EXHIBIT 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DARDEN RESTAURANTS, INC.
2001 Annual Report to Stockholders
PAGE 18
As of May 27, 2001, Darden Restaurants, Inc. (Darden or the Company) operated
1,168 Red Lobster, Olive Garden, Bahama Breeze and Smokey Bones BBQ Sports Bar
restaurants in the U.S. and Canada and licensed 34 restaurants in Japan. All of
the restaurants in the U.S. and Canada are operated by the Company with no
franchising.
This discussion should be read in conjunction with the business information and
the consolidated financial statements and related notes found elsewhere in this
report.
Darden's fiscal year ends on the last Sunday in May. Fiscal years ended 2001,
2000, and 1999 each consisted of 52 weeks of operation.
REVENUES
Total revenues in 2001 were $4.02 billion, an 8.6 percent increase from 2000.
Total revenues in 2000 were $3.70 billion, a 7.0 percent increase from 1999.
COSTS AND EXPENSES
Food and beverage costs for both 2001 and 2000 were 32.4 percent of sales, a
decrease of 0.4 percentage points from 1999. The comparability in 2001 and 2000
food and beverage costs, as a percentage of sales, is primarily a result of
favorable menu-mix changes, pricing changes, and other efficiencies resulting
from higher sales volumes, offset by higher product costs. The decrease in food
and beverage costs in 2000 from 1999, as a percentage of sales, is primarily
attributable to pricing, margin improving initiatives such as waste reduction,
and a lower-margin promotion run by Red Lobster during the first quarter of
1999.
Restaurant labor decreased in 2001 to 31.4 percent of sales, compared to 31.9
percent of sales in 2000 and 32.3 percent of sales in 1999 primarily due to
efficiencies resulting from higher sales volumes.
Restaurant expenses (primarily lease expenses, property taxes, credit card fees,
utilities, and workers' compensation costs) amounted to 14.2 percent of sales in
2001, which was comparable to the 14.1 and 14.3 percent of sales levels in 2000
and 1999, respectively. The comparability is a result of higher sales volumes
and the fixed component of these expenses which are not impacted by higher sales
volumes, offset by higher utility costs.
Selling, general, and administrative expenses decreased in 2001 to 10.1 percent
of sales, compared to 10.3 percent in 2000 and 10.4 percent in 1999. The
decrease in 2001 is principally a result of reduced marketing expenses as a
percent of sales, partially offset by additional labor costs associated with new
concept expansion and development.
Depreciation and amortization expense of 3.7 percent of sales in 2001 increased
from 3.5 percent in 2000 and 3.6 percent in 1999 primarily as a result of new
restaurant and remodel activity, partially offset by the favorable impact of
higher sales volumes. Interest expense increased to 0.8 percent of sales in
2001, compared to 0.6 percent of sales in 2000 and 1999. The increase is
primarily due to higher debt levels in 2001.
INCOME FROM OPERATIONS
Pre-tax earnings increased by 12.4 percent in 2001 to $301.2 million, compared
to $268.0 million (before net restructuring and asset impairment credit) in 2000
and $207.4 million (before net restructuring credit) in 1999. The increase in
2001 was primarily attributable to annual same-restaurant sales increases in the
U.S. for both Red Lobster and Olive Garden totaling 5.9 percent and 7.2 percent,
respectively. The increase in 2000 was mainly attributable to annual
same-restaurant sales increases in the U.S. for both Red Lobster and Olive
Garden totaling 7.6 percent and 7.2 percent, respectively. Red Lobster and Olive
Garden have enjoyed 14 and 27 consecutive quarters of U.S. same-restaurant sales
increases, respectively.
PROVISION FOR INCOME TAXES
The effective tax rate for 2001 was 34.6 percent, compared to 35.4 percent in
2000 (before net restructuring and asset impairment credit) and 34.8 percent in
1999 (before net restructuring credit). The decrease in the effective tax rate
from 2000 to 2001 resulted primarily from increases in income tax credits and
deductions that were not available in 2000. The increase in the effective tax
rate from 1999 to 2000 is primarily a result of higher 2000 pre-tax earnings.
DARDEN RESTAURANTS, INC.
2001 Annual Report to Stockholders
PAGE 19
NET EARNINGS AND NET EARNINGS PER SHARE BEFORE NET RESTRUCTURING
AND ASSET IMPAIRMENT CREDIT
Net earnings for 2001 of $197.0 million, or $1.59 per diluted share, increased
13.8 percent, compared to 2000 net earnings before net restructuring and asset
impairment credit of $173.1 million, or $1.31 per diluted share. Net earnings
before net restructuring and asset impairment credit for 2000 increased 27.9
percent, compared to net earnings before restructuring credit for 1999 of $135.3
million, or 96 cents per diluted share.
NET EARNINGS AND NET EARNINGS PER SHARE
Net earnings for 2001 of $197.0 million ($1.59 per diluted share) compared with
net earnings after net restructuring and asset impairment credit for 2000 of
$176.7 million ($1.34 per diluted share) and net earnings after restructuring
credit of $140.5 million ($0.99 per diluted share).
During 1997, an after-tax restructuring and asset impairment charge of $145.4
million ($0.93 per diluted share) was taken related to low-performing restaurant
properties in the U.S. and Canada and other long-lived assets, including those
restaurants that have been closed. The pre-tax charge included approximately
$160.7 million of non-cash charges primarily related to the write-down of
buildings and equipment to net realizable value and approximately $69.2 million
of charges to be settled in cash related to carrying costs of buildings and
equipment prior to their disposal, lease buy-out provisions, employee severance
and other costs. Cash required to carry out these activities is being provided
by operations and the sale of closed properties.
After-tax restructuring credits of $5.2 million and $5.2 million were taken in
the fourth quarter of 2000 and 1999, respectively, as the Company reversed
portions of its 1997 restructuring liability. The 2000 reversal primarily
resulted from favorable lease terminations. The 1999 reversal primarily resulted
from the Company's decision to close fewer restaurants than identified for
closure as part of the initial restructuring action. The credits had no effect
on the Company's cash flow.
During 2000, an after-tax asset impairment charge of $1.6 million was taken in
the fourth quarter related to additional write-downs of the value of properties
held for disposition.
FINANCIAL CONDITION
Short-term debt totaled $12.0 million as of May 27, 2001, down from $115.0
million at May 28, 2000. The decrease resulted primarily from the Company's
issuance of long-term debt in which the proceeds were used to repay short-term
debt.
LIQUIDITY AND CAPITAL RESOURCES
The Company intends to manage its business and its financial ratios to maintain
an investment grade bond rating, which allows access to financing at reasonable
costs. Currently, the Company's publicly issued long-term debt carries "Baa1"
(Moody's Investors Service), "BBB+" (Standard & Poor's) and "BBB+" (Fitch)
ratings. The Company's commercial paper has ratings of "P-2" (Moody's Investors
Service), "A-2" (Standard & Poor's) and "F-2" (Fitch). Such ratings are only
accurate as of the date of this report and have been obtained with the
understanding that Moody's Investors Service, Standard & Poor's, and Fitch will
continue to monitor the credit of the Company and make future adjustments to
such ratings to the extent warranted. The ratings may be changed, superseded, or
withdrawn at any time.
Darden's long-term debt includes $150 million of unsecured 6.375 percent notes
due in February 2006 and $100 million of unsecured 7.125 percent debentures due
in February 2016. In September 2000, the Company also issued $150 million of
unsecured 8.375 percent senior notes due in September 2005. Proceeds of the
issuance were used to repay short-term debt.
In November 2000, Darden filed a prospectus supplement with the Securities and
Exchange Commission allowing the Company to offer up to $350 million of
medium-term notes from time to time. The notes will be unsecured, may bear
interest at either fixed or floating rates, and may have maturity dates of nine
months or more after issuance. In April 2001, the Company issued $75 million of
7.45 percent fixed rate notes under this program with a maturity date of April
2011. Proceeds of the issuance were used to repay short-term debt.
As of May 27, 2001, Darden's long-term debt also includes a $44.5 million
commercial bank loan that is used to support two loans from the Company to the
Employee Stock Ownership Plan portion of the Darden Savings Plan.
DARDEN RESTAURANTS, INC.
2001 Annual Report to Stockholders
PAGE 20
The Company has a commercial paper program that serves as its primary source of
short-term financing. As of May 27, 2001, there were $12 million of borrowings
outstanding under the program. To support the program, the Company has a credit
facility with a consortium of banks under which the Company can borrow up to
$300 million. As of May 27, 2001, no amounts were outstanding under the credit
facility. The credit facility expires in October 2004 and contains various
restrictive covenants, such as maximum debt to capital ratios. None of these
covenants is expected to impact the Company's liquidity or capital resources.
The Company's adjusted debt-to-adjusted-total capital ratio (which includes 6.25
times the total annual restaurant minimum rent and 3.00 times the total annual
restaurant equipment minimum rent as a component of adjusted debt and adjusted
total capital) was 44 percent and 42 percent at May 27, 2001, and May 28, 2000,
respectively. The Company's fixed-charge coverage ratio, which measures the
number of times each year that the Company earns enough to cover its fixed
charges, amounted to 6.5 times and 7.1 times at May 27, 2001, and May 28, 2000,
respectively. Based on these ratios, the Company believes its financial
condition remains strong. The composition of the Company's capital structure is
shown in the following table.
