EXHIBIT 13
MANAGEMENT'S DISCUSSION
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Darden Restaurants was created as an independent publicly held company in May
1995 through the spin-off of all of General Mills' restaurant operations to its
shareholders. Darden operates 1,217 Red Lobster, The Olive Garden and Bahama
Breeze restaurants in the U.S. and Canada. All the restaurants 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. For comparison in this discussion, fiscal years prior to 1996 include a
pro forma annual pretax cost adjustment of $5.37 million to reflect the
estimated additional general and administrative expenses which would have been
incurred by Darden as a separate publicly held company.
REVENUES
Total revenues in fiscal 1996 were $3.2 billion, a 1 percent increase from
fiscal 1995 which included $71.1 million of sales from the discontinued China
Coast. Total revenues increased 7 percent between fiscal 1995 and fiscal 1994.
The increases in sales were attributable to the opening of new units and
increases in same-store sales. Same-store sales gains were primarily due to
increased sales of appetizers, beverages and desserts, and modest price
increases.
COSTS AND EXPENSES
Food and beverage costs for fiscal 1996 were 33.3 percent of sales, a decline of
1.3 percentage points from fiscal 1995 and 0.9 percentage points from 1994.
These favorable declines were caused by 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 fiscal 1996 at 29.9 percent of sales
against 29.5 percent for fiscal 1995 and 29.3 percent in fiscal 1994. These
increases were due to wage rate inflation, reduced same-store sales at Red
Lobster and higher training costs to implement cost-saving systems at The Olive
Garden.
Restaurant expenses (primarily lease expenses, new unit opening expenses,
utilities and workers' compensation costs) declined in fiscal 1996 to 14.3
percent of sales compared to 14.8 percent in fiscal 1995 and 14.9 percent in
fiscal 1994. These favorable decreases were due primarily to the closing of
China Coast, a reduced number of new restaurant openings and an increased focus
on store-level costs at The Olive Garden.
Selling, general and administrative expenses for the fiscal year increased to
11.7 percent of sales compared to a pro forma 11.1 percent in fiscal 1995 and
10.3 percent of sales in fiscal 1994. The increases were caused by higher
marketing expense.
Depreciation and amortization expense of 4.2 percent of sales in fiscal 1996 was
down slightly from the 4.3 percent in fiscal 1995 and was flat compared to
fiscal 1994. Interest expense of 0.7 percent of sales in fiscal 1996 was flat
compared to fiscal 1995 and 0.1 percentage points higher than fiscal 1994.
INCOME FROM OPERATIONS
Pretax earnings before restructuring rose by almost 19 percent in fiscal 1996 to
$188.7 million, compared to the pro forma $159.1 million in fiscal 1995, and
were approximately the same as the pro forma $188.3 million in fiscal 1994. The
increase in fiscal 1996 was primarily a result of the decline in food and
beverage costs and restaurant expenses as mentioned above.
PROVISION FOR INCOME TAXES
The effective tax rate after restructuring charges increased to 34.6 percent in
fiscal 1996 compared to the pro forma 17.7 percent in fiscal 1995 and 36.4
percent in fiscal 1994. The higher effective rate in 1996, compared to 1995, was
primarily attributable to higher operating earnings and a lower amount of
federal income tax credits.
EARNINGS AFTER TAX AND EARNINGS PER SHARE BEFORE RESTRUCTURING Earnings after
tax before restructuring charges for fiscal 1996 increased 10 percent to $119.2
million or 75 cents per share, compared with the pro forma $108.3 million or 68
cents per share earned in fiscal 1995. Pro forma net income before accounting
changes was $119.9 million or 75 cents per share in fiscal 1994.
NET INCOME AND EARNINGS PER SHARE
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.
The pretax restructuring charge includes approximately $60.4 million of non-cash
charges primarily related to the write-down of buildings and equipment to net
realizable value and approximately $14.6 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 the restructuring activities will be provided by
operations. (See Note 3 of Notes to Consolidated Financial Statements.) Net
earnings after restructuring expenses were $74.4 million (47 cents per share)
compared with the pro forma $49.2 million (31 cents per share) in fiscal 1995.
In fiscal 1995, an after-tax 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 low-performing restaurants. The pretax 1995 restructuring charge
included approximately $65.4 million of non-cash asset write-downs and
approximately $33.9 million of charges to be settled in cash. No restructuring
charges were incurred in fiscal 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company intends to manage its business and its financial ratios so as 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 "A3" (Moody's Investor Services, Inc.), "BBB+" (Standard & Poor's
Corporation) and "A-" (Duff & Phelps Corporation) ratings. Our commercial paper
has ratings of "P-2" (Moody's), "A-2" (Standard & Poor's) and "D-1" (Duff &
Phelps).
Darden completed its long-term capital structure in January 1996 with the
issuance of $150 million of 6.375 percent notes due in 2006 and $100 million of
7.125 percent debentures due in 2016. 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 cost to terminate an interest-rate swap
that was established prior to the distribution from General Mills. The Company
is also the guarantor under a $50 million variable rate loan agreement for the
benefit of the Employee Stock Ownership Plan (ESOP). The ESOP loan, which is due
during 2007, is included as a component of long-term debt with a related offset
in stockholders' equity. Also, Darden's shelf registration statement permits
issuance of an additional $250 million of unsecured debt securities.
Commercial paper is the primary source of short-term financing. Bank credit
lines are maintained to ensure availability of short-term funds on an as-needed
basis. In May 1996, the fee-paid credit lines were reduced from $500 million to
$350 million.
The Company's adjusted debt-to-total capital ratio (which includes 6.25 times
the total annual restaurant minimum rent as a component of debt and total
capital) was 34 percent at May 26, 1996. 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 5.6 times. Based on these ratios,
the Company's financial condition remains strong. The composition of the
Company's capital structure is shown in the following table.
