 2023, which is expected to contribute to future sales growth. Darden also noted continued inflationary pressures on food and labor costs, which were partially offset by pricing strategies and operational efficiencies. The company remains focused on its 'People Strategy' to attract and retain talent, highlighting low turnover rates compared to industry benchmarks.
Jul 21, 2023
2022
DARDEN RESTAURANTS INC Annual Report, Year Ended May 29, 2022
Darden Restaurants, Inc. (DRI) demonstrated a strong recovery and growth in fiscal year 2022, which ended May 29, 2022. The company reported a significant increase in total sales, reaching $9.63 billion, up 33.8% from the previous year. This growth was driven by a substantial same-restaurant sales increase of 30.9% and the addition of 33 net new company-owned restaurants. Diluted earnings per share (EPS) from continuing operations also saw a healthy rise to $7.40, a 54.2% increase compared to fiscal year 2021. This performance indicates a robust recovery from pandemic-related impacts and a successful execution of the company's growth and operational strategies across its diverse brand portfolio. The company is strategically expanding its footprint, with plans to open 55-60 new restaurants in fiscal year 2023. Darden maintains a positive outlook, projecting sales growth of 6% to 8% for fiscal year 2023, supported by anticipated same-restaurant sales growth of 4% to 6%. Despite facing inflationary pressures on wages and cost of goods sold, Darden's management has effectively navigated these challenges through pricing strategies, operational efficiencies, and leveraging its scale. The company's financial position remains strong, supported by consistent cash flow generation and a well-managed balance sheet, positioning it for continued growth and shareholder value creation.
Jul 22, 2022
2021
DARDEN RESTAURANTS INC Annual Report, Year Ended May 30, 2021
Darden Restaurants, Inc. (DRI) reported a challenging fiscal year 2021, significantly impacted by the COVID-19 pandemic. Total sales decreased by 7.8% to $7.20 billion compared to fiscal 2020, primarily due to a 7.8% decline in same-restaurant sales driven by pandemic-related restrictions and changes in consumer behavior. Despite these headwinds, Darden demonstrated resilience, returning to profitability with net earnings from continuing operations of $632.4 million, a significant improvement from a net loss of $49.2 million in fiscal 2020, which was heavily affected by impairments. The company is focused on adapting its business model, investing in team members, streamlining operations, and accelerating technology rollouts to enhance both off-premise and in-restaurant experiences. Looking ahead, Darden projects a strong recovery in fiscal 2022, forecasting sales growth of 28% to 32% driven by an expected 25% to 29% same-restaurant sales increase and the opening of 35-40 new restaurants. The company's strategic priorities include strengthening operational fundamentals, leveraging its scale for brand development, and enhancing customer engagement through data-driven marketing and technology. Darden's robust balance sheet and effective cost management initiatives position it to navigate the ongoing recovery and capitalize on future growth opportunities.
Jul 23, 2021
2020
DARDEN RESTAURANTS INC Annual Report, Year Ended May 31, 2020
Darden Restaurants, Inc. (DRI) reported a challenging fiscal year 2020, significantly impacted by the COVID-19 pandemic. While the first three quarters showed strong sales growth, the fourth quarter experienced a severe decline of 43.0% due to mandated dine-in restrictions, forcing a shift to To-Go and delivery formats. In response, Darden took aggressive measures including drawing down credit facilities, raising equity, suspending dividends, and reducing costs. These actions, along with a substantial non-cash impairment charge of $390.0 million related to goodwill and intangible assets, led to a net loss from continuing operations of $49.2 million for the year, a significant drop from the $718.6 million net earnings in fiscal 2019. Despite the headwinds, Darden managed to add 19 net new restaurants and maintain operational control, with 89.0% of dining rooms open in some capacity by the end of the fiscal year. The company is focused on adapting its business model, enhancing safety protocols, and managing liquidity to navigate the ongoing pandemic. The outlook for fiscal 2021 includes plans for 35-40 net new restaurant openings and capital expenditures between $250-$300 million, signaling a commitment to continued growth despite the uncertain operating environment.
Jul 24, 2020
2019
DARDEN RESTAURANTS INC Annual Report, Year Ended May 26, 2019
Darden Restaurants, Inc. (DRI) reported strong performance in its fiscal year ending May 26, 2019, with total sales reaching $8.51 billion, a 5.3% increase year-over-year. This growth was driven by the addition of 39 net new company-owned restaurants and a 2.5% increase in same-restaurant sales across its portfolio. Net earnings from continuing operations saw a significant 19.0% increase to $718.6 million, translating to $5.73 per diluted share, up from $4.79 in the prior year. This improvement was bolstered by the positive impact of the Tax Cuts and Jobs Act. The company continues to invest in its core brands, particularly Olive Garden and LongHorn Steakhouse, which are driving same-restaurant sales growth. Darden also demonstrated its commitment to shareholder returns through dividends and share repurchases, with plans to continue expanding its restaurant base in fiscal year 2020. The company's strategy remains focused on operational excellence, culinary innovation, and delivering an outstanding guest experience across its diverse brand portfolio, which includes Olive Garden, LongHorn Steakhouse, Cheddar's Scratch Kitchen, Yard House, The Capital Grille, Seasons 52, Bahama Breeze, and Eddie V's. Darden's robust financial position, indicated by its investment-grade credit ratings, and its consistent cash flow generation provide a solid foundation for future growth and shareholder returns.
Jul 19, 2019
2018
DARDEN RESTAURANTS INC Annual Report, Year Ended May 27, 2018
Darden Restaurants, Inc. (DRI) reported strong performance in its fiscal year 2018, which ended May 27, 2018. The company saw a significant increase in sales, primarily driven by the acquisition of Cheddar's Scratch Kitchen and positive same-restaurant sales growth across its portfolio. Net earnings from continuing operations also saw a substantial increase, reflecting improved operational efficiency and the benefits of the Tax Cuts and Jobs Act. Looking ahead, Darden anticipates continued sales growth in fiscal year 2019, supported by new restaurant openings and sustained same-restaurant sales increases. The company is committed to returning value to shareholders through dividends and share repurchases, further demonstrating financial strength and confidence in its business strategy. Investors can look to Darden's diversified brand portfolio and focus on operational excellence as key drivers of future performance.