May 27, 2001 May 28, 2000
CAPITAL STRUCTURE $ In millions $ In millions
- --------------------------------------------------------------------------------------------------------------------
Short-term debt $ 12.0 $ 115.0
Long-term debt 520.6 306.6
- --------------------------------------------------------------------------------------------------------------------
Total debt 532.6 421.6
Stockholders' equity 1,035.2 960.5
- --------------------------------------------------------------------------------------------------------------------
Total capital $ 1,567.8 $ 1,382.1
====================================================================================================================
ADJUSTMENTS TO CAPITAL
- --------------------------------------------------------------------------------------------------------------------
Leases-debt equivalent 275.1 264.8
Adjusted total debt 807.7 686.4
Adjusted total capital $ 1,842.9 $ 1,646.9
Debt-to-total capital ratio 34% 31%
Adjusted debt-to-adjusted total capital ratio 44% 42%
====================================================================================================================
In 2001, 2000, and 1999, the Company declared eight cents per share in annual
dividends paid in two installments. In March 2000, the Company's Board approved
an additional authorization for the ongoing stock buy-back plan whereby the
Company may purchase on the open market up to 20.0 million additional shares of
Darden common stock. This buy-back authorization is in addition to previously
approved authorizations by the Board covering open market purchases of up to
44.6 million shares of Darden common stock. In 2001, 2000, and 1999, the Company
purchased treasury stock totaling $177 million, $202 million, and $228 million,
respectively. As of May 27, 2001, a total of 52.5 million shares have been
purchased under the various stock buy-back plan authorizations.
The Company generated $421 million, $343 million, and $358 million in funds from
operating activities during 2001, 2000, and 1999, respectively. The Company
requires capital principally for building new restaurants, replacing equipment
and remodeling existing restaurants. Capital expenditures were $355 million in
2001, compared to $269 million in 2000, and $124 million in 1999. The increased
expenditures in 2001 and 2000 resulted primarily from new restaurant growth as
well as remodeling activity at Olive Garden and Red Lobster restaurants. The
2001, 2000, and 1999 capital expenditures, treasury stock purchases, and
dividend requirements were financed primarily through internally generated funds
and the issuance of commercial paper. This has resulted in the Company carrying
current liabilities in excess of current assets. The Company estimates that its
2002 capital expenditures will be slightly more in amount to that of 2001.
The Company is not aware of any other trends or events that would materially
affect its capital requirements or liquidity. The Company believes that its
internal cash generating capabilities and short-term borrowings available
through its commercial paper program should be sufficient to finance its capital
expenditures and other operating activities through fiscal 2002.
IMPACT OF INFLATION
For 2001, 2000, and 1999, management does not believe that inflation has had a
significant overall effect on the Company's operations. As operating expenses
increase, management believes the Company has historically been able to pass on
increased costs through menu price increases and other strategies.
DARDEN RESTAURANTS, INC.
2001 Annual Report to Stockholders
PAGE 21
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to a variety of market risks, including fluctuations in
interest rates, foreign currency exchange rates, and commodity prices. To manage
this exposure, Darden periodically enters into interest rate, foreign currency
exchange, and commodity instruments for other than trading purposes.
The Company uses the variance/covariance method to measure value at risk, over
time horizons ranging from one week to one year, at the 95 percent confidence
level. As of May 27, 2001, the Company's potential losses in future net earnings
resulting from changes in foreign currency exchange rates, commodity prices, and
floating rate debt interest rate exposures were approximately $1 million over a
period of one year. The Company issued $225 million of new long-term fixed rate
debt during fiscal 2001. The value at risk from an increase in the fair value of
all of the Company's long-term fixed rate debt, over a period of one year, was
approximately $40 million. The fair value of the Company's long-term fixed rate
debt during fiscal 2001 averaged $359 million, with a high of $472 million and a
low of $229 million. The Company's interest rate risk management objective is to
limit the impact of interest rate changes on earnings and cash flows by
targeting an appropriate mix of variable and fixed rate debt.
FUTURE APPLICATION OF ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 requires that all derivative
instruments be recorded on the balance sheet at fair value. Gains or losses
resulting from changes in the fair values of those derivatives are recorded each
period in current earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge transaction and the type of hedge
transaction. The ineffective portion of all hedges will be recognized in
earnings. In June 1999, the FASB issued SFAS 137, which deferred the effective
date of adoption of SFAS 133 for one year. In June 2000, the FASB issued SFAS
138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities - an Amendment of FASB Statement No. 133". SFAS 138, which amends the
accounting and reporting standards of SFAS 133 for certain derivative
instruments and hedging activities, must be adopted concurrently with SFAS 133.
The Company adopted SFAS 133 and SFAS 138 in the first quarter of fiscal 2002.
Adoption of SFAS 133 and SFAS 138 did not materially impact the Company's
consolidated financial position, results of operations or cash flows.
FORWARD-LOOKING STATEMENTS
Certain statements included in this report 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. Words or phases such as
"believe", "plan", "will", "expect", "intend", "is anticipated", "estimate",
"project", and similar expressions are intended to identify forward-looking
statements. All of these statements, and any other statements in this report
that are not historical facts, are forward-looking. Examples of forward-looking
statements include, but are not limited to, projections regarding expected
casual dining sales growth; the ability of the casual dining segment to weather
economic downturns; demographic trends; the Company's expansion plans and
business development activities; and the Company's long-term goals of increasing
market share, expanding margins on incremental sales, and growing earnings 15
percent to 20 percent per year on a compound annual basis. Forward-looking
statements are based on assumptions concerning important risks and uncertainties
that could significantly affect anticipated results. These risks and
uncertainties include, but are not limited to, (i) the highly competitive nature
of the restaurant industry, especially pricing, service, location, personnel,
and type and quality of food; (ii) economic, market, and other conditions,
including changes in consumer preferences and demographic trends; (iii) changes
in food and other costs, and the general impact of inflation; (iv) the
availability of desirable restaurant locations; (v) government regulations,
including those relating to zoning, land use, environmental matters, and liquor
licenses; and (vi) growth plans, including real estate development and
construction activities, the issuance and renewal of licenses, and permits for
restaurant development and the availability of funds to finance growth. If the
Company's projections and estimates regarding these key factors differ
materially from what actually occurs, the Company's actual results could vary
significantly from the performance projected in its forward-looking statements.
DARDEN RESTAURANTS, INC.
2001 Annual Report to Stockholders
PAGE 22
REPORT OF MANAGEMENT RESPONSIBILITIES
The management of Darden Restaurants, Inc. is responsible for the fairness and
accuracy of the consolidated financial statements. The consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles, using management's best estimates and judgments where appropriate.
The financial information throughout this report is consistent with our
consolidated financial statements.
Management has established a system of internal controls that provides
reasonable assurance that assets are adequately safeguarded, and transactions
are recorded accurately, in all material respects, in accordance with
management's authorization. We maintain a strong audit program that
independently evaluates the adequacy and effectiveness of internal controls. Our
internal controls provide for appropriate separation of duties and
responsibilities, and there are documented policies regarding utilization of
Company assets and proper financial reporting. These formally stated and
regularly communicated policies set high standards of ethical conduct for all
employees.
The Audit Committee of the Board of Directors meets regularly to determine that
management, internal auditors, and independent auditors are properly discharging
their duties regarding internal control and financial reporting. The independent
auditors, internal auditors, and employees have full and free access to the
Audit Committee at any time.
KPMG LLP, independent certified public accountants, are retained to audit the
consolidated financial statements. Their report follows.
/s/ Joe R. Lee
Joe R. Lee
Chairman of the Board and Chief Executive Officer
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Darden Restaurants, Inc.
We have audited the accompanying consolidated balance sheets of Darden
Restaurants, Inc. and subsidiaries as of May 27, 2001, and May 28, 2000, and the
related consolidated statements of earnings, changes in stockholders' equity,
and cash flows for each of the years in the three-year period ended May 27,
2001. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Darden Restaurants,
Inc. and subsidiaries as of May 27, 2001, and May 28, 2000, and the results of
their operations and their cash flows for each of the years in the three-year
period ended May 27, 2001, in conformity with accounting principles generally
accepted in the United States of America.
/s/ KPMG LLP
Orlando, Florida
June 15, 2001
DARDEN RESTAURANTS, INC.
2001 Annual Report to Stockholders
PAGE 23
CONSOLIDATED STATEMENTS OF EARNINGS
Fiscal Year Ended
- --------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data) May 27, 2001 May 28, 2000 May 30, 1999
- --------------------------------------------------------------------------------------------------------------------
Sales $4,021,157 $3,701,256 $ 3,458,107
Costs and Expenses:
Cost of sales:
Food and beverage 1,302,926 1,199,709 1,133,705
Restaurant labor 1,261,837 1,181,156 1,117,401
Restaurant expenses 569,963 519,832 493,811
- --------------------------------------------------------------------------------------------------------------------
Total Cost of Sales $3,134,726 $2,900,697 $ 2,744,917
Selling, general and administrative 407,685 379,731 360,909
Depreciation and amortization 146,864 130,464 125,327
Interest, net 30,664 22,388 19,540
Restructuring and asset impairment credit, net (5,931) (8,461)
- --------------------------------------------------------------------------------------------------------------------
Total Costs and Expenses $3,719,939 $3,427,349 $ 3,242,232
- --------------------------------------------------------------------------------------------------------------------
Earnings before Income Taxes 301,218 273,907 215,875
Income Taxes 104,218 97,202 75,337
- --------------------------------------------------------------------------------------------------------------------
Net Earnings $ 197,000 $ 176,705 $ 140,538
====================================================================================================================
Net Earnings per Share:
Basic $ 1.64 $ 1.38 $ 1.02
Diluted $ 1.59 $ 1.34 $ 0.99
====================================================================================================================
Average Number of Common Shares Outstanding:
Basic 119,800 128,500 137,300
Diluted 123,800 131,900 141,400
====================================================================================================================
See accompanying notes to consolidated financial statements.