CAPITAL STRUCTURE
- -------------------------------------------------------------------------
May 26, 1996
In Millions
- -------------------------------------------------------------------------
Short-term debt $ 72.6
Long-term debt 301.2
- -------------------------------------------------------------------------
Total debt 373.8
Stockholders' equity 1,222.6
- -------------------------------------------------------------------------
Total capital $1,596.4
- -------------------------------------------------------------------------
ADJUSTMENTS TO CAPITAL
Leases-debt equivalent 249.2
- -------------------------------------------------------------------------
Adjusted total debt 623.0
- -------------------------------------------------------------------------
Adjusted total capital $1,845.6
Debt-to-total capital ratio 23%
Adjusted debt-to-total capital ratio 34%
- -------------------------------------------------------------------------
In September 1995, the Company declared an 8 cents per share annual dividend to
be paid in two installments. In December 1995, the Company's Board approved a
stock repurchase plan whereby the Company may purchase on the open market up to
6.5 million common shares to offset shares issued through employee stock option
and restricted stock programs. In fiscal 1996, 1.9 million shares were purchased
under this program.
The Company typically carries current liabilities in excess of current assets,
because the restaurant business receives substantially immediate payment for
sales, (nominal receivables), while inventories and other current liabilities
normally carry longer payment terms, (usually 15 to 30 days). The seasonal
variation in net working capital is typically in the $30 to $50 million range.
The Company requires capital principally for building new restaurants, replacing
equipment and remodeling existing units. Capital expenditures were $214 million
in fiscal 1996, down from $358 million in fiscal 1995 and $335 million in fiscal
1994 because of decisions to slow the growth in new Olive Garden units and
discontinue China Coast operations. Fiscal 1996 capital expenditure and dividend
requirements were financed primarily through internally generated funds. The
Company generated $294 million, $274 million and $262 million in funds from
operating activities during fiscal years 1996, 1995 and 1994, respectively.
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 26, 1996, and May 28, 1995, and the
related consolidated statements of earnings and cash flows for each of the
fiscal years in the three-year period ended May 26, 1996. 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 generally accepted auditing
standards. 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 26, 1996, and May 28, 1995, and the results of
their operations and their cash flows for each of the fiscal years in the
three-year period ended May 26, 1996, in conformity with generally accepted
accounting principles.
Orlando, Florida KPMG Peat Marwick LLP
June 18, 1996
CONSOLIDATED STATEMENTS OF EARNINGS
- --------------------------------------------------------------------------------
Fiscal Year Ended
-----------------------------------------
(In Thousands, Except per Share Data) May 26, 1996 May 28, 1995* May 29, 1994*
- --------------------------------------------------------------------------------
Sales $3,191,779 $3,163,289 $2,962,980
Costs and Expenses:
Cost of sales:
Food and beverages 1,062,624 1,093,896 1,014,066
Restaurant labor 954,886 931,553 868,178
Restaurant expenses 455,626 470,194 442,769
- --------------------------------------------------------------------------------
Total Cost of Sales $2,473,136 $2,495,643 $2,325,013
Selling, General and Administive 373,920 345,827 301,146
Depreciation and Amortizat 134,599 135,472 124,732
Interest, Net 21,406 21,901 18,394
Restructuring 75,000 99,302
- --------------------------------------------------------------------------------
Total Costs and Expenses $3,078,061 $3,098,145 $2,769,285
- --------------------------------------------------------------------------------
Earnings from Operations before Income 113,718 65,144 193,695
Taxes
Income Taxes 39,363 12,738 70,589
- --------------------------------------------------------------------------------
Earnings from Operations $74,355 $52,406 $123,106
Cumulative Effect to May 31, 1993 of
Accounting Changes 3,661
- --------------------------------------------------------------------------------
Net Earnings $74,355 $52,406 $126,767
- --------------------------------------------------------------------------------
Earnings per Share:
Earnings from operations $ 0.47 $ 0.33 $ 0.77
Cumulative effect of accounting changes 0.03
- --------------------------------------------------------------------------------
Net Earnings per Share $ 0.47 $ 0.33 $ 0.80
- --------------------------------------------------------------------------------
Average Number of Common Shares 158,700 158,000 159,100
Outstanding
- --------------------------------------------------------------------------------
<FN>
See accompanying notes to consolidated financial statements.
* The historical consolidated statements of earnings for fiscal years 1995 and
1994 reflect periods during which the Company did not operate as a separate,
independent company. The table below reflects the impact of pro forma
adjustments of $5,370 to record the estimated additional general and
administrative expenses which would have been incurred by Darden as a separate
publicly held company, and $2,138 of associated income tax benefit at an
assumed effective tax rate of 39.8%.
</FN>
- --------------------------------------------------------------------------------
Fiscal Year Ended (Unaudited)
-----------------------------
Pro Forma Pro Forma
(In Thousands, Except per Share Data) May 28, 1995 May 29, 1994
- --------------------------------------------------------------------------------
Earnings from Operations before Income Taxes $ 59,774 $ 188,325
Income Taxes 10,600 68,451
=========================================================-----------------------
Earnings from Operations $ 49,174 $ 119,874
=========================================================-----------------------
Earnings per Share from Operations $ 0.31 $ .75
=========================================================-----------------------
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
(In Thousands) May 26, 1996 May 28, 1995
- --------------------------------------------------------------------------------
ASSETS
Current Assets:
Cash and cash equivalents $ 30,343 $ 20,134
Receivables 24,772 25,330
Inventories 120,725 162,968
Net assets held for dispo 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 $ 28,196 $ 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, no par value. Authorized
500,000 shares; issued and outstanding 159,619
and 158,178 shares, respectively $1,266,212 $1,253,415
Preferred stock, no par value. Authorized 25,000
shares; none issued and outstanding
Retained earnings 61,708
Treasury stock, 1,908 shares at cost (25,037)
Cumulative foreign currency adjustment (10,351) (10,281)
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
================================================================================
<FN>
See accompanying notes to consolidated financial statements.
