8-KOther Events

DARDEN RESTAURANTS INC 8-K Report (May 11, 2004)

Filed May 11, 2004For Securities:DRI

Summary

Darden Restaurants, Inc. (DRI) filed an 8-K on May 11, 2004, reporting an asset impairment and restructuring charge. The company announced the closure of six underperforming Bahama Breeze restaurants and a write-down of four other Bahama Breeze locations, as well as one Olive Garden and one Red Lobster restaurant that will remain operational. This move is expected to result in an estimated $22.5 million non-cash, after-tax charge ($36.7 million pre-tax) for asset impairment and an additional $0.6 million after-tax charge for restaurant closing costs, collectively reducing fourth-quarter earnings by approximately 14 cents per diluted share.

Key Highlights

  • 1Darden Restaurants announced the closure of 6 Bahama Breeze locations and impairment charges for 4 additional Bahama Breeze, 1 Olive Garden, and 1 Red Lobster restaurants.
  • 2An estimated $22.5 million non-cash, after-tax charge ($36.7 million pre-tax) for asset impairment will be recorded.
  • 3An estimated $0.6 million after-tax charge ($1.0 million pre-tax) for restaurant closing costs will also be recorded.
  • 4These charges are expected to reduce fourth-quarter earnings by approximately $0.14 per diluted share.
  • 5Excluding these charges, Darden expects fiscal 2004 annual earnings per diluted share growth of 12% to 15%, consistent with prior expectations.
  • 6Management believes these actions will strengthen the Bahama Breeze brand, making it a more meaningful contributor to future earnings.
  • 7Bahama Breeze is expected to be accretive to earnings in fiscal 2005, with an estimated pre-tax cash flow benefit of $11 million in fiscal 2005.

Frequently Asked Questions

The primary reason for the charge is Darden Restaurants' decision to close six underperforming Bahama Breeze restaurants and to impair the value of four other Bahama Breeze locations, as well as one Olive Garden and one Red Lobster restaurant. This is aimed at strengthening the Bahama Breeze brand and improving overall financial performance.

The total charges are estimated to reduce fourth-quarter earnings by approximately 14 cents per diluted share. However, excluding these charges, Darden reiterates its expectation for fiscal 2004 annual earnings per diluted share growth of 12% to 15%, indicating that core operations remain on track.

Darden expects these actions to position Bahama Breeze for future growth, becoming a more meaningful contributor to earnings. The brand is projected to be accretive to earnings in fiscal 2005, with an estimated pre-tax cash flow benefit of approximately $11 million in fiscal 2005 from property sales and elimination of operating losses.

The company stated that employees and management of each closed restaurant will be given the opportunity to pursue transfers to other Bahama Breeze or Darden restaurants.