Jul 20, 2018
2017-A
DARDEN RESTAURANTS INC Annual Report (Amendment), Year Ended May 28, 2017
Darden Restaurants, Inc. (DRI) filed its Annual Report on Form 10-K for the fiscal year ended May 28, 2017. This filing primarily serves as an amendment to correct an administrative error in an exhibit and does not update other financial or operational information presented in the original report filed on July 21, 2017. For investors, this means the core financial performance and strategic insights from the original 10-K remain the primary focus for analysis for the period ending May 28, 2017. The report indicates that Darden Restaurants is not a shell company, and the aggregate market value of its common stock held by non-affiliates as of November 25, 2016, was approximately $7.06 billion. The company had over 125 million shares of common stock outstanding as of May 28, 2017. Key strategic decisions and financial results for the fiscal year would be detailed in the original 10-K filing, with this amendment being a procedural correction.
Jul 26, 2017
2017
DARDEN RESTAURANTS INC Annual Report, Year Ended May 28, 2017
Darden Restaurants, Inc.'s 2017 10-K filing details a year of significant growth and strategic acquisition, highlighted by the $799 million purchase of Cheddar's Scratch Kitchen. This acquisition substantially expanded the company's footprint, adding 140 company-owned and 25 franchised locations. Financially, Darden demonstrated robust performance with a 3.4% increase in sales from continuing operations, reaching $7.17 billion, driven by a 1.8% same-restaurant sales increase (excluding Cheddar's) and new unit development. Net earnings from continuing operations saw a substantial 34.1% rise to $482.5 million, with diluted EPS increasing by 37.8% to $3.83, reflecting improved operational efficiencies and strategic brand management across its portfolio, which includes Olive Garden, LongHorn Steakhouse, and a growing fine dining segment. Darden also provided a positive outlook for fiscal 2018, projecting same-restaurant sales growth of 1.0% to 2.0% and overall sales growth of 11.5% to 13.0%, supported by plans to open 35-40 new restaurants. The company continued its commitment to shareholder returns through dividends and share repurchases, signaling financial strength and confidence in its ongoing growth strategy. The acquisition of Cheddar's is expected to be integrated into Darden's operational model in fiscal 2018, with management anticipating positive contributions and synergies.
Jul 21, 2017
2016
DARDEN RESTAURANTS INC Annual Report, Year Ended May 29, 2016
Darden Restaurants (DRI) reported fiscal 2016 (52 weeks ended May 29, 2016) with sales from continuing operations of $6.93 billion, up 2.5% from $6.76 billion, driven by a 3.3% combined Darden same-restaurant sales increase and two net new company-owned restaurants. Operating income rose 69% to $622.2 million, and earnings from continuing operations increased 83% to $359.7 million ($2.78 per diluted share). Those figures are flattered by the 53rd week in fiscal 2015 comparisons, and by lower impairments and G&A. Diluted EPS including discontinued operations was $2.90, versus $5.47 in fiscal 2015, which included the large Red Lobster sale gain. Management attributed margin gains to food and beverage cost favorability, sales leverage, and lower marketing and G&A as a percent of sales, partly offset by higher restaurant expenses from new rent. The balance sheet was substantially deleveraged. Darden retired about $1.03 billion of long-term debt using proceeds from the Four Corners REIT spin-off ($315 million special dividend), sale-leasebacks of 64 restaurant properties ($238 million net), and the corporate headquarters sale-leaseback ($131 million). Total debt fell to $502 million from $1.54 billion, and the debt-to-total-capital ratio dropped to 20% from 40%. The adjusted debt-to-adjusted-capital ratio, which includes lease obligations, improved to 53% from 55%. The tradeoff is much higher rent: total rent expense rose to $265.6 million from $194.9 million, and 1,449 of 1,536 restaurants are leased. Operating lease commitments total about $2.8 billion, and capital and financing leases add roughly $230 million more. Cash flow from continuing operations was $820 million, and share repurchases were $185 million, with $316 million remaining under the $500 million authorization. Management guides fiscal 2017 same-restaurant sales growth of 1–2%, continuing-operations sales growth of 1.7–2.7%, 24–28 new restaurant openings, and capex of $310–350 million. Key risks include the rising rent burden from real estate monetization, intense full-service competition, commodity and labor cost pressure (including minimum wage increases), cyber and data privacy exposure, and ongoing weakness at the smaller brands (Bahama Breeze, Seasons 52, Eddie V's). Goodwill and trademarks total about $1.45 billion, and a write-down of roughly $1.22 billion would breach the leverage covenant, though the company reported no impairment. Management said the 2016 results reflected a 'Back-to-Basics' operating focus.
Jul 25, 2016
2015
DARDEN RESTAURANTS INC Annual Report, Year Ended May 31, 2015
Darden Restaurants (DRI) reported fiscal 2015 (53 weeks ended May 31, 2015) with continuing-operations sales of $6.76 billion, up 7.6% from $6.29 billion, driven by 33 net new company-owned restaurants and a combined same-restaurant sales increase of 2.4% on a 52-week basis. Excluding the 53rd week, sales grew about 5.6%. Earnings from continuing operations rose 7.2% to $196.4 million ($1.51 diluted EPS), but that figure absorbed roughly $1.10 per share of one-time charges, including $91.3 million of debt extinguishment costs, lobster aquaculture and other impairments, severance, and strategic action plan and proxy contest costs. Reported net earnings were $709.5 million ($5.47 diluted EPS), inflated by the $837.0 million pre-tax gain on the July 2014 sale of Red Lobster to RL Acquisition LLC for $2.08 billion in net proceeds. Note that continuing-operations results were also helped by a negative effective tax rate of -12.0%. The balance sheet improved materially. Darden used Red Lobster proceeds to retire about $1.01 billion of long-term debt and repurchased $502 million of stock through a $500 million accelerated share repurchase. Total debt fell to $1.54 billion from $2.76 billion, and the adjusted debt-to-capital ratio improved to 55% from 65%. Cash rose to $536 million. Management guided fiscal 2016 for combined same-restaurant sales growth of 2.0% to 2.5%, sales growth of 2.0% to 2.5%, and diluted EPS growth of 20% to 25% excluding the contemplated real estate transactions. The company also announced a plan to transfer about 430 restaurant properties into a REIT, with proceeds expected to pay down debt. Key risks include the REIT transaction's execution, weak Olive Garden traffic (guest counts down 1.6%), commodity inflation, and the performance of smaller brands such as Bahama Breeze and Seasons 52.