DARDEN RESTAURANTS, INC.
2001 Annual Report to Stockholders
PAGE 24
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------------------------------------------
(In thousands) May 27, 2001 May 28, 2000
- --------------------------------------------------------------------------------------------------------------------
ASSETS
Current Assets:
Cash and cash equivalents $ 61,814 $ 26,102
Receivables 32,870 27,962
Inventories 148,429 142,187
Net assets held for disposal 10,087 19,614
Prepaid expenses and other current assets 26,942 26,525
Deferred income taxes 48,000 48,070
- --------------------------------------------------------------------------------------------------------------------
Total Current Assets $ 328,142 $ 290,460
Land, Buildings and Equipment 1,779,515 1,578,541
Other Assets 110,801 102,422
- --------------------------------------------------------------------------------------------------------------------
Total Assets $ 2,218,458 $ 1,971,423
====================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 156,859 $ 140,487
Short-term debt 12,000 115,000
Current portion of long-term debt 2,647 2,513
Accrued payroll 82,588 77,805
Accrued income taxes 47,698 33,256
Other accrued taxes 27,429 25,524
Other current liabilities 225,037 212,302
- --------------------------------------------------------------------------------------------------------------------
Total Current Liabilities $ 554,258 $ 606,887
Long-term Debt 517,927 304,073
Deferred Income Taxes 90,782 79,102
Other Liabilities 20,249 20,891
- --------------------------------------------------------------------------------------------------------------------
Total Liabilities $ 1,183,216 $ 1,010,953
- --------------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Common stock and surplus, no par value. Authorized
500,000 shares; issued 169,299 and 165,977 shares,
respectively; outstanding 117,380 and 122,192 shares,
respectively $ 1,405,799 $ 1,351,707
Preferred stock, no par value. Authorized 25,000 shares;
none issued and outstanding
Retained earnings 532,121 344,579
Treasury stock, 51,919 and 43,785 shares, at cost (840,254) (666,837)
Accumulated other comprehensive income (13,102) (12,457)
Unearned compensation (49,322) (56,522)
- --------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity $ 1,035,242 $ 960,470
- --------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' $ 2,218,458 $ 1,971,423
Equity
====================================================================================================================
See accompanying notes to consolidated financial statements.
DARDEN RESTAURANTS, INC.
2001 Annual Report to Stockholders
PAGE 25
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------------------------------------------
Common Accumulated
Stock Other Total
and Retained Treasury Comprehensive Unearned Stockholders'
(In thousands, except per share data) Surplus Earnings Stock Income Compensation Equity
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Balance at May 31, 1998 $1,286,191 $ 48,327 $(239,876) $(11,749) $(63,048) $1,019,845
- --------------------------------------------------------------------------------------------------------------------
Comprehensive income:
Net earnings 140,538 140,538
Other comprehensive income, foreign
currency adjustment (366) (366)
--------
Total comprehensive income 140,172
Cash dividends declared ($0.08 per share) (10,857) (10,857)
Stock option exercises (2,789 shares) 25,437 25,437
Issuance of restricted stock (370 shares),
net of forfeiture adjustments 4,873 (4,844) 29
Earned compensation 2,341 2,341
ESOP note receivable repayments 1,800 1,800
Income tax benefit credited to equity 9,722 9,722
Proceeds from issuance of equity put
options 2,184 2,184
Purchases of common stock for treasury
(12,162 shares) (227,510) (227,510)
Issuance of treasury stock under Employee
Stock Purchase Plan (55 shares) 389 484 873
- --------------------------------------------------------------------------------------------------------------------
Balance at May 30, 1999 1,328,796 178,008 (466,902) (12,115) (63,751) 964,036
- --------------------------------------------------------------------------------------------------------------------
Comprehensive income:
Net earnings 176,705 176,705
Other comprehensive income, foreign
currency adjustment (342) (342)
---------
Total comprehensive income 176,363
Cash dividends declared ($0.08 per share) (10,134) (10,134)
Stock option exercises (1,153 shares) 10,212 10,212
Issuance of restricted stock (163
shares), net of forfeiture adjustments 3,638 (3,685) (47)
Earned compensation 3,314 3,314
ESOP note receivable repayments 7,600 7,600
Income tax benefit credited to equity 5,506 5,506
Proceeds from issuance of equity put
options 1,814 1,814
Purchases of common stock for treasury
(11,487 shares) (202,105) (202,105)
Issuance of treasury stock under Employee
Stock Purchase Plan (243 shares) 1,741 2,170 3,911
- --------------------------------------------------------------------------------------------------------------------
Balance at May 28, 2000 1,351,707 344,579 (666,837) (12,457) (56,522) 960,470
- --------------------------------------------------------------------------------------------------------------------
Comprehensive income:
Net earnings 197,000 197,000
Other comprehensive income, foreign
currency adjustment (645) (645)
-----------
Total comprehensive income 196,355
Cash dividends declared ($0.08 per share) (9,458) (9,458)
Stock option exercises (3,113 shares) 33,158 33,158
Issuance of restricted stock (295
shares), net of forfeiture adjustments 3,986 1,035 (5,109) (88)
Earned compensation 4,164 4,164
ESOP note receivable repayments 8,145 8,145
Income tax benefit credited to equity 15,287 15,287
Purchases of common stock for treasury
(8,440 shares) (176,511) (176,511)
Issuance of treasury stock under Employee
Stock Purchase and other plans
(224 shares) 1,661 2,059 3,720
- --------------------------------------------------------------------------------------------------------------------
Balance at May 27, 2001 $1,405,799 $532,121 $(840,254) $(13,102) $(49,322) $1,035,242
- --------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
DARDEN RESTAURANTS, INC.
2001 Annual Report to Stockholders
PAGE 26
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal Year Ended
- --------------------------------------------------------------------------------------------------------------------
(In thousands) May 27, 2001 May 28, 2000 May 30, 1999
- --------------------------------------------------------------------------------------------------------------------
Cash Flows - Operating Activities
Net Earnings $ 197,000 $ 176,705 $ 140,538
Adjustments to reconcile net earnings to cash flow:
Depreciation and amortization 146,864 130,464 125,327
Amortization of unearned compensation and loan costs 7,031 5,895 4,879
Change in current assets and liabilities 41,740 2,472 70,924
Change in other liabilities (642) (371) 2,682
(Gain) loss on disposal of land, buildings and equipment 1,559 2,683 (1,798)
Deferred income taxes 11,750 24,609 13,967
Income tax benefit credited to equity 15,287 5,506 9,722
Non-cash restructuring and asset impairment credit, net (5,931) (8,461)
Other, net (19) 594 162
- --------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities $ 420,570 $ 342,626 $ 357,942
- --------------------------------------------------------------------------------------------------------------------
Cash Flows - Investing Activities
Purchases of land, buildings and equipment (355,139) (268,946) (123,673)
Purchases of intangibles (11,215) (2,431) (2,203)
(Increase) decrease in other assets 485 611 (8,794)
Proceeds from disposal of land, buildings and equipment
(including net assets held for disposal) 13,492 20,998 38,134
- --------------------------------------------------------------------------------------------------------------------
Net Cash Used by Investing Activities $ (352,377) $(249,768) $ (96,536)
- --------------------------------------------------------------------------------------------------------------------
Cash Flows - Financing Activities
Proceeds from issuance of common stock 36,701 13,944 26,310
Dividends paid (9,458) (10,134) (10,857)
Purchases of treasury stock (176,511) (202,105) (227,510)
ESOP note receivable repayments 8,145 7,600 1,800
Increase (decrease) in short-term debt (103,000) 91,500 (51,600)
Proceeds from issuance of long-term debt 224,454 9,848
Repayment of long-term debt (10,658) (9,986) (4,126)
Payment of loan costs (2,154) (349)
Proceeds from issuance of equity put options 1,814 2,184
- --------------------------------------------------------------------------------------------------------------------
Net Cash Used by Financing Activities $ (32,481) $(107,716) $ (253,951)
- --------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents 35,712 (14,858) 7,455
Cash and Cash Equivalents - Beginning of Year 26,102 40,960 33,505
- --------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents - End of Year $ 61,814 $ 26,102 $ 40,960
====================================================================================================================
Cash Flow from Changes in Current Assets and Liabilities
Receivables (4,908) (7,706) 7,056
Inventories (6,242) (1,485) 41,697
Prepaid expenses and other current assets (289) (4,184) (1,310)
Accounts payable 16,372 (4,238) 11,787
Accrued payroll 4,783 3,540 1,025
Accrued income taxes 14,442 16,712 15,477
Other accrued taxes 1,905 (441) 1,793
Other current liabilities 15,677 274 (6,601)
- --------------------------------------------------------------------------------------------------------------------
Change in Current Assets and Liabilities $ 41,740 $ 2,472 $ 70,924
====================================================================================================================
See accompanying notes to consolidated financial statements.
DARDEN RESTAURANTS, INC.
2001 Annual Report to Stockholders
PAGE 27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying 2001, 2000 and 1999 consolidated financial statements include
the operations of Darden Restaurants, Inc. and its wholly owned subsidiaries
(Darden or the Company). All significant intercompany balances and transactions
have been eliminated in consolidation.
