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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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(MarkOne)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended February 27, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ............ to ............
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1-13666
Commission File Number
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DARDEN RESTAURANTS, INC.
(Exact name of registrant as specified in its charter)
Florida 59-3305930
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
5900 Lake Ellenor Drive,
Orlando, Florida 32809
(Address of principal executive offices) (Zip Code)
407-245-4000
(Registrant's telephone number, including area code)
------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. X Yes No
----- -----
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APPLICABLE ONLY TO CORPORATE ISSUERS:
Number of shares of common stock outstanding as of March 28, 2000:
123,729,845 (excluding 42,091,805 shares held in treasury).
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DARDEN RESTAURANTS, INC.
TABLE OF CONTENTS
Page
Part I - Financial Information
Item 1. Financial Statements
Consolidated Statements of Earnings 3
Consolidated Balance Sheets 5
Consolidated Statements of Changes in
Stockholders' Equity 6
Consolidated Statements of Cash Flows 7
Notes to Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
Index to Exhibits 16
2
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
DARDEN RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(In Thousands, Except per Share Data)
(Unaudited)
Thirteen Weeks Ended
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February 27, 2000 February 28, 1999
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Sales........................................................ $ 917,505 $ 866,907
Costs and Expenses:
Cost of sales:
Food and beverages...................................... 295,289 284,272
Restaurant labor........................................ 295,031 280,458
Restaurant expenses..................................... 123,900 119,667
---------- ----------
Total Cost of sales................................... $ 714,220 $ 684,397
Selling, general and administrative....................... 90,934 88,156
Depreciation and amortization............................. 32,990 31,415
Interest, net............................................. 6,646 4,422
---------- ----------
Total Costs and Expenses............................ $ 844,790 $ 808,390
---------- ----------
Earnings before Income Taxes................................. 72,715 58,517
Income Taxes................................................. (25,823) (20,164)
---------- ----------
Net Earnings................................................. $ 46,892 $ 38,353
========== ==========
Net Earnings per Share:
Basic .................................................... $ 0.37 $ 0.28
========== ==========
Diluted................................................... $ 0.36 $ 0.27
========== ==========
Average Number of Common Shares Outstanding:
Basic .................................................... 127,700 137,100
========== ==========
Diluted................................................... 130,500 141,200
========== ==========
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See accompanying notes to consolidated financial statements.
3
DARDEN RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(In Thousands, Except per Share Data)
(Unaudited)
Thirty-Nine Weeks Ended
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February 27, 2000 February 28, 1999
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Sales........................................................ $ 2,695,127 $ 2,544,132
Costs and Expenses:
Cost of sales:
Food and beverages...................................... 865,919 838,303
Restaurant labor........................................ 870,208 828,762
Restaurant expenses..................................... 383,183 372,342
----------- -----------
Total Cost of sales................................... $ 2,119,310 $ 2,039,407
Selling, general and administrative....................... 279,292 259,299
Depreciation and amortization............................. 96,131 93,738
Interest, net............................................. 16,487 14,643
----------- -----------
Total Costs and Expenses............................ $ 2,511,220 $ 2,407,087
----------- -----------
Earnings before Income Taxes................................. 183,907 137,045
Income Taxes................................................. (65,248) (47,594)
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Net Earnings................................................. $ 118,659 $ 89,451
=========== ===========
Net Earnings per Share:
Basic .................................................... $ 0.91 $ 0.65
=========== ===========
Diluted................................................... $ 0.89 $ 0.63
=========== ===========
Average Number of Common Shares Outstanding:
Basic .................................................... 130,200 138,500
=========== ===========
Diluted................................................... 133,800 142,300
=========== ===========
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See accompanying notes to consolidated financial statements.
