10-QPeriod: Q2 FY2011

DARDEN RESTAURANTS INC Quarterly Report for Q2 Ended Nov 28, 2010

Filed January 5, 2011For Securities:DRI

Summary

Darden Restaurants, Inc. reported solid financial performance for the quarter and six months ended November 28, 2010, reflecting continued growth in sales and earnings from continuing operations. Sales increased by 5.2% in the quarter and 4.7% year-to-date, driven by the addition of new restaurants and positive same-restaurant sales growth across key brands like Olive Garden and LongHorn Steakhouse. Despite some cost pressures, particularly in restaurant expenses, the company demonstrated effective cost management, leading to an improvement in operating margins. Overall, the company generated strong earnings from continuing operations, with diluted EPS rising 25.6% for the quarter and 21.8% year-to-date. Darden also continued to return capital to shareholders through dividends and share repurchases, signaling confidence in its financial position and future prospects. The company maintains a healthy liquidity position and expects its operating cash flows and credit facilities to support ongoing capital expenditures and shareholder returns.

Financial Highlights

51 data points
Beta

Revenue

$1.73B

22.3% Gross Margin

Net Income

$74.50M

4.3% Net Margin

EPS (Diluted)

$0.53

Total Assets

$5.25B

Cash & Equivalents

$52.90M

Free Cash Flow

-$95.80M

Financial Statements
Beta
Revenue$1.73B
Cost of Revenue$1.34B
Gross Profit$384.70M
SG&A Expenses$180.00M
Operating Expenses$1.62B
Operating Income$75.80M
Net Income$74.50M
EPS (Basic)$0.54
EPS (Diluted)$0.53
Shares Outstanding (Basic)137.60M
Shares Outstanding (Diluted)141.20M

Key Highlights

  • 1Sales from continuing operations increased by 5.2% to $1.73 billion for the quarter ended November 28, 2010, driven by new restaurant openings and same-restaurant sales growth.
  • 2Diluted earnings per share (EPS) from continuing operations grew to $0.54 in the quarter, a 25.6% increase from $0.43 in the prior year period.
  • 3Olive Garden and LongHorn Steakhouse showed notable same-restaurant sales increases of 2.0% and 6.8% respectively in the quarter.
  • 4The company maintained cost discipline, with total costs and expenses as a percentage of sales decreasing from 95.1% to 94.0% year-over-year for the quarter.
  • 5Darden Restaurants returned significant capital to shareholders through dividends ($0.32 per share declared) and share repurchases, with an additional 25.0 million shares authorized for buyback.
  • 6The company ended the quarter with a strong liquidity position, including $52.9 million in cash and cash equivalents and $513.8 million of available credit under its revolving credit facility.
  • 7Despite an increase in restaurant expenses as a percentage of sales, the company benefited from improved restaurant labor cost management.

Frequently Asked Questions

Sales growth was primarily driven by the addition of 63 net new restaurants since the second quarter of the prior fiscal year and a blended same-restaurant sales increase of 1.4% for Olive Garden, Red Lobster, and LongHorn Steakhouse.

Total costs and expenses as a percentage of sales decreased from 95.1% in the prior year's second quarter to 94.0% in the current quarter. While restaurant expenses increased, this was partially offset by improved restaurant labor cost management due to pricing, increased productivity, and low employee turnover.

Darden Restaurants actively returns capital through dividend payments and share repurchases. The company declared a dividend of $0.32 per share and continued its share repurchase program, with an additional authorization of 25.0 million shares in December 2010.

The company reported $52.9 million in cash and cash equivalents and $513.8 million in available credit under its revolving credit facility as of November 28, 2010. Darden expects its operating cash flows and credit facilities to be sufficient to fund its capital expenditures, dividends, and share repurchase program through fiscal 2011.