Fiscal Year
Darden's fiscal year ends on the last Sunday in May. Fiscal years 2001, 2000 and
1999 each consisted of 52 weeks.
Inventories
Inventories are valued at the lower of weighted average cost or market.
Land, Buildings and Equipment
All land, buildings and equipment are recorded at cost. Building components are
depreciated over estimated useful lives ranging from seven to 40 years using the
straight-line method. Equipment is depreciated over estimated useful lives
ranging from three to ten years also using the straight-line method. Accelerated
depreciation methods are generally used for income tax purposes.
Intangible Assets
The cost of intangible assets at May 27, 2001, and May 28, 2000, amounted to
$26,818 and $16,412, respectively. Intangibles are amortized using the
straight-line method over their estimated useful lives ranging from three to 40
years. Costs capitalized principally represent software and related development
costs and the purchase costs of leases with favorable rent terms. Accumulated
amortization on intangible assets as of May 27, 2001, and May 28, 2000, amounted
to $6,199 and $5,201, respectively.
Impairment of Long-Lived Assets
Restaurant sites and certain identifiable intangibles are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future net cash flows expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceeds their fair value.
Restaurant sites and certain identifiable intangibles to be disposed of are
reported at the lower of their carrying amount or fair value, less estimated
costs to sell.
Liquor Licenses
The costs of obtaining non-transferable liquor licenses that are directly issued
by local government agencies for nominal fees are expensed in the year incurred.
The costs of purchasing transferable liquor licenses through open markets in
jurisdictions with a limited number of authorized liquor licenses are
capitalized. If there is permanent impairment in the value of a liquor license
due to market changes, the asset is written down to its net realizable value.
Annual liquor license renewal fees are expensed.
Foreign Currency Translation
The Canadian dollar is the functional currency for Darden's Canadian restaurant
operations. Assets and liabilities denominated in Canadian dollars are
translated into U.S. dollars using the exchange rates in effect at the balance
sheet date. Results of operations are translated using the average exchange
rates prevailing throughout the period. Translation gains and losses are
reported as a separate component of accumulated other comprehensive income in
stockholders' equity. Gains and losses from foreign currency transactions are
included in the consolidated statements of earnings for each period.
Pre-Opening Costs
Non-capital expenditures associated with opening new restaurants are expensed as
incurred.
DARDEN RESTAURANTS, INC.
2001 Annual Report to Stockholders
PAGE 28
Advertising
Production costs of commercials and programming are charged to operations in the
year the advertising is first aired. The costs of other advertising, promotion,
and marketing programs are charged to operations in the year incurred.
Advertising expense was $196,314, $182,220, and $180,563, in 2001, 2000, and
1999, respectively.
Income Taxes
The Company provides for federal and state income taxes currently payable as
well as for those deferred because of temporary differences between reporting
income and expenses for financial statement purposes versus tax purposes.
Federal income tax credits are recorded as a reduction of income taxes. Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
Statements of Cash Flows
For purposes of the consolidated statements of cash flows, amounts receivable
from credit card companies and investments purchased with a maturity of three
months or less are considered cash equivalents.
Net Earnings Per Share
Basic earnings per share is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding for the
reporting period. Diluted earnings per share reflects the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock. Outstanding stock options issued by
the Company represent the only dilutive effect reflected in diluted weighted
average shares.
Options to purchase 2,412,600, 3,586,200, and 120,200 shares of common stock
were excluded from the calculation of diluted earnings per share for the years
ended May 27, 2001, May 28, 2000, and May 30, 1999, respectively, because their
exercise prices exceeded the average market price of common shares for the
period.
Derivative Financial and Commodity Instruments
The Company may, from time to time, use financial and commodities derivatives in
the management of interest rate and commodities pricing risks that are inherent
in its business operations. The Company may also use financial derivatives as
part of its stock repurchase program as described in Note 10. Such instruments
are not held or issued for trading or speculative purposes. The Company may,
from time to time, use interest rate swap and cap agreements in the management
of interest rate exposure. The interest rate differential to be paid or received
is normally accrued as interest rates change, and is recognized as a component
of interest expense over the life of the agreements. If an agreement is
terminated prior to the maturity date and is characterized as a hedge, any
accrued rate differential would be deferred and recognized as interest expense
over the life of the hedged item. The Company uses commodities hedging
instruments, including forwards, futures and options, to reduce the risk of
price fluctuations related to future raw materials requirements for commodities
such as coffee, soybean oil, and natural gas. The terms of such instruments
generally do not exceed 12 months, and depend on the commodity and other market
factors. Deferred gains and losses are subsequently recorded as cost of products
sold in the consolidated statements of earnings when the inventory is sold. If
the inventory is not acquired and the hedge is disposed of, the deferred gain or
loss is recognized immediately in cost of products sold. The Company believes
that it does not have material risk from any of the above financial instruments,
and the Company does not anticipate any material losses from the use of such
instruments.
DARDEN RESTAURANTS, INC.
2001 Annual Report to Stockholders
PAGE 29
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Stock-Based Compensation
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation," encourages the use of a fair-value method of
accounting for stock-based awards under which the fair value of stock options is
determined on the date of grant and expensed over the vesting period. As allowed
by SFAS 123, the Company has elected to account for its stock-based compensation
plans under the intrinsic value-based method of accounting prescribed by
Accounting Principles Board Opinion No. 25 (APB 25), "Accounting for Stock
Issued to Employees." Under APB 25, compensation expense is recorded on the date
of grant if the current market price of the underlying stock exceeds the
exercise price. The Company has adopted the disclosure requirements of SFAS 123.
Comprehensive Income
Comprehensive income includes net earnings and other comprehensive income items
that are excluded from net earnings under generally accepted accounting
principles, such as foreign currency translation adjustments and unrealized
gains and losses on investments. The Company's only item of other comprehensive
income is foreign currency translation adjustments which have been reported
separately within stockholders' equity.
Segment Reporting
As of May 27, 2001, the Company operated 1,168 Red Lobster, Olive Garden, Bahama
Breeze and Smokey Bones BBQ Sports Bar restaurants in North America as part of a
single operating segment. The restaurants operate principally in the United
States within the casual dining industry, providing similar products to similar
customers. The restaurants also possess similar pricing structures resulting in
similar long-term expected financial performance characteristics. Revenues from
external customers are derived principally from food and beverage sales. The
Company does not rely on any major customers as a source of revenue. Management
believes that the Company meets the criteria for aggregating its operating
segments into a single reporting segment.
Reclassifications
Certain reclassifications have been made to prior year amounts to conform with
current year presentation.
Future Application of Accounting Standards
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS 133
requires that all derivative instruments be recorded on the balance sheet at
fair value. Gains or losses resulting from changes in the fair values of those
derivatives are recorded each period in current earnings or other comprehensive
income, depending on whether a derivative is designated as part of a hedge
transaction and the type of hedge transaction. The ineffective portion of all
hedges will be recognized in earnings. In June 1999, the FASB issued SFAS 137,
which deferred the effective date of adoption of SFAS 133 for one year. In June
2000, the FASB issued SFAS 138, "Accounting for Certain Derivative Instruments
and Certain Hedging Activities - an Amendment of FASB Statement No. 133". SFAS
138, which amends the accounting and reporting standards of SFAS 133 for certain
derivative instruments and hedging activities, must be adopted concurrently with
SFAS 133. The Company adopted SFAS 133 and SFAS 138 in the first quarter of
fiscal 2002. Adoption of SFAS 133 and SFAS 138 did not materially impact the
Company's consolidated financial position, results of operations, or cash flows.
DARDEN RESTAURANTS, INC.
2001 Annual Report to Stockholders
PAGE 30
NOTE 2 - ACCOUNTS RECEIVABLE
Darden contracts with national storage and distribution companies to provide
services that are billed to Darden on a per-case basis. In connection with these
services, certain Darden inventory items are sold to these companies at a
predetermined price when they are shipped to their storage facilities. These
items are repurchased at the same price by Darden when the inventory is
subsequently delivered to Company restaurants. These transactions do not impact
the consolidated statements of earnings. Receivables from national storage and
distribution companies amounted to $24,996 and $24,692 at May 27, 2001, and May
28, 2000, respectively.
NOTE 3 - RESTRUCTURING AND ASSET IMPAIRMENT CREDIT, NET
Darden recorded asset impairment charges of $2,629 and $158,987 in 2000 and
1997, respectively, representing the difference between fair value and carrying
value of impaired assets. The asset impairment charges relate to low-performing
restaurant properties and other long-lived assets, including restaurants that
have been closed. Fair value is generally determined based on appraisals or
sales prices of comparable properties. In connection with the closing of certain
restaurant properties, the Company recorded other restructuring expenses of
$70,900 in 1997. The liability was 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 2002.
During 2000 and 1999, the Company reversed portions of its 1997 restructuring
liability totaling $8,560 and $8,461, respectively. The 2000 reversal primarily
resulted from favorable lease terminations. The 1999 reversal primarily resulted
from the Company's decision to close fewer restaurants than identified for
closure as part of the initial restructuring action. No restructuring or asset
impairment expense or credit was charged to operating results during 2001.