4
DARDEN RESTAURANTS, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)
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February 27, 2000 May 30, 1999
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ASSETS
Current Assets:
Cash and cash equivalents................................. $ 20,345 $ 40,960
Receivables............................................... 29,259 20,256
Inventories............................................... 204,801 144,115
Net assets held for disposal.............................. 25,997 35,269
Prepaid expenses and other current assets................. 17,415 21,475
Deferred income taxes..................................... 52,430 65,662
----------- -----------
Total Current Assets.................................... $ 350,247 $ 327,737
Land, Buildings and Equipment................................ 1,539,243 1,461,535
Other Assets................................................. 103,498 104,388
----------- -----------
Total Assets........................................ $ 1,992,988 $ 1,893,660
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... $ 124,599 $ 144,725
Short-term debt........................................... 155,000 23,500
Current portion of long-term debt......................... 2,386 2,386
Accrued payroll........................................... 74,790 74,265
Accrued incomes taxes..................................... 16,683 16,544
Other accrued taxes....................................... 23,180 25,965
Other current liabilities................................. 238,711 234,830
----------- -----------
Total Current Liabilities............................... $ 635,349 $ 522,215
Long-term Debt............................................... 309,299 314,065
Deferred Income Taxes........................................ 71,988 72,086
Other Liabilities............................................ 21,202 21,258
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Total Liabilities..................................... $ 1,037,838 $ 929,624
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Stockholders' Equity:
Common stock and surplus.................................. $ 1,349,267 $ 1,328,796
Retained earnings......................................... 291,440 178,008
Treasury stock............................................ (613,593) (466,902)
Accumulated other comprehensive income.................... (11,817) (12,115)
Unearned compensation..................................... (60,147) (63,751)
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Total Stockholders' Equity............................ $ 955,150 $ 964,036
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Total Liabilities and Stockholders' Equity.......... $ 1,992,988 $ 1,893,660
=========== ===========
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See accompanying notes to consolidated financial statements.
5
DARDEN RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Thirty-Nine Weeks Ended February 27, 2000 and February 28, 1999
(In Thousands)
(Unaudited)
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Common Accumulated
Stock Other Total
and Retained Treasury Comprehensive Unearned Stockholders'
Surplus Earnings Stock Income Compensation Equity
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Balance at May 30, 1999.................... $1,328,796 $178,008 $(466,902) $(12,115) $(63,751) $ 964,036
Comprehensive income:
Net earnings............................ 118,659 118,659
Other comprehensive income, foreign
currency adjustment................... 298 298
----------
Total comprehensive income.......... 118,957
Cash dividends declared.................... (5,227) (5,227)
Stock option exercises (974 shares)........ 8,992 8,992
Issuance of restricted stock (220 shares),
net of forfeiture adjustments............ 3,563 (3,590) (27)
Earned compensation........................ 2,344 2,344
ESOP note receivable repayments............ 4,850 4,850
Income tax benefit credited to equity...... 4,627 4,627
Proceeds from issuance of equity put
options.................................. 1,814 1,814
Purchases of common stock for treasury
(8,128 shares)........................... (148,252) (148,252)
Issuance of treasury stock under Employee
Stock Purchase Plan (180 shares)......... 1,475 1,561 3,036
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Balance at February 27, 2000............... $1,349,267 $291,440 $(613,593) $(11,817) $(60,147) $ 955,150
============================================================================================================================
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Common Accumulated
Stock Other Total
and Retained Treasury Comprehensive Unearned Stockholders'
Surplus Earnings Stock Income Compensation Equity
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Balance at May 31, 1998.................... $1,286,191 $ 48,327 $(239,876) $(11,749) $(63,048) $1,019,845
Comprehensive income:
Net earnings............................ 89,451 89,451
Other comprehensive income, foreign
currency adjustment................... (843) (843)
----------
Total comprehensive income.......... 88,608
Cash dividends declared.................... (5,531) (5,531)
Stock option exercises (2,520 shares)...... 22,321 22,321
Issuance of restricted stock (333 shares),
net of forfeiture adjustments............ 4,104 (4,076) 28
Earned compensation........................ 1,461 1,461
ESOP note receivable repayments............ 975 975
Income tax benefit credited to equity...... 8,209 8,209
Proceeds from issuance of equity put
options.................................. 2,184 2,184
Purchases of common stock for treasury
(8,738 shares)........................... (153,683) (153,683)
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Balance at February 28, 1999............... $1,323,009 $132,247 $(393,559) $(12,592) $(64,688) $ 984,417
============================================================================================================================
See accompanying notes to consolidated financial statements.