</FN>
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
Fiscal Year Ended
----------------------------------------
(In Thousands) May 26, 1996 May 28, 1995 May 29, 1994
- --------------------------------------------------------------------------------
Cash Flows-Operating Activities
Earnings from operations $ 74,355 $ 52,406 $ 123,106
Adjustments to reconcile earnings to
cash flow:
Depreciation and amortization 134,599 135,472 124,732
Amortization of unearned
compensation and loan costs 1,929
Change in current assets and
liabilities 9,722 (8,718) 2,801
Change in other liabilities 1,861 (2,086) 5,476
Loss on disposal of land, buildings
and equipment 6,076 2,572 5,615
Deferred income taxes (3,513) 2,000 535
Non-cash restructuring expenses 69,073 92,356
Other, net (70) (24) (247)
- --------------------------------------------------------------------------------
Net Cash Provided by Operating $ 294,032 $ 273,978 $ 262,018
Activities
- --------------------------------------------------------------------------------
Cash Flows-Investment Activities
Purchases of land, buildings
and equipment (213,905) (357,904) (335,031)
Purchases of intangibles (1,200) (1,623) (124)
Increase in other assets (733) (21,790) (3,818)
Proceeds from sales of land, buildings
and equipment (including net
assets held for disposal) 16,338 6,604 8,505
- --------------------------------------------------------------------------------
Net Cash Used by
Investment Activities $ (199,500) $ (374,713) $ (330,468)
- --------------------------------------------------------------------------------
Cash Flows - Financing Activities
Proceeds from issuance of common stock 7,318
Income tax benefit credited to equity 2,570
Dividends paid (12,647)
Purchases of treasury stock (25,037)
ESOP note receivable repayments 1,100
Increase (decrease) in short-term debt (25,400) 98,000
Proceeds from issuance of
long-term debt 248,303 250,000
Repayment of long-term debt (251,010) (111) (99)
Payment of interest-rate swap
settlement and loan costs (29,520)
Increase (decrease) in advances from
former parent company (244,719) 69,434
- --------------------------------------------------------------------------------
Net Cash Provided by (Used by)
Financing Activities $ (84,323) $ 103,170 $ 69,335
- --------------------------------------------------------------------------------
Increase in Cash and Cash Equivalents 10,209 2,435 885
Cash and Cash Equivalents -
Beginning of Year 20,134 17,699 16,814
- --------------------------------------------------------------------------------
Cash and Cash Equivalents -
End of Year $ 30,343 $ 20,134 $ 17,699
- --------------------------------------------------------------------------------
Cash Flow from Changes in Current Assets
and Liabilities
Receivables 558 820 (8,992)
Inventories 42,243 (27,436) (33,107)
Net assets held for disposal (3,088) 1,566 10,111
Prepaid expenses and other current
assets 10,024 (3,067) (1,753)
Accounts payable (38,503) 6,461 30,586
Accrued payroll (1,721) 6,008 7,402
Accrued income taxes 572 11,950
Other accrued taxes (675) (1,297) 2,629
Other current liabilities 312 (3,723) (4,075)
- --------------------------------------------------------------------------------
Change in Current Assets and Liabilities $ 9,722 $ (8,718) $ 2,801
- --------------------------------------------------------------------------------
Transfer of long-term debt from former
parent company $ 50,000
company
- --------------------------------------------------------------------------------
Transfer of unearned compensation from former $ (69,172)
parent company
- --------------------------------------------------------------------------------
<FN>
See accompanying notes to consolidated financial statements.
</FN>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data.)
NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Principles of Consolidation
The accompanying fiscal year 1996 consolidated financial statements include the
operations of Darden Restaurants, Inc. and its wholly owned subsidiaries
("Darden" or "the Company"). The consolidated financial statements prior to
fiscal year 1996 represent the former combined restaurant operations of General
Mills, Inc. ("General Mills" or "former parent") in the United States and Canada
that now comprise Darden. The common shares of Darden were distributed by
General Mills to its stockholders as of May 28, 1995.
The consolidated financial statements prior to fiscal year 1996 include an
allocation of certain general corporate expenses of General Mills which are not
directly related to Darden, as well as an allocation of interest expense and
income taxes that approximate the amounts Darden would have incurred on a
stand-alone basis. Management believes the allocation methods used are
reasonable.
Darden's fiscal year ends on the last Sunday in May. Fiscal years 1996, 1995 and
1994 each consisted of 52 weeks.
B. Land, Buildings and Equipment
All land, buildings and equipment are recorded at cost. Building components are
depreciated over estimated useful lives ranging from 7 to 40 years using the
straight-line method. Equipment is depreciated over estimated useful lives
ranging from 3 to 10 years also using the straight-line method. Accelerated
depreciation methods are generally used for income tax purposes.
In fiscal year 1996, the Company adopted Statement of Financial Accounting
Standards No. 121 (SFAS 121), "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of." The effect of adopting SFAS
121 on the Company's financial position and results of operations was
insignificant. In accordance with SFAS 121, the Company periodically reviews
restaurant sites and certain identifiable intangibles for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Measurement of an impairment loss for such assets is
based on the fair value of the asset. Restaurant sites and certain identifiable
intangibles to be disposed of are reported at the lower of the carrying amount
or fair value, less estimated cost to sell.
C. Inventories
Inventories are valued at the lower of cost or market value, using the
"first-in, first-out" method.
D. Intangible Assets
The cost of intangible assets is amortized evenly over their estimated useful
lives. Most of these costs were incurred through the purchase of leases with
favorable rent terms. The Audit Committee of the Board of Directors annually
reviews intangible assets. At its meeting on May 23, 1996, the Board of
Directors affirmed that the remaining amounts of these assets have continuing
value.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) E. 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 for fees in excess of nominal amounts 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.
F. Foreign Currency Translation
The Canadian dollar is the functional currency for the Canadian restaurant
operations. Assets and liabilities are translated 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 accumulated in a cumulative foreign currency adjustment account
included as a separate component of stockholders' equity. Gains and losses from
foreign currency transactions are generally included in the consolidated
statements of earnings for each period.
G. Pre-Opening Costs
Capitalized pre-opening costs include the direct and incremental costs
associated with the opening of a new restaurant and are amortized over a
one-year period from the restaurant opening date.
H. Advertising
Production costs of commercials and programming are charged to operations in the
year first aired. The costs of other advertising, promotion and marketing
programs are charged to operations in the year incurred. Advertising expense was
$239,526, $211,904 and $173,053 in fiscal years 1996, 1995 and 1994,
respectively.
