SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
FORM 10-Q
-------------------------
(MarkOne)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarterly period ended August 29, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ............ to ............
-------------------------
1-13666
Commission File Number
-------------------------
DARDEN RESTAURANTS, INC.
(Exact name of registrant as specified in its charter)
Florida 59-3305930
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
5900 Lake Ellenor Drive,
Orlando, Florida 32809
(Address of principal executive offices) (Zip Code)
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
----- -----
-------------------------
APPLICABLE ONLY TO CORPORATE ISSUERS:
Number of shares of common stock outstanding as of September 27, 1999:
131,418,755 (excluding 34,050,825 shares held in treasury).
<PAGE>
DARDEN RESTAURANTS, INC.
TABLE OF CONTENTS
Page
Part I - Financial Information
Item 1. Financial Statements
Consolidated Statements of Earnings 3
Consolidated Balance Sheets 4
Consolidated Statements of Changes in
Stockholders' Equity 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
Index to Exhibits 12
2
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
DARDEN RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(In Thousands, Except per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
- -------------------------------------------------------------------------------------------------------
August 29, 1999 August 30, 1998
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Sales ...................................................... $ 929,391 $ 886,057
Costs and Expenses:
Cost of sales:
Food and beverages...................................... 298,828 296,415
Restaurant labor........................................ 295,119 282,550
Restaurant expenses..................................... 132,121 131,987
---------- ----------
Total Cost of Sales................................... $ 726,068 $ 710,952
Selling, general and administrative....................... 94,150 84,787
Depreciation and amortization............................. 31,370 31,012
Interest, net............................................. 4,576 5,435
---------- ----------
Total Costs and Expenses............................ $ 856,164 $ 832,186
---------- ----------
Earnings before Income Taxes................................ 73,227 53,871
Income Taxes................................................ (25,914) (18,692)
---------- ----------
Net Earnings................................................ $ 47,313 $ 35,179
========== ==========
Net Earnings per Share:
Basic..................................................... $ 0.36 $ 0.25
========== ==========
Diluted................................................... $ 0.35 $ 0.24
========== ==========
Average Number of Common Shares Outstanding:
Basic..................................................... 132,200 139,700
========== ==========
Diluted................................................... 136,400 145,900
========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
3
<PAGE>
DARDEN RESTAURANTS, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
(Unaudited)
- -----------------------------------------------------------------------------------------------------
August 29, 1999 May 30, 1999
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 30,285 $ 40,960
Receivables............................................... 22,526 20,256
Inventories............................................... 192,492 144,115
Net assets held for disposal.............................. 35,692 35,269
Prepaid expenses and other current assets................. 16,327 21,475
Deferred income taxes..................................... 60,890 65,662
----------- -----------
Total Current Assets.................................... $ 358,212 $ 327,737
Land, Buildings and Equipment............................... 1,468,629 1,473,535
Other Assets................................................ 102,482 104,388
----------- -----------
Total Assets.......................................... $ 1,929,323 $ 1,905,660
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... $ 156,202 $ 144,725
Short-term debt........................................... 27,000 23,500
Current portion of long-term debt......................... 2,386 2,386
Accrued payroll........................................... 63,946 74,265
Accrued income taxes...................................... 18,923 16,544
Other accrued taxes....................................... 26,573 25,965
Other current liabilities................................. 231,377 246,830
----------- -----------
Total Current Liabilities............................... $ 526,407 $ 534,215
Long-term Debt.............................................. 313,490 314,065
Deferred Income Taxes....................................... 72,389 72,086
Other Liabilities........................................... 21,334 21,258
----------- -----------
Total Liabilities..................................... $ 933,620 $ 941,624