Jul 24, 2015
2014
DARDEN RESTAURANTS INC Annual Report, Year Ended May 25, 2014
Darden Restaurants' fiscal 2014 10-K (year ended May 25, 2014) shows a company in transition. Continuing-operations sales rose 6.2% to $6.29 billion, driven by 70 net new restaurants and a 2.7% same-restaurant sales gain at LongHorn Steakhouse, partly offset by a 3.4% decline at Olive Garden. However, profitability weakened sharply: continuing-operations net earnings fell 22.8% to $183.2 million ($1.38 diluted EPS), as food and beverage and restaurant labor costs rose faster than sales, and the company absorbed roughly $0.23 per share of one-time strategic plan, impairment and workforce reduction costs. Total diluted EPS, including discontinued operations, was $2.15 versus $3.13 a year earlier. The defining event is the pending $2.11 billion cash sale of Red Lobster (announced May 15, 2014), which is classified as discontinued operations and held for sale. Management plans to use about $1.00 billion of the expected ~$1.60 billion net proceeds to retire debt and $500-600 million for share repurchases, while maintaining the $2.20 annual dividend. The filing also discloses an activist challenge from Starboard Value, which has nominated 12 director candidates for the 2014 annual meeting. A potential board change could trigger change-of-control provisions in the company's credit facilities and certain notes, a material risk that management says the Board may be able to mitigate through technical actions. For investors, the key questions are whether the Red Lobster sale closes as expected in fiscal Q1 2015, whether Olive Garden's same-restaurant sales decline can be reversed, and how the proxy contest and debt-retirement plan play out. Management guides fiscal 2015 continuing-operations diluted EPS up 30-35%, sales up 5-7% (including a 53rd week), and 35-40 net new restaurants.
Jul 18, 2014
2013
DARDEN RESTAURANTS INC Annual Report, Year Ended May 26, 2013
Darden Restaurants (NYSE: DRI) reported fiscal 2013 (ended May 26, 2013) results that show a company growing its top line through expansion and acquisition while absorbing margin pressure. Sales from continuing operations rose 6.9% to $8.55 billion, driven by 104 net new company-owned restaurants, the addition of 40 Yard House restaurants acquired for $585 million in August 2012, and a 2.1% blended same-restaurant sales gain at The Capital Grille, Bahama Breeze and Seasons 52. Those gains were partially offset by a 1.3% blended same-restaurant sales decline at Olive Garden, Red Lobster and LongHorn Steakhouse, where U.S. same-restaurant guest counts fell at Olive Garden (-2.8%) and Red Lobster (-1.8%). Profitability weakened meaningfully. Earnings from continuing operations fell 13.4% to $412.6 million, and diluted EPS from continuing operations dropped 12.3% to $3.14. Management attributed the decline to higher SG&A (up 13.5%, including media costs and Yard House acquisition and integration costs of roughly $0.09 per share), restaurant expenses, depreciation and interest expense, partially offset by a lower effective tax rate of 21.0% (versus 25.3% in fiscal 2012, aided by FICA tips credits). Restaurant labor rose as a percent of sales on wage inflation and lost sales leverage. Leverage also increased: total debt rose to $2.72 billion and the adjusted debt-to-adjusted-capital ratio reached 65% (from 62%), with the company citing an investment-grade rating (Baa2/BBB/BBB). Looking ahead, management guided fiscal 2014 blended U.S. same-restaurant sales from flat to +2.0%, total sales growth of 6–8% including Yard House, diluted EPS from continuing operations 3–5% below fiscal 2013, roughly 80 net new restaurants, and capital expenditures of $600–650 million. Capital returns remain a priority: the quarterly dividend was raised to $0.55 (a $2.20 annualized rate, up 10%), and the company retired 159.3 million treasury shares in fiscal 2013 while repurchasing only 1.0 million shares. The filing also discloses a pending collective wage-and-hour action (Alequin v. Darden) covering servers and bartenders, for which no loss estimate can yet be made.
Jul 19, 2013
2012
DARDEN RESTAURANTS INC Annual Report, Year Ended May 27, 2012
Darden Restaurants (DRI) closed fiscal 2012 (ended May 27, 2012) with sales from continuing operations of $8.00 billion, up 6.6% from $7.50 billion, driven by 89 net new restaurants, 11 acquired Eddie V's locations and a 1.8% blended same-restaurant sales increase at Olive Garden, Red Lobster and LongHorn Steakhouse. Diluted EPS from continuing operations rose 5.0% to $3.58, even though net earnings from continuing operations slipped 0.5% to $476.5 million, because the share count fell from 140.3 million to 133.2 million through buybacks. Margin pressure was visible: food and beverage costs rose to 30.8% of sales from 29.0%, driven by seafood and other commodity inflation and unfavorable menu mix, while restaurant labor and SG&A leverage partly offset it. Balance sheet leverage increased meaningfully. Total debt rose to $2.13 billion from $1.65 billion, the debt-to-total-capital ratio reached 54% versus 46%, and the adjusted debt-to-adjusted-capital ratio reached 62% versus 56%. Stockholders' equity fell to $1.84 billion. Management funded $375 million of buybacks and $224 million of dividends while also investing $640 million in capital expenditures, with operating cash flow declining to $762 million from $895 million. The company also agreed to acquire Yard House for $585 million in cash (expected to close early in fiscal 2013), and it raised the quarterly dividend to $0.50 from $0.43. Looking ahead, management guided fiscal 2013 blended same-restaurant sales growth of 1% to 2% for the core brands, total sales growth of 9% to 10% including Yard House, diluted EPS growth of 5% to 9%, about 100 to 110 net new restaurants and capex of roughly $750 million. Investors should weigh the growth in unit count and acquisitions against the rising leverage, the commodity cost headwinds and the still-modest same-store sales growth at the core brands.