I. Statements of Cash Flows
For purpose 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.
J. Earnings Per Share
Earnings per share for 1996 has been determined by dividing net earnings by the
weighted average number of common shares outstanding during the year, net of
common shares held in treasury. Earnings per share for 1995 and 1994 has been
determined by dividing the appropriate net earnings by the weighted average
number of common shares outstanding during the year, based on the average number
of General Mills' common shares presumed to be outstanding during the applicable
fiscal year. Common share equivalents were not material.
K. 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 estimated.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUTING POLICIES (CONTINUED) L. Accounting for
Stock Options Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation," is effective for fiscal years beginning after
December 15, 1995. The Company will adopt this statement in fiscal 1997 by
providing pro forma equivalent footnote disclosure information, and will elect
to continue applying APB Opinion No. 25 to account for stock options granted to
employees. Adoption of this new standard will not affect the Company's financial
position, results of operations or cash flows.
M. Reclassifications
Certain reclassifications have been made in the prior years' consolidated
statements of earnings and cash flows to conform with the fiscal year 1996
presentation.
NOTE 2 - ACCOUNTS RECEIVABLE
Darden contracts with a national storage and distribution company to provide
services which are billed to Darden on a per-case basis. In connection with
these services, certain Darden inventory items are sold to the distribution
company at a predetermined price when they are shipped to the distribution
company's storage facilities. These items are repurchased at the same price by
Darden when the inventory is delivered to Company restaurants by the
distribution company. The receivable from the distribution company was $20,083
and $23,119 at May 26, 1996, and May 28, 1995, respectively.
NOTE 3 - RESTRUCTURING EXPENSE
Darden recorded restructuring expense in 1996 related to the closing of all
China Coast restaurants and in 1995 primarily related to restaurant closings in
the U.S. and Canada. These expenses resulted in a reduction in net earnings of
$44,849 ($0.28 per share) in 1996 and $59,085 ($0.37 per share) in 1995. All
restructuring actions are expected to be substantially completed in 1997. As of
May 26, 1996, approximately $5,927 and $19,185 of costs associated with the 1996
and 1995 restructurings, respectively, had been paid and charged against the
restructuring liability. The restructuring liability included in other current
liabilities was $37,773 and $61,213 as of May 26, 1996, and May 28, 1995,
respectively.
The components of the restructuring expense are as follows:
- --------------------------------------------------------------------------
Fiscal Year
-------------------------------------
1996 1995
- --------------------------------------------------------------------------
Write-down of land, buildings
and equipment to net realizable $56,600 $65,399
value
Carrying costs of buildings and
equipment prior to disposal 7,431 2,225
Lease buy-out provisions 1,600 27,880
Employee severance costs 1,169 1,687
Other 8,200 2,111
- --------------------------------------------------------------------------
$75,000 $99,302
Less related income tax effect (30,151) (40,217)
- --------------------------------------------------------------------------
Restructuring expense,
net of income taxes $44,849 $59,085
- --------------------------------------------------------------------------
NOTE 4 - INCOME TAXES
Darden adopted Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" (SFAS 109) as of May 31, 1993. The adoption of SFAS 109
changed the method of accounting for income taxes from the deferred method to
the asset and liability method. Deferred income taxes reflect the differences
between assets and liabilities recognized for financial reporting purposes and
amounts recognized for tax purposes measured using the current enacted tax
rates. The cumulative effect of adoption was an increase in net earnings of
approximately $6,300 ($.04 per share).
The components of earnings (loss) from operations before income taxes and the
provision for income taxes thereon are as follows on the next page:
- -----------------------------------------------------------------------------
Fiscal Year
-------------------------------------------
1996 1995 1994
- -----------------------------------------------------------------------------
Earnings (loss) from operations
before income taxes:
U.S. $118,506 $82,450 $205,769
Canada (4,788) (17,306) (12,074)
- -----------------------------------------------------------------------------
Net earnings from operations
before income taxes $113,718 $65,144 $193,695
- -----------------------------------------------------------------------------
Income taxes:
Current:
Federal $33,935 $11,848 $59,297
State and local 8,608 5,812 14,815
Canada 333 (6,922) (4,058)
- -----------------------------------------------------------------------------
Total current 42,876 10,738 70,054
Deferred (principally U.S.) (3,513) 2,000 535
- -----------------------------------------------------------------------------
Total income taxes $39,363 $12,738 $70,589
- -----------------------------------------------------------------------------
During 1996, 1995 and 1994, Darden paid income taxes of $25,777, $31,469 and
$74,270, respectively. 1995 and 1994 income taxes were paid as part of the
General Mills consolidated tax returns.