----------- -----------
Stockholders' Equity:
Common stock and surplus.................................. $ 1,341,274 $ 1,328,796
Retained earnings......................................... 225,321 178,008
Treasury stock............................................ (493,869) (466,902)
Accumulated other comprehensive income.................... (12,458) (12,115)
Unearned compensation..................................... (64,565) (63,751)
----------- -----------
Total Stockholders' Equity............................ $ 995,703 $ 964,036
----------- -----------
Total Liabilities and Stockholders' Equity.......... $ 1,929,323 $ 1,905,660
=========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
4
<PAGE>
DARDEN RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Thirteen Weeks Ended August 29, 1999 and August 30, 1998
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Common Accumulated
Stock Other Total
and Retained Treasury Comprehensive Unearned Stockholders'
Surplus Earnings Stock Income Compensation Equity
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at May 30, 1999.................... $1,328,796 $178,008 $(466,902) $(12,115) $(63,751) $ 964,036
Comprehensive income:
Net earnings............................. 47,313 47,313
Other comprehensive income, foreign
currency adjustment.................... (343) (343)
----------
Total comprehensive income........... 46,970
Stock option exercises (602 shares)........ 5,314 5,314
Issuance of restricted stock (158 shares),
net of forfeiture adjustments............ 2,181 (2,153) 28
Earned compensation........................ 739 739
ESOP note receivable repayments............ 600 600
Income tax benefit credited to equity...... 3,361 3,361
Proceeds from issuance of equity put
options.................................. 1,139 1,139
Purchases of common stock for treasury
(1,367 shares)........................... (27,425) (27,425)
Issuance of treasury stock under Employee
Stock Purchase Plan (52 shares) ......... 483 458 941
- ----------------------------------------------------------------------------------------------------------------------------
Balance at August 29, 1999................. $1,341,274 $225,321 $(493,869) $(12,458) $(64,565) $ 995,703
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Common Accumulated
Stock Other Total
and Retained Treasury Comprehensive Unearned Stockholders'
Surplus Earnings Stock Income Compensation Equity
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at May 31, 1998.................... $1,286,191 $ 48,327 $(239,876) $(11,749) $(63,048) $1,019,845
Comprehensive income:
Net earnings............................. 35,179 35,179
Other comprehensive income, foreign
currency adjustment.................... (1,981) (1,981)
----------
Total comprehensive income........... 33,198
Stock option exercises (1,167 shares)...... 9,881 9,881
Issuance of restricted stock (288 shares),
net of forfeiture adjustments............ 3,263 (3,235) 28
Earned compensation........................ 472 472
Income tax benefit credited to equity...... 3,633 3,633
Proceeds from issuance of equity put
options.................................. 826 826
Purchases of common stock for treasury
(3,219 shares)........................... (52,626) (52,626)
- ----------------------------------------------------------------------------------------------------------------------------
Balance at August 30, 1998................. $1,303,794 $83,506 $(292,502) $(13,730) $(65,811) $1,015,257
- ----------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
5
<PAGE>
DARDEN RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
- ------------------------------------------------------------------------------------------------------------------
August 29, 1999 August 30, 1998
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows--Operating Activities
Net earnings.................................................... $ 47,313 $ 35,179
Adjustments to reconcile net earnings to cash flow:
Depreciation and amortization................................. 31,370 31,012
Amortization of unearned compensation and loan costs.......... 1,406 1,099
Change in current assets and liabilities...................... (50,484) 19,990
Change in other liabilities .................................. 76 266
Loss (gain) on disposal of land, buildings and equipment...... 214 (866)
Deferred income taxes......................................... 5,075 4,524
Other, net.................................................... 381 (574)
--------- ---------
Net Cash Provided by Operating Activities................... $ 35,351 $ 90,630
--------- ---------
Cash Flows--Investing Activities
Purchases of land, buildings and equipment...................... (40,602) (24,364)
Purchases of intangibles........................................ (583) (508)
Decrease (increase) in other assets............................. 1,271 (207)
Proceeds from disposal of land, buildings and equipment
(including net assets held for disposal)...................... 7,073 12,825
--------- ---------
