ORLANDO, Fla., March 22, 2018 /PRNewswire/ -- Darden Restaurants, Inc., (NYSE: DRI) today reported its financial results for the third quarter ended February 25, 2018.

Third Quarter 2018 Financial Highlights, Comparisons Versus Same Fiscal Quarter Last Year

  • Total sales increased 13.3% to $2.13 billion, including 11.3% growth from the addition of 154 Cheddar's Scratch Kitchen restaurants and 34 other net new restaurants
  • Blended same-restaurant sales from Darden's legacy brands increased 2.0%

 

+2.2% for Olive Garden

+2.8% for The Capital Grille

+1.9% for Yard House

+2.0% for LongHorn Steakhouse

+2.7% for Eddie V's

-0.2% for Seasons 52





+0.2% for Bahama Breeze

 

  • Same-restaurant sales for Cheddar's Scratch Kitchen were -2.2%
  • Reported diluted net earnings per share from continuing operations increased 31.8% to $1.74
  • Adjusted diluted net earnings per share from continuing operations increased 29.5% to $1.71*
  • Issued $300 million of 30-year debt at 4.55%, which replaced $311 million of higher-interest (6.8% and 6.0%) long-dated bonds tendered in the quarter
  • The Company repurchased approximately $19 million of its outstanding common stock

* See "Non-GAAP Information" below for more details

"Our solid performance this quarter is a result of our focus on executing our back-to-basics operating philosophy to deliver memorable guest experiences," said CEO Gene Lee. "Our strategy continues to work, creating an environment that allowed us to invest in our people and our business, strengthen our balance sheet and return nearly $100 million to shareholders during the quarter."

Adjustments to Earnings Per Share* 
Reported diluted net earnings per share from continuing operations for the third quarter were $0.03 higher than adjusted diluted net earnings per share from continuing operations due to the following performance adjustments:

  • ($0.54) for debt retirement costs;
  • +$0.61 related to the net benefit of deferred tax revaluation; and
  • ($0.04) for Cheddar's integration costs

* See "Non-GAAP Information" below for more details

Segment Performance 
Segment profit represents sales, less costs for food and beverage, restaurant labor, restaurant expenses and marketing expenses.

 

Q3 Sales


Q3 Segment Profit

($ in millions)

2018

2017

% Change

2018

2017

% Change

Consolidated Darden

$2,128.4

$1,878.7

13.3

%





Olive Garden

$1,073.2

$1,035.1

3.7

%

$226.7

$217.7

4.1

%

LongHorn Steakhouse

$452.8

$434.3

4.3

%

$89.9

$85.0

5.8

%

Fine Dining

$164.4

$153.7

7.0

%

$40.3

$36.4

10.7

%

Other Business

$438.0

$255.6

71.4

%

$65.5

$44.8

46.2

%

 

YTD Sales


YTD Segment Profit

($ in millions)

2018

2017

% Change

2018

2017

% Change

Consolidated Darden

$5,946.0

$5,235.6

13.6

%





Olive Garden

$3,014.6

$2,911.3

3.5

%

$593.4

$557.5

6.4

%

LongHorn Steakhouse

$1,245.0

$1,185.6

5.0

%

$214.0

$197.5

8.4

%

Fine Dining

$427.1

$396.6

7.7

%

$86.6

$76.7

12.9

%

Other Business

$1,259.3

$742.1

69.7

%

$182.8

$124.1

47.3

%

 

U.S. Same-Restaurant Sales Results

 

Q3

YTD

Olive

Garden

LongHorn
Steakhouse

Olive

Garden

LongHorn
Steakhouse

Same-Restaurant Sales

2.2%

2.0%

2.4%

2.8%

Same-Restaurant Traffic

0.1%

(0.1)%

0.3%

0.3%

Pricing

1.7%

0.7%

1.6%

1.0%

Menu-mix

0.4%

1.4%

0.5%

1.5%

Note: The Company estimates that more severe winter weather negatively impacted same-restaurant sales by -70 basis points in the third quarter of fiscal 2018 compared to the same fiscal quarter last year.

Dividend Declared 
Darden's Board of Directors declared a regular quarterly cash dividend of $0.63 per share on the Company's outstanding common stock. The dividend is payable on May 1, 2018 to shareholders of record at the close of business on April 10, 2018.