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
-------------------------------------------
1996 1995 1994
- -----------------------------------------------------------------------------
U.S. statutory rate 35.0% 35.0% 35.0%
State and local income taxes,
net of federal tax benefits 4.6 4.6 4.8
Benefit of U.S. federal income (6.8) (21.2) (4.5)
tax credits
Other, net 1.8 1.2 1.1
- -----------------------------------------------------------------------------
Effective income tax rate 34.6% 19.6% 36.4%
- -----------------------------------------------------------------------------
NOTE 4 - INCOME TAXES (CONTINUED)
The tax effects of temporary differences that give rise to deferred tax assets
and liabilities are as follows:
- --------------------------------------------------------------------------
May 26, 1996 May 28, 1995
- --------------------------------------------------------------------------
Accrued liabilities $14,750 $15,807
Compensation and employee benefits 29,766 24,979
Asset disposition liabilities 27,248 23,475
Other 1,667 3,008
- --------------------------------------------------------------------------
Gross deferred tax assets 73,431 67,269
- --------------------------------------------------------------------------
Buildings and equipment (89,368) (90,182)
Prepaid pension asset (15,055) (14,504)
Prepaid interest (5,424)
Other (1,613) (4,125)
- --------------------------------------------------------------------------
Gross deferred tax liabilities (111,460) (108,811)
- --------------------------------------------------------------------------
Net deferred tax liability $(38,029) $(41,542)
- --------------------------------------------------------------------------
NOTE 5 - LAND, BUILDINGS AND EQUIPMENT
The components of land, buildings and equipment are as follows:
- --------------------------------------------------------------------------
May 26, 1996 May 28, 1995
- --------------------------------------------------------------------------
Land $402,056 $395,198
Buildings 1,300,025 1,279,658
Equipment 642,287 622,785
Construction in progress 65,107 56,468
- --------------------------------------------------------------------------
Total land, buildings and equipment 2,409,475 2,354,109
Less accumulated depreciation (706,614) (616,127)
- --------------------------------------------------------------------------
Net land, buildings and equipment $1,702,861 $1,737,982
- --------------------------------------------------------------------------
NOTE 6 - OTHER ASSETS
The components of other assets are as follows:
- --------------------------------------------------------------------------
May 26, 1996 May 28, 1995
- --------------------------------------------------------------------------
Prepaid pension $38,702 $37,285
Prepaid interest and loan costs 29,337
Liquor licenses 17,744 17,271
Intangible assets 9,894 9,453
Miscellaneous 1,986 3,751
- --------------------------------------------------------------------------
Total other assets $97,663 $67,760
- --------------------------------------------------------------------------
NOTE 7 - SHORT-TERM DEBT
Short-term debt at May 26, 1996, consisted of $72,600 of unsecured commercial
paper borrowings with original maturities of one month or less and interest
rates ranging from 5.30% to 5.53%. The Company also maintains a 364-day
revolving loan agreement under which the Company can borrow up to $100,000. The
loan agreement allows the Company to borrow at
NOTE 7 - SHORT-TERM DEBT (CONTINUED)
interest rates which vary based on the federal funds rate, the prime rate, LIBOR
or acompetitively bid rate among the members of the lender consortium, at the
option of the Company. The Company is required to pay a facility fee of seven
basis points per annum on the average daily amount of loan commitments by the
consortium. The amount of interest and the annual facility fee is subject to
change based on the Company's achievement of certain financial ratios and debt
ratings. Advances under the loan agreement are unsecured. At May 26, 1996, no
borrowings were outstanding under this agreement. At May 28, 1995, $98,000 in
borrowings were outstanding under this agreement at interest rates which ranged
from 6.16% to 6.24%.
NOTE 8 - LONG-TERM DEBT
The components of long-term debt are as follows:
- --------------------------------------------------------------------------
May 26, 1996 May 28, 1995
- --------------------------------------------------------------------------
10-year notes and 20-year debentures
as described below $250,000
Revolving loan agreement as $250,000
described below
ESOP loan guarantee with variable
rate of interest (4.51% at May 26,
1996), due December 31, 2007 50,000 50,000
Other 2,882 3,892
- --------------------------------------------------------------------------
Total long-term debt 302,882 303,892
Less issuance discount (1,677) (32)
- --------------------------------------------------------------------------
Total long term debt less issuance 301,205 303,860
discount
Less current portion (54) (108)
- --------------------------------------------------------------------------
Long term debt, excluding current $301,151 $303,752
portion
- --------------------------------------------------------------------------
In January 1996, the Company issued $150,000 of 6.375% notes due in 2006 and
$100,000 of 7.125% debentures due in 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% for the notes and 7.82% for the
debentures, after consideration of loan costs, issuance discounts, and interest
rate swap termination costs.
The Company also maintains a revolving loan agreement expiring May 19, 2000,
with a consortium of banks under which the Company can borrow up to $250,000.
The terms and conditions of this loan agreement are similar to the Company's
364-day revolving loan agreement which is discussed in Note 7, except that the
required facility fee is nine basis points per annum. At May 26, 1996, no
borrowings were outstanding under this agreement. At May 28, 1995, $250,000 in
borrowings were outstanding at interest rates which ranged from 6.16% to 6.22%.
The aggregate maturities of long-term debt for each of the five years subsequent
to May 26, 1996, and thereafter are $54 in 1997, 1998 and 1999, $155 in 2000,
$206 in 2001 and $302,359 thereafter.
NOTE 9 - FINANCIAL INSTRUMENTS
The Company has participated in the financial derivatives markets to manage its
exposure to interest rate fluctuations. At May 28, 1995, 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% to 7.89%. The interest rate swaps were
settled during January 1996 at a cost to the Company of $27,670. This cost will
be recognized as an adjustment to interest expense over the term of the
Company's 10-year notes and 20-year debentures (see Note 8). The following
methods were used in estimating fair value disclosures for significant financial
instruments: Cash equivalents approximate their carrying amount due to the short
duration of those items. Short-term debt approximates its carrying amount.
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. Interest rate swaps are based on the
difference in the present value of variable-rate future receipts and fixed-rate
future payments. The carrying amounts and fair values of the Company's
significant financial instruments are as follows:
- --------------------------------------------------------------------------
May 26, 1996 May 28, 1995
-------------------------------------------------
-------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
- --------------------------------------------------------------------------
Cash and cash equivalents $ 30,343 $ 30,343 $ 20,134 $ 20,134
Short-term debt 72,600 72,600 98,000 98,000
Total long-term debt 301,205 282,810 303,860 304,235
Interest rate swaps (14,313)
==========================================================================
NOTE 10 - STOCKHOLDERS' EQUITY
The following table summarizes the changes in the components of stockholder's
equity:
- --------------------------------------------------------------------------------
Common Cumulative
Stock Foreign Total
and Retained Treasury Currency Unearned Stockholders'
(in Thousands) Surplus Earnings Stock Adjustment Compensation Equity
- --------------------------------------------------------------------------------
Balance at
May 30, 1993 $1,221,392 $ $ $(10,027) $ $1,211,365
Net earnings 126,767 126,767
Net advances
from General
Mills 69,434 69,434
Foreign currency
adjustment, net
of income taxes
of $5,399 (247) (247)
- --------------------------------------------------------------------------------
Balance at
May 29, 1994 1,417,593 (10,274) 1,407,319
Net earnings 52,406 52,406
Net advances to
General Mills (216,584) (216,584)
Foreign currency
adjustment (7) (7)
Transfer of
unearned
compensation
from General
Mills (69,172) (69,172)
- --------------------------------------------------------------------------------
Balance at
May 28, 1995 $1,253,415 $(10,281) $(69,172) $1,173,962
Net earnings 74,355 74,355
Cash dividends
declared ($0.08
per share) (12,647) (12,647)
Stock option
exercises (1,137
shares) 7,318 7,318
Issuance of
restricted stock
(304 shares) 2,909 (2,909)
Earned
compensation 1,086 1,086
ESOP note
receivable
repayments 1,100 1,100
Income tax
benefit credited
to equity 2,570 2,570
Purchases of
common stock
for treasury
(1,908 shares) (25,037) 25,037
Foreign currency
adjustment (70) (70)
- --------------------------------------------------------------------------------
Balance at
May 26, 1996 $1,266,212 $61,708 $(25,037) $(10,351)$(69,895) $1,222,637
- --------------------------------------------------------------------------------
NOTE 11 - STOCKHOLDERS' RIGHTS PLAN
The Company has a stockholders' rights plan that entitles each holder of Company
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% or more, or makes a tender offer for 20% 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
As explained in Note 1-A, the interest expense appearing in the 1995 and 1994
consolidated statements of earnings includes an allocation of a portion of
General Mills' consolidated interest expense assuming a debt-to-capital ratio of
approximately 25% for Darden. Long-term rates of 8.56% and 8.5% were used to
calculate interest expense on non-ESOP debt averaging $307,500
NOTE 12 - INTEREST, NET (CONTINUED)
and $265,800 in fiscal years 1995 and 1994, respectively. These long-term rates
approximate the prevailing cost of long-term debt for companies with financial
characteristics similar to those of Darden during the fiscal periods presented.