Net Cash Used by Investing Activities....................... $ (32,841) $ (12,254)
--------- ---------
Cash Flows--Financing Activities
Proceeds from issuance of common stock.......................... 6,246 9,881
Income tax benefit credited to equity........................... 3,361 3,633
Purchases of treasury stock..................................... (27,425) (52,626)
ESOP note receivable repayment.................................. 600
Increase (decrease) in short-term debt.......................... 3,500 (45,600)
Repayment of long-term debt..................................... (606) (5)
Proceeds from issuance of equity put options.................... 1,139 826
--------- ---------
Net Cash Used by Financing Activities....................... $ (13,185) $ (83,891)
--------- ---------
Decrease in Cash and Cash Equivalents.............................. (10,675) (5,515)
Cash and Cash Equivalents - Beginning of Period.................... 40,960 33,505
--------- ---------
Cash and Cash Equivalents - End of Period.......................... $ 30,285 $ 27,990
========= =========
Cash Flow from Changes in Current Assets and Liabilities
Receivables..................................................... (2,270) 4,211
Inventories..................................................... (48,377) 37,222
Prepaid expenses and other current assets....................... (2,210) 384
Accounts payable................................................ 11,477 (28,534)
Accrued payroll................................................. (10,319) (13,011)
Accrued income taxes............................................ 2,379 22,083
Other accrued taxes............................................. 608 1,342
Other current liabilities....................................... (1,772) (3,707)
--------- ---------
Change in Current Assets and Liabilities...................... $ (50,484) $ 19,990
========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
6
<PAGE>
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
29, 1999 are not necessarily indicative of the results that may be expected for
the fiscal year ended May 28, 2000.
These statements should be read in conjunction with the consolidated
financial statements and footnotes included in our annual report on Form 10-K
for the year ended May 30, 1999. The accounting policies used in preparing these
consolidated financial statements are the same as those described in our annual
report on Form 10-K.
Note 2. Consolidated Statements of Cash Flows
-------------------------------------
During the thirteen weeks ended August 29, 1999, Darden paid $7,902 for
interest (net of amount capitalized) and $16,274 for income taxes. During the
thirteen weeks ended August 30, 1998, Darden paid $8,673 for interest (net of
amount capitalized) and received income tax refunds of $10,051.
Note 3. Net Earnings Per Share
----------------------
Outstanding stock options issued by the Company represent the only dilutive
effect reflected in diluted weighted average shares outstanding. Options to
purchase 2,621,129 and 3,000 shares of common stock were excluded from the
calculation of diluted earnings per share for the thirteen weeks ended August
29, 1999 and August 30, 1998, respectively, because their exercise prices
exceeded the average market price of common shares for the period.
7
<PAGE>
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 for the thirteen weeks ended August 29,
1999 and August 30, 1998.
Thirteen Weeks Ended
- --------------------------------------------------------------------------------
August 29, 1999 August 30, 1998
- --------------------------------------------------------------------------------
Sales..................................... 100.0% 100.0%
Costs and Expenses:
Cost of sales:
Food and beverages.................... 32.1 33.4
Restaurant labor...................... 31.8 31.9
Restaurant expenses................... 14.2 14.9
------ ------
Total Cost of Sales................. 78.1% 80.2%
Selling, general and administrative..... 10.1 9.6
Depreciation and amortization........... 3.4 3.5
Interest, net........................... 0.5 0.6
------ ------
Total Costs and Expenses.......... 92.1% 93.9%
------ ------
Earnings before Income Taxes.............. 7.9 6.1
Income Taxes.............................. (2.8) (2.1)
------ ------
Net Earnings.............................. 5.1% 4.0%
====== ======
For the fiscal 2000 first quarter ended August 29, 1999, earnings after tax
were $47.3 million or 35 cents per diluted share, compared to earnings after tax
of $35.2 million or 24 cents per diluted share in the first quarter of last
year. The increase in first quarter earnings was primarily attributable to
strong same-restaurant sales at both Red Lobster and Olive Garden. Sales of
$929.4 million for the first quarter were 4.9% higher than last year's first
quarter.
Food and beverage costs for the first quarter were 32.1% of sales, compared
to 33.4% of sales last year primarily attributable to reduced costs, pricing and
a lower margin promotion run by Red Lobster during the first quarter last year.