The components of the restructuring and asset impairment credit, net, and the
after-tax and earnings per share effects of these items for 2000 and 1999 are as
follows:
Fiscal Year
- --------------------------------------------------------------------------------------------------------------------
2000 1999
- --------------------------------------------------------------------------------------------------------------------
Carrying costs of buildings and equipment prior to disposal and
employee severance costs $ $ (3,907)
Lease buy-out provisions (8,560) (4,554)
- --------------------------------------------------------------------------------------------------------------------
Subtotal (8,560) (8,461)
Impairment of restaurant properties 2,629
- --------------------------------------------------------------------------------------------------------------------
Total restructuring and asset impairment credit, net (5,931) (8,461)
Less related income tax effect 2,308 3,236
- --------------------------------------------------------------------------------------------------------------------
Restructuring and asset impairment credit, net, net of
income taxes (3,623) (5,225)
- --------------------------------------------------------------------------------------------------------------------
Earnings per share effect - basic and diluted $ (0.03) $ (0.04)
====================================================================================================================
The restructuring liability is included in other current liabilities in the
accompanying consolidated balance sheets. As of May 27, 2001, approximately
$42,600 of carrying, employee severance, and lease buy-out costs associated with
the 1997 restructuring action had been paid and charged against the
restructuring liability. A summary of restructuring liability activity for 2001
and 2000 is as follows:
Fiscal Year
- ------------------------------------------------------------------------ --------------------- ---------------------
2001 2000
- ------------------------------------------------------------------------ --------------------- ---------------------
Beginning balance $ 8,564 $ 37,139
Non-cash Adjustments:
Restructuring credit (8,560)
Reclassification of asset impairment (described below) (12,000)
Cash Payments:
Carrying costs and employee severance payments (1,364) (2,744)
Lease payments including lease buy-outs, net (1,402) (5,271)
- ------------------------------------------------------------------------ --------------------- ---------------------
Ending Balance $ 5,798 $ 8,564
======================================================================== ===================== =====================
DARDEN RESTAURANTS, INC.
2001 Annual Report to Stockholders
PAGE 31
Asset impairment charges of $12,000 included in the beginning 2000 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.
NOTE 4 - INCOME TAXES
The components of earnings before income taxes and the provision for income
taxes thereon are as follows:
Fiscal Year
- --------------------------------------------------------------------------------------------------------------------
2001 2000 1999
- --------------------------------------------------------------------------------------------------------------------
Earnings before income taxes:
U.S. $ 296,160 $ 269,802 $ 212,585
Canada 5,058 4,105 3,290
- --------------------------------------------------------------------------------------------------------------------
Earnings before income taxes $ 301,218 $ 273,907 $ 215,875
- --------------------------------------------------------------------------------------------------------------------
Income taxes:
Current:
Federal $ 79,285 $ 61,528 $ 53,621
State and local 13,049 10,861 7,577
Canada 134 204 172
- --------------------------------------------------------------------------------------------------------------------
Total current 92,468 72,593 61,370
- --------------------------------------------------------------------------------------------------------------------
Deferred (principally U.S.) 11,750 24,609 13,967
- --------------------------------------------------------------------------------------------------------------------
Total income taxes $ 104,218 $ 97,202 $ 75,337
====================================================================================================================
During 2001, 2000, and 1999, Darden paid income taxes of $63,893, $53,688, and
$34,790, respectively.
The following table is a reconciliation of the U.S. statutory income tax rate to
the effective income tax rate included in the accompanying consolidated
statements of earnings:
Fiscal Year
- --------------------------------------------------------------------------------------------------------------------
2001 2000 1999
- --------------------------------------------------------------------------------------------------------------------
U.S. statutory rate 35.0% 35.0% 35.0%
State and local income taxes, net of federal tax benefits 3.1 3.3 3.3
Benefit of federal income tax credits (4.1) (3.9) (4.5)
Other, net 0.6 1.1 1.1
- --------------------------------------------------------------------------------------------------------------------
Effective income tax rate 34.6% 35.5% 34.9%
====================================================================================================================
The tax effects of temporary differences that give rise to deferred tax assets
and liabilities are as follows:
May 27, 2001 May 28, 2000
- --------------------------------------------------------------------------------------------------------------------
Accrued liabilities $ 14,899 $ 15,836
Compensation and employee benefits 50,902 48,310
Asset disposition and restructuring liabilities 5,306 7,616
Net assets held for disposal 937 1,837
Other 2,436 2,210
- --------------------------------------------------------------------------------------------------------------------
Gross deferred tax assets 74,480 75,809
- --------------------------------------------------------------------------------------------------------------------
Buildings and equipment (73,578) (64,071)
Prepaid pension asset (17,376) (16,406)
Prepaid interest (3,812) (4,161)
Deferred rent and interest income (13,474) (14,560)
Intangibles (5,840) (4,497)
Other (3,182) (3,146)
- --------------------------------------------------------------------------------------------------------------------
Gross deferred tax liabilities (117,262) (106,841)
- --------------------------------------------------------------------------------------------------------------------
Net deferred tax liabilities $ (42,782) $ (31,032)
====================================================================================================================
A valuation allowance for deferred tax assets is provided when it is more likely
than not that some portion or all of the deferred tax assets will not be
realized. Realization is dependent upon the generation of future taxable income
or the reversal of deferred tax liabilities during the periods in which those
temporary differences become deductible. Management considers the scheduled
reversal of deferred tax liabilities, projected future taxable income, and tax
planning strategies in making this assessment. As of May 27, 2001, and May 28,
2000, no valuation allowance has been recognized in the accompanying
consolidated financial statements for the deferred tax assets because the
Company believes that sufficient projected future taxable income will be
generated to fully utilize the benefits of these deductible amounts.
NOTE 5 - LAND, BUILDINGS AND EQUIPMENT
The components of land, buildings and equipment are as follows:
May 27, 2001 May 28, 2000
- --------------------------------------------------------------------------------------------------------------------
Land $ 426,171 $ 409,069
Buildings 1,562,107 1,425,557
Equipment 759,812 680,178
Construction in progress 128,976 75,027
- --------------------------------------------------------------------------------------------------------------------
Total land, buildings and equipment 2,877,066 2,589,831
Less accumulated depreciation (1,097,551) (1,011,290)
- --------------------------------------------------------------------------------------------------------------------
Net land, buildings and equipment $ 1,779,515 $ 1,578,541
====================================================================================================================
DARDEN RESTAURANTS, INC.
2001 Annual Report to Stockholders
PAGE 32
NOTE 6 - OTHER ASSETS
The components of other assets are as follows:
May 27, 2001 May 28, 2000
- --------------------------------------------------------------------------------------------------------------------
Prepaid pension $ 45,624 $ 42,893
Prepaid interest and loan costs 19,768 20,312
Liquor licenses 18,642 17,599
Intangible assets 20,619 11,211
Prepaid equipment maintenance 1,641 4,103
Miscellaneous 4,507 6,304
- --------------------------------------------------------------------------------------------------------------------
Total other assets $ 110,801 $ 102,422
====================================================================================================================
NOTE 7 - SHORT-TERM DEBT
Short-term debt at May 27, 2001, and May 28, 2000, consisted of $12,000 and
$115,000, respectively, of unsecured commercial paper borrowings with original
maturities of one month or less. The debt bore interest rates of 4.3 percent at
May 27, 2001, and 6.36 to 6.75 percent at May 28, 2000.
NOTE 8 - LONG-TERM DEBT
The components of long-term debt are as follows:
May 27, 2001 May 28, 2000
- --------------------------------------------------------------------------------------------------------------------
8.375% senior notes due September 2005 $ 150,000 $
6.375% notes due February 2006 150,000 150,000
7.45% medium-term notes due April 2011 75,000
7.125% debentures due February 2016 100,000 100,000
ESOP loan with variable rate of interest (4.45% at May 27,
2001) due December 2018 44,455 52,600
Other 2,647 5,160
- --------------------------------------------------------------------------------------------------------------------
Total long-term debt 522,102 307,760
Less issuance discount (1,528) (1,174)
- --------------------------------------------------------------------------------------------------------------------
Total long-term debt less issuance discount 520,574 306,586
Less current portion (2,647) (2,513)
- --------------------------------------------------------------------------------------------------------------------
Long-term debt, excluding current portion $ 517,927 $ 304,073
====================================================================================================================
In July 2000, the Company registered $500,000 of debt securities with the
Securities and Exchange Commission (SEC) using a shelf registration process.
Under this process, the Company may offer, from time to time, up to $500,000 of
debt securities. In September 2000, the Company issued $150,000 of unsecured
8.375 percent senior notes due in September 2005. The senior notes rank equally
with all of the Company's other unsecured and unsubordinated debt and are senior
in right of payment to all of the Company's future subordinated debt.
In November 2000, Darden filed a prospectus supplement with the SEC to offer up
to $350,000 of medium-term notes from time to time as part of the shelf
registration process referred to above. In April 2001, under this program, the
Company issued $75,000 of unsecured 7.45 percent medium-term notes due in April
2011.
In January 1996, the Company issued $150,000 of unsecured 6.375 percent notes
due in February 2006 and $100,000 of unsecured 7.125 percent debentures due in
February 2016. The proceeds from the issuance were used to refinance commercial
paper borrowings. Concurrent with the issuance of the notes and debentures, the
Company terminated, and settled for cash, interest-rate swap agreements with
notional amounts totaling $200,000, which hedged the movement of interest rates
prior to the issuance of the notes and debentures. The cash paid in terminating
the interest-rate swap agreements is being amortized to interest expense over
the life of the notes and debentures. The effective annual interest rate is 7.57
percent for the notes and 7.82 percent for the debentures, after consideration
of loan costs, issuance discounts, and interest-rate swap termination costs.