Share Repurchase Program 
During the quarter, the Company repurchased approximately 0.2 million shares of its common stock for a total cost of approximately $19 million. As of the end of the fiscal third quarter, the Company had approximately $262 million remaining under the current $500 million repurchase authorization.

Updated Fiscal 2018 Financial Outlook 
The Company increased its financial outlook for Fiscal 2018 based on year-to-date results and its expected performance in the fourth quarter.

 

Current (03/22/18)

Prior (01/08/18)

Same-restaurant sales growth

Approx. 2%

Approx. 2%

New restaurant openings

Approx. 40

Approx. 40

Total sales growth

Approx. 13%

Approx. 13%

Effective tax rate

16.0% to 16.5%

 Approx. 18%

Adjusted diluted net earnings per share from continuing operations*

$4.75 to $4.80

$4.70 to $4.78

Diluted average common shares outstanding for the year

Approx. 126M

Approx. 126M

* See "Non-GAAP Information" below for more details

Investor Conference Call 
The Company will host a conference call and slide presentation on Thursday, March 22 at 8:30 am ET to review its recent financial performance. To listen to the call live, please go to https://www.webcaster4.com/Webcast/Page/1007/24792 at least fifteen minutes early to register, download, and install any necessary audio software. Prior to the call, a slide presentation will be posted on the Investor Relations section of our website at: www.darden.com. For those who cannot access the Internet, please dial 1-800-857-9760 and enter passcode 1227145. For those who cannot listen to the live broadcast, a replay will be available shortly after the call.

About Darden 
Darden is a restaurant company featuring a portfolio of differentiated brands that include Olive Garden, LongHorn Steakhouse, Cheddar's Scratch Kitchen, Yard House, The Capital Grille, Seasons 52, Bahama Breeze and Eddie V's. Our people equal our success, and we are proud to employ more than 175,000 team members in over 1,700 restaurants. Together, we create memorable experiences for 380 million guests each year in communities across North America. For more information, please visit www.darden.com.

Information about Forward-Looking Statements
 Forward-looking statements in this communication regarding our expected earnings performance and all other statements that are not historical facts, including without limitation statements concerning our future economic performance, are made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Any forward-looking statements speak only as of the date on which such statements are first made, and we undertake no obligation to update such statements to reflect events or circumstances arising after such date. We wish to caution investors not to place undue reliance on any such forward-looking statements. By their nature, forward-looking statements involve risks and uncertainties that could cause actual results to materially differ from those anticipated in the statements. The most significant of these uncertainties are described in Darden's Form 10-K, Form 10-Q and Form 8-K reports. These risks and uncertainties include the ability to successfully integrate Cheddar's Scratch Kitchen operations into our business, technology failures including failure to maintain a secure cyber network, food safety and food-borne illness concerns, litigation, unfavorable publicity, risks relating to public policy changes and federal, state and local regulation of our business, long-term and non-cancelable property leases, labor and insurance costs, failure to execute a business continuity plan following a disaster, health concerns including food-related pandemics or virus outbreaks, intense competition, failure to drive profitable sales growth, a lack of availability of suitable locations for new restaurants, higher-than-anticipated costs to open, close, relocate or remodel restaurants, an inability or failure to manage the accelerated impact of social media, a failure to execute innovative marketing tactics, a failure to develop and recruit effective leaders, a failure to address cost pressures, shortages or interruptions in the delivery of food and other products and services, adverse weather conditions and natural disasters, volatility in the market value of derivatives, economic factors specific to the restaurant industry and general macroeconomic factors including interest rates, disruptions in the financial markets, risks of doing business with franchisees, licensees and vendors in foreign markets, failure to protect our intellectual property, impairment in the carrying value of our goodwill or other intangible assets, failure of our internal controls over financial reporting and other factors and uncertainties discussed from time to time in reports filed by Darden with the Securities and Exchange Commission.

Non-GAAP Information
 The information in this press release includes financial information determined by methods other than in accordance with U.S. generally accepted accounting principles ("GAAP"), such as adjusted diluted net earnings per share from continuing operations. The Company's management uses these non-GAAP measures in its analysis of the Company's performance. The Company believes that the presentation of certain non-GAAP measures provides useful supplemental information that is essential to a proper understanding of the operating results of the Company's businesses. These non-GAAP disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Reconciliations of these non-GAAP measures are included in this release.