Restaurant labor costs amounting to 31.8% of sales were comparable to last
year's 31.9% of sales. Restaurant expenses decreased to 14.2% of sales compared
to 14.9% last year primarily due to the fixed component of these expenses which
are not impacted by higher sales volumes. The increase in first quarter selling,
general and administrative expenses to 10.1% of sales compared to 9.6% of sales
last year was primarily attributable to increased marketing expenses and
additional labor costs associated with strong financial performance and new
concept expansion and development. Depreciation and amortization as a percentage
of sales decreased to 3.4% compared to last year's 3.5% primarily as a result of
higher sales volume.
The effective tax rate for the first quarter of fiscal 2000 was 35.4%
compared to 34.7% in last year's first quarter. The increase in the effective
tax rate reflects a higher level of expected pre-tax income for fiscal 2000.
Inventories totaled $192.5 million as of August 29, 1999, up from $144.1
million at May 30, 1999. The increase resulted primarily from purchases of
seafood at prices which the Company believes were favorable. This additional
seafood is expected to be used during the current fiscal year.
Division Results
- ----------------
Red Lobster sales of $522.5 million were 1.8% above last year's first
quarter. Same-restaurant sales in the United States were up 4.0% for the
quarter, marking the seventh consecutive quarter of same-restaurant sales
increases. First quarter operating profit improved significantly over the prior
year primarily as a result of favorable food and beverage costs and restaurant
expenses as a percentage of sales. These results were achieved even though Red
Lobster operated 29 fewer restaurants than the same period last year and did not
repeat its high volume "Bottomless Crab" promotion that helped to generate its
high sales and traffic volumes in the first quarter of last year.
8
<PAGE>
Olive Garden continued its positive momentum in the first quarter with a
7.8% increase in sales to $396.0 million. Same-restaurant sales in the United
States increased 8.1%, representing the twentieth consecutive quarter of
same-restaurant sales increases. First quarter operating profits were
substantially improved over the prior year primarily due to increased sales and
lower food and beverage costs and restaurant expenses as a percentage of sales.
Bahama Breeze continues to produce strong sales at each of its six
restaurants. Six additional restaurants are currently under construction, all of
which have expected fiscal 2000 opening dates.
The table below details the number of restaurants open at the end of the
first quarter of fiscal 2000, compared with the number open at the end of May
1999 and the end of last fiscal year's first quarter. In addition, the Company
opened its first Smokey Bones BBQ and Hometown Sports Bar restaurant on
September 13, 1999 in Orlando, Florida.
NUMBER OF RESTAURANTS
- --------------------------------------------------------------------------------
August 29, 1999 May 30, 1999 August 30, 1998
- --------------------------------------------------------------------------------
Red Lobster - USA............ 617 635 646
Red Lobster - Canada......... 34 34 34
------ ------ ------
Total................... 651 669 680
Olive Garden - USA........... 459 459 459
Olive Garden - Canada........ 5 5 5
------ ------ ------
Total................... 464 464 464
Bahama Breeze................ 6 6 3
------ ------ ------
Total................... 1,121 1,139 1,147
====== ====== ======
Year 2000
- ---------
The total costs to the Company of Year 2000 activities has not been and is
not anticipated to be material to its financial position or results of
operations in any given year. As of August 29, 1999, the Company had spent
approximately $3.2 million on Year 2000 issues. This amount does not include the
costs incurred to develop and install new systems resulting from the Company's
seafood inventory accounting system project which was already contemplated for
replacement. The total costs to the Company of addressing Year 2000 issues is
estimated to be less than $5 million. These total costs are based on
management's best estimates, which were derived utilizing numerous assumptions
of future events, including the continued availability of certain resources,
third-party modification plans and other factors. However, there can be no
guarantee that these estimates will be achieved, and actual results could differ
from those estimates.
Forward-Looking Statements
- --------------------------
Certain information included in this report and other materials filed or to
be filed by the Company with the Securities and Exchange Commission (as well as
information included in oral statements or written statements made or to be made
by the Company) may contain statements that are forward-looking within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Such statements include
information relating to current expansion plans, business development
activities, and Year 2000 compliance. Such forward-looking information is based
on assumptions concerning important risks and uncertainties that could
significantly affect anticipated results in the future and, accordingly, such
results may differ from those expressed in any forward-looking statements made
by or on behalf of the Company. These risks and uncertainties include, but are
not limited to, those relating to real estate development and construction
activities, the issuance and renewal of licenses and permits for restaurant
development and operation, economic conditions, changes in federal or state laws
or the administration of such laws, and the Year 2000 readiness of suppliers,
banks, vendors and others having a direct or indirect business relationship with
the Company.