Jul 20, 2012
2011
DARDEN RESTAURANTS INC Annual Report, Year Ended May 29, 2011
Darden Restaurants (NYSE: DRI) closed fiscal 2011 (ended May 29, 2011) with sales from continuing operations of $7.50 billion, up 5.4% from $7.11 billion in fiscal 2010, and diluted EPS from continuing operations of $3.41, up 19.2% from $2.86. Net earnings were $476.3 million. Growth was driven by 70 net new restaurants (including 31 Olive Garden, 23 LongHorn Steakhouse) and a 1.4% blended same-restaurant sales increase across Olive Garden, Red Lobster and LongHorn. Restaurant-level margin improved as food and beverage costs rose as a percent of sales but restaurant labor and restaurant expenses fell, and the effective tax rate rose to 26.1%. The balance sheet and capital allocation were central to the year. Darden repurchased 8.6 million shares for $385.5 million, raised the quarterly dividend to 43 cents (an expected $1.72 annual rate for fiscal 2012, a 34.4% increase), and repaid $226.8 million of maturing notes, partly funded by $185.5 million of commercial paper. Adjusted debt to adjusted total capital improved to 56% from 57%, and management guided fiscal 2012 to roughly 80-90 new restaurants, 2.5% blended same-restaurant sales growth, 6-7% total sales growth and 12-15% diluted EPS growth. Capital expenditures are estimated at about $600 million. Key risks for investors include the concentration of goodwill and trademarks in LongHorn Steakhouse and The Capital Grille (LongHorn's fair value exceeded carrying value by only about 116% and The Capital Grille's by about 7%), commodity inflation in seafood and other food costs, the unproven economics of Bahama Breeze, Seasons 52 and synergy restaurants, and the sensitivity of consumer discretionary spending to unemployment and energy prices. The filing reports effective internal controls and an unqualified KPMG audit opinion.
Jul 22, 2011
2010
DARDEN RESTAURANTS INC Annual Report, Year Ended May 30, 2010
Darden Restaurants (DRI) reported fiscal 2010 (52 weeks ended May 30, 2010) results that showed resilience despite a weak same-restaurant sales environment. Sales from continuing operations were $7.11 billion, down 1.4% from $7.22 billion in fiscal 2009, which had a 53rd week contributing $123.7 million. Combined same-restaurant sales for Olive Garden, Red Lobster and LongHorn fell 2.6%, though this outperformed the Knapp-Track benchmark decline of 4.9%. Net earnings from continuing operations rose 9.5% to $407.0 million, and diluted EPS from continuing operations rose 7.9% to $2.86, helped by lower food and beverage, restaurant expense and interest costs as a percent of sales, partly offset by a roughly nine-cent hit from a gift card breakage estimate change. The balance sheet strengthened meaningfully. Total debt fell to $1.70 billion from $1.85 billion, the adjusted debt-to-adjusted-capital ratio improved to 57% from 62%, and cash rose to $248.8 million. Operating cash flow from continuing operations increased to $903.4 million. Management guided fiscal 2011 to 70-75 net new restaurants, a 2-3% combined U.S. same-restaurant sales increase, 5.5-6.5% sales growth, and 14-17% diluted EPS growth from continuing operations. The Board also raised the quarterly dividend 28% to $0.32. Key risks for investors include continued traffic weakness at Red Lobster and Olive Garden, the still-elevated leverage after the 2007 RARE acquisition, goodwill and trademark exposure to LongHorn and The Capital Grille (LongHorn goodwill cushion of about 82% and Capital Grille about 18%), commodity and seafood cost volatility, and the unproven profitability of newer brands Bahama Breeze and Seasons 52.
Jul 23, 2010
2009-A
DARDEN RESTAURANTS INC Annual Report (Amendment), Year Ended May 31, 2009
This filing is an Amendment No. 1 to Darden Restaurants, Inc.'s Form 10-K for the fiscal year ended May 31, 2009. The amendment's primary purpose is to correct an omission in the original filing by including the "Value Realized on Exercise" column in the "Option Exercises and Stock Vested for Fiscal 2009" table within the Executive Compensation section. It also includes updated certifications required by the Sarbanes-Oxley Act. Investors should note that this amendment does not alter the company's financial position, results of operations, or cash flows as previously reported, and it does not reflect any events occurring after the original filing date of July 24, 2009. The filing essentially provides a more complete picture of executive compensation related to stock options and awards for fiscal year 2009.
Nov 13, 2009
2009
DARDEN RESTAURANTS INC Annual Report, Year Ended May 31, 2009
Darden Restaurants' fiscal 2009 10-K (year ended May 31, 2009, a 53-week year) shows a company that grew sales while absorbing a weak consumer environment and a heavier debt load from the 2007 RARE Hospitality acquisition. Sales from continuing operations rose 8.9% to $7.22 billion, driven mainly by the first full year of LongHorn Steakhouse and The Capital Grille, 64 net new restaurants across the core concepts, and the extra week (which contributed $123.7 million). Excluding the 53rd week, the company's own commentary implies growth closer to the mid-single digits. Same-restaurant sales for Olive Garden, Red Lobster and LongHorn combined fell 1.4%, which management notes compares favorably to a 5.6% decline in the Knapp-Track benchmark. Diluted EPS from continuing operations rose 3.9% to $2.65, though net earnings from continuing operations rose only 0.6%, reflecting the share count reduction from buybacks. Margins compressed: the restaurant-level cost of sales rose as a percentage of sales, interest expense climbed 25% to $107.4 million, and pre-tax margin fell from 7.8% to 7.1%. Balance sheet and cash flow are the key investor watch items. Total debt was about $1.85 billion against $1.61 billion of stockholders' equity, and the adjusted debt-to-adjusted-capital ratio improved modestly to 62% from 64%. Operating cash flow from continuing operations was $783.5 million, comfortably covering capital expenditures of $535.3 million and dividends of $110.2 million. Management guided fiscal 2010 to flat-to-slightly-lower sales and EPS from -2% to +8%, with 50-55 net new restaurants and a 25% dividend increase to an annualized $1.00 per share. The company also disclosed a Lehman Brothers commitment default that reduced revolver availability to $502.6 million, and several pending legal matters, including a securities class action and a shareholder derivative suit. Goodwill ($518.7 million) and trademarks ($454.4 million) remain significant and carry sensitivity to discount-rate changes, particularly for LongHorn and The Capital Grille.