Interest expense on average ESOP debt of $67,075, $69,570 and $72,300 in fiscal
years 1996, 1995 and 1994, respectively, was included in compensation expense.
Capitalized interest was computed using the Company's borrowing rate for 1996
and General Mills' borrowing rate for 1995 and 1994. The Company paid $14,657
for interest in fiscal 1996.
The components of interest, net are as follows:
- -----------------------------------------------------------------------------
Fiscal Year
-------------------------------------------
1996 1995 1994
- -----------------------------------------------------------------------------
Interest expense $24,875 $26,331 $22,593
Capitalized interest (2,007) (4,327) (4,087)
Interest income (1,462) (103) (112)
- -----------------------------------------------------------------------------
Interest, net $21,406 $21,901 $18,394
- -----------------------------------------------------------------------------
NOTE 13 - LEASES
An analysis of rent by property leased (all of which are accounted for as
operating leases) is as follows:
- -----------------------------------------------------------------------------
Fiscal Year
-------------------------------------------
1996 1995 1994
- -----------------------------------------------------------------------------
Restaurant minimum rent $39,867 $41,489 $39,277
Restaurant percentage rent 1,713 1,911 1,916
Restaurant rent averaging expense (275) 1,567 1,771
Transportation equipment 2,103 1,505 1,389
Office equipment 956 730 713
Office space 331 260 251
Warehouse space 207 180 171
- -----------------------------------------------------------------------------
Total rent expense $44,902 $47,642 $45,488
- -----------------------------------------------------------------------------
Minimum rental obligations are accounted for on a straight-line basis over the
term of the lease. Some leases require payment of property taxes, insurance and
maintenance costs in addition to the rent payments. The annual non-cancellable
future lease commitments for each of the five years subsequent to May 26, 1996
and thereafter are $44,640 in 1997, $44,079 in 1998, $42,192 in 1999, $39,041 in
2000, $35,323 in 2001 and $174,785 thereafter, for a cumulative total of
$380,060.
NOTE 14 - RETIREMENT PLANS
The Company has a defined benefit plan covering most salaried employees and a
group of hourly employees with a frozen level of benefits. Benefits for salaried
employees are based on length of service and final average compensation. The
hourly plan provides a monthly amount for each year of credited service. The
Company's funding policy is consistent with the funding
NOTE 14 - RETIREMENT PLANS (CONTINUED)
requirements of federal law and regulations. Plan assets consist
principally of listed equity securities, corporate obligations and U.S.
government securities.
Components of net pension expense (income) are as follows:
- -----------------------------------------------------------------------------
Fiscal Year
-------------------------------------------
1996 1995 1994
- -----------------------------------------------------------------------------
Service cost-benefits earned $2,427 $2,725 $4,298
Interest cost on projected
benefit obligation 3,806 3,924 4,005
Actual return on plan assets (16,965) (8,564) (1,834)
Net amortization and deferral 9,316 981 (2,305)
- -----------------------------------------------------------------------------
Net pension expense (income) $(1,416) $(934) $4,164
- -----------------------------------------------------------------------------
The weighted-average discount rate and rate of increase in future compensation
levels used in determining the actuarial present value of the benefit
obligations were 7.75% and 6.0% in 1996, 8.0% and 5.9% in 1995, and 8.8% and
6.4% in 1994, respectively. The expected long-term rate of return on plan assets
was 10.4%.
The funded status of the plan and the amount recognized on the consolidated
balance sheets is as follows:
- --------------------------------------------------------------------------
May 26, 1996 May 28, 1995
- --------------------------------------------------------------------------
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
- --------------------------------------------------------------------------
Actuarial present value
of benefit obligations:
Vested benefits $49,053 $ 1,856 $41,826 $ 1,770
Non-vested benefits 4,571 4,277
- --------------------------------------------------------------------------
Accumulated benefit
obligations 53,624 1,856 46,103 1,770
- --------------------------------------------------------------------------
Projected benefit
obligation 60,964 1,856 52,128 1,770
Plan assets at fair
value 81,786 73,629
- --------------------------------------------------------------------------
Plan assets in excess
of (less than) the
projected benefit
obligation 20,822 (1,856) 21,501 (1,770)
Unrecognized net loss 21,730 20,278
Unrecognized transition (3,850) (4,494)
asset
- --------------------------------------------------------------------------
Prepaid (accrued)
pension cost $38,702 $ (1,856) $37,285 $ (1,770)
- --------------------------------------------------------------------------
The Company has a defined contribution plan covering most employees age 21 and
older with at least one year of service. Employees classified as "highly
compensated" under the Internal Revenue Code are ineligible to participate. The
Company matches participant contributions up to 6% of compensation on the basis
of $0.50 for each dollar contributed by the participant. The plan had net assets
of $160,291 at May 26, 1996, and $142,916 at May 28, 1995. Expense recognized in
1996, 1995 and 1994 was $2,505, $1,562, and $1,290, respectively.
