SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
June 20, 1996
Darden Restaurants, Inc.
(Exact name of registrant as specified in its charter)
Florida 1-13666 59-3305930
(State or other jurisdiction (Commission (IRS employer
of incorporation) file number) identification No.)
5900 Lake Ellenor Drive, Orlando, Florida 32809
(Address of principal executive offices)
Registrant's telephone number, including area code:
(407) 245-4000
Not Applicable
(Former name or former address, if changed since last report)
Item 1. Changes in Control of Registrant.
Not applicable.
Item 2. Acquisition or Disposition of Assets.
Not applicable.
Item 3. Bankruptcy or Receivership.
Not applicable.
Item 4. Changes in Registrant's Certifying Accountant.
Not applicable.
Item 5. Other Events.
On June 20, 1996, the Registrant issued a news release which
included the following: Certain Financial Results for fiscal year
1996; Financial Highlights for the fiscal years and 13 weeks ended
May 26, 1996 (Unaudited) and May 28, 1995 (Pro Forma); Consolidated
Statements of Earnings for the fiscal years and 13 weeks ended May
26, 1996 (Unaudited) and May 28, 1995 (Pro Forma); Consolidated
Balance Sheets at May 26, 1996 (Unaudited) and May 28, 1995; and
Number of Restaurants at May 26, 1996 and May 28, 1995.
Item 6. Resignations of Registrant's Directors.
Not applicable.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
(c) Exhibits.
The following is filed herewith. The exhibit numbers
correspond with Item 601(b) of Regulation S-K.
Exhibit No. Description
99.1 Certain Financial Results for fiscal year
1996; Financial Highlights for the fiscal
years and 13 weeks ended May 26, 1996
(Unaudited) and May 28, 1995 (Pro Forma);
Consolidated Statements of Earnings for
the fiscal years and 13 weeks ended May
26, 1996 (Unaudited) and May 28, 1995
(Pro Forma); Consolidated Balance Sheets
at May 26, 1996 (Unaudited) and May 28,
1995; and Number of Restaurants at May
26, 1996 and May 28, 1995, as included in
the Company's Press Release of June 20,
1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: June 21, 1996 DARDEN RESTAURANTS, INC.
By: /s/ C. L. Whitehill
C. L. Whitehill
Senior Vice President,
General Counsel and Secretary
INDEX TO EXHIBITS
Exhibit Number Page
99.1 Certain Financial Results for fiscal year 1995; 5
Financial Highlights for the fiscal years and 13 weeks
ended May 26, 1996 (Unaudited) and May 28, 1995 (Pro
Forma); Consolidated Statements of Earnings for the
fiscal years and 13 weeks ended May 26, 1996 (Unaudited)
and May 28, 1995 (Pro Forma); Consolidated Balance
Sheets at May 26, 1996 (Unaudited) and May 28, 1995;
and Number of Restaurants at May 26, 1996 and May 28,
1995, as included in the Company's Press Release of
June 20, 1996.
EXHIBIT 99.1
Press Release dated June 20, 1996 of Darden Restaurants, Inc. regarding
Certain Financial Results for fiscal year 1996
ORLANDO, FL -- Darden Restaurants today reported that earnings after tax before
restructuring charges for the fiscal year ended May 26, 1996, increased 10% to
$119.2 million or 75 cents per share, compared with the pro forma $108.3 million
or 68 cents per share earned in the prior fiscal year. Annual sales of $3.19
billion were up slightly from the prior year's sales of $3.16 billion, which
included $71.1 million in sales from the discontinued China Coast. Pretax
earnings before restructuring for the year rose by 19%, but a higher effective
tax rate of 36.8% versus 32.0%, slowed the rate of increase for earnings after
tax.
As indicated early in May, fourth quarter after-tax earnings were expected to be
approximately even with the prior year because of sales shortfalls and lower
than expected earnings at both Red Lobster and The Olive Garden. Fourth quarter
reported after tax earnings of $34.5 million or 22 cents per share were
approximately even with last year's earnings before restructuring charges. While
pretax earnings before restructuring rose by almost 12%, a higher effective tax
rate of 36.4% versus 27.4% caused after-tax earnings to be even with the prior
year. Sales in the fourth quarter were $829.5 million, down slightly from last
year's $838.3 million, which included $19.9 million in China Coast sales.