6
DARDEN RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Thirteen Weeks Ended
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February 27, 2000 February 28, 1999
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Cash Flows--Operating Activities
Net earnings.................................................... $ 46,892 $ 38,353
Adjustments to reconcile net earnings to cash flow:
Depreciation and amortization................................. 32,990 31,415
Amortization of unearned compensation and loan costs.......... 1,540 1,155
Change in current assets and liabilities...................... 45,844 28,499
Change in other liabilities .................................. 46 22
Loss on disposal of land, buildings and equipment............. 549 381
Deferred income taxes......................................... 2,521 1,850
Other, net.................................................... (379) 496
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Net Cash Provided by Operating Activities................... $ 130,003 $ 102,171
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Cash Flows--Investment Activities
Purchases of land, buildings and equipment...................... (85,419) (28,938)
Purchases of intangibles........................................ (485) (568)
Increase in other assets........................................ (2,953) (1,405)
Proceeds from disposal of land, buildings and equipment
(including net assets held for disposal)...................... 4,014 7,799
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Net Cash Used by Investment Activities...................... $ (84,843) $ (23,112)
---------- ----------
Cash Flows--Financing Activities
Proceeds from issuance of common stock.......................... 2,549 7,621
Income tax benefit credited to equity........................... 518 3,051
Purchases of treasury stock..................................... (64,779) (66,988)
ESOP note receivable repayment.................................. 2,100 725
Increase in short-term debt..................................... 16,300 4,500
Repayment of long-term debt..................................... (2,100) (726)
Proceeds from issuance of equity put options.................... 675
Payment of loan costs........................................... (25)
----------
Net Cash Used by Financing Activities....................... $ (44,762) $ (51,817)
---------- ----------
Increase in Cash and Cash Equivalents.............................. 398 27,242
Cash and Cash Equivalents - Beginning of Period.................... 19,947 13,064
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Cash and Cash Equivalents - End of Period.......................... $ 20,345 $ 40,306
========== ==========
Cash Flow from Changes in Current Assets and Liabilities
Receivables..................................................... (24,695) (1,384)
Refundable income taxes, net.................................... 4,347
Inventories..................................................... 10,460 (13,772)
Prepaid expenses and other current assets....................... 2,328 1,162
Accounts payable................................................ 4,203 16,130
Accrued payroll................................................. 9,805 11,151
Accrued income taxes............................................ 16,683 369
Other accrued taxes............................................. 374 (400)
Other current liabilities....................................... 22,339 15,243
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Change in Current Assets and Liabilities...................... $ 45,844 $ 28,499
========== ==========
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See accompanying notes to consolidated financial statements.