Jul 24, 2009
2008
DARDEN RESTAURANTS INC Annual Report, Year Ended May 25, 2008
Darden Restaurants' fiscal 2008 10-K (fiscal year ended May 25, 2008) shows a company that grew sharply in size but saw margins compress, largely because of the October 2007 acquisition of RARE Hospitality (LongHorn Steakhouse and The Capital Grille). Continuing-operations sales rose 19.0% to $6.63 billion, driven by RARE, 39 net new Olive Gardens, and a 4.9% U.S. same-restaurant sales increase at Olive Garden. Net earnings from continuing operations fell 2.0% to $369.5 million, though diluted EPS from continuing operations rose 0.8% to $2.55 thanks to a lower share count. Total diluted EPS was $2.60, including a $0.05 contribution from discontinued operations, which mainly reflects the Smokey Bones sale. Integration costs and purchase accounting adjustments tied to RARE totaled about $44.8 million pre-tax, and food, labor, and interest costs also weighed on results. The balance sheet changed materially. Total assets rose to $4.73 billion from $2.88 billion, and long-term debt rose to $1.63 billion from $492 million after the company issued $1.15 billion of senior notes to refinance the acquisition bridge loan. The debt-to-total-capital ratio increased to 57% from 39%, and the lease-adjusted ratio reached 64% from 50%. Management says it still aims to keep an investment-grade rating (currently Baa3/BBB/BBB), and it expects fiscal 2009 sales growth of 14% to 15%, with capital expenditures of about $600 million and an 11% increase in the indicated annual dividend to $0.80. Risks investors should weigh include the higher leverage, a securities class action and a shareholder demand letter tied to 2008 guidance, and weak same-restaurant sales at LongHorn and The Capital Grille.
Jul 17, 2008
2007
DARDEN RESTAURANTS INC Annual Report, Year Ended May 27, 2007
Darden Restaurants (DRI) reported fiscal 2007 (ended May 27, 2007) with continuing-operations sales up 4.0% to $5.57 billion and diluted EPS from continuing operations up 13.0% to $2.53, driven by Olive Garden's 51 consecutive quarters of same-restaurant sales growth and Red Lobster's continued growth. However, reported net earnings fell to $201.4 million ($1.35 diluted EPS) from $338.2 million ($2.16) because of $175.7 million in after-tax losses from discontinued operations, primarily $236.4 million in pre-tax impairment charges tied to the decision to close 54 Smokey Bones and two Rocky River Grillhouse restaurants and to sell the remaining 73 Smokey Bones units. Nine underperforming Bahama Breeze restaurants were also closed and classified as discontinued. Management guided to fiscal 2008 diluted EPS growth from continuing operations of 10% to 12%, expects roughly 40 net new restaurants, and projects same-restaurant sales growth of 2% to 4% at Olive Garden and Red Lobster. Capital allocation is shifting toward shareholder returns: the quarterly dividend moves to 18 cents (an indicated annual rate of 72 cents, up more than 56%), and the target debt leverage range is being raised to 55-65% of adjusted capital from 40-50%. The company repurchased $371.2 million of stock in fiscal 2007 and holds 20.5 million shares of remaining authorization. Investors should weigh the strong core Olive Garden and Red Lobster performance against the ongoing execution risk in Smokey Bones' exit, the unproven Bahama Breeze and Seasons 52 concepts, and rising labor costs (restaurant labor rose to 32.5% of sales). Balance sheet metrics remain solid, with an investment-grade rating (Baa1/BBB+/BBB+) and an adjusted debt-to-capital ratio of 50%, though the planned leverage increase will raise financial risk.
Jul 19, 2007
2006
DARDEN RESTAURANTS INC Annual Report, Year Ended May 28, 2006
Darden Restaurants (NYSE: DRI), the largest publicly held casual dining company in the world by U.S. company-restaurant revenue, closed fiscal 2006 (ended May 28, 2006) with record results. Sales rose 8.4% to $5.72 billion, driven by a net addition of 46 company-owned restaurants and U.S. same-restaurant sales gains at Olive Garden (+5.5%), Red Lobster (+4.9%) and Bahama Breeze (+1.7%). Net earnings grew 16.4% to $338 million, and diluted EPS rose 21.3% to $2.16, helped by lower food and beverage, SG&A, and D&A costs as a percent of sales and a shrinking share count from buybacks. Operating cash flow reached $717 million against $338 million of capital expenditures. The filing also flags clear pressure points. Smokey Bones same-restaurant sales fell 3.7% and management is repositioning the brand, which may require further investment or a name change, and it has limited new openings to five locations. Bahama Breeze remains a turnaround with growth postponed. Restaurant labor rose to 32.3% of sales and restaurant expenses to 15.5%, and the company faces an FTC staff finding (July 26, 2006) that its gift-card dormancy fee disclosures violated Section 5, with a proposed $31 million equitable monetary relief demand still under negotiation. Management expects fiscal 2007 diluted EPS growth of 9-10%, including roughly 4 points of drag from adopting SFAS 123R, and plans 39-45 new restaurant openings. For investors, the story is a strong Olive Garden and Red Lobster franchise-like core generating solid cash flow and returning capital through buybacks and a higher dividend ($0.40 per share, up from $0.08), offset by execution risk at the newer concepts and a meaningful but unquantified legal and regulatory overhang. Leverage is moderate: adjusted debt-to-capital was 47%, and the company maintains investment-grade ratings (Baa1/BBB+/BBB+).