Joe Lee, Chairman and Chief Executive Officer, said, "Fourth quarter earnings
did not meet our target. Action plans are underway to increase performance at
Red Lobster and The Olive Garden in fiscal 1997."
During its first year as a public company, Darden Restaurants made substantial
progress in several major areas, including a significant earnings turnaround at
The Olive Garden, an updating of over half of Red Lobster's restaurants with the
new Wharfside decor, an early decision to discontinue China Coast and stop its
operating losses, and the successful opening of Darden's newest restaurant
concept, Bahama Breeze.
During fiscal 1996, an after-tax restructuring charge of $44.8 million (28 cents
per share) was taken in the first quarter to close all China Coast operations.
In fiscal 1995, a restructuring charge of $59.1 million (37 cents per share) was
taken to position the company for its spin-off from General Mills and to close
unproductive Red Lobster and Olive Garden units. Net of these charges, after-tax
earnings were $74.4 million, or 47 cents per share in fiscal 1996, and $49.2
million, or 31 cents per share in fiscal 1995. Net after-tax earnings in the
fourth quarter of fiscal 1996 were $34.5 million, or 22 cents per share,
compared with $18.2 million, or 11 cents per share reported in last year's
fourth quarter.
Operating Highlights
Food and beverage costs for the year were 33.3% of sales, down from last year's
34.6%. Food and beverage costs for the fourth quarter were 34.0%, versus 34.8%
in the prior year. These favorable changes resulted from reduced food waste at
The Olive Garden, modest price increases at both Red Lobster and The Olive
Garden, and an improved menu mix. Restaurant labor was slightly higher for the
year at 29.9% of sales against 29.5% for last year. In the fourth quarter,
restaurant labor was 29.8% versus 29.1% last year. This increase was due to wage
rate inflation and higher training costs to implement cost-saving systems at The
Olive Garden. Restaurant expense declined to 14.3% of sales this year compared
to 14.9% last year. Restaurant expense in the fourth quarter was 13.6% of sales
versus 14.6% last year. These favorable decreases were due primarily to the
increased focus on store-level costs at The Olive Garden. As a result of the
favorable food cost and store expense trends, store-level profit margins
increased to 22.5% of sales in fiscal 1996, versus 21.1% last year. Fourth
quarter store-level margins were 22.6% versus 21.5% last year. Increased
marketing expense caused selling, general and administrative expenses for the
fiscal year to rise to 11.7% of sales, up from 11.1% in the prior year. Fourth
quarter selling, general and administrative expense of 11.3% of sales compared
with 10.9% last year. All of the increase in SG&A for both the quarter and the
year was caused by higher marketing expense. Capital expenditures totaled $214
million in fiscal 1996, compared to $358 million in fiscal 1995. A semi-annual
dividend of 4 cents per share was paid on both November 1, 1995 and May 1, 1996.
Division Results
Red Lobster North America sales of $1.92 billion for the year were even with
last year. Sales in the fourth quarter were $501.4 million, which was also
approximately the same as in the prior year. Same-store sales in the U.S. were
down 2.2% and 2.7% for the year and fourth quarter, respectively. Disappointing
fourth-quarter promotions and very strong sales a year ago in May caused the
fourth quarter same-store sales decline. Annual same-store sales were down due
to the softness in the fourth quarter and adverse winter weather in the third
quarter. Because of this sales decline, Red Lobster operating profits for the
fiscal year and fourth quarter were below the prior year. Average annual unit
sales for Red Lobster restaurants in the U.S. were $2.74 million, down 3.9% from
last year. The decrease was caused by an increasing number of restaurants in
smaller markets and the same-store sales decline.
At the end of the fiscal year, Red Lobster had 729 restaurants operating in the
U.S. and Canada, compared with 715 restaurants at the end of May last year. For
the year, Red Lobster opened 25 restaurants and closed 11. Approximately 70% of
Red Lobster's new restaurants were opened in smaller population markets. During
the fourth quarter, 12 units were opened, one was closed. Darden's strategy is
to keep its restaurants fresh with an innovative remodeling package that is
implemented before same-store sales start to decline. Red Lobster is currently
being remodeled with the Wharfside decor. During fiscal 1996, 155 restaurants
were remodeled, with 60 being completed in the fourth quarter. Currently 423
restaurants or 58% of the total have been remodeled or opened with the Wharfside
decor package.