7
DARDEN RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Thirty-Nine Weeks Ended
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February 27, 2000 February 28, 1999
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Cash Flows--Operating Activities
Net earnings.................................................... $ 118,659 $ 89,451
Adjustments to reconcile net earnings to cash flow:
Depreciation and amortization................................. 96,131 93,738
Amortization of unearned compensation and loan costs.......... 4,289 3,344
Change in current assets and liabilities...................... (70,612) 50,591
Change in other liabilities .................................. (56) 585
(Gain) loss on disposal of land, buildings and equipment...... 1,125 (221)
Deferred income taxes......................................... 13,134 14,329
Other, net.................................................... 148 178
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Net Cash Provided by Operating Activities................... $ 162,818 $ 251,995
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Cash Flows--Investment Activities
Purchases of land, buildings and equipment...................... (192,350) (84,393)
Purchases of intangibles........................................ (1,846) (1,642)
Increase in other assets........................................ (1,947) (2,040)
Proceeds from disposal of land, buildings and equipment
(including net assets held for disposal)...................... 16,733 29,487
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Net Cash Used by Investment Activities...................... $ (179,410) $ (58,588)
---------- ----------
Cash Flows--Financing Activities
Proceeds from issuance of common stock.......................... 11,870 22,321
Income tax benefit credited to equity........................... 4,627 8,209
Dividends paid.................................................. (5,227) (5,531)
Purchases of treasury stock..................................... (148,252) (153,683)
ESOP note receivable repayments................................. 4,850 975
Increase (decrease) in short-term debt.......................... 131,500 (60,100)
Repayment of long-term debt..................................... (4,856) (981)
Proceeds from issuance of equity put options.................... 1,814 2,184
Payment of loan costs........................................... (349)
----------
Net Cash Used by Financing Activities....................... $ (4,023) $ (186,606)
---------- ----------
(Decrease) Increase in Cash and Cash Equivalents................... (20,615) 6,801
Cash and Cash Equivalents - Beginning of Period.................... 40,960 33,505
---------- ----------
Cash and Cash Equivalents - End of Period.......................... $ 20,345 $ 40,306
========== ==========
Cash Flow from Changes in Current Assets and Liabilities
Receivables..................................................... (9,003) (296)
Inventories..................................................... (60,686) 31,515
Prepaid expenses and other current assets....................... (3,298) 2,393
Accounts payable................................................ (20,126) 4,961
Accrued payroll................................................. 525 (2,884)
Accrued income taxes............................................ 139 (324)
Other accrued taxes............................................. (2,785) (1,529)
Other current liabilities....................................... 24,622 16,755
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Change in Current Assets and Liabilities...................... $ (70,612) $ 50,591
========== ==========
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See accompanying notes to consolidated financial statements.
8
DARDEN RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollar Amounts in Thousands, Except per Share Data)
Note 1. Background
----------
These consolidated financial statements do not include certain
information and footnotes required by generally accepted accounting principles
for complete financial statements. However, in the opinion of management, all
adjustments considered necessary for a fair presentation have been included and
are of a normal recurring nature. Operating results for the thirteen and
thirty-nine weeks ended February 27, 2000 are not necessarily indicative of the
results that may be expected for the fiscal year ending May 28, 2000.
These statements should be read in conjunction with the consolidated
financial statements and footnotes included in our annual report on Form 10-K
for the year ended May 30, 1999. See Note 4 related to a reclassification made
to the May 30, 1999 consolidated balance sheet. The accounting policies used in
preparing these consolidated financial statements are the same as those
described in our annual report on Form 10-K.
Note 2. Consolidated Statements of Cash Flows
-------------------------------------
During the thirteen and thirty-nine weeks ended February 27, 2000,
Darden paid $9,323 and $18,488, respectively, for interest (net of amount
capitalized) and $1,671 and $48,210, respectively, for income taxes. During the
thirteen and thirty-nine weeks ended February 28, 1999, Darden paid $7,896 and
$16,439, respectively, for interest (net of amount capitalized) and $6,678 and
$10,749, respectively, for income taxes.
Note 3. Net Earnings Per Share
----------------------
Outstanding stock options issued by the Company represent the only
dilutive effect reflected in diluted weighted average shares outstanding.
Options to purchase 3,725,249 shares of common stock were excluded from the
calculation of diluted EPS for the thirteen weeks ended February 27, 2000
because their exercise prices exceeded the average market price of common shares
for the period. No options were excluded from the calculation of diluted EPS for
the thirteen weeks ended February 28, 1999. Options to purchase 3,597,926 and
58,700 shares of common stock were excluded from the calculation of diluted EPS
for the thirty-nine weeks ended February 27, 2000 and February 28, 1999,
respectively, because their exercise prices exceeded the average market price of
common shares for the period.
Note 4. Restructuring Liability
-----------------------
In 1997, the Company recorded restructuring charges of $70,900 in
connection with the closing of certain restaurant properties. The related
liabilities are included in other current liabilities in the accompanying
consolidated balance sheets and were established to accrue for estimated
carrying costs of buildings and equipment prior to disposal, employee severance
costs, lease buy-out provisions and other costs associated with the
restructuring action. All restaurant closings under this restructuring action
have been completed. The remaining restructuring actions, including disposal of
the closed owned properties and the lease buy-outs related to the closed leased
properties, are expected to be substantially completed during 2001.
