8-KFinancial EventsExhibits & Filings

DARDEN RESTAURANTS INC 8-K Report, Exit or Disposal Costs (May 7, 2007)

Filed May 7, 2007For Securities:DRI

Summary

Darden Restaurants, Inc. has announced a significant strategic shift by approving a plan to sell its Smokey Bones Barbeque & Grill® restaurant operations and exit the business. This decision stems from the company's determination that the Smokey Bones concept, despite its design as a nationally advertised brand, is not on a viable path to becoming a meaningful growth vehicle for Darden. As a result, Darden closed 54 Smokey Bones locations and two Rocky River GrillhouseSM restaurants on May 5, 2007. The company intends to continue operating the remaining 73 Smokey Bones restaurants while actively seeking a buyer. Darden estimates a pre-tax charge of approximately $260 million in the fourth quarter of fiscal 2007, comprising a substantial non-cash asset impairment charge of $235 million and approximately $25 million in estimated cash costs related to closures.

Key Highlights

  • 1Darden Restaurants is exiting the Smokey Bones business, citing it as not a meaningful growth vehicle.
  • 254 Smokey Bones restaurants and 2 Rocky River Grillhouse restaurants were closed on May 5, 2007.
  • 3Darden plans to sell the remaining 73 Smokey Bones restaurants.
  • 4An estimated pre-tax charge of approximately $260 million is expected in Q4 fiscal 2007.
  • 5The charge includes a $235 million non-cash asset impairment and $25 million in estimated cash costs for closures.
  • 6Cash costs include lease termination, severance, and restaurant-level closing expenses.

Frequently Asked Questions

Darden's Board of Directors determined that the Smokey Bones concept and its business model were not on a path to achieving their vision of becoming a nationally advertised brand and a meaningful growth vehicle for the company.

Darden expects to incur a pre-tax charge of approximately $260 million in the fourth quarter of fiscal 2007. This includes a $235 million non-cash asset impairment charge and approximately $25 million in estimated cash costs related to the closures and lease terminations.

Darden closed 54 Smokey Bones restaurants and 2 Rocky River Grillhouse restaurants on May 5, 2007. The company is seeking a buyer for the remaining 73 Smokey Bones restaurants.

The estimated $25 million in cash costs primarily includes approximately $15 million for lease contract termination costs, $4 million for one-time severance benefits for terminated employees, $3 million for restaurant-level closing costs, and $3 million in other costs. The actual lease termination costs may vary based on landlord negotiations.