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):
September 19, 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 September 19, 1996, in conjunction with its annual meeting of
shareholders, the Registrant issued a news release reporting
financial results for the first quarter of fiscal year 1997,
announcing operating initiatives at Red Lobster restaurants,
announcing an increased stock buyback program, and reporting the
declaration of the company's semi-annual dividend.
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 Press Release dated September 19, 1996,
entitled "Darden Reports First-Quarter
Results, Announces Red Lobster Operating
Initiatives and Increased Stock Buyback."
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: September 20, 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
Reports First-Quarter Results, Announces Red Lobster
Operating Initiatives and Increased Stock Buyback."
EXHIBIT 99.1
EXHIBIT 99.1
DARDEN REPORTS FIRST-QUARTER RESULTS, ANNOUNCES RED LOBSTER OPERATING
INITIATIVES AND INCREASED STOCK BUYBACK
ORLANDO, FL -- At today's annual meeting, Darden Restaurants released
first-quarter results and announced significant menu and service changes which
began this week at all Red Lobster restaurants. In addition, the Company
announced that its Board of Directors authorized an increased stock buyback
program and declared the regular semi-annual dividend.
For the first quarter ended August 25, 1996, sales of $805.6 million were
down 3.6 percent compared to last year. Approximately half the sales decline
related to the discontinued China Coast stores which were closed last August,
and the remaining shortfall was attributable to Red Lobster. First-quarter
earnings after tax were $20.5 million or 13 cents per share, compared to
earnings after tax before restructuring charges of $32.8 million or 21 cents per
share in the first quarter of fiscal 1996. The decline in first-quarter earnings
was primarily attributable to significantly lower earnings at Red Lobster.
In last year's first quarter, the company recorded a $75 million pre-tax
restructuring charge ($44.8 million after tax or $0.28 per share) to discontinue
China Coast. After this unusual item, last year's first quarter showed a net
loss of $12.1 million or $0.08 per share.
This week, Red Lobster launched a significant new sales and customer
building campaign that brings together new food and flavors with in-store
operational improvements in an upbeat, energetic atmosphere. This program was
launched on September 16, with an extensive marketing campaign highlighting
everyday low prices, quality ingredients and attentive service. Customers will
find a large number of menu items priced under $10, half portions available on
many favorite entrees, and new flavorful menu items such as Jay's Jump'n
Jambalaya, Shrimp Cozumel and Louisiana Lacy's Catfish. In-store operations have
been simplified and additional emphasis has been placed on training throughout
the restaurants to deliver a more consistent, satisfying customer dining
experience. Also, an 800 number has been created to continuously measure
customer satisfaction.
Joe Lee, Chairman and Chief Executive Officer, said "The first-quarter
operating results are very disappointing, but I believe we have the right
strategies and action plans in place to improve Red Lobster's performance. I'm
excited about the new, lower priced menu and the in-store operational changes we
are making to give each customer a great dining experience. Because of one-time
costs to implement the changes at Red Lobster and the time required for customer
traffic to build, however, we expect Darden's second fiscal quarter to be
unprofitable."
After obtaining a favorable legal opinion, the Darden Board of Directors
authorized the buyback of an additional 6% of the Company's common stock,
bringing the total buyback authorization to 10% of shares outstanding or 15.8
million shares. These shares will be bought back opportunistically on the open
market based on price and operating performance considerations. The Board also
declared the regular, semi-annual dividend of 4 cents per share payable on
November 1, 1996 to shareholders of record on October 10, 1996.
FIRST QUARTER OPERATING HIGHLIGHTS
Food and beverage costs for the quarter were 33.2% of sales, approximately
the same as last year. Restaurant labor increased to 30.6% of sales compared to
29.4% last year due to wage rate inflation and higher manager compensation paid
in response to competitive market conditions. Restaurant expenses increased
modestly to 15.3% of sales compared to 14.9% last year as smallwares expenses
related to the Red Lobster operating initiatives were higher. As a result of the
sales decline and increased labor and store expenses, the store-level profit
margin decreased to 20.8% in the first quarter of fiscal 1997 from 22.5% last
year. The increase in first-quarter selling, general and administrative expenses
to 12.3% of sales compared to 11.4% of sales last year was primarily
attributable to the completion of the staffing required as a separate public
company and to provide better direct support to our restaurants.
The effective tax rate for the first quarter of fiscal 1997 was 29.1%
compared to 37.0% in last year's first quarter. The estimated effective annual
tax rate for fiscal 1997 is approximately 29%, which is down from last year's
effective tax rate before unusual items of 36.8% because of expectations for
higher tax credits and lower pretax income for the year.
DIVISION RESULTS
Red Lobster sales of $475.1 million were down 4.7% compared to the first
quarter of last year. Same-store sales in the U.S. were down 6.4% as featured
promotions ran high preferences, but did not increase customer traffic. Because
of the sales shortfall, Red Lobster operating profits for the first quarter were
significantly below the prior year. During the first quarter, Red Lobster opened
four new stores and closed three for a total of 730 stores compared to 713
stores last year. Red Lobster has reduced its new store openings and plans to
open only 10 additional stores for the remainder of this fiscal year. Also, Red
Lobster relocated six stores during the quarter, four of which utilized former
China Coast sites, and plans to relocate 16 more stores during the remainder of
the fiscal year, 12 of which will utilize former China Coast sites. During the
first quarter, 43 restaurants were remodeled with the wharfside decor package.
Currently, 475 restaurants or 65% of the total have been remodeled or opened
with this package. The balance of restaurants scheduled for remodeling are
expected to be completed during the next 12 months with costs per remodel
decreasing to approximately $200,000 to $250,000 per unit, versus prior costs of
$350,000 to $400,000 per unit.
The Olive Garden continued its steady course of improvement with a 2.2%
increase in sales to $328.9 million. Same-store sales in the U.S. increased
0.2%, representing the eighth consecutive quarter of same-store sales increases.
First-quarter operating profits decreased slightly compared to last year,
primarily due to an unfavorable shift in the lunch/dinner traffic mix. The Olive
Garden opened three new units during the quarter for a total of 490 stores
compared to 475 stores at the end of last year's first quarter. Three additional
new stores are planned for the remainder of this year.
Because both Red Lobster and The Olive Garden have meaningfully reduced
new store expansion, this year's capital expenditure budget has been reduced
from earlier plans by approximately $50 million to a current estimate of $200
million. Furthermore, future new store opening commitments have been sharply
reduced. This will enable management to focus on its top priority of improving
current operating performance.
Jeff O'Hara, President and Chief Operating Officer commented, "Red Lobster
has successfully responded to many competitive challenges over its 28-year
history. I am excited about the changes we're making and confident we will see
improved customer traffic and operating performance as the year progresses."
OTHER ACTIONS
At the Company's annual meeting, shareholders elected the nine nominees to
the Board of Directors, approved the appointment of KPMG Peat Marwick as
independent auditors, and approved the proposed stock option and incentive
plans.
Darden Restaurants, with headquarters in Orlando, Florida is the world's
largest publicly traded casual dining company, with 1,221 restaurants operating
under the Red Lobster, The Olive Garden and Bahama Breeze brands, approximately
115,000 employees and annual sales of $3.2 billion.