9
<PAGE>
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
*Exhibit 10(a) Darden Restaurants, Inc. Amended and Restated
Stock Option and Long-Term Incentive Plan of
1995, as approved September 23, 1999
Exhibit 12 Computation of Ratio of Consolidated Earnings to
Fixed Charges
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K.
(i) On June 22, 1999, the Company filed a current report on Form
8-K to announce fourth quarter financial results for fiscal
year 1999.
(ii) On June 28, 1999, the Company filed a current report on Form
8-K to announce the appointment of Barry Moullet to Senior
Vice President of Darden Restaurants.
- ------------------------
* Items that are management contracts or compensatory plans or arrangements
required to be filed as an exhibit pursuant to Item 6(a) of Form 10-Q.
10
<PAGE>
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 7, 1999 By: /s/ Paula J. Shives
------------------------------------------
Paula J. Shives
Senior Vice President,
General Counsel and Secretary
Dated: October 7, 1999 By: /s/ Linda Dimopoulos
------------------------------------------
Linda Dimopoulos
Senior Vice President - Corporate
Controller and Business Information
Systems (Principal accounting officer)
11
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Exhibit Title Page
- ------- ------------- ----
*10(a) Darden Restaurants, Inc. Amended and Restated
Stock Option and Long-Term Incentive Plan of
1995, as approved September 23, 1999 13
12 Computation of Ratio of Consolidated Earnings
to Fixed Charges 20
27 Financial Data Schedule 21
- ------------------------
* Items that are management contracts or compensatory plans or arrangements
required to be filed as an exhibit pursuant to Item 6(a) of Form 10-Q.
12
Exhibit 10(a)
DARDEN RESTAURANTS, INC.
AMENDED AND RESTATED STOCK OPTION AND LONG-TERM INCENTIVE PLAN OF 1995
1. PURPOSE OF THE PLAN
The purpose of the Darden Restaurants, Inc. Amended and Restated Stock
Option and Long-Term Incentive Plan of 1995 (the "Plan") is to attract and
retain able employees by rewarding employees of Darden Restaurants, Inc.,
its subsidiaries and affiliates (defined as entities in which Darden
Restaurants, Inc. owns an equity interest of 25% or more) (collectively,
the "Company") who are responsible for the growth and sound development of
the business of the Company, and to align the interests of all employees
with those of the stockholders of the Company and to compensate certain
management employees of the Company by granting stock options in lieu of
salary increases or other compensation or employee benefits.
2. EFFECTIVE DATE, DURATION AND SUMMARY OF PLAN
A. Effective Date and Duration
---------------------------
This Plan shall become effective as of the effective date of the
distribution of Darden Restaurants, Inc. Common Stock to the holders
of General Mills, Inc. common stock. Awards may be made under the Plan
until September 30, 2004.
B. Summary of Option Provisions for Participants
---------------------------------------------
The stock option that will be awarded to employees under this Plan
gives a right to an employee to purchase at a future date shares of
Darden Restaurants, Inc. Common Stock at a fixed price. As an
employee, you will receive an "option agreement" in your own name,
which will contain the term and other conditions of the option grant.
In general, each option agreement will state the number of shares of
Darden Restaurants, Inc. Common Stock that you can purchase from the
Company, the price at which you can purchase the shares, and the last
date you can make your purchase. You will not have any taxable income
when you receive the option agreement.
The price at which you may buy the Darden Restaurants, Inc. shares
will be equal to the market price of the Company shares on the New
York Stock Exchange as of the day the option was awarded to you. If
after the period that you must hold the option before you can exercise
such option the price of Darden Restaurants, Inc. Common Stock has
risen, you will be able to make a gain on exercising the option equal
to the difference between the exercise price of the option and the
market price of Darden Restaurants, Inc. shares on the date you use
your option to buy shares under the terms of the option certificate.