9
DARDEN RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
(Dollar Amounts in Thousands, Except per Share Data)
Note 4. Restructuring Liability - continued
-----------------------------------
A summary of restructuring liability activity for the nine months ended February
27, 2000 is as follows:
Balance at May 30, 1999................................... $ 37,139
Non-cash Adjustment
Reclassification of asset impairment
(described below).................................. (12,000)
Cash Payments
Carrying costs and employee severance payments....... (2,247)
Lease payments including lease buy-outs.............. (4,875)
---------
Balance at February 27, 2000.............................. $ 18,017
=========
Asset impairment charges of $12 million included in the May 30, 1999
restructuring liability have been reclassified to reduce the carrying value of
land for all periods presented. This reclassification related to asset
impairment charges recorded in 1997 for long-lived assets associated with
Canadian restaurants.
10
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following table sets forth selected restaurant operating data as a
percentage of sales for the periods indicated. All information is derived from
the consolidated statements of earnings for the thirteen and thirty-nine weeks
ended February 27, 2000 and February 28, 1999.
Thirteen Weeks Ended Thirty-Nine Weeks Ended
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February 27, February 28, February 27, February 28,
2000 1999 2000 1999
- --------------------------------------------------------------------------------------------------------------------
Sales...................................... 100.0% 100.0% 100.0% 100.0%
Costs and Expenses:
Cost of sales:
Food and beverages.................... 32.2 32.8 32.1 32.9
Restaurant labor...................... 32.2 32.4 32.3 32.6
Restaurant expenses................... 13.5 13.8 14.2 14.6
------ ------ ------ ------
Total Cost of Sales................. 77.9% 79.0% 78.6% 80.1%
Selling, general and administrative..... 9.9 10.2 10.4 10.2
Depreciation and amortization........... 3.6 3.6 3.6 3.7
Interest, net........................... 0.7 0.5 0.6 0.6
------ ------ ------ ------
Total Costs and Expenses ......... 92.1% 93.3% 93.2% 94.6%
------ ------ ------ ------
Earnings before Income Taxes............... 7.9 6.7 6.8 5.4
Income Taxes............................... (2.8) (2.3) (2.4) (1.9)
------ ------ ------ ------
Net Earnings............................... 5.1% 4.4% 4.4% 3.5%
====== ====== ====== ======
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Financial Condition and Results of Operations
- ---------------------------------------------
For the fiscal 2000 third quarter ended February 27, 2000, earnings
after tax were $46.9 million or 36 cents per diluted share, compared to earnings
after tax of $38.4 million or 27 cents per diluted share in the third quarter of
fiscal 1999. The increase in third quarter earnings was primarily attributable
to strong same-restaurant sales at both Red Lobster and Olive Garden. Sales of
$917.5 million for the third quarter were 5.8% higher than last year's third
quarter.
For the first nine months of fiscal 2000, net earnings were $118.7
million or 89 cents per diluted share, compared to $89.5 million or 63 cents per
diluted share in the same fiscal 1999 period. Sales approximating $2.7 billion
for the first nine months of fiscal 2000 were 5.9% higher than last year.
Food and beverage costs for the quarter were 32.2% of sales, compared
to 32.8% of sales last year, primarily attributable to reduced product costs.
Restaurant labor decreased to 32.2% of sales compared to last year's 32.4% due
primarily to efficiencies resulting from higher sales volumes. Restaurant
expenses, also benefiting from higher sales volumes, decreased to 13.5% of sales
compared to 13.8% last year. The decrease in third quarter selling, general and
administrative expenses to 9.9% of sales compared to 10.2% of sales last year
was mainly attributable to reduced marketing expenses offset by additional labor
costs associated with new concept expansion and development. Depreciation and
amortization expense remained constant at 3.6% of sales. Interest expense
increased to 0.7% of sales compared to 0.5% last year due to higher levels of
short-term debt outstanding during the third quarter of fiscal 2000.
