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DARDEN RESTAURANTS INC Annual Report, Year Ended May 26, 2002

Filing Date
Filed August 19, 2002
Period End
May 26, 2002
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 19, 2002. Cited figures are marked; the original filing is the authoritative source.

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 billiona, 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 millionb, against $318 million of capital expenditures, leaving meaningful free cash flow.

Total debt rose to $662.5 millionc 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 milliond 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.

02—Key points

Key Highlights

  1. Sales increased 9.4% to $4.37 billion, driven by same-restaurant sales growth (Red Lobster +6.2%, Olive Garden +6.3%) and 43 net new company-owned restaurants.
  2. Net earnings rose 20.7% to $237.8 million; diluted EPS grew 22.6% to $1.30 (about 21.7% growth excluding a $1.6 million after-tax restructuring credit).
  3. Cost of sales improved to 77.5% of sales from 78.2% in fiscal 2001, reflecting lower food and beverage costs and labor efficiencies from higher volumes.
  4. Operating cash flow was $508 million against $318 million of capex, and Darden repurchased $209 million of stock (9.0 million shares).
  5. Total long-term debt rose to $662.5 million after a $150 million 5.75% medium-term note issuance; the adjusted debt-to-capital ratio increased to 46% from 44%.
  6. The company plans 54 to 72 new restaurants and about $400 million of capex in fiscal 2003, with Smokey Bones (20-25 openings) and Bahama Breeze as key growth drivers.
  7. Leadership changes were announced in August 2002: the Smokey Bones and Bahama Breeze presidents departed, with Vice Chairs Blum and Rivera serving as acting presidents.

03—Questions

Frequently Asked Questions

  1. How strong was Darden's fiscal 2002 operating performance?

    Performance was strong. Sales grew 9.4% to $4.37 billion, and net earnings rose 20.7% to $237.8 million. Both Red Lobster and Olive Garden reported record sales and profits, and the consolidated restaurant operating margin improved as cost of sales fell to 77.5% of sales from 78.2%.

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

    Modestly, yes. Long-term debt increased to $662.5 million from $520.6 million after a $150 million issuance in March 2002, and the adjusted debt-to-capital ratio (including lease obligations) rose to 46% from 44%. Management still characterizes the financial condition as strong, the company retains an investment-grade rating (Baa1/BBB+/BBB+), and it has $300 million of committed bank credit undrawn.

  3. How is Darden returning capital to shareholders?

    Primarily through share repurchases. Darden bought back 9.0 million shares for $209 million in fiscal 2002, with 86.3 million shares repurchased to date under a program authorizing up to 96.9 million. The company also paid a modest dividend of $0.053 per share and executed a 3-for-2 stock split in May 2002.

  4. What are the main growth plans and risks for the coming year?

    Darden plans 54 to 72 new openings in fiscal 2003, led by Olive Garden (20-25), Smokey Bones (20-25), Bahama Breeze (6-10), and Red Lobster (8-12), with about $400 million in capital expenditures. Key risks include intense casual-dining competition, food and labor cost inflation, commodity volatility such as shrimp and lobster prices, dependence on site selection, and the execution risk of expanding the newer concepts.

04—Continue

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