SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
FORM 10-Q/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended August 25, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from .............. to ......................
Commission File Number 1-13666
DARDEN RESTAURANTS, INC.
(Exact name of registrant as specified in its charter)
Florida 59-3305930
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5900 Lake Ellenor Drive, 32809
Orlando, Florida (Zip Code)
(Address of principal executive offices)
407-245-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
x Yes No
Number of shares of common stock outstanding as of September 24, 1996:
157,681,805 (excluding 2,195,213 shares held in the Treasury).
This Amendment is being submitted for the purpose of adjusting the document
count, tags and headers contained in the electronic filing of the registrant's
Form 10-Q for the quarterly period ended August 25, 1996, in accordance with
the requirements of the Electronic Data Gathering and Retrieval(EDGAR)System.
In all other respects, the documents submitted with the Amendment are identical
to those previously filed with registrant's Form 10-Q.
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Amendment to be signed
on its behalf by the undersigned, thereunto duly authorized.
Dated: December 12, 1996 DARDEN RESTAURANTS, INC..
By: /s/ C.L. Whitehill
C.L. Whitehill
Senior Vice President,
General Counsel and Secretary
DARDEN RESTAURANTS, INC.
TABLE OF CONTENTS
Page
Part I - Financial Information
Item 1. Financial Statements
Consolidated Statements of Earnings (Loss) 2
Consolidated Balance Sheets 3
Consolidated Statements of Cash Flows 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 9
Index to Exhibits 10
PART I-FINANCIAL INFORMATION
Item 1. Financial Statements
DARDEN RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
(In Thousands, Except per Share Data)
(Unaudited)
Thirteen Weeks Ended
---------------------------------
August 25, 1996 August 27, 1995
Sales....................... $805,555 $836,021
Costs and Expenses:
Cost of sales:
Food and beverages........ 267,692 277,350
Restaurant labor.......... 246,711 245,956
Restaurant expenses....... 123,217 124,436
------- -------
Total Cost of Sales $637,620 $647,742
Selling, general and
administrative............ 99,076 95,649
Depreciation and amortization 35,033 35,260
Interest, net............... 4,933 5,366
Restructuring............... ______ 75,000
--------
Total Costs and Expenses.. $776,662 $859,017
------- --------
Earnings (Loss) before
Income Taxes......... 28,893 (22,996)
Income Taxes........... (8,420) 10,933
---------- --------
Net Earnings (Loss)........ $ 20,473 $(12,063)
======== ========
Earnings (Loss) per Share... $ 0.13 $ (0.08)
====== =========
Average Number of Common
Shares Outstanding........ 157,700 158,300
======= =======
<FN>
See accompanying notes to consolidated financial statements.
</FN>
DARDEN RESTAURANTS, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)
ASSETS August 25, 1996 May 26, 1996
- --------------------------------------------------------------------
Current Assets:
Cash and cash equivalents........ $ 31,602 $ 30,343
Receivables...................... 29,363 24,772
Inventories...................... 119,525 120,725
Net assets held for disposal..... 34,762 31,762
Prepaid expenses and other
current assets...................... 16,670 17,298
Deferred income taxes............ 61,656 63,080
------ ------
Total Current Assets......... $293,578 $ 287,980
Land, Buildings and Equipment 1,700,702 1,702,861
Other Assets........................ 96,812 97,663
--------- ----------
Total Assets................. $2,091,092 $2,088,504
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities:
Accounts payable.................. $ 139,150 $ 128,196
Short-term debt................... 33,700 72,600
Current portion of long-term debt. 54 54
Accrued payroll................... 50,763 53,677
Accrued income taxes.............. 10,020 12,522
Other accrued taxes............... 22,373 18,921
Other current liabilities......... 154,021 159,336
--------- ---------
Total Current Liabilities.... $ 410,081 $ 445,306
Long-term Debt...................... 318,078 301,151
Deferred Income Taxes............... 102,032 101,109
Other Liabilities................... 18,666 18,301
--------- ---------
Total Liabilities............ $ 848,857 $ 865,867
--------- ---------
Stockholders' Equity:
Common stock and surplus......... $1,267,704 $1,266,212
Retained earnings................ 82,181 61,708
Treasury stock................... (27,943) (25,037)
Cumulative foreign currency
adjustment....................... (10,118) (10,351)
Unearned compensation............ (69,589) (69,895)
----------- ----------
Total Stockholders' Equity... $1,242,235 $1,222,637
---------- ----------
Total Liabilities and Stockholders'
Equity.............................. $2,091,092 $2,088,504
========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</FN>
DARDEN RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Thirteen Weeks Ended
August 25, August 27,
1996 1995
-----------------------------
- ---------------------------------------------
Cash Flows--Operating Activities
Net earnings (loss).................. $20,473 $ (12,063)
Adjustments to reconcile net earnings
(loss) to cash flow:
Depreciation and amortization...... 35,033 35,260
Amortization of unearned compensation
and loan costs..................... 903 153
Change in current assets and
liabilities........................ 1,969 (7,817)
Change in other liabilities ....... 365 25
Loss on disposal of land, buildings
and equipment...................... 1,103 1,579
Deferred income taxes.............. 2,347 (3,786)
Accrued restructuring expenses..... 75,000
Other, net........................ 233 796
------- --------
Net Cash Provided by Operating
Activities................... $62,426 $ 89,147
------- --------
Cash Flows--Investment Activities
Purchases of land, buildings and
and equipment....................... (38,952) (39,387)
Purchases of intangibles............ (80) (840)
Increase in other assets............ (153) (1,709)
