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DARDEN RESTAURANTS INC Annual Report, Year Ended May 27, 2001

Filing Date
Filed August 16, 2001
Period End
May 27, 2001
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 filed August 16, 2001. Cited figures are marked; the original filing is the authoritative source.

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 billiona, 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 millionb, and the effective tax rate eased to 34.6%.

Balance-sheet leverage increased to fund growth. Capital expenditures rose to $355 millionc 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 milliond 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.

02—Key points

Key Highlights

  1. Record fiscal 2001 sales of $4.02 billion (+8.6%) and net earnings of $197.0 million, or $1.59 per diluted share (+13.8% vs. prior year before restructuring credit)
  2. Same-restaurant sales rose 5.9% at Red Lobster and 7.2% at Olive Garden; Red Lobster has 14 and Olive Garden 27 consecutive quarters of comp sales growth
  3. Restaurant-level margin improvement: restaurant labor fell to 31.4% of sales from 31.9%, SG&A fell to 10.1% from 10.3%, and food and beverage costs held at 32.4%
  4. Net restaurant count rose to 1,168 with 31 openings in fiscal 2001; fiscal 2002 plans call for 40 to 49 new openings, including national expansion of Smokey Bones
  5. Leverage increased: total debt rose to $532.6 million from $421.6 million, adjusted debt-to-capital reached 44% (from 42%), and fixed-charge coverage fell to 6.5x (from 7.1x)
  6. Operating cash flow of $421 million funded $355 million in capital expenditures and $177 million of share repurchases, with a $2.1 per-share book value increase to $8.82
  7. Investment-grade ratings maintained (Baa1 / BBB+ / BBB+), with $300 million of available bank credit facilities and no borrowings outstanding under them at year end

03—Questions

Frequently Asked Questions

  1. How did Darden perform in fiscal 2001?

    Darden reported record sales of $4.02 billion, up 8.6%, and net earnings of $197.0 million, or $1.59 per diluted share. Earnings rose 13.8% over the prior year's $173.1 million before the restructuring credit. Growth came mainly from same-restaurant sales gains at Red Lobster (5.9%) and Olive Garden (7.2%), along with improved cost control.

  2. Is Darden's balance sheet getting more leveraged?

    Yes, modestly. Total debt increased to $532.6 million from $421.6 million, mainly from new senior notes and medium-term notes used to repay commercial paper. The adjusted debt-to-capital ratio rose to 44% from 42%, and fixed-charge coverage declined to 6.5x from 7.1x. Management still considers the financial position strong and expects internal cash flow and commercial paper to cover needs through fiscal 2002.

  3. What are the company's growth plans for fiscal 2002?

    Darden plans 40 to 49 new restaurant openings across Red Lobster (10-12), Olive Garden (14-17), Bahama Breeze (8-10), and Smokey Bones (8-10). Smokey Bones is entering national expansion, and Bahama Breeze is also expanding. Capital expenditures are expected to be slightly higher than in fiscal 2001. Management's stated long-term goal is 15% to 20% annual earnings growth.

  4. What are the main risks to Darden's business?

    The filing cites intense competition in casual dining, changes in consumer tastes and demographics, economic conditions, food and commodity cost inflation (seafood supply is noted as volatile), the availability of desirable locations, government regulation (including liquor licensing and ADA compliance), and the company's ability to execute its growth plans. Alcohol accounts for about 9% of sales, and the company faces dram-shop liability exposure.

04—Continue

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