DARDEN RESTAURANTS, INC.
2001 Annual Report to Stockholders
PAGE 33
The Company also maintains a credit facility which expires in October 2004, with
a consortium of banks under which the Company can borrow up to $300,000. The
credit facility allows the Company to borrow at interest rates that vary based
on the prime rate, LIBOR,or a competitively bid rate among the members of the
lender consortium, at the option of the Company. The credit facility is
available to support the Company's commercial paper borrowing program, if
necessary. The Company is required to pay a facility fee of 15 basis points per
annum on the average daily amount of loan commitments by the consortium. The
amount of interest and the annual facility fee are subject to change based on
the Company's achievement of certain debt ratings and financial ratios, such as
maximum debt to capital ratios. Advances under the credit facility are
unsecured. At May 27, 2001, and May 28, 2000, no borrowings were outstanding
under this credit facility.
The aggregate maturities of long-term debt for each of the five years subsequent
to May 27, 2001, and thereafter are $2,647 in 2002, $0 in 2003 through 2005,
$300,000 in 2006, and $219,455 thereafter.
NOTE 9 - FINANCIAL INSTRUMENTS
The Company has participated in the financial derivatives markets to manage its
exposure to interest rate fluctuations. The Company had interest rate swaps with
a notional amount of $200,000, which it used to convert variable rates on its
long-term debt to fixed rates effective May 30, 1995. The Company received the
one-month commercial paper interest rate and paid fixed-rate interest ranging
from 7.51 percent to 7.89 percent. The interest rate swaps were settled during
January 1996 at a cost to the Company of $27,670. This cost is being recognized
as an adjustment to interest expense over the term of the Company's 10-year,
6.375 percent notes and 20-year, 7.125 percent debentures (see Note 8).
The following methods were used in estimating fair value disclosures for
significant financial instruments: Cash equivalents and short-term debt
approximate their carrying amount due to the short duration of those items.
Long-term debt is based on quoted market prices or, if market prices are not
available, the present value of the underlying cash flows discounted at the
Company's incremental borrowing rates. The carrying amounts and fair values of
the Company's significant financial instruments are as follows:
May 27, 2001 May 28, 2000
- --------------------------------------------------------------------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
- --------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents $ 61,814 $ 61,814 $ 26,102 $ 26,102
Short-term debt 12,000 12,000 115,000 115,000
Total long-term debt 520,574 513,392 306,586 284,835
- --------------------------------------------------------------------------------------------------------------------
NOTE 10 - STOCKHOLDERS' EQUITY
The Company's Board of Directors has approved a stock repurchase program that
authorizes the Company to repurchase up to 64.6 million shares of the Company's
common stock. In 2001, 2000, and 1999, the Company purchased treasury stock
totaling $176,511, $202,105, and $227,510, respectively. As of May 27, 2001,
52.5 million shares have been purchased under the program.
As a part of its stock repurchase program, the Company issues equity put options
from time to time that entitle the holder to sell shares of Company common stock
to the Company, at a specified price, if the holder exercises the option. In
2000, the Company issued put options for 1,750,000 shares for $1,814 in
premiums. At May 28, 2000, put options for 250,000 shares were outstanding. No
put options were issued in 2001 or outstanding at May 27, 2001.
DARDEN RESTAURANTS, INC.
2001 Annual Report to Stockholders
PAGE 34
NOTE 11 - STOCKHOLDERS' RIGHTS PLAN
The Company has a stockholders' rights plan that entitles each holder of the
Company's common stock to purchase one-hundredth of one share of Darden
preferred stock for each common share owned at a purchase price of $62.50 per
share, subject to adjustment to prevent dilution. The rights are exercisable
when, and are not transferable apart from the Company's common stock until, a
person or group has acquired 20 percent or more, or makes a tender offer for 20
percent or more, of the Company's common stock. If the specified percentage of
the Company's common stock is then acquired, each right will entitle the holder
(other than the acquiring company) to receive, upon exercise, common stock of
either the Company or the acquiring company having a value equal to two times
the exercise price of the right. The rights are redeemable by the Company's
Board in certain circumstances and expire on May 24, 2005.
NOTE 12 - INTEREST, NET
The components of interest, net are as follows:
Fiscal Year
- --------------------------------------------------------------------------------------------------------------------
2001 2000 1999
- --------------------------------------------------------------------------------------------------------------------
Interest expense $35,196 $24,999 $21,015
Capitalized interest (3,671) (1,910) (593)
Interest income (861) (701) (882)
- --------------------------------------------------------------------------------------------------------------------
Interest, net $30,664 $22,388 $19,540
====================================================================================================================
Capitalized interest was computed using the Company's borrowing rate. The
Company paid $24,281, $19,834, and $16,356 for interest (net of amounts
capitalized) in 2001, 2000, and 1999, respectively.
NOTE 13 - LEASES
An analysis of rent expense incurred under operating leases is as follows:
Fiscal Year
- --------------------------------------------------------------------------------------------------------------------
2001 2000 1999
- --------------------------------------------------------------------------------------------------------------------
Restaurant minimum rent $40,007 $38,818 $38,866
Restaurant percentage rent 3,163 2,183 1,853
Restaurant equipment minimum rent 8,388 8,267 8,511
Restaurant rent averaging expense (510) (473) 13
Transportation equipment 2,320 1,946 1,856
Office equipment 1,323 1,090 1,012
Office space 1,020 597 505
Warehouse space 227 227 215
- --------------------------------------------------------------------------------------------------------------------
Total rent expense $55,938 $52,655 $52,831
====================================================================================================================
Minimum rental obligations are accounted for on a straight-line basis over the
term of the lease. Percentage rent expense is generally based on sales levels or
changes in the Consumer Price Index. Most leases require payment of property
taxes, insurance, and maintenance costs in addition to the rent payments. The
annual non-cancelable future lease commitments for each of the five years
subsequent to May 27, 2001, and thereafter are: $51,787 in 2002, $45,890 in
2003, $34,233 in 2004, $28,746 in 2005, $23,074 in 2006, and $69,817 thereafter,
for a cumulative total of $253,547.
NOTE 14 - RETIREMENT PLANS
Substantially all of the Company's employees are eligible to participate in a
retirement plan. The Company's salaried employees are eligible to participate in
a post-retirement benefit plan.
Defined Benefit Plans and Post-retirement Benefit Plan
The Company sponsors defined benefit pension plans for salaried employees with
various benefit formulas and a group of hourly employees with a frozen level of
benefits. The Company also sponsors a contributory plan that provides
health-care benefits to its salaried retirees.
DARDEN RESTAURANTS, INC.
2001 Annual Report to Stockholders
PAGE 35
The following provides a reconciliation of the changes in the plan benefit
obligation, fair value of plan assets, and the funded status of the plans as of
February 28, 2001, and February 29, 2000:
Defined Benefit Plans (1) Post-retirement Benefit Plan
- ------------------------------------------------------------------------------------------------------------------
2001 2000 2001 2000
- ------------------------------------------------------------------------------------------------------------------
Change in Benefit Obligation:
Benefit obligation at the beginning of period $ 82,634 $ 83,205 $ 5,663 $ 5,718
Service cost 3,488 3,091 246 260
Interest cost 6,450 5,683 448 396
Participant contributions 96 89
Benefits paid (3,765) (4,204) (159) (206)
Actuarial (gain) loss 8,532 (5,141) 445 (594)
-------- ---------- --------- ---------
Benefit obligation at the end of period $ 97,339 $ 82,634 $ 6,739 $ 5,663
======== ========= ========= =========
Change in Plan Assets:
Fair value of plan assets at the
beginning of period $115,872 $ 102,550 $ $
Actual return on plan assets 7,894 17,495
Employer contributions 41 31 63 117
Participant contributions 96 89
Benefits paid (3,765) (4,204) (159) (206)
-------- --------- --------- ---------
Fair value of plan assets at the end of period $120,042 $115,872 $ $
======== ======== ========= =========
Reconciliation of Funded Status of the Plan:
Funded status at end of year $ 22,703 $ 33,238 $ (6,739) $ (5,663)
Unrecognized transition asset (642) (1,284)
Unrecognized prior service cost (1,849) (2,305) 65 83
Unrecognized actuarial (gain) loss 22,857 10,843 (371) (835)
Contributions for March to May 10 10 28 38
--------- --------- --------- ---------
Prepaid (accrued) benefit costs $ 43,079 $ 40,502 $ (7,017) $ (6,377)
========= ========= ========= =========
Components of the Consolidated
Balance Sheets:
Prepaid benefit costs $ 45,624 $ 42,893 $ $
Accrued benefit costs (2,545) (2,391) (7,017) (6,377)
-------- --------- --------- ---------
Net asset (liability) recognized $ 43,079 $ 40,502 $ (7,017) $ (6,377)
======== ========= ========= =========
(1) For plans with accumulated benefit obligations in excess of plan assets,
the accumulated benefit obligation and plan assets were $2,781 and zero,
respectively, as of February 28, 2001, and $2,460 and zero, respectively,
as of February 29, 2000.