NOTE 14 - RETIREMENT PLANS (CONTINUED)
The defined contribution plan includes an Employee Stock Ownership Plan (ESOP).
This ESOP borrowed $50,000 from third parties guaranteed by the Company and
borrowed $25,000 from the Company at a variable interest rate. 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 1996, 1995, and 1994, the
ESOP incurred interest expense of $3,431, $3,318, and $2,244 respectively, and
used dividends received of $1,735, $2,884, and $3,477 and contributions received
from the Company of $2,397, $2,098, and $2,580, 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 earnings per share. The ESOP's third
party debt is described in Note 8. At May 26, 1996, the ESOP's debt to the
Company had a balance of $16,900 with a variable rate of interest of 5.61%. The
principal balance is due to be repaid in December 2014. The number of Company
common shares within the ESOP at May 26, 1996, approximates 10,621,000
representing 8,675,000 unreleased shares, 9,000 shares committed to be released
and 1,937,000 shares allocated to participants.
At May 26, 1996, 384,958 unreleased common shares of General Mills remained in
the ESOP. It is the ESOP's intention to sell the General Mills shares in the
open market, with the proceeds to be used to acquire Company common shares.
NOTE 15 - OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
The Company sponsors a plan that provides health care benefits to its salaried
retirees. The plan is contributory with retiree contributions based on years
of service.
Components of the postretirement health-care expense are as follows:
- -----------------------------------------------------------------------------
Fiscal Year
-------------------------------------------
1996 1995 1994
- -----------------------------------------------------------------------------
Service cost-benefits earned $227 $317 $ 469
Interest cost on accumulated
benefit obligation 364 422 361
Net amortization and deferral 76 85 186
- -----------------------------------------------------------------------------
Net postretirement expense $667 $824 $1,016
- -----------------------------------------------------------------------------
The plan is not funded. The amounts included in the consolidated balance sheets
are as follows:
- --------------------------------------------------------------------------
May 26, 1996 May 28, 1995
- --------------------------------------------------------------------------
Accumulated benefit obligations:
Retirees $ 662 $ 359
Fully eligible active employees 255 36
Other active employees 3,843 5,905
- --------------------------------------------------------------------------
Accumulated benefit obligations 4,760 6,300
Plan assets at fair value 0 0
- --------------------------------------------------------------------------
Accumulated benefit obligations
in excess of plan assets 4,760 6,300
Unrecognized prior service cost (533) (895)
Unrecognized net loss (271) (1,981)
- --------------------------------------------------------------------------
Accrued postretirement benefits $3,956 $3,424
- --------------------------------------------------------------------------
- ------------------------------------------------------------------------
NOTE 15 - OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS (CONTINUED)
- ------------------------------------------------------------------------
The discount rates used in determining the actuarial present value of the
benefit obligations were 8.75% in 1996 and 8.0% in 1995.
The health-care cost trend rate increase in the per capita charges for benefits
ranged from 7.1% to 7.8% for 1997, depending on the medical service category.
The rates gradually decrease from 4.6% to 5.5% for 2007 and remain at that level
thereafter. If the health-care cost trend rate increased by one percentage point
in each future year, the aggregate of the service and interest cost components
of postretirement expense would increase for 1996 by $119, and the accumulated
benefit obligation at May 26, 1996, would increase by $921.
In fiscal 1994, Darden adopted SFAS No. 112, "Employers' Accounting for
Postemployment Benefits." The cumulative effect as of May 31, 1993, of changing
to the accrual basis for severance and disability costs was a decrease in net
earnings of approximately $2,600 ($.01 per share).
NOTE 16 - STOCK PLANS
The Darden Restaurants Stock Option and Long-Term Incentive Plan of 1995
provides for the granting of stock options to key employees at a price equal to
the fair market value of the shares at the date of the grant and are for terms
not exceeding 10 years. 15,000,000 shares of common stock are authorized for
issuance under the plan; 3,000,000 of these shares are available solely for
issuance in connection with the granting of stock options in lieu of merit
salary increases or other compensation or employee benefits. Such options vest
at the discretion of the Compensation Committee. The plan also allows for grants
of restricted stock and restricted stock units (RSUs) for up to 10% of the
shares under the plan.
No individual may receive in excess of 2% of the total number of shares
authorized under the plan in restricted stock or RSUs. Restricted stock and RSUs
granted under the plan vest no sooner than one year from the date of grant. No
individual may receive awards covering in excess of 10 percent of the total
number of shares authorized for issuance under the plan.
The Darden Restaurants Stock Plan for Non-Employee Directors provides for a
one-time grant to each non-employee director of an option to purchase 12,500
shares of common stock at a price equal to the fair market value of the shares
at the date of grant. The plan also provides for an annual grant of 3,000 shares
of restricted stock to each non-employee director. Up to 250,000 shares of
common stock may be issued under this plan. The Darden Restaurants Compensation
Plan for Non-Employee Directors provides that non-employee directors may elect
to receive their annual retainer and meeting fees in cash, deferred cash or
shares of common stock. The common stock issuable under the plan shall have a
fair market value equivalent to the value of the foregone retainer and meeting
fees. 50,000 shares of common stock are available for issuance under the plan.
NOTE 16 - STOCK PLANS (CONTINUED)
Option transactions, commencing as of the distribution date, are as follows:
- --------------------------------------------------------------------------
Per Share Option
Number of Shares Price Range
- --------------------------------------------------------------------------
Balance at May 28, 1995 15,199,136 $2.37 to $12.49
Options granted 5,599,308 $10.56 to $13.00
Options exercised (1,136,998) $2.37 to $11.11
Options cancelled (1,855,253) $3.88 to $12.49
- --------------------------------------------------------------------------
Balance at May 26, 1996 17,806,193 $3.88 to $13.00
- --------------------------------------------------------------------------
Options exercisable at May 26, 1996 6,177,151 $3.88 to $12.49
- --------------------------------------------------------===========-------
NOTE 17 - COMMITMENTS AND CONTINGENCIES
Darden makes normal trade commitments in the course of regular operations and is
subject to litigation incident to the conduct of its ongoing business. In the
opinion of management, there are no unusual commitments or contingencies at May
26, 1996, that would materially affect the financial position or operating
results of Darden.