The effective tax rate for the third quarter of fiscal 2000 was 35.5%
compared to 34.5% in last year's second quarter. The increase in the effective
tax rate reflects a higher level of expected pre-tax income for fiscal 2000.
Food and beverage costs for the first nine months of fiscal 2000 were
32.1% of sales, down from last year's 32.9% primarily attributable to reduced
product costs, pricing, and a lower margin promotion run by Red Lobster during
the first quarter last year. Restaurant labor decreased to 32.3% of sales
compared to last year's 32.6% primarily due to efficiencies resulting from
higher sales volumes. Restaurant expenses decreased to 14.2% of sales compared
to 14.6% last year primarily as a result of higher sales volumes and the fixed
component of these
11
expenses which are not impacted by higher sales volumes. Selling, general and
administrative expenses increased to 10.4% of sales compared to 10.2% in the
prior year, primarily attributable to additional labor costs associated with new
concept expansion and development. Depreciation and amortization expense as a
percentage of sales decreased to 3.6% from 3.7% last year.
The effective tax rate for the first nine months of fiscal 2000 was
35.5% compared to 34.7% last year due to a higher level of expected pre-tax
income for the year.
Inventories totaled $204.8 million as of February 27, 2000, up from
$144.1 million at May 30, 1999. The increase resulted primarily from increased
lobster inventory related to Red Lobster's fourth quarter Lobsterfest promotion.
Accounts payable decreased primarily due to temporary changes made to supplier
terms in connection with the Company's recent change in distributors.
Short-term debt totaled $155.0 million as of February 27, 2000, up from
$23.5 million at May 30, 1999. The increase resulted primarily from increased
share repurchase activity due to favorable Company stock prices over the first
three quarters of fiscal 2000, as well as increased land, buildings and
equipment spending and the increased inventory levels discussed above.
Division Results
- ----------------
Red Lobster sales of $508.5 million were 3.1% above last year's third
quarter. Same-restaurant sales in the United States were up 5.0% for the
quarter, marking the ninth consecutive quarter of same-restaurant sales
increases. Third quarter operating profits were substantially improved over the
prior year due primarily to favorable food and beverage costs and restaurant
expenses as a percentage of sales. Through the first nine months of fiscal 2000,
Red Lobster's sales increased 3.6% to $1.5 billion and same-restaurant sales in
the United States increased by 5.6%. These results were achieved even though Red
Lobster operated 17 fewer restaurants at the end of the third quarter compared
to last year and did not repeat its high volume "Bottomless Crab" promotion that
helped generate high sales and traffic volumes in the first quarter of last
year.
Olive Garden continued its positive momentum in the third quarter of
fiscal 2000 with a 7.7% increase in sales to $395.7 million. Same-restaurant
sales in the United States increased 8.3%, marking the twenty-second consecutive
quarter of same-restaurant sales increases. Third quarter operating profits were
substantially improved over the prior year primarily due to increased sales and
lower restaurant labor expenses as a percentage of sales. Through the first nine
months of fiscal 2000, Olive Garden sales increased by 7.4% to 1.2 billion and
same-restaurant sales in the United States increased by 7.8%.
Bahama Breeze continues to produce strong sales at each of its ten
restaurants. Three additional restaurants are currently under construction, all
of which have expected fiscal 2000 opening dates.
Darden's latest test concept, Smokey Bones BBQ and Sports Bar, opened
its first restaurant on September 13, 1999 in Orlando, FL. This restaurant's
sales have exceeded management's initial expectations. Two additional
restaurants are currently under construction.
The table below details the number of restaurants open at the end of
the third quarter of fiscal 2000, compared with the number open at the end of
May 1999 and the end of last fiscal year's third quarter.