Jul 28, 2006
2005
DARDEN RESTAURANTS INC Annual Report, Year Ended May 29, 2005
Darden Restaurants (NYSE: DRI), the largest publicly held casual dining company in the world by U.S. company-restaurant revenue, reported strong fiscal 2005 results (52 weeks ended May 29, 2005). Sales rose 5.5% to $5.28 billion (7.4% on a 52-week basis, excluding the extra week in fiscal 2004). Net earnings increased 27.9% to $291 million, and diluted EPS rose 32.8% to $1.78. Earnings were lifted by lower food and beverage, restaurant expense, and D&A costs as a percent of sales, along with a reduction in diluted share count from ongoing buybacks. Fiscal 2004 was depressed by a $37 million Bahama Breeze impairment and restructuring charge, which makes the year-over-year comparison look stronger than the underlying trend. Operationally, Olive Garden was the standout, with U.S. same-restaurant sales up 7.2% on a 52-week basis and 43 consecutive quarters of comparable sales growth. Red Lobster returned to positive comparable sales (up 0.9%) and year-over-year operating profit growth after a difficult fiscal 2004. Smokey Bones continues to expand rapidly, with 35 openings in fiscal 2005 and plans for 25 to 30 more in fiscal 2006, though it posted a modestly larger operating loss. Bahama Breeze remains a turnaround effort, with sales down 7.2% and the expansion program on hold. Financially, the company generated $583 million in operating cash flow and repurchased $312 million of stock. It ended the year with $1.04 billion of current liabilities, which were inflated by $300 million of notes maturing in fiscal 2005 and 2006 that management plans to refinance. Management guided to 55 to 65 net new restaurants and low double-digit diluted EPS growth in fiscal 2006. Risks disclosed include competition, food and labor cost inflation, and several California and Washington wage-and-hour class actions, one of which was settled for roughly $9.5 million.
Jul 29, 2005
2004-A
DARDEN RESTAURANTS INC Annual Report (Amendment), Year Ended May 30, 2004
Darden Restaurants (DRI) filed this 10-K/A for fiscal 2004 (ended May 30, 2004, a 53-week year) to restate its financial statements for fiscal 1996 through 2004 and Q1 fiscal 2005. The restatement stems from a change in lease accounting: rent expense is now recognized straight-line over the expected lease term, including cancelable option periods where failure to exercise would carry an economic penalty. The change is non-cash in aggregate and does not affect cash flows, sales, or same-restaurant sales. Fiscal 2004 net earnings were restated to $227.2 million ($1.34 diluted EPS) from $231.5 million ($1.36 as originally reported), a reduction of $0.02 per diluted share. Cumulative retained earnings were reduced by $70.3 million and the deferred rent liability increased by $114 million. Operationally, Darden is the largest publicly held casual dining company in the world, with 1,325 company-operated restaurants at year-end (680 Red Lobster, 543 Olive Garden, 32 Bahama Breeze, 69 Smokey Bones, and one Seasons 52). Sales rose 7.5% to $5.00 billion, though the 53rd week contributed about $90 million; on a 52-week basis, growth was 5.5%. Olive Garden was the clear bright spot, with U.S. same-restaurant sales up 4.6% and operating profit up double digits. Red Lobster's 23-quarter streak of same-restaurant sales gains ended, with U.S. same-restaurant sales down 3.5%. Bahama Breeze was restructured, with six closures and four write-downs, and fiscal 2004 carried roughly $38 million of pre-tax impairment and restructuring charges. For investors, the key points are a stable balance sheet (debt-to-total capital of 36%, adjusted for leases of 46%, investment-grade ratings), continued share repurchases ($235 million in fiscal 2004), and management guidance for fiscal 2005 of 8-12% diluted EPS growth, 50-60 new restaurants, and 1-3% same-restaurant sales growth at Red Lobster and Olive Garden. The restatement is a non-cash accounting correction, but it does lower reported earnings and book equity, and the Red Lobster sales slowdown is the primary operating concern.
Jan 7, 2005
2004
DARDEN RESTAURANTS INC Annual Report, Year Ended May 30, 2004
Darden Restaurants (DRI), the largest publicly held casual dining company in the world by company-owned restaurant revenue, reported fiscal 2004 (53 weeks ended May 30, 2004) with sales of $5.00 billion, up 7.5% from $4.65 billion, and net earnings of $231 million ($1.36 diluted EPS), versus $232 million ($1.31) in fiscal 2003. Excluding the extra 53rd week (about $90 million of sales), 52-week sales growth was about 5.5%. Net earnings were flat (down 0.3%) because of a $38 million pre-tax asset impairment and restructuring charge tied to closing six underperforming Bahama Breeze restaurants and writing down several others. Diluted EPS still rose 3.8%, helped by a meaningful reduction in average diluted shares from continued buybacks (10.7 million shares repurchased for $235 million). The brand mix tells a divergent story. Olive Garden was the standout, with U.S. same-restaurant sales up 4.6% and sales up 11.1% to $2.21 billion, and management reported record operating profit and return on sales. Red Lobster, the largest concept at $2.44 billion in sales, was essentially flat (up 0.1%), with U.S. same-restaurant sales down 3.5% as guest counts fell 6.5%, ending a 23-quarter streak of comparable sales gains. Smokey Bones (69 units after 30 openings) and Bahama Breeze (32 units after the closures) remain earlier-stage concepts that management says are not yet accretive to earnings. Management guides to fiscal 2005 diluted EPS growth of 8% to 12%, same-restaurant sales growth of 1% to 3% for Red Lobster and Olive Garden, and 50 to 60 net new restaurants. Financially, Darden remains conservatively levered for a restaurant operator, with a debt-to-total-capital ratio of 35% and an adjusted debt-to-capital ratio of 45% that includes lease equivalents. Operating cash flow was $525 million against $354 million of capital expenditures, and the company holds investment-grade ratings (Baa1/BBB+/BBB+). Chairman and CEO Joe Lee will retire on November 29, 2004, with Clarence Otis, Jr. succeeding him as CEO. Investors should weigh Olive Garden's strength and disciplined capital allocation against Red Lobster's traffic declines, the cost of underperforming new concepts, and rising labor and restaurant expense ratios.