The following presents the weighted-average assumptions used to determine the
actuarial present value of the defined benefit plans and the post-retirement
benefit plan obligations:
Defined Benefit Plans Post-retirement Benefit Plan
- ------------------------------------------------------------------------------------------------------------------
2001 2000 2001 2000
- ---------------------------------------------------------------------------------------------------------------
Discount rate 7.5% 8.0% 7.5% 8.0%
Expected long-term rate of return on plan assets 10.4% 10.4% N/A N/A
Rate of future compensation increases 4.0% 4.5% N/A N/A
The assumed health care cost trend rate increase in the per-capita charges for
benefits ranged from 6.0 percent to 4.7 percent for 2002, depending on the
medical service category. The rates gradually decrease to a range of 5.5 percent
to 4.6 percent through 2006 and 2004, respectively, and remain at that level
thereafter.
The assumed health care cost trend rate has a significant effect on amounts
reported for retiree health care plans. A one-percentage-point variance in the
assumed health care cost trend rate would increase or decrease the total of the
service and interest cost components of net periodic post-retirement benefit
cost by $146 and $111, respectively, and would increase or decrease the
accumulated post-retirement benefit obligation by $1,298 and $1,036,
respectively.
DARDEN RESTAURANTS, INC.
2001 Annual Report to Stockholders
PAGE 36
Components of net periodic benefit cost (income) are as follows:
Defined Benefit Plans Post-retirement Benefit Plan
----------------------- ----------------------------
2001 2000 1999 2001 2000 1999
- ------------------------------------------------- ------------ ----------- ---------- -- -------- -------- -----------
Service cost $ 3,488 $ 3,091 $ 3,251 $ 246 $ 260 $ 267
Interest cost 6,255 5,509 5,243 447 396 408
Expected return on plan assets (11,589) (10,652) (10,247)
Amortization of unrecognized transition asset (642) (642) (642)
Amortization of unrecognized prior service cost (456) (456) (456) 18 18 18
Recognized net actuarial loss (gain) 213 1,405 1,088 (18)
------- ------- -------- ----- ----- -----
Net periodic benefit cost (income) $(2,731) $(1,745) $ (1,763) $ 693 $ 674 $ 693
======= ======= ======== ===== ===== =====
Defined Contribution Plan
The Company has a defined contribution plan covering most employees age 21 and
older. The Company matches participant contributions with at least one year of
service up to six percent of compensation on the basis of Company performance
with the match ranging from a minimum of $0.25 up to $1.00 for each dollar
contributed by the participant. The plan had net assets of $363,610 at May 27,
2001, and $264,127 at May 28, 2000. Expense recognized in 2001, 2000, and 1999
was $3,358, $3,729, and $5,054, respectively. Employees classified as "highly
compensated" under the Internal Revenue Code are ineligible to participate in
this plan. Amounts due to highly compensated employees under a separate,
nonqualified deferred compensation plan totaled $53,763 and $44,150 as of May
27, 2001 and May 28, 2000, respectively.
The defined contribution plan includes an Employee Stock Ownership Plan (ESOP).
This ESOP originally borrowed $50,000 from third parties guaranteed by the
Company and borrowed $25,000 from the Company at a variable interest rate. The
$50,000 third party loan was refinanced in 1997 by a commercial bank's loan to
the Company and a corresponding loan from the Company to the ESOP. Compensation
expense is recognized as contributions are accrued. Contributions to the plan,
plus the dividends accumulated on the common stock held by the ESOP, are used to
pay principal, interest, and expenses of the plan. As loan payments are made,
common stock is allocated to ESOP participants. In 2001, 2000, and 1999, the
ESOP incurred interest expense of $3,086, $3,436, and $3,203, respectively, and
used dividends received of $415, $941, and $647, respectively, and contributions
received from the Company of $9,224, $9,385, and $4,368, respectively, to pay
principal and interest on its debt.
Company shares owned by the ESOP are included in average common shares
outstanding for purposes of calculating net earnings per share. At May 27, 2001,
the ESOP's debt to the Company had a balance of $44,455 with a variable rate of
interest of 4.45 percent; $27,555 of the principal balance is due to be repaid
no later than December 2007, with the remaining $16,900 due to be repaid no
later than December 2014. The number of Company common shares within the ESOP at
May 27, 2001, approximates 9,810,000, representing 6,740,000 unreleased shares
and 3,070,000 shares allocated to participants.
NOTE 15 - STOCK PLANS
The Company maintains three principal stock option and stock grant plans: the
Amended and Restated Stock Option and Long-Term Incentive Plan of 1995 (1995
Plan); the Restaurant Management and Employee Stock Plan of 2000 (2000 Plan);
and the Stock Plan for Directors, adopted in 2000 (Director Plan). All of the
plans are administered by the Compensation Committee of the Board of Directors.
The 1995 Plan provides for the issuance of up to 22,200,000 common shares in
connection with the granting of non-qualified stock options, and restricted
stock or restricted stock units (RSUs), to key employees. Restricted stock and
RSUs may be granted under the plan for up to 1,500,000 shares. The 2000 Plan
provides for the issuance of up to 3,600,000 common shares out of the Company's
DARDEN RESTAURANTS, INC.
2001 Annual Report to Stockholders
PAGE 37
treasury in connection with the granting of non-qualified stock options and
restricted stock or RSUs to key employees, excluding directors and Section 16
reporting officers. Restricted stock and RSUs may be granted under the plan for
up to five percent of the shares authorized under the plan. The Director Plan
provides for the issuance of up to 250,000 common shares out of the Company's
treasury in connection with the granting of non-qualified stock options and
restricted stock and RSUs to non-employee directors. Under all of the plans,
stock options are granted at a price equal to the fair market value of the
shares at the date of grant, for terms not exceeding ten years, and have various
vesting periods at the discretion of the Compensation Committee. Restricted
stock and RSUs granted under the 1995 and 2000 Plans generally vest no sooner
than one year from the date of grant, although the restricted period may be
accelerated based on performance goals established by the Committee.
The Company also maintains the Compensation Plan for Non-Employee Directors that
was adopted in 2000. This plan provides that non-employee directors may elect to
receive their annual retainer and meeting fees in any combination of cash,
deferred cash or Company common shares, and authorizes the issuance of up to
50,000 common shares out of the Company's treasury for this purpose. The common
shares issuable under the plan shall have a fair market value equivalent to the
value of the foregone retainer and meeting fees.
The per share weighted average fair value of stock options granted during 2001,
2000, and 1999 was $17.54, $6.47, and $10.21, respectively. These amounts were
determined using the Black Scholes option-pricing model which values options
based on the stock price at the grant date, the expected life of the option, the
estimated volatility of the stock, expected dividend payments, and the risk-free
interest rate over the expected life of the option. The dividend yield was
calculated by dividing the current annualized dividend by the option price for
each grant. The expected volatility was determined considering stock prices for
the fiscal year the grant occurred and prior fiscal years, as well as
considering industry volatility data. The risk-free interest rate was the rate
available on zero coupon U.S. government obligations with a term equal to the
remaining term for each grant. The expected life of the option was estimated
based on the exercise history from previous grants.
The weighted-average assumptions used in the Black Scholes model were as
follows:
Stock Options
Granted in Fiscal Year
- --------------------------------------------------------------------------------------------------------------------
2001 2000 1999
- --------------------------------------------------------------------------------------------------------------------
Risk-free interest rate 7.00% 6.50% 5.60%
Expected volatility of stock 30.0% 30.0% 30.0%
Dividend yield 0.1% 0.1% 0.1%
Expected option life 6.0 years 6.0 years 6.0 years
====================================================================================================================
The Company applies APB 25 in accounting for its stock option plans and,
accordingly, no compensation cost has been recognized in the Company's
consolidated financial statements for stock options granted under any of its
stock plans. Had the Company determined compensation cost based on the fair
value at the grant date for its stock options as prescribed under SFAS 123, the
Company's net earnings and net earnings per share would have been reduced to the
pro forma amounts indicated below:
Fiscal Year
- --------------------------------------------------------------------------------------------------------------------
2001 2000 1999
- --------------------------------------------------------------------------------------------------------------------
Net earnings
As reported $ 197,000 $ 176,705 $ 140,538
Pro forma $ 184,542 $ 168,171 $ 134,527
Basic net earnings per share
As reported $ 1.64 $ 1.38 $ 1.02
Pro forma $ 1.54 $ 1.31 $ 0.98
Diluted net earnings per share
As reported $ 1.59 $ 1.34 $ 0.99
Pro forma $ 1.49 $ 1.27 $ 0.95
====================================================================================================================
DARDEN RESTAURANTS, INC.
2001 Annual Report to Stockholders
PAGE 38
Under SFAS 123, stock options granted prior to 1996 are not required to be
included as compensation in determining pro forma net earnings. To determine pro
forma net earnings, reported net earnings have been adjusted for compensation
costs associated with stock options granted from 1996 forward that are expected
to eventually vest.
