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):
December 10, 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)
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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 December 10, 1996, the Registrant issued a news release reporting
certain financial results for the second quarter of fiscal year
1997.
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.
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Exhibit No. Description
99.1 Press Release dated December 10, 1996,
entitled "Darden Reports Second-Quarter
Results."
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: December 11, 1996 DARDEN RESTAURANTS, INC.
By: /s/ C. L. Whitehill
C. L. Whitehill
Senior Vice President,
General Counsel and Secretary
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INDEX TO EXHIBITS
Exhibit Number Page
99.1 Press Release dated December 10, 1996, entitled
"Darden Reports Second-Quarter Results." 5
<PAGE>
EXHIBIT 99.1
DARDEN REPORTS SECOND-QUARTER RESULTS
ORLANDO, FL - Darden Restaurants reported today that actions taken to enhance
long-term performance at Red Lobster contributed to a net loss of 7 cents per
share for the second fiscal quarter ended November 24, 1996. New menu items,
bolder flavors, lower prices and service improvements that provide a better
customer experience are all part of the Red Lobster changes. Customer response
has been dramatic, with customer traffic counts averaging more than 8% higher
than in the prior-year period since these changes were implemented on September
16. The Olive Garden continued its strong performance, logging its ninth
consecutive quarter of same-store sales increases.
"I am especially pleased that Red Lobster's customer visits are exceeding our
expectations," said Joe Lee, Chairman and Chief Executive Officer. "While we are
not pleased with our second-quarter financial performance, we are encouraged
with the results of our new strategy. We are committed to providing our guests
with great food, service and value, and will make whatever near-term investments
are necessary to assure favorable long-term performance."
Darden Restaurant's sales of $748.8 million in the second quarter were up 2.4
percent compared to last year. The second-quarter after tax loss was $11.2
million or 7 cents per share, compared to earnings after tax of $16.3 million or
10 cents per share in the second quarter of fiscal 1996. The second-quarter net
loss was caused by reduced operating profits at Red Lobster.
The Olive Garden's results were on target and showed a modest operating profit
gain in the second quarter. Red Lobster's loss was caused by a combination of
one-time expenses of about $15 million to introduce the new menu and service
changes and reduced margins caused by the lower prices and other repositioning
actions.
For the first six months of fiscal 1997, sales of $1.6 billion were
approximately the same as in the prior year, which included $16 million from the
discontinued China Coast operation. After-tax earnings before restructuring
charges were $9.3 million or 6 cents per share, down from $ 49.1 million or 31
cents per share in the first half of the prior year. In last year's first
quarter, the company recorded a $44.8 million after-tax restructuring charge
($0.28 per share) to discontinue China Coast. Six-month net earnings including
this unusual item were $4.3 million or 3 cents per share in fiscal 1996.
Operating Highlights
All cost elements as a percent of sales in the second quarter were affected by
Red Lobster's pricing actions. Food and beverage costs for the quarter were
34.5% of sales compared to 33.0% last year because of the strategy to lower
check averages and increase portions at Red Lobster. Restaurant labor increased
to 33.7% of sales compared to 30.7% last year due to one-time training costs at
Red Lobster to launch the new menu, continued wage rate inflation, and higher
manager salaries. The Olive Garden also experienced higher training costs to
introduce its "Vino Riserva" wine program. Restaurant expenses increased
slightly to 16.0% of sales compared to 15.3% last year primarily because of
one-time expenses for smallware supplies and maintenance at Red Lobster. As a
result of these increased costs, the store-level profit margin decreased to
15.8% in the second quarter of fiscal 1997 compared to 21.0% last year.
The increase in second-quarter selling, general and administrative expenses to
12.5% of sales compared to 12.2% of sales last year, was a result of additional
field personnel support for the restaurants and the initial heavy advertising to
introduce to customers the changes at Red Lobster.
The effective tax rate for the second quarter of fiscal 1997 was 29.4% compared
to 37.2% last year. The estimated effective annual tax rate for fiscal 1997 is
approximately 29.0%, which is down from last year's effective tax rate before
unusual items of 36.8% because of higher tax credits and lower pretax income for
the year.
Division Results
Red Lobster's sales of $437.6 million were roughly the same as in last year's
second quarter. Same-store sales in the U.S. were down 3.6% for the entire
second quarter, primarily because of sharply lower sales early in September
before the new menu was introduced. Because of the one-time costs associated
with the new menu roll-out and lower margins, Red Lobster reported an operating
loss for the second quarter. Customers responded very favorably to Red Lobster's
new menu and service initiatives. Since September 16, customer traffic has
averaged more than 8% higher than in the prior year. Because of the lower entree
prices and somewhat reduced preference for appetizers and other add-ons, the
average customer check also declined by more than 8%, resulting in a very slight
decline in same-store sales compared to an industry sample which had a decline
of over 3%. Furthermore, overall customer satisfaction, as measured by
independent market research surveys, improved by 26%, compared to the first
quarter, and the corresponding value rating increased 25%. More importantly, the
"intent to return" score increased 28%, confirming a favorable response to the
new menu and service initiatives.
"The second-quarter investment behind new and exciting food, lower prices and
extensive store-level training, was critical and marks the beginning of Red
Lobster's turnaround" said Jeff O'Hara, President and Chief Operating Officer.
"We are very pleased with our customers' response to the changes at Red Lobster
as demonstrated by the improvement in the satisfaction, value, and intent to
return scores, but more importantly by the very significant increase in customer
traffic."
During the second quarter, Red Lobster opened four stores and closed one for a
total of 733 stores compared to 710 stores last year. Also, Red Lobster
relocated five stores during the quarter, four of which utilized former China
Coast sites, and intends to relocate 11 more stores during the remainder of the
fiscal year. Also, during the second quarter, 35 restaurants were remodeled with
the wharfside decor package at an average cost of under $200,000 each. The
balance of restaurants scheduled to be remodeled are expected to be completed by
the end of the fiscal year.
The Olive Garden continued its positive momentum in the second quarter as sales
increased 6% to $309.6 million. Same-store sales in the U.S. increased 2.5%,
marking the ninth consecutive quarter of same-store sales increases. This sales
performance compares favorably to a broad-based sample of competitive casual
dining companies, as measured by the independent Knapp Track survey, which had a
same-store sales decline of about 3% during the most recent quarter. The Olive
Garden's second-quarter operating profits were slightly ahead of last year as a
result of the successful "Never Ending Pasta Bowl" and "Chicken Alfredo"
promotions. Also, The Olive Garden introduced a new wine service program in
October where customers pour their own wine and pay on the honor system. This
program has shown promising results, has increased overall guest satisfaction
and boosted alcoholic beverage sales. During the second quarter, The Olive
Garden opened two stores and closed one for a total of 491 restaurants compared
to 478 restaurants last year.
The initial Bahama Breeze restaurant in Orlando continues to deliver strong
performance. Construction has commenced on a second unit in the Orlando market,
with opening planned for May 1997.
Darden Restaurants, with headquarters in Orlando, Florida is the world's largest
publicly traded casual dining company, with 1,225 restaurants operating under
the Red Lobster, The Olive Garden and Bahama Breeze brands, approximately
115,000 employees and annual sales of $3.2 billion.