This gain will be taxable to you.
You will never be obligated to buy shares of the Company if you do not
wish to do so. After the required holding period before you can
exercise the option, you can continue to hold the option as an
employee for the remaining years of the option before making the
decision whether or not to buy shares of the Company. Thereafter, the
rights under the option will lapse and cannot be used by the employee.
Generally you cannot sell or assign the option to any other person and
the specific provisions which cover your rights in the option are
covered in the full text of the Plan.
13
<PAGE>
3. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Compensation Committee (the
"Committee"). The Committee shall be comprised solely of non-employee,
independent members of the Board of Directors (the "Board") appointed in
accordance with the Company's Articles of Incorporation. Subject to the
provisions of Section 14, the Committee shall have authority to adopt rules
and regulations for carrying out the purpose of the Plan, select the
employees to whom Awards will be made ("Participants"), determine the
number of shares to be awarded and the other terms and conditions of Awards
in accordance with the Plan provisions and interpret, construe and
implement the provisions of the Plan; provided that if at any time Rule
16b-3 or any successor rule ("Rule 16b-3") under the Securities Exchange
Act of 1934, as amended (the "1934 Act"), so permits, without adversely
affecting the ability of the Plan to comply with the conditions for
exemption from Section 16 of the 1934 Act (or any successor provisions)
provided by Rule 16b-3, the Committee may delegate its duties under the
Plan in whole or in part, on such terms and conditions, to the Chief
Executive Officer and to other senior officers of the Company; provided
further, that only the Committee may select and make other decisions as to
Awards to Participants who are subject to Section 16 of the 1934 Act and to
other executives of the Company. The Committee (or its permitted delegate)
may correct any defect or supply any omission or reconcile any
inconsistency in any agreement relating to any Award under the Plan in the
manner and to the extent it deems necessary. Decisions of the Committee (or
its permitted delegate) shall be final, conclusive and binding upon all
parties, including the Company, stockholders and Participants.
4. COMMON STOCK SUBJECT TO THE PLAN
The shares of common stock of the Company (without par value) ("Common
Stock") to be issued upon exercise of a Stock Option, awarded as Restricted
Stock, or issued upon expiration of the restricted period for Restricted
Stock Units, may be made available from the authorized but unissued Common
Stock, shares of Common Stock held in the Company's treasury, or Common
Stock purchased by the Company on the open market or otherwise. Approval of
the Plan by the sole shareholder of the Company shall constitute
authorization to use such shares for the Plan.
The Committee, in its discretion, may require as a condition to the grant
of Stock Options, Restricted Stock or Restricted Stock Units (collectively,
"Awards"), the deposit of Common Stock owned by the Participant receiving
such grant, and the forfeiture of such Awards, if such deposit is not made
or maintained during the required holding period or the applicable
restricted period. Such shares of deposited Common Stock may not be
otherwise sold, pledged or disposed of during the applicable holding period
or restricted period. The Committee may also determine whether any shares
issued upon exercise of a Stock Option shall be restricted in any manner.
The maximum aggregate number of shares of Common Stock authorized under the
Plan for which Awards may be granted under the Plan is 22,200,000. Upon the
expiration, forfeiture, termination or cancellation, in whole or in part,
of unexercised Stock Options, or forfeiture of Restricted Stock or
Restricted Stock Units on which no dividends or dividend equivalents have
been paid, the shares of Common Stock subject thereto shall again be
available for Awards under the Plan.
The number of shares subject to the Plan, the outstanding Awards and the
exercise price per share of outstanding Stock Options may be appropriately
adjusted by the Committee in the event that:
(i) the number of outstanding shares of Common Stock shall be changed by
reason of split-ups, spin-offs, combinations or reclassifications of
shares;
(ii) any stock dividends are distributed to the holders of Common Stock;
(iii)the Common Stock is converted into or exchanged for other shares as a
result of any merger or consolidation (including a sale of assets) or
other recapitalization, or other similar events occur which affect the
value of the Common Stock; or
(iv) the Committee determines such adjustments are appropriate to prevent
dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan.