Stock option activity during the periods indicated was as follows:
Weighted Average Weighted Average
Options Exercise Price Options Exercise Price
Exercisable Per Share Outstanding Per Share
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Balance at May 31, 1998 6,286,678 $ 9.55 16,362,900 $ 10.16
- --------------------------------------------------------------------------------------------------------------------
Options granted 2,888,554 $ 15.37
Options exercised (2,789,237) $ 9.12
Options cancelled (962,666) $ 9.36
- --------------------------------------------------------------------------------------------------------------------
Balance at May 30, 1999 5,883,774 $ 10.53 15,499,551 $ 11.35
- --------------------------------------------------------------------------------------------------------------------
Options granted 3,727,496 $ 20.91
Options exercised (1,152,922) $ 9.18
Options cancelled (505,618) $ 13.07
- --------------------------------------------------------------------------------------------------------------------
Balance at May 28, 2000 6,712,259 $ 10.68 17,568,507 $ 13.47
- --------------------------------------------------------------------------------------------------------------------
Options granted 3,583,818 $ 16.48
Options exercised (3,113,400) $ 10.50
Options cancelled (617,400) $ 16.23
- --------------------------------------------------------------------------------------------------------------------
Balance at May 27, 2001 8,148,226 $ 11.43 17,421,525 $ 14.52
- --------------------------------------------------------------------------------------------------------------------
The following table provides information regarding exercisable and outstanding
options as of May 27, 2001:
Weighted
Weighted Weighted Average
Range of Average Average Remaining
Exercise Options Exercise Options Exercise Contractual
Price Per Share Exercisable Price Per Share Outstanding Price Per Share Life (Years)
- --------------------------------------------------------------------------------------------------------------------
$ 5.00 - $10.00 2,256,397 $ 9.40 3,064,520 $ 9.29 4.76
$10.01 - $15.00 4,970,681 $ 11.29 5,083,099 $ 11.31 3.63
$15.01 - $20.00 847,806 $ 16.75 6,712,503 $ 16.48 8.32
Over $20.00 73,342 $ 21.34 2,561,403 $ 22.03 8.13
- --------------------------------------------------------------------------------------------------------------------
8,148,226 $ 11.43 17,421,525 $ 14.52 6.30
====================================================================================================================
DARDEN RESTAURANTS, INC.
2001 Annual Report to Stockholders
PAGE 39
NOTE 16 - EMPLOYEE STOCK PURCHASE PLAN
Effective January 1, 1999, the Company adopted the Darden Restaurants Employee
Stock Purchase Plan to provide eligible employees who have completed one year of
service an opportunity to purchase shares of its common stock, subject to
certain limitations. Under the plan, employees may elect to purchase shares at
the lower of 85 percent of the fair market value of the Company's common stock
as of the first or last trading days of each quarterly participation period.
During 2001, 2000, and 1999, employees purchased shares of common stock under
the plan totaling 219,000, 243,000, and 55,000, respectively. An additional
883,000 shares are available for issuance as of May 27, 2001.
The Company applies APB 25 in accounting for its Employee Stock Purchase Plan,
so no compensation cost has been recognized for shares issued under the plan.
The impact of recognizing compensation expense for purchases made under the plan
in accordance with the fair value method specified in SFAS 123 is less than $200
and has no impact on reported basic or diluted earnings per share.
NOTE 17 - COMMITMENTS AND CONTINGENCIES
The Company makes trade commitments in the course of its normal operations. As
of May 27, 2001, the Company was contingently liable for approximately $10,889
under outstanding letters of credit issued in connection with purchase
commitments. As of May 27, 2001, the Company also has guaranteed approximately
$6,922 of third-party sub-lease obligations.
The Company is involved in litigation arising from the normal course of
business. In the opinion of management, this litigation is not expected to
materially impact the Company's consolidated financial position, results of
operations, or cash flows.
NOTE 18 - QUARTERLY DATA (UNAUDITED)
Summarized quarterly data for 2001 and 2000 are as follows:
Fiscal 2001 - Quarters Ended
- --------------------------------------------------------------------------------------------------------------------
Aug. 27 Nov. 26 Feb. 25 May 27 Total
- --------------------------------------------------------------------------------------------------------------------
Sales $1,018,205 $931,958 $988,635 $1,082,359 $4,021,157
Gross Profit 229,093 194,832 219,566 242,940 886,431
Earnings before Interest and Taxes 94,112 53,088 84,019 100,663 331,882
Earnings before Taxes 87,838 45,311 75,491 92,578 301,218
Net Earnings 56,921 29,541 49,527 61,011 197,000
Net Earnings per Share:
Basic 0.47 0.25 0.41 0.52 1.64
Diluted 0.46 0.24 0.40 0.50 1.59
Dividends Paid per Share 0.04 0.04 0.08
Stock Price:
High 18.875 26.250 27.000 29.490 N/A
Low 15.438 16.625 19.000 20.660 N/A
====================================================================================================================
Fiscal 2000 - Quarters Ended
- --------------------------------------------------------------------------------------------------------------------
Aug. 29 Nov. 28 Feb. 27 May 28 Total
- --------------------------------------------------------------------------------------------------------------------
Sales $ 929,391 $ 848,231 $917,505 $ 1,006,129 $ 3,701,256
Gross Profit 203,381 169,282 203,353 224,543 800,559
Earnings before Interest and Taxes 77,803 43,230 79,361 95,901 296,295
Earnings before Taxes 73,227 37,965 72,715 90,000 273,907
Net Earnings 47,313 24,454 46,892 58,046 176,705
Net Earnings per Share:
Basic 0.36 0.19 0.37 0.47 1.38
Diluted 0.35 0.18 0.36 0.46 1.34
Dividends Paid per Share 0.04 0.04 0.08
Stock Price:
High 23.063 20.625 19.000 19.438 N/A
Low 17.625 15.625 13.500 12.438 N/A
====================================================================================================================
DARDEN RESTAURANTS, INC.
2001 Annual Report to Stockholders
PAGE 40
Five Year Financial Summary
(Dollar amounts in thousands, except per share data)
Fiscal Year Ended
- --------------------------------------------------------------------------------------------------------------------
Operating Results May 27, 2001 May 28, 2000 May 30, 1999 May 31, 1998 May 25, 1997
- --------------------------------------------------------------------------------------------------------------------
Sales $ 4,021,157 $3,701,256 $3,458,107 $ 3,287,017 $ 3,171,810
- --------------------------------------------------------------------------------------------------------------------
Costs and Expenses:
Cost of Sales:
Food and beverage 1,302,926 1,199,709 1,133,705 1,083,629 1,077,316
Restaurant labor 1,261,837 1,181,156 1,117,401 1,062,490 1,017,315
Restaurant expenses 569,963 519,832 493,811 482,311 481,348
- --------------------------------------------------------------------------------------------------------------------
Total Cost of Sales $ 3,134,726 $2,900,697 $2,744,917 $ 2,628,430 $ 2,575,979
- --------------------------------------------------------------------------------------------------------------------
Restaurant Operating Profit 886,431 800,559 713,190 658,587 595,831
- --------------------------------------------------------------------------------------------------------------------
Selling, general and administrative 407,685 379,731 360,909 358,542 361,263
Depreciation and amortization 146,864 130,464 125,327 126,289 136,876
Interest, net 30,664 22,388 19,540 20,084 22,291
Restructuring and asset impairment
expense or (credit), net (5,931) (8,461) 229,887
- --------------------------------------------------------------------------------------------------------------------
Total Costs and Expenses $ 3,719,939 $3,427,349 $3,242,232 $ 3,133,345 $ 3,326,296
- --------------------------------------------------------------------------------------------------------------------
Earnings (loss) before Income Taxes 301,218 273,907 215,875 153,672 (154,486)
Income Taxes 104,218 97,202 75,337 51,958 (63,457)
- --------------------------------------------------------------------------------------------------------------------
Net Earnings (Loss) $ 197,000 $ 176,705 $ 140,538 $ 101,714 $ (91,029)
- --------------------------------------------------------------------------------------------------------------------
Net Earnings (Loss) per Share:
Basic $ 1.64 $ 1.38 $ 1.02 $ 0.69 $ (0.59)
Diluted $ 1.59 $ 1.34 $ 0.99 $ 0.67 $ (0.59)
- --------------------------------------------------------------------------------------------------------------------
Average Number of Common Shares
Outstanding, Net of Shares Held in
Treasury (in 000's):
Basic 119,800 128,500 137,300 148,300 155,600
Diluted 123,800 131,900 141,400 151,400 155,600
====================================================================================================================
Excluding Restructuring and Asset
Impairment Expense or (Credit), Net
Earnings $ 197,000 $ 173,082 $ 135,313 $ 101,714 $ 54,330
Earnings per Share:
Basic $ 1.64 $ 1.35 $ 0.99 $ 0.69 $ 0.35
Diluted $ 1.59 $ 1.3 $ 0.96 $ 0.67 $ 0.35
====================================================================================================================
Financial Position
Total Assets $ 2,218,458 $1,971,423 $1,890,247 $ 1,984,742 $ 1,963,722
Land, Buildings and Equipment 1,779,515 1,578,541 1,461,535 1,490,348 1,533,272
Working Capital (Deficit) (226,116) (316,427) (194,478) (161,123) (143,211)
Long-term Debt 520,574 306,586 316,451 310,608 313,192
Stockholders' Equity 1,035,242 960,470 964,036 1,019,845 1,081,213
Stockholders' Equity per Shar 8.82 7.86 7.30 7.23 7.07
====================================================================================================================
Other Statistics
Cash Flow from Operations $ 420,570 $ 342,626 $ 357,942 $ 239,933 $ 190,074
Capital Expenditures 355,139 268,946 123,673 112,168 159,688
Dividends Paid 9,458 10,134 10,857 11,681 12,385
Dividends Paid per Share 0.08 0.08 0.08 0.08 0.08
Advertising Expense $ 196,314 $ 182,220 $ 180,563 $ 186,261 $ 204,321
Number of Employees 128,900 122,300 116,700 114,800 114,600
Number of Restaurants 1,168 1,139 1,139 1,151 1,182
Stock Price:
High $ 29.490 $ 23.063 $ 23.375 $ 18.125 $ 12.125
Low 15.438 12.438 14.188 8.125 6.750
Close 28.900 18.875 21.313 15.438 8.250
====================================================================================================================