The Olive Garden made significant progress in improving its operations and
earnings. The Olive Garden North America annual sales of $1.26 billion were 6%
ahead of last year. Sales in the fourth quarter of $326.7 million were up 4%.
Annual operating profits were up over 75% due to increased same-store sales, a
focus on operating efficiency and reduced food waste. Same-store sales increased
2.3% for the year and 2.0% in the fourth quarter. The fourth quarter was the
seventh consecutive quarter of same-store sales growth for The Olive Garden.
Average annual sales for The Olive Garden restaurants in the U.S. were $2.63
million, up 3.0% from the prior year.
The major initiatives that contributed to Olive Garden's earnings turnaround
include improved store operations, increased variety, flavor and value of menu
offerings, higher advertising spending behind a stronger message and improved
financial controls including a significant reduction in food waste. During
fiscal 1996, The Olive Garden opened 13 new stores and closed three stores
resulting in 487 North American restaurants at the end of May, compared with 477
restaurants in May 1995. In the fourth quarter, seven restaurants were opened.
Jeff O'Hara, President and Chief Operating Officer commented, "We are moving
forward at Red Lobster and The Olive Garden with efforts to further enrich the
dining experience and consistently deliver excellent service and appetizing new
food to our guests. In addition, significant efforts are underway to improve the
effectiveness of the marketing programs at Red Lobster."
Actions taken to improve the performance of the company's restaurants include
improved staffing and training at both Red Lobster and The Olive Garden to
achieve a new, higher standard for food and service; increased focus on
operating efficiencies at Red Lobster and The Olive Garden through food waste
reduction and cost controls, which should contribute to stronger margins in the
coming year; and strengthened management and culinary expertise at both concepts
to enhance our leadership position in both the seafood and Italian casual dining
market segments.
Other Actions
In the fourth quarter the company began the stock repurchase plan which was
approved by the board of directors in December, 1995. This plan authorized the
purchase of up to 6.5 million shares, which will be used to offset shares issued
through the employee stock option and restricted stock programs. In fiscal 1996,
approximately 1.9 million shares were purchased.
Darden Restaurants, with headquarters in Orlando, Florida is the world's largest
publicly traded casual dining company, with 1,217 restaurants operating under
the Red Lobster, The Olive Garden and Bahama Breeze brands, over 119,000
employees and annual sales of $3.2 billion.
DARDEN RESTAURANTS, INC.
FOURTH QUARTER AND FISCAL 1996 FINANCIAL HIGHLIGHTS
(In Millions, Except per Share Data)
13 Weeks Ended 52 Weeks Ended
Unaudited Pro Forma Unaudited Pro Forma
05/26/96 05/28/95 05/26/96 05/28/95
Sales $829.50 $838.30 $3,191.80 $3,163.30
Net Earnings $34.50 $18.20 $74.40 $49.20
Earnings per Share $0.22 $0.11 $0.47 $0.31
Average Common Shares
Outstanding 158.4 158.1 158.7 158
Earnings Before Restructuring
Charges
Earnings from Operations before
restructuring charges $34.50 $35.20 $119.20 $108.30
EPS from Operations before
restructuring charges $0.22 $0.22 $0.75 $0.68
DARDEN RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(In Thousands, Except per Share Data)
13 Weeks Ended 52 Weeks Ended
Unaudited Pro Forma Unaudited Pro Forma
5/26/96 5/28/95 5/26/96 5/28/95
Sales $829,463 $838,287 $3,191,779 3,163,289
Costs and Expenses:
Cost of Sales:
Food and beverages 282,080 291,454 1,062,624 1,093,896
Restaurant labor 247,171 244,272 954,886 931,553