Aug 12, 2004
2003
DARDEN RESTAURANTS INC Annual Report, Year Ended May 25, 2003
Darden Restaurants (DRI), the largest publicly held casual dining company in the world by company-owned revenue, reported fiscal 2003 (ended May 25, 2003) sales of $4.65 billion, up 6.6% from $4.37 billion, and operated 1,271 company-owned restaurants in the U.S. and Canada, including 673 Red Lobster, 524 Olive Garden, 34 Bahama Breeze, 39 Smokey Bones and one Seasons 52. Net earnings declined 2.3% to $232 million, while diluted EPS rose 0.8% to $1.31 from $1.30, aided by a 6.6% reduction in diluted share count from continued buybacks (10.7 million shares repurchased for $213 million). Management stated that sales were below expectations due to weaker guest counts, a more competitive environment and a severe winter, and that Red Lobster's operating profit declined as labor, restaurant expenses, SG&A and depreciation rose as a percent of sales. Margin pressure is visible: total costs were 92.5% of sales versus 91.7% in fiscal 2002, and restaurant expenses rose to 15.1% of sales from 14.3%. Olive Garden was the bright spot, with record sales of $1.99 billion (up 6.8%), record operating profit, and 35 consecutive quarters of U.S. same-restaurant sales gains. Management is explicitly restructuring the Bahama Breeze concept, which is still dilutive to earnings and is slowing new openings to four in fiscal 2004, while Smokey Bones (sales of $93 million) and Red Lobster remain core growth and profit drivers respectively. The balance sheet is conservative by restaurant standards: long-term debt was $658 million, the adjusted debt-to-capital ratio was 45%, the company maintained investment-grade ratings (Baa1/BBB+/BBB+), and operating cash flow of $509 million comfortably funded $423 million of capital expenditures. Management expects fiscal 2004 capital expenditures of roughly $400 million and 57 to 71 new restaurant openings.
Aug 22, 2003
2002
DARDEN RESTAURANTS INC Annual Report, Year Ended May 26, 2002
Darden Restaurants (DRI) reported fiscal 2002 (52 weeks ended May 26, 2002) results that were strong across the board. Sales rose 9.4% to $4.37 billion, driven by U.S. same-restaurant sales growth (Red Lobster +6.2%, Olive Garden +6.3%) and a net increase of 43 company-owned restaurants. Net earnings grew 20.7% to $237.8 million, and diluted EPS rose 22.6% to $1.30 (about 21.7% excluding a small restructuring credit). Restaurant operating margin improved as cost of sales fell to 77.5% of sales from 78.2%, mainly from lower food and beverage costs and labor efficiency gains from higher volumes. Olive Garden and Red Lobster both posted record sales and profits, and Red Lobster and Olive Garden have now recorded 18 and 31 consecutive quarters of U.S. same-restaurant sales growth, respectively. The balance sheet and cash flow picture is solid but more leveraged. Operating cash flow reached $508 million, against $318 million of capital expenditures, leaving meaningful free cash flow. Total debt rose to $662.5 million after $150 million of new 5.75% medium-term notes were issued in March 2002, and the adjusted debt-to-capital ratio rose to 46% from 44%. Management still describes the financial position as strong and says it maintains an investment-grade rating (Baa1/BBB+/BBB+). Darden repurchased 9.0 million shares for $209 million and paid a 3-for-2 stock split in May 2002. Looking ahead, the company plans roughly $400 million of fiscal 2003 capital spending and 54 to 72 new restaurants, with Smokey Bones and Bahama Breeze as the main growth engines. Investors should also note the August 2002 leadership changes: Smokey Bones president Bob Mock and Bahama Breeze president Gary Heckel departed, and Vice Chairs Brad Blum and Dick Rivera took over as acting presidents of those concepts. The 10-K also flags the usual restaurant-sector risks, including competition, food and labor cost inflation, commodity volatility (notably shrimp and lobster), location dependence, and growth execution risk. Overall, the filing describes a company with strong unit economics, growing earnings, and disciplined capital returns, with the main watch items being rising leverage and the execution risk of expanding the newer concepts.
Aug 19, 2002
2001
DARDEN RESTAURANTS INC Annual Report, Year Ended May 27, 2001
Darden Restaurants, Inc. (NYSE: DRI), the largest publicly held casual dining company in the U.S., closed fiscal 2001 (year ended May 27, 2001) with record sales of $4.02 billion, up 8.6% from $3.70 billion, and net earnings of $197.0 million, or $1.59 per diluted share, up 13.8% from $173.1 million ($1.31) before the prior year's restructuring credit. Growth was driven by same-restaurant sales gains of 5.9% at Red Lobster and 7.2% at Olive Garden, with Red Lobster posting 14 and Olive Garden 27 consecutive quarters of comparable-sales increases. Restaurant-level margins improved, with food and beverage costs at 32.4% of sales and restaurant labor down to 31.4% from 31.9%, while SG&A fell to 10.1% of sales. Pre-tax earnings rose 12.4% to $301.2 million, and the effective tax rate eased to 34.6%. Balance-sheet leverage increased to fund growth. Capital expenditures rose to $355 million from $269 million, and operating cash flow was $421 million. Total debt climbed to $532.6 million from $421.6 million, as the company issued $150 million of 8.375% senior notes due 2005 and $75 million of 7.45% medium-term notes due 2011, and reduced short-term commercial paper to $12 million from $115 million. The adjusted debt-to-capital ratio rose to 44% from 42%, and fixed-charge coverage fell to 6.5x from 7.1x. Management still describes the financial condition as strong, with Baa1/BBB+ ratings, and it repurchased $177 million of stock during the year. Management plans 40 to 49 new openings in fiscal 2002, including the national rollout of Smokey Bones, and capital spending of roughly the same amount as in 2001. For investors, the key points are consistent top-line momentum in the two core brands, margin gains from higher volumes, and a shift toward debt-funded expansion. Management's long-term goal of 15% to 20% annual earnings growth is stated in the filing's forward-looking disclosures. Key risks include intense casual-dining competition, shifting consumer tastes, food and commodity costs (notably seafood supply), and the pace of new-unit execution.
