10-KPeriod: FY2012

DARDEN RESTAURANTS INC Annual Report, Year Ended May 27, 2012

Filed July 20, 2012For Securities:DRI

Summary

Darden Restaurants, Inc. (DRI) operates as the world's largest company-owned and operated full-service restaurant firm, boasting a significant presence with 1,994 locations across the United States and Canada as of May 27, 2012. The company's portfolio includes well-established brands such as Red Lobster and Olive Garden, alongside growth-oriented brands like LongHorn Steakhouse, The Capital Grille, Bahama Breeze, and Seasons 52. In fiscal year 2012, Darden served over 423 million meals, demonstrating its substantial market reach and operational scale. The company is focused on strategic growth through same-restaurant sales increases, expansion of existing brands, and the development or acquisition of new brands. Darden is also exploring innovative strategies like 'synergy restaurants' and consumer packaged goods sales. While Darden emphasizes operational excellence, brand relevance, and a strong culture, investors should note potential risks including intense competition, rising labor and commodity costs, food safety concerns, and the integration of recent acquisitions like Yard House, which was announced shortly after the fiscal year end.

Financial Highlights

54 data points
Beta

Revenue

$5.33B

23.3% Gross Margin

Net Income

$475.50M

8.9% Net Margin

EPS (Diluted)

$3.57

Total Assets

$5.94B

Cash & Equivalents

$70.50M

Free Cash Flow

$55.90M

Financial Statements
Beta
Revenue$5.33B
Cost of Revenue$4.09B
Gross Profit$1.24B
SG&A Expenses$540.10M
Operating Expenses$4.97B
Operating Income$279.20M
Interest Expense$102.70M
Net Income$475.50M
EPS (Basic)$3.65
EPS (Diluted)$3.57
Shares Outstanding (Basic)130.10M
Shares Outstanding (Diluted)133.20M

Key Highlights

  • 1Darden Restaurants is the world's largest company-owned full-service restaurant operator with 1,994 locations in the U.S. and Canada as of May 27, 2012, serving over 423 million meals in FY2012.
  • 2The company's brand portfolio includes major players like Red Lobster and Olive Garden, complemented by growth-focused brands such as LongHorn Steakhouse, The Capital Grille, Bahama Breeze, and Seasons 52.
  • 3Darden is actively pursuing growth through increasing same-restaurant sales, expanding its current brands, and developing or acquiring new concepts.
  • 4The company is experimenting with innovative formats like 'synergy restaurants' (combining two brands in one location) to test expansion into smaller markets.
  • 5Strategic initiatives are in place for FY2013, including consolidating brands into a single digital platform, enhancing 'To Go!' operations for Olive Garden, and launching a national Spanish language advertising campaign for Red Lobster.
  • 6Darden reported being recognized by FORTUNE magazine as one of the "100 Best Companies to Work For" for the second consecutive year, highlighting its commitment to employee culture and diversity.
  • 7A significant strategic move announced shortly after year-end was the agreement to acquire Yard House USA, Inc. for $585 million, indicating continued M&A activity to expand its brand portfolio.

Frequently Asked Questions

Darden Restaurants' primary revenue drivers are its company-owned and operated full-service restaurants across its various brands, including Red Lobster, Olive Garden, LongHorn Steakhouse, The Capital Grille, Bahama Breeze, and Seasons 52. Sales are generated from dine-in customers, with a notable portion coming from alcoholic beverage sales.

Darden's growth strategy focuses on increasing same-restaurant sales, expanding the footprint of its existing brands, and developing or acquiring new brands that can be expanded profitably. They are also exploring innovative concepts like 'synergy restaurants' and testing consumer packaged goods. Investments in technology for digital guest engagement and operational efficiencies are also key components.

Key risks include intense competition within the full-service restaurant industry, potential disruptions in the food supply chain, food safety concerns and related litigation, rising labor and commodity costs, adverse publicity, regulatory changes (including healthcare reform and menu labeling), and challenges related to integrating new acquisitions like Yard House. Dependence on skilled management and hourly employees is also a critical factor.

Darden expands its brand portfolio through both organic growth (opening new restaurants of existing brands) and strategic acquisitions. The acquisition of Eddie V's Prime Seafood and the planned acquisition of Yard House are examples of their approach to broadening their brand offerings, particularly within the Specialty Restaurant Group.