Restaurant expenses 112,548 122,559 455,626 470,194
641,799 658,285 2,473,136 2,495,643
Selling, General and
Administrative (1),(5) 93,621 91,207 373,920 351,197
Depreciation and Amortization 34,766 35,208 134,599 135,472
Interest, net 5,060 5,068 21,406 21,901
Restructuring (2), (3) - 28,623 75,000 99,302
Total Costs and Expenses 775,246 818,391 3,078,061 3,103,515
Earnings Before Income Taxes 54,217 19,896 113,718 59,774
Income Taxes -19,735 -1,737 -39,363 -10,600
Net Earnings $34,482 $18,159 $74,355 $49,174
Earnings per Share (4) $0.22 $0.11 $0.47 $0.31
Average Common Shares
Outstanding (4) 158,400 158,100 158,700 158,000
<FN>
NOTES:
(1) Includes marketing expense
(2) Operating results before restructuring charges were as follows:
13 Weeks Ended 52 Weeks Ended
Unaudited Pro Forma Unaudited Pro Forma
5/26/96 5/28/95 5/26/96 5/28/95
Pretax Earnings before
Restructuring Charges $54,217 $48,519 $188,718 $159,076
Income Taxes -19,735 -13,275 -69,514 -50,817
Net Earnings Before
Restructuring Charges $34,482 $35,244 $119,204 $108,259
Earnings Per Share Before
Restructuring Charges $0.22 $0.22 $0.75 $0.68
(3)The after tax effect of the fiscal year 1996 restructuring charges was
$44,849 ($0.28 per share) in the first quarter of the fiscal year. The
restructuring charges are related to the closing of all China Coast
restaurants. The after tax effect of the fiscal year 1995 restructuring
charges was $59,085 ($0.37 per share) in the third and fourth quarters. The
restructuring charges related primarily to restaurant closings in the U.S.
and Canada.
(4)The average number of common shares used to compute earnings per share for
the 13 and 52 weeks ended May 28, 1995 is based on the average number of
General Mills' common shares outstanding during those periods.
(5)Pro forma expenses of $1,343 and $5,370 ($808 and $3,232 after taxes) were
recorded for the 13 and 52 weeks ended May 28, 1995 respectively. These cover
the estimated additional general and administrative expenses which would have
been incurred by Darden as a separate publicly-held company.
</FN>
DARDEN RESTAURANTS, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands)
ASSETS May 26, 1996 May 28,1995
Current Assets: (Unaudited)
Cash and cash equivalents $30,343 $20,134
Receivables 24,772 25,330
Inventories 120,725 162,968
Net assets held for disposal 31,762 11,448
Prepaid expenses and other
current assets 17,298 27,322
Deferred income taxes 63,080 60,437
Total Current Assets 287,980 307,639
Land, Buildings and Equipment 1,702,861 1,737,982
Other Assets 97,663 67,760
Total Assets $2,088,504 $2,113,381
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $128,196 $166,699
Short-term debt 72,600 98,000
Current portion of long-term debt 54 108
Accrued payroll 53,677 55,398
Accrued income taxes 12,522 11,950
Other accrued taxes 18,921 19,596
Other current liabilities 159,336 165,497
Total Current Liabilities 445,306 517,248
Long-term Debt 301,151 303,752
Deferred Income Taxes 101,109 101,979
Other Liabilities 18,301 16,440
Total Liabilities 865,867 939,419
Stockholders' Equity:
Common stock and surplus 1,266,212 1,253,415
Retained Earnings 61,708
Treasury Stock -25,037
Cumulative foreign currency -10,351 -10,281
adjustment
Unearned compensation -69,895 -69,172
Total Stockholders' Equity 1,222,637 1,173,962
Total Liabilities and
Stockholders' Equity $2,088,504 $2,113,381
DARDEN RESTAURANTS, INC.
NUMBER OF RESTAURANTS
5/28/95 Units Opened Units Closed 5/26/96
Red Lobster USA 660 25 8 677
Red Lobster Canada 55 0 3 52
---- --- --- ----
715 25 11 729
Olive Garden USA 459 13 1 471
Olive Garden Canada 18 0 2 16
---- --- - ----
477 13 3 487
Bahama Breeze 0 1 0 1
---- --- -- -----
China Coast 51 - 51 0
---- --- -- ------
Total Restaurants 1,243 39 65 1,217