Aug 16, 2001
1999
DARDEN RESTAURANTS INC Annual Report, Year Ended May 30, 1999
Darden Restaurants (DRI), the world's largest full-service restaurant company, reported a solid fiscal 1999 (year ended May 30, 1999) in its 10-K filed August 1999. Sales rose 5% to $3.46 billion (52 weeks vs. 53 in fiscal 1998), driven by same-restaurant sales growth of 7.4% at Red Lobster and 9.0% at Olive Garden. Net earnings were $140.5 million, or $0.99 per diluted share, up from $101.7 million ($0.67) in fiscal 1998. Excluding a $5.2 million after-tax restructuring credit (reversal of part of a 1997 charge), earnings were $135.3 million, or $0.96 per diluted share, a 33% increase. Operating leverage was visible in the cost structure: food and beverage costs fell to 32.8% of sales, restaurant expenses to 14.3%, and SG&A to 10.4%. The balance sheet and cash flow remained conservative. Operating cash flow reached $348 million, capital expenditures were $124 million, and the company returned capital through $228 million of share repurchases plus $10.9 million of dividends. Stockholders' equity declined to $964 million because of buybacks, and total debt fell to $340 million. Management cites an adjusted debt-to-capital ratio of 39% and a fixed-charge coverage ratio of 6.2x, and it reports investment-grade ratings (Baa1/BBB/BBB+). Growth is deliberately restrained. Darden operated 1,139 restaurants at year-end, after closing 15 Red Lobster and two Olive Garden units, and it plans about 16 openings in fiscal 2000 (five Red Lobster, up to five Olive Garden, six Bahama Breeze). The company is shifting emphasis toward improving returns at its two core chains and expanding its newest concept, Bahama Breeze, at a measured pace. Risks flagged include Year 2000 readiness of suppliers and partners (the company says its own systems are compliant), a $48 million value-at-risk on fixed-rate debt, and ongoing restructuring cash outflows from the 1997 charge.
Aug 23, 1999
1996-A
DARDEN RESTAURANTS INC Annual Report (Amendment), Year Ended May 26, 1996
Darden Restaurants, Inc. (NYSE: DRI) reported fiscal 1996 results for the year ended May 26, 1996, its first full year as an independent company after the May 1995 spin-off from General Mills. Sales rose about 1% to $3.19 billion, with the company operating 1,217 Red Lobster, Olive Garden and Bahama Breeze restaurants in the U.S. and Canada. Results were weighed down by a first-quarter after-tax restructuring charge of $44.8 million (28 cents per share) to close all China Coast restaurants. Reported net earnings were $74.4 million, or 47 cents per share, versus a pro forma $49.2 million (31 cents) in fiscal 1995. Excluding restructuring, earnings from operations rose 10% to $119.2 million, or 75 cents per share, driven by lower food and beverage costs (33.3% of sales, down 1.3 points) and lower restaurant expenses (14.3% of sales). The underlying margin story is mixed. Food costs improved on reduced waste at Olive Garden and better menu mix, but restaurant labor rose to 29.9% of sales and selling, general and administrative expense climbed to 11.7% of sales on higher marketing spend. Same-store sales gains came mainly from appetizers, beverages, desserts and modest price increases, while new unit growth slowed sharply; capital expenditures fell to $214 million from $358 million in fiscal 1995 as the company slowed new Olive Garden openings. From a balance sheet perspective, Darden looks conservatively financed. Total debt was $373.8 million against $1.22 billion of stockholders' equity, and the company issued $250 million of fixed-rate notes and debentures in January 1996 to refinance commercial paper. Credit ratings were A3/BBB+/A-, and the adjusted debt-to-total capital ratio, which counts lease obligations, was 34%. Operating cash flow was $294 million, and the company repurchased 1.9 million shares and paid its first dividend of 8 cents per share. Note that this document is Amendment No. 1 to the 10-K/A, filed to correct exhibit tagging and headers for EDGAR; the financial content is otherwise identical to the original filing.
Oct 30, 1996
1996
DARDEN RESTAURANTS INC Annual Report, Year Ended May 26, 1996
Darden Restaurants, Inc. (NYSE: DRI) filed its first annual report as an independent public company for the fiscal year ended May 26, 1996, following its May 1995 spin-off from General Mills. The company is the world's largest full-service restaurant operator, running 1,217 company-operated Red Lobster, Olive Garden and Bahama Breeze restaurants in the U.S. and Canada, with Red Lobster and The Olive Garden accounting for nearly all units. Fiscal 1996 sales were $3.19 billion, up about 1% from $3.16 billion, with growth held back by the closure of all 51 China Coast restaurants and a slowdown in new Olive Garden openings. Net earnings were $74.4 million ($0.47 per share), up from $52.4 million ($0.33) in fiscal 1995, but this figure includes a $44.8 million after-tax ($0.28 per share) restructuring charge tied to the China Coast closures. Excluding that charge, earnings before restructuring rose about 10% to $119.2 million ($0.75 per share) versus a pro forma $108.3 million ($0.68). Margin improvement drove the profit gains. Food and beverage costs fell to 33.3% of sales from 34.6% a year earlier, and restaurant expenses declined to 14.3%. These gains were partly offset by higher restaurant labor (29.9% of sales) and selling, general and administrative expenses, which rose to 11.7% of sales on higher marketing spend. Operating cash flow was $294 million and capital expenditures fell sharply to $214 million from $358 million, reflecting a deliberate slowdown in new unit growth. Management plans only 21 new openings in fiscal 1997, concentrated in its two core brands. The balance sheet is conservative. Total debt was $374 million against stockholders' equity of $1.22 billion, a 23% debt-to-capital ratio (34% including capitalized operating leases). The company holds investment-grade ratings (A3/BBB+/A-) and maintains $600 million of bank revolving credit lines. Investors should watch the pace of restaurant-level margin recovery, the cost of the ongoing restructuring (which management expects to be substantially completed in 1997), and the company's ability to sustain same-store sales growth in a competitive casual-dining segment.
Aug 16, 1996