NOTE 18 - QUARTERLY DATA (UNAUDITED)
Summarized quarterly data for 1996 and 1995 are as follows:
- --------------------------------------------------------------------------
Fiscal 1996
Quarters Ended
- --------------------------------------------------------------------------
Aug. 27 Nov. 26 Feb. 25 May 26 Total
------------------------------------------------
Sales $836,021 $731,184 $795,111 $829,463 $3,191,779
Gross Profit 188,279 153,868 188,832 187,664 718,643
Earnings (Loss) before
Interest and Taxes (17,630) 31,448 62,029 59,277 135,124
Earnings (Loss) before
Taxes (22,996) 26,000 56,497 54,217 113,718
Net Earnings (Loss) (12,063) 16,328 35,608 34,482 74,355
Net Earnings (Loss)
Per Share $ (0.08) $ 0.10 $ 0.22 $ 0.22 $ 0.47
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Fiscal 1995
Quarters Ended
- --------------------------------------------------------------------------
Aug. 28 Nov. 27 Feb. 26 May 28 Total
------------------------------------------------
Sales $788,239 $733,355 $803,408 $838,287 $3,163,289
Gross Profit 170,771 143,144 173,729 180,002 667,646
Earnings (Loss) before
Interest and Taxes 57,387 26,097 (22,745) 26,306 87,045
Earnings (Loss) before
Taxes 52,130 20,373 (28,597) 21,238 65,144
Net Earnings (Loss) 32,228 12,551 (11,340) 18,967 52,406
Net Earnings (Loss)
Per Share $ 0.20 $ 0.08 $ 0.06 $ 0.11 $ 0.33
- --------------------------------------------------------------------------
- ------------------------------------------------------------------------
FIVE YEAR FINANCIAL SUMMARY
- ------------------------------------------------------------------------
(Dollar amounts in thousands, except per share data)
- ------------------------------------------------------------------------
Fiscal Year Ended
Pro Forma
- --------------------------------------------------------------------------------
May 26, May 28, May 29, May 30, May 31,
1996 1995 1994 1993 1992
------------------------------------------------------------
OPERATING RESULTS
Sales $3,191,779 $3,163,289 $2,962,980 $2,737,044 $2,542,018
Costs and Expenses:
Cost of Sales:
Food and beverages 1,062,624 1,093,896 1,014,066 928,711 870,699
Restaurant labor 954,886 931,553 868,178 812,118 724,032
Restaurant expenses 455,626 470,194 442,769 406,524 388,655
- --------------------------------------------------------------------------------
Total Cost of Sales 2,473,136 2,495,643 2,325,013 2,147,353 1,983,386
- --------------------------------------------------------------------------------
Restaurant Operating
Profit 718,643 667,646 637,967 589,691 558,632
- --------------------------------------------------------------------------------
Selling, General and
Administrative 373,920 351,197 306,516 272,082 276,742
Depreciation and
Amortization 134,599 135,472 124,732 115,684 99,454
Interest, Net 21,406 21,901 18,394 15,589 10,853
- --------------------------------------------------------------------------------
Total Costs and
Expenses 3,003,061 3,004,213 2,774,655 2,550,708 2,370,435
Expenses
- --------------------------------------------------------------------------------
Earnings before
Restructuring
Expenses and Income
Taxes 188,718 159,076 188,325 186,336 171,583
Income Taxes before
Restructuring Expense 69,514 50,817 68,451 71,050 63,262
- --------------------------------------------------------------------------------
Earnings from
Operations before
Restructuring
Expenses and
Accounting Changes 119,204 108,259 119,874 115,286 108,321
Cumulative Effect of
Accounting Changes 3,661
Restructuring
Expenses, Net of
Income Taxes 44,849 59,085 26,900
- --------------------------------------------------------------------------------
Net Earnings $ 74,355 $ 49,174 $ 123,535 $ 88,386 $ 108,321
- --------------------------------------------------------------------------------
Earnings per Share
from Operations
before Restructuring
Expenses and
Accounting Charges $ 0.75 $ 0.68 $ 0.75 $ 0.71 $ 0.65
Earnings per Share
from Operations
after Restructuring
Expenses $ 0.47 $ 0.31 $ 0.78 $ 0.54 $ 0.65
Average Number of
Common Shares
Outstanding, Net of
Shares Held in
Treasury (in 000's) 158,700 158,000 159,100 163,100 165,700
- --------------------------------------------------------------------------------
FINANCIAL POSITION
Total Assets $2,088,504 $2,113,381 $1,859,124 $1,611,956 $1,433,019
Land, Buildings and
and Equipment 1,702,861 1,737,982 1,564,245 1,370,087 1,244,855
Working Capital
(deficit) (157,326) (209,609) (152,926) (105,339) (102,133)
Long-term Debt 301,205 303,860 303,971
Stockholders' Equity 1,222,637 1,173,962 1,057,319
Stockholders' Equity
per share 7.70 7.43 6.65
- --------------------------------------------------------------------------------
OTHER STATISTICS
Cash Flow from
Operations $ 294,032 $ 273,978 $ 262,018 $ 237,663 $ 266,441
Capital Expenditures 213,905 357,904 335,031 294,408 290,013
Dividends Paid 12,647
Dividends Paid per
Share 0.08
Advertising Expense $ 239,526 $ 211,904 $ 173,053 $ 154,052 $ 157,242
Number of Employees 119,100 124,700 115,200 102,600 90,100
Number of Restaurants 1,217 1,243 1,158 1,043 961
Stock Price:
High $ 14.00 $ 10.875
Low 9.875 9.375
Close 11.75 10.875
- --------------------------------------------------------------------------------