12
NUMBER OF RESTAURANTS
- --------------------------------------------------------------------------------------------------------------------
February 27, 2000 May 30, 1999 February 28, 1999
- --------------------------------------------------------------------------------------------------------------------
Red Lobster - USA............................... 619 635 634
Red Lobster - Canada............................ 32 34 34
------- ------- -------
Total...................................... 651 669 668
Olive Garden - USA.............................. 459 459 459
Olive Garden - Canada........................... 5 5 5
------- ------- -------
Total...................................... 464 464 464
Bahama Breeze................................... 10 6 4
------- ------- -------
Smokey Bones.................................... 1 0 0
------- ------- -------
Total.................................. 1,126 1,139 1,136
======= ======= =======
- --------------------------------------------------------------------------------------------------------------------
Year 2000
- ---------
The total cost to the Company of Year 2000 activities has not been and
is not anticipated to be material to its financial position or results of
operations in any given year. As of February 27, 2000, the Company had spent
approximately $3.4 million on Year 2000 issues. This amount does not include the
costs incurred to develop and install new systems resulting from the Company's
seafood inventory accounting system project which was already contemplated for
replacement.
The total cost to the Company of addressing Year 2000 issues had been
estimated to be less than $5 million. This amount was based on management's best
estimates, which were derived utilizing numerous assumptions of future events,
including the continued availability of certain resources, third-party
modification plans and other factors. While there can be no guarantee that these
estimates will be achieved, and actual results could differ from those
estimates, management now anticipates that the total cost to the Company of
addressing Year 2000 issues will be well under $5 million.
As of the filing date of this report, the Company's business and
operations have not been materially impacted by Year 2000 matters. For a more
in-depth discussion of Year 2000, reference is made to the Company's Annual
Report on Form 10-K for the fiscal year ended May 30, 1999.
Forward-Looking Statements
- --------------------------
Certain information included in this report and other materials filed
or to be filed by the Company with the Securities and Exchange Commission (as
well as information included in oral statements or written statements made or to
be made by the Company) may contain statements that are forward-looking within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Such statements
include information relating to current expansion plans, business development
activities, and Year 2000 compliance. Such forward-looking information is based
on assumptions concerning important risks and uncertainties that could
significantly affect anticipated results in the future and, accordingly, such
results may differ from those expressed in any forward-looking statements made
by or on behalf of the Company. These risks and uncertainties include, but are
not limited to, those relating to real estate development and construction
activities, the issuance and renewal of licenses and permits for restaurant
development and operation, economic conditions, changes in federal or state laws
or the administration of such laws, and the Year 2000 readiness of suppliers,
banks, vendors and others having a direct or indirect business relationship with
the Company. Additional discussion of potential risks and uncertainties appears
in this report in Exhibit 99.
13
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit 12 Computation of Ratio of Consolidated
Earnings to Fixed Charges
Exhibit 27 Financial Data Schedule
Exhibit 99 Cautionary Statements Under the Private
Securities Litigation Reform Act of 1995
(b) Reports on Form 8-K.
(i) On December 15, 1999, the Company filed a current
report on Form 8-K announcing second quarter earnings
for fiscal 2000 and certain officer promotions.
(ii) On January 19, 2000, the Company filed a current
report on Form 8-K announcing food and product
distribution relationships with MBM Corporation and
Marriott Distribution Services.
(iii) On February 28, 2000, the Company filed a current
report on Form 8-K reporting on certain issues
addressed during its conference for investors and
restaurant analysts.
14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DARDEN RESTAURANTS, INC.
Dated: April 10, 2000 By: /s/ Paula J. Shives
----------------------------------------------
Paula J. Shives
Senior Vice President,
General Counsel and Secretary
Dated: April 10, 2000 By: /s/ Clarence Otis, Jr.
----------------------------------------------
Clarence Otis, Jr.
Senior Vice President, Chief Financial Officer
(Principal financial officer)
15
INDEX TO EXHIBITS
Exhibit
Number Exhibit Title Page
- ------- ------------- ----
12 Computation of Ratio of Consolidated
Earnings to Fixed Charges 17
27 Financial Data Schedule 18
99 Cautionary Statements Under the Private
Securities Litigation Reform Act of 1995 19
16