 

 

Fiscal Q3 Reported to Adjusted Earnings Reconciliation

Q3 2018

Q3 2017

$ in millions, except EPS

Earnings
Before
Income
Tax

Income
Tax
Expense
(Benefit)

Net
Earnings

Diluted
Net
Earnings
Per
Share

Earnings
Before
Income
Tax

Income
Tax
Expense

Net
Earnings

Diluted
Net
Earnings
Per
Share

Reported Earnings from Continuing Operations

$116.0

$(102.5)

$218.5

$1.74

$220.2

$53.9

$166.3

$1.32

% Change vs Prior Year





31.8

%








Adjustments:
















Debt retirement costs

102.2

33.6

68.6

0.54

—

—

—

—

Net benefit of deferred tax revaluation

—

77.3

(77.3)

(0.61)

—

—

—

—

Cheddar's integration expenses

6.7

1.4

5.3

0.04

—

—

—

—

Adjusted Earnings from Continuing Operations

$224.9

$9.8

$215.1

$1.71

$220.2

$53.9

$166.3

$1.32

% Change vs Prior Year





29.5

%








 

 

Reconciliation of Fiscal 2018 Reported to Adjusted Earnings Outlook

Current (03/22/18)

Prior (01/08/18)

Reported diluted net earnings per share from continuing operations

$4.73

to

$4.78

$5.17

to

$5.27

Cheddar's integration expense

0.14

0.14

0.13

0.10

Debt retirement costs

0.81

0.81



Income tax expense from Cheddar's integration and Interest expense

(0.32)

(0.32)

(0.04)

(0.03)

Net benefit of deferred tax revaluation

(0.61)

(0.61)

(0.56)

(0.56)

Adjusted diluted net earnings per share from continuing operations

$4.75

to

$4.80

$4.70

to

$4.78

 

 

DARDEN RESTAURANTS, INC.

NUMBER OF COMPANY-OWNED RESTAURANTS


2/25/18

2/26/17

Olive Garden1

853

843

LongHorn Steakhouse

499

488

Cheddar's Scratch Kitchen

154

—

Yard House

71

65

The Capital Grille

57

56

Bahama Breeze

39

36

Seasons 52

41

40

Eddie V's

19

17

Darden Continuing Operations

1,733

1,545

1Includes six locations in Canada for all periods presented.

 

 

DARDEN RESTAURANTS, INC.

CONSOLIDATED STATEMENTS OF EARNINGS

(In millions, except per share data)

(Unaudited)


Three Months Ended

Nine Months Ended

2/25/2018

2/26/2017

2/25/2018

2/26/2017

Sales

$

2,128.4

$

1,878.7

$

5,946.0

$

5,235.6

Costs and expenses:






Food and beverage

603.3

541.5

1,701.4

1,512.8

Restaurant labor

683.0

578.3

1,929.6

1,662.2

Restaurant expenses

360.8

320.4

1,055.2

929.4

Marketing expenses

58.9

54.6

183.0

175.4

General and administrative expenses

110.1

87.2

307.0

254.4

Depreciation and amortization

79.2

67.9

234.1

202.5

Impairments and disposal of assets, net

(0.3)

(0.7)

(1.1)

(8.4)

Total operating costs and expenses

$

1,895.0

$

1,649.2

$

5,409.2

$

4,728.3

Operating income

233.4

229.5

536.8

507.3

Interest, net

117.4

9.3

147.9

28.7

Earnings before income taxes

116.0

220.2

388.9

478.6

Income tax (benefit) expense

(102.5)

53.9

(39.5)

121.5

Earnings from continuing operations

$

218.5

$

166.3

$

428.4

$

357.1

Losses from discontinued operations, net of tax benefit of
   $(0.5), $(0.9), $(4.0) and $(2.2), respectively

(0.7)

(0.7)

(6.9)

(1.8)

Net earnings

$

217.8

$

165.6

$

421.5

$

355.3








Basic net earnings per share:






Earnings from continuing operations

$

1.77

$

1.34

$

3.45

$

2.88

Losses from discontinued operations

(0.01)

(0.01)

(0.06)

(0.02)

Net earnings

$

1.76

$

1.33

$

3.39

$

2.86

Diluted net earnings per share:






Earnings from continuing operations

$

1.74

$

1.32

$

3.40

$

2.84

Losses from discontinued operations

(0.01)

—

(0.06)

(0.02)

Net earnings

$

1.73

$

1.32

$

3.34

$

2.82

Average number of common shares outstanding:






Basic

123.6

124.1

124.2

124.1

Diluted

125.7

125.9

126.1

125.8

 

 

DARDEN RESTAURANTS, INC.