14
<PAGE>
5. ELIGIBLE PERSONS
Only persons who are employees of the Company shall be eligible to receive
Awards under the Plan ("Participants"). No Award shall be made to any
member of the Committee or any other non-employee director of the Company.
6. PURCHASE PRICE OF STOCK OPTIONS
The purchase price for each share of Common Stock issuable under a Stock
Option shall not be less than 100% of the Fair Market Value of the shares
of Common Stock on the date of grant. "Fair Market Value" as used in the
Plan shall equal the mean of the high and low price of the Common Stock on
the New York Stock Exchange on the applicable date.
7. STOCK OPTION TERM AND TYPE
The term of any Stock Option as determined by the Committee shall not
exceed 10 years from the date of grant and shall expire as of the close of
business on the last day of the designated term, unless terminated earlier
under the provisions of the Plan. All Stock Option grants under the Plan
shall be non-qualified stock options governed by Section 83 of the Internal
Revenue Code of 1986, as amended (the "Code") .
8. EXERCISE OF STOCK OPTIONS
A. Of the 22,200,000 shares of Common Stock authorized for issuance
hereunder, not less than 3,000,000 shall be issued only as salary
replacement Stock Options ("SRO's") in lieu of salary increases,
compensation or other employee benefits, subject that SRO's granted to
directors pursuant to the Stock Plan for Directors (as amended) shall
also be included within such 3,000,000 shares of Common Stock. Except
as provided in Sections 12 and 13, each Stock Option issued as an SRO
may be exercised as determined by the Committee in its discretion.
B. Except as provided in Sections 12 and 13 (Change of Control and
Termination of Employment), each Stock Option, other than an SRO, may
be exercised from the date of grant no sooner than in increments of
one-third after two years, one-third after three years and one-third
after four years, subject to the Participant's continued employment
with the Company and in accordance with other terms and conditions
prescribed by the Committee which may specify a longer period before an
option may be exercised.
C. The number of shares of Common Stock subject to Stock Options,
excluding SRO's, granted under the Plan to any single Participant shall
not exceed 300,000 shares in each of the last four fiscal years of the
Plan determined on a prospective and retroactive cumulative basis.
D. A Participant exercising a Stock Option shall give notice to the
Company of such exercise and of the number of shares elected to be
purchased prior to 5:00 P.M. EST/EDT on the day of exercise, which must
be a business day at the executive offices of the Company. At the time
of purchase, the Participant shall tender the full purchase price of
the shares purchased. Until such payment has been made and a
certificate or certificates for the shares purchased has been issued in
the Participant's name, the Participant shall possess no stockholder
rights with respect to such shares. Payment of such purchase price
shall be made to the Company, subject to any applicable rule or
regulation adopted by the Committee:
(i) in cash (including check, draft, money order or wire transfer
made payable to the order of the Company);
(ii) through the delivery of shares of Common Stock owned by the
Participant; or
(iii) by a combination of (i) and (ii) above.
For determining the amount of the payment, Common Stock delivered pursuant
to (ii) or (iii) shall have a value equal to the Fair Market Value of the
Common Stock on the date of exercise.
15
<PAGE>
9. RESTRICTED STOCK AND RESTRICTED STOCK UNITS
With respect to Awards of Restricted Stock and Restricted Stock Units, the
Committee shall:
(i) select Participants to whom Awards will be made, provided that
Restricted Stock Units may only be awarded to those employees of the
Company who are employed in a country other than the United States;
(ii) determine the number of shares of Restricted Stock or the number of
Restricted Stock Units to be awarded;
(iii)determine the length of the restricted period, which shall be no less
than one year;
(iv) determine the purchase price, if any, to be paid by the Participant
for Restricted Stock or Restricted Stock Units; and
(v) determine any restrictions other than those set forth in this Section
9.
Any shares of Restricted Stock granted under the Plan may be evidenced in
such manner as the Committee deems appropriate, including, without
limitation, book-entry registration or issuance of stock certificates, and
may be held in escrow.
