10-QPeriod: Q3 FY2011

DARDEN RESTAURANTS INC Quarterly Report for Q3 Ended Feb 27, 2011

Filed April 4, 2011For Securities:DRI

Summary

Darden Restaurants, Inc. reported solid financial results for the third quarter and the first nine months of fiscal year 2011, demonstrating consistent growth across its brands. Sales from continuing operations increased by 5.5% year-over-year for the quarter and 5.0% for the nine-month period, driven by both new restaurant openings and positive same-restaurant sales growth, particularly at LongHorn Steakhouse and the "other brands" category which includes The Capital Grille, Bahama Breeze, and Seasons 52. Net earnings from continuing operations saw a significant increase of 12.5% for the quarter and 17.1% for the nine-month period, reflecting improved operational efficiencies such as lower labor and restaurant expenses as a percentage of sales. The company's financial health remains strong, supported by healthy operating cash flows and a robust credit facility. Darden continued its capital allocation strategy, with substantial share repurchases and an increased dividend payout, signaling confidence in its business outlook and commitment to returning value to shareholders. While facing increased food and beverage costs and higher selling, general, and administrative expenses, Darden successfully leveraged sales growth and cost management to enhance profitability.

Financial Highlights

51 data points
Beta

Revenue

$1.98B

25.2% Gross Margin

Net Income

$151.20M

7.6% Net Margin

EPS (Diluted)

$1.08

Total Assets

$5.41B

Cash & Equivalents

$89.70M

Free Cash Flow

$266.70M

Financial Statements
Beta
Revenue$1.98B
Cost of Revenue$1.48B
Gross Profit$498.40M
SG&A Expenses$194.80M
Operating Expenses$1.78B
Operating Income$151.70M
Net Income$151.20M
EPS (Basic)$1.11
EPS (Diluted)$1.08
Shares Outstanding (Basic)136.40M
Shares Outstanding (Diluted)140.00M

Key Highlights

  • 1Total sales from continuing operations increased by 5.5% in Q3 FY11 and 5.0% for the first nine months of FY11 compared to the prior year.
  • 2Net earnings from continuing operations grew by 12.5% in Q3 FY11 and 17.1% for the first nine months of FY11.
  • 3Diluted EPS from continuing operations increased by 13.7% in Q3 FY11 and 18.0% for the first nine months of FY11.
  • 4The company opened 66 net new restaurants during the nine-month period, contributing to sales growth.
  • 5Same-restaurant sales showed positive growth, with LongHorn Steakhouse leading at 6.1% for the quarter.
  • 6Darden continued its share repurchase program, buying back 6.3 million shares in the first nine months of FY11.
  • 7The company maintained a strong liquidity position with $617.8 million available under its revolving credit facility as of February 27, 2011.

Frequently Asked Questions

Sales from continuing operations increased by 5.5% to $1.98 billion in the third quarter of fiscal year 2011, up from $1.87 billion in the same period of fiscal year 2010. This growth was attributed to the addition of 66 net new restaurants and a 0.9% increase in blended U.S. same-restaurant sales for Olive Garden, Red Lobster, and LongHorn Steakhouse.

Profitability improved significantly. Net earnings from continuing operations rose by 12.5% to $151.7 million in the third quarter of fiscal year 2011, and by 17.1% to $340.8 million for the first nine months. Diluted earnings per share from continuing operations also increased, by 13.7% for the quarter ($1.08 vs $0.95) and 18.0% for the nine-month period ($2.42 vs $2.05).

While facing increased food and beverage costs, Darden demonstrated effective cost management by improving restaurant labor and restaurant expenses as a percentage of sales. This contributed to an overall decrease in total costs and expenses as a percentage of sales, from 90.6% in Q3 FY10 to 89.9% in Q3 FY11, driving operating profit improvements.

Darden continued to return value to shareholders through share repurchases and dividends. In the first nine months of fiscal 2011, the company repurchased 6.3 million shares of common stock and increased its quarterly dividend to $0.32 per share. The company also maintained a $750 million revolving credit facility, providing ample liquidity.