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DARDEN RESTAURANTS INC Annual Report (Amendment), Year Ended May 26, 1996

Filing Date
Filed October 30, 1996
Period End
May 26, 1996
Security
DRI
In the record · 2016–202610-K1210-Q338-K98

DRI filed 12 annual reports (10-K), 33 quarterly reports (10-Q) and 98 current reports (8-K) between 2016 and 2026.

  1. Deal closed8-K · Apr ’17Apr ’17
  2. FY2019 annual report10-K · Jul ’19Jul ’19
  3. Leadership change8-K · Dec ’21Dec ’21
  4. Leadership change8-K · Sep ’25Sep ’25

01—Abstract

Summary

Summary of the 10-K/A filed October 30, 1996. Cited figures are marked; the original filing is the authoritative source.

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 billiona, 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 millionb, 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 millionc 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 milliond, 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.

02—Key points

Key Highlights

  1. Fiscal 1996 sales of $3.19 billion, up 1% year over year, with growth driven by new units and same-store sales gains.
  2. Reported net earnings of $74.4 million (47 cents per share), including a $44.8 million after-tax restructuring charge to close China Coast; earnings before restructuring rose 10% to $119.2 million (75 cents per share).
  3. Food and beverage costs fell to 33.3% of sales from 34.6% in fiscal 1995, the main driver of improved margins.
  4. Restaurant labor rose to 29.9% of sales and SG&A rose to 11.7% of sales, reflecting wage inflation, training costs and higher marketing expense.
  5. Capital expenditures dropped to $214 million from $358 million as Darden slowed new Olive Garden development; operating cash flow was $294 million.
  6. Conservative capital structure: total debt of $373.8 million, 23% debt-to-total capital (34% including lease equivalents), and ratings of A3 (Moody's), BBB+ (S&P) and A- (Duff & Phelps).
  7. Initiated an 8-cent annual dividend and repurchased 1.9 million shares under a 6.5 million share buyback authorization.

03—Questions

Frequently Asked Questions

  1. Why did reported earnings fall versus the earnings before restructuring figure?

    The company took a $75 million pretax ($44.8 million after-tax, 28 cents per share) restructuring charge in the first quarter of fiscal 1996 to close all China Coast restaurants. Most of the charge, about $60.4 million, was non-cash write-downs of buildings and equipment, with the remainder related to carrying costs, lease buy-outs, severance and other items to be settled in cash.

  2. Are the Olive Garden and Red Lobster businesses growing?

    Growth is modest. Total sales rose only 1%, and the filing notes that same-store sales at Red Lobster declined, which contributed to higher labor costs as a percentage of sales. Olive Garden's growth has been deliberately slowed, with capital spending cut sharply, while the company focused on store-level cost control at Olive Garden.

  3. Is Darden's debt load a concern for investors?

    Based on the filing, not especially. Long-term debt of about $301 million is modest relative to $1.22 billion of equity. Management targets an investment-grade rating, and the company reported a fixed-charge coverage ratio of 5.6 times. The $50 million ESOP guarantee is offset within equity. Bank credit lines were reduced from $500 million to $350 million in May 1996, and $250 million of shelf capacity remains.

  4. What does this amended filing change?

    Amendment No. 1 was filed solely to correct the document count, tags and headers for the exhibits under EDGAR requirements. The company states that all other content, including the financial statements in Exhibit 13, is identical to the original Form 10-K, so the financial results are unchanged.

04—Continue

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