Proceeds from disposal of land,
buildings and equipment
(including net assets held for
disposal)........................... 2,012 337
--------- ---------
Net Cash Used by Investment
Activities.................... $(37,173) $(41,599)
--------- ---------
Cash Flows--Financing Activities
Proceeds from issuance of common stock 824 386
Income tax benefit credited to equity 268
Purchases of treasury stock......... (2,906)
ESOP note receivable repayment...... 900
Decrease in short-term debt......... (38,900) (29,000)
Proceeds from issuance of long-term debt 16,900
Repayment of long-term debt......... (3) (19)
Payment of loan costs............... (177) _______
Net Cash Used by Financing
Activities................... $(23,994) $(27,733)
--------- ---------
Increase in Cash and Cash Equivalents... 1,259 19,815
Cash and Cash Equivalents - Beginning of
Period.................................. 30,343 20,134
--------- --------
Cash and Cash Equivalents - End of Period $ 31,602 $39,949
========= ========
Cash Flow from Changes in Current Assets
and Liabilities
Receivables......................... (4,591) (430)
Inventories......................... 1,200 (1,580)
Net assets held for disposal........ (2,181) 314
Prepaid expenses and other current
assets.............................. 628 (787)
Accounts payable.................... 10,954 (9,305)
Accrued payroll..................... (2,914) (2,026)
Accrued income taxes................ (2,079) (7,573)
Other accrued taxes................. 3,452 3,870
Other current liabilities........... (2,500) 9,700
Change in Current Assets and Liabilities $ 1,969 $(7,817)
======== ========
<FN>
See accompanying notes to consolidated financial statements.
</FN>
DARDEN RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollar Amounts In Thousands, Except per Share Data)
Note 1 - Background
These consolidated financial statements do not include certain information
and footnotes required by generally accepted accounting principles for complete
financial statements. However, in the opinion of management, all adjustments
considered necessary for a fair presentation have been included and are of a
normal recurring nature. Operating results for the thirteen weeks ended August
25, 1996 are not necessarily indicative of the results that may be expected for
the fiscal year ending May 25, 1997.
These statements should be read in conjunction with the consolidated
financial statements and footnotes included in Darden's annual report on
Form10-K for the year ended May 26, 1996. The accounting policies used in
preparing these consolidated financial statements are the same as those
described in Darden's annual report on Form10-K.
Note 2 - Consolidated Statements of Cash Flows
During the thirteen weeks ended August 25, 1996, Darden paid $8,217 for
interest (net of amount capitalized) and $6,840 for income taxes.
Note 3 - Restructuring Expense
Darden recorded pretax restructuring expense of $75,000 during the
thirteen weeks ended August 27, 1995 related to the closing of all China Coast
restaurants. These expenses resulted in a reduction of net earnings of $44,849
($.28 per share) and primarily relate to the write-down of land, buildings and
equipment to net realizable value. These restructuring actions are expected to
be completed in fiscal 1997. As of August 25, 1996, $6,283 of cash payments had
been charged against the restructuring reserve.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following table sets forth selected restaurant operating data as a
percentage of sales for the periods indicated. All information is derived from
the consolidated statements of earnings (loss) for the thirteen weeks ended
August 25, 1996 and August 27, 1995.
Thirteen Weeks Ended
-------------------------------------
August 25, 1996 August 27, 1995
-------------------------------------
Sales............................... 100.0% 100.0%
Costs and Expenses:
Cost of sales:
Food and beverages.............. 33.2 33.2
Restaurant labor................ 30.7 29.4
Restaurant expenses............. 15.3 14.9
---- ----
Total Cost of Sales.. 79.2% 77.5%
Selling, general and administrative. 12.3 11.4
Depreciation and amortization....... 4.3 4.2
Interest, net....................... 0.6 0.6
---- ----
Total Costs and
Expenses before
Restructuring Expenses 96.4% 93.7%
Restructuring....................... 9.0
---- ----
Total Costs and
Expenses after
Restructuring Expenses 96.4% 102.7%
---- -----
Earnings (Loss) before Income Taxes. 3.6 (2.7)
Income Taxes........................ (1.1) 1.3
---- ----
Net Earnings (Loss)................. 2.5% (1.4)%
===== =====
Net Earnings before Restructuring
Expenses:
Earnings before Restructuring
Expenses and Income Taxes........... 3.6% 6.2%
Income Taxes before Restructuring
Expenses (1.1) (2.3)
----- ----
Net Earnings before Restructuring
Expenses 2.5% 3.9%
==== ====
RESULTS OF OPERATIONS
Operating results before restructuring expenses for the thirteen weeks
ended August 25, 1996 and August 27, 1995 are summarized below:
(Dollar Amounts in Thousands,
Except Per Share Data)
-----------------------------------
-----------------------------------
Thirteen Weeks Ended
-----------------------------------
-----------------------------------
August 25, 1996 August 27, 1995
-----------------------------------
Earnings before Restructuring
Expenses and Income Taxes.......... $28,893 $52,004
Income Taxes before Restructuring
Expenses........................... (8,420) (19,218)
------- --------
Net Earnings before Restructuring
Expenses........................... $20,473 $32,786
======= =======
Earnings Per Share before
Restructuring Expenses............. $ 0.13 $ 0.21
======= =======
For the fiscal 1997 first quarter ended August 25, 1996, 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 last fiscal year. The decline in first-quarter earnings was primarily
attributable to lower earnings at Red Lobster. Sales of $805.6 million for the
quarter were down 3.6% compared to last year. Approximately half the sales
decline related to the closing of the China Coast chain in August of 1995, and
the remaining shortfall was attributable to Red Lobster.