CONSOLIDATED BALANCE SHEETS

(In millions)


2/25/2018

5/28/2017

(Unaudited)

ASSETS


Current assets:


Cash and cash equivalents

$

146.8

$

233.1

Receivables, net

50.6

75.9

Inventories

208.0

178.9

Prepaid income taxes

62.7

6.2

Prepaid expenses and other current assets

90.4

80.6

Assets held for sale

11.1

13.2

Total current assets

$

569.6

$

587.9

Land, buildings and equipment, net

2,404.8

2,272.3

Goodwill

1,182.0

1,201.7

Trademarks

950.2

950.2

Other assets

348.1

280.2

Total assets

$

5,454.7

$

5,292.3

LIABILITIES AND STOCKHOLDERS' EQUITY


Current liabilities:


Accounts payable

$

291.5

$

249.5

Short-term debt

50.6

—

Accrued payroll

157.3

149.1

Accrued income taxes

—

1.9

Other accrued taxes

53.1

54.2

Unearned revenues

456.6

388.6

Other current liabilities

458.4

445.9

Total current liabilities

$

1,467.5

$

1,289.2

Long-term debt

926.4

936.6

Deferred income taxes

106.4

145.6

Deferred rent

310.6

282.8

Other liabilities

518.9

536.4

Total liabilities

$

3,329.8

$

3,190.6

Stockholders' equity:


Common stock and surplus

$

1,628.4

$

1,614.6

Retained earnings

586.4

560.1

Treasury stock

(7.8)

(7.8)

Accumulated other comprehensive income (loss)

(80.4)

(62.9)

Unearned compensation

(1.7)

(2.3)

Total stockholders' equity

$

2,124.9

$

2,101.7

Total liabilities and stockholders' equity

$

5,454.7

$

5,292.3

 

 

DARDEN RESTAURANTS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


Nine Months Ended

2/25/2018

2/26/2017

Cash flows—operating activities


Net earnings

$

421.5

$

355.3

Losses from discontinued operations, net of tax

6.9

1.8

Adjustments to reconcile net earnings from continuing operations to cash flows:


Depreciation and amortization

234.1

202.5

Stock-based compensation expense

32.2

27.3

Loss on extinguishment of debt

102.2

—

Change in current assets and liabilities and other, net

(45.9)

114.4

Net cash provided by operating activities of continuing operations

$

751.0

$

701.3

Cash flows—investing activities


Purchases of land, buildings and equipment

(294.9)

(214.0)

Proceeds from disposal of land, buildings and equipment

3.3

8.2

Cash used in business acquisitions, net of cash acquired

(40.4)

—

Purchases of capitalized software and changes in other assets, net

(10.3)

(14.5)

Net cash used in investing activities of continuing operations

$

(342.3)

$

(220.3)

Cash flows—financing activities


Proceeds from issuance of common stock

35.5

62.5

Income tax benefits credited to equity

—

12.1

Dividends paid

(234.9)

(208.9)

Repurchases of common stock

(207.6)

(214.9)

Proceeds from issuance of short-term debt, net

50.6

—

Repayment of long-term debt

(408.2)

—

Proceeds from issuance of long-term debt

300.0

—

Principal payments on capital and financing leases

(3.9)

(3.0)

Other, net

(11.5)

0.8

Net cash used in financing activities of continuing operations

$

(480.0)

$

(351.4)

Cash flows—discontinued operations


Net cash used in operating activities of discontinued operations

(15.2)

(13.8)

Net cash provided by investing activities of discontinued operations

0.2

0.8

Net cash used in discontinued operations

$

(15.0)

$

(13.0)




Increase (decrease) in cash and cash equivalents

(86.3)

116.6

Cash and cash equivalents - beginning of period

233.1

274.8

Cash and cash equivalents - end of period

$

146.8

$

391.4

 

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SOURCE Darden Restaurants, Inc.: Financial

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