Subject to the restrictions set forth in this Section 9, each Participant
who receives Restricted Stock shall have all rights as a stockholder with
respect to such shares, including the right to vote the shares and receive
dividends and other distributions.
Each Participant who receives Restricted Stock Units shall be eligible to
receive, at the expiration of the applicable restricted period, one share
of Common Stock for each Restricted Stock Unit awarded, and the Company
shall issue to and register in the name of each such Participant a
certificate for that number of shares of Common Stock. Participants who
receive Restricted Stock Units shall have no rights as stockholders with
respect to such Restricted Stock Units until such time as share
certificates for Common Stock are issued to the Participants; provided,
however, that quarterly during the applicable restricted period for all
Restricted Stock Units awarded hereunder, the Company shall pay to each
such Participant an amount equal to the sum of all dividends and other
distributions paid by the Company during the prior quarter on that
equivalent number of shares of Common Stock.
Subject to the provisions of Section 12, for awards of Restricted Stock or
Restricted Stock Units which have a deposit requirement, a Participant will
be eligible to vest only in those shares of Restricted Stock or Restricted
Stock Units for which personally-owned shares are on deposit with the
Company as of the date the Participant's employment with the Company
terminates.
The total number of shares of Common Stock issued upon vesting of
Restricted Stock or Restricted Stock Units granted under the Plan shall not
exceed 1,500,000 of the total number of shares of Common Stock which may be
issued under this Plan, and no single Participant shall receive under the
Plan Restricted Stock or Restricted Stock Units which, upon vesting, would
exceed 2% of the total number of shares of Common Stock which may be issued
under the Plan.
10. NON-TRANSFERABILITY
Except as otherwise provided in Section 9, no shares of Restricted Stock
and no Restricted Stock Units shall be sold, exchanged, transferred,
pledged, or otherwise disposed of during the restricted period. No Stock
Options granted under this Plan shall be transferable by a Participant
otherwise than (i) by the Participant's last will and testament or (ii) by
the applicable laws of descent and distribution, or (iii) by gift by a
Participant who is subject to Section 16 of the 1934 Act and is eligible
for retirement (age 55 with 10 years of service) to a "family member"
defined by the Committee. Such Stock Options shall be exercised during the
Participant's lifetime only by the Participant or his or her guardian or
legal representative or the donee family member. After death, such Stock
Option may be exercised in accordance with Section 13B. Other than as set
forth herein, no Award under the Plan shall be subject to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance or charge, and
any attempt to do so shall be void.
16
<PAGE>
11. WITHHOLDING TAXES
It shall be a condition to the obligation of the Company to deliver shares
upon the exercise of a Stock Option, the vesting of Restricted Stock or
Restricted Stock Units and the corresponding issuance of shares of
unrestricted Common Stock, that the Participant pay to the Company cash in
an amount equal to all federal, state, local and foreign withholding taxes
required to be collected in respect thereof.
Notwithstanding the foregoing, to the extent permitted by law and pursuant
to such rules as the Committee may adopt, a Participant may authorize the
Company to satisfy any such withholding requirement by directing the
Company to withhold from any shares of Common Stock to be issued, all or a
portion of such number of shares as shall be sufficient to satisfy the
withholding obligation.
12. CHANGE OF CONTROL
Each outstanding Stock Option shall become immediately and fully
exercisable for a period of 6 months following the date of the following
occurrences, each constituting a "Change of Control":
(i) if any person (including a group as defined in Section 13(d)(3) of the
1934 Act) becomes, directly or indirectly, the beneficial owner of 20%
or more of the shares of the Company entitled to vote for the election
of directors;
(ii) as a result of or in connection with any cash tender offer, exchange
offer, merger or other business combination, sale of assets or
contested election, or combination of the foregoing, the persons who
were directors of the Company just prior to such event cease to
constitute a majority of the Company's Board of Directors; or
(iii)the stockholders of the Company approve an agreement providing for a
transaction in which the Company will cease to be an independent
publicly-owned corporation or a sale or other disposition of all or
substantially all of the assets of the Company occurs.
After such 6-month period the normal option exercise provisions of the Plan
shall govern. In the event a Participant is terminated as an employee of
the Company within 2