In last fiscal 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 fiscal year's first
quarter showed a net loss of $12.1 million or $0.08 per share.
Food and beverage costs for the quarter ended August 25, 1996 were 33.2% of
sales, approximately the same percentage of sales as last year. Restaurant labor
increased to 30.7% of sales compared to last year's 29.4% due to wage rate
inflation and higher manager compensation paid in response to competitive market
conditions. Restaurant expenses increased to 15.3% of sales compared to 14.9%
last year as smallwares expenses related to 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 efforts to provide better direct
support to the Company's restaurants.
The 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 the Company expects higher tax
credits and lower pre-tax 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 guest 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 at August 25, 1996.
Red Lobster has reduced its projected new store openings and plans to open only
10 additional stores for the remainder of this fiscal year. 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.
The Olive Garden sales increased 2.2% to $328.9 million compared to the
first quarter of last year. 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.
Three additional new stores are planned for the remainder of this year.
Because both Red Lobster and The Olive Garden have 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 also been sharply
reduced. This will enable management to focus on its top priority of improving
current operating performance.
On September 16, 1996, Red Lobster launched a new sales and customer
building campaign with new menu items and in-store operational improvements. An
extensive marketing campaign will be used to highlight the lower prices and
improved service. A number of menu items are priced under $10, and half portions
are available on several entrees. In-store operations are being simplified and
additional emphasis is being placed on training throughout the restaurants. An
800 number is being created to measure customer satisfaction. While these
actions are intended to favorably impact Red Lobster's long-term operating
performance, the costs of implementing these changes are expected to result in
an unprofitable second quarter for the Company.
The table below details the number of restaurants open at the end of the
first quarter of fiscal year 1997, compared with the number open at the end of
fiscal year 1996 and the end of last fiscal year's first quarter.
NUMBER OF RESTAURANTS
August 25, 1996 May 26, 1996 August 27, 1995
--------------- ------------ ---------------
Red Lobster - USA 678 677 659
Red Lobster - Canada 52 52 54
------- ------- --------
Total 730 729 713
Olive Garden - USA 474 471 458
Olive Grden - Canada 16 16 17
------- ------- --------
Total 490 487 475
Bahama Breeze 1 1 0
-------- -------- ---------
Total 1,221 1,217 1,188
===== ===== =====
LIQUIDITY AND CAPITAL RESOURCES
During the quarter ended August 25, 1996, the Employee Stock Ownership
Plan portion of the Profit Sharing and Savings Plan for Darden Restaurants, Inc.
(the "ESOP") refinanced $50 million in existing debt, which was previously
guaranteed by the Company, and $16.9 million in existing debt, which was
previously payable to the Company. The refinancings were accomplished by a
commercial bank's loan to the Company with a corresponding loan from the Company
to the ESOP. Based on the terms of both the old and new loans and applicable
interest rates, the net impact on the Company's financial structure was
favorable.
PART II-OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit 11 Determination of Common Shares and Common Share
Equivalents
Exhibit 12 Computation of Ratio of Consolidated Earnings to
Fixed Charges
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K.
During the fiscal quarter ended August 25, 1996, the Company filed
the following report on Form 8-K:
On June 21, 1996, the Company filed a Form 8-K to report 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.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DARDEN RESTAURANTS, INC.
Dated: October 3, 1996 By: /s/ C.L. Whitehill
C.L. Whitehill
Senior Vice President,
General Counsel and Secretary
Dated: October 3, 1996 By: /s/ James D. Smith
James D. Smith
Senior Vice President -
Finance
(Principal financial and
accounting officer)
INDEX TO EXHIBITS
Exhibit
Number Exhibit Title Page
11 Determination of Common Shares and Common Share
Equivalents 11
12 Computation of Ratio of Consolidated Earnings to Fixed
Charges 12
27 Financial Data Schedule 13