10-QPeriod: Q1 FY2003

DARDEN RESTAURANTS INC Quarterly Report for Q1 Ended Aug 25, 2002

Filed October 9, 2002For Securities:DRI

Summary

Darden Restaurants, Inc. reported a solid first quarter for fiscal year 2003, ending August 25, 2002. Sales increased by 9.4% to $1.17 billion compared to the prior year, driven by same-restaurant sales growth at both Red Lobster and Olive Garden, alongside the addition of new company-owned restaurants. The company demonstrated improved profitability, with net earnings rising 15.7% to $71.9 million, or $0.40 per diluted share, up from $62.2 million, or $0.34 per diluted share, in the same quarter last year. Key operational efficiencies were noted, with total costs and expenses decreasing as a percentage of sales. Management highlighted a strategic focus on restaurant expansion, particularly for Smokey Bones, and continued share repurchases to enhance shareholder value. The company maintains a strong liquidity position, supported by operating cash flows and available credit facilities, and expressed confidence in its ability to fund future capital expenditures and growth initiatives.

Key Highlights

  • 1Total sales grew 9.4% year-over-year to $1.17 billion for the first quarter.
  • 2Net earnings increased 15.7% to $71.9 million, with diluted EPS rising to $0.40 from $0.34.
  • 3Both Red Lobster and Olive Garden experienced positive U.S. same-restaurant sales growth, continuing long-term positive trends.
  • 4Total costs and expenses as a percentage of sales improved, decreasing from 91.2% to 90.7%.
  • 5The company continues its aggressive expansion strategy, with plans to open 20-25 Smokey Bones restaurants in FY2003.
  • 6Darden repurchased approximately $46.1 million of its common stock during the quarter.
  • 7The company maintained a strong liquidity position, with $137.1 million in cash and cash equivalents at quarter-end.

Frequently Asked Questions

The primary drivers of the sales increase were higher annual same-restaurant sales at Red Lobster (up 6.6%) and Olive Garden (up 4.8%) in the U.S., coupled with a net increase of 43 company-owned restaurants compared to the previous year's first quarter.

Total costs and expenses as a percentage of sales improved, decreasing from 91.2% in the prior year's first quarter to 90.7% in the current quarter. This was achieved through a decrease in food and beverage costs, and selling, general, and administrative expenses as a percentage of sales, though partially offset by increases in restaurant labor and restaurant expenses.

Darden is actively expanding its restaurant portfolio. Red Lobster and Olive Garden continue to see steady growth. Notably, Smokey Bones BBQ is undergoing significant expansion, with plans to open 20-25 restaurants in fiscal year 2003, more than doubling its current footprint.

Darden continued its stock repurchase program, buying back $46.1 million worth of common stock in the quarter. This program is utilized to offset the dilutive effect of stock option exercises and to enhance shareholder value. Additionally, a cash dividend of $0.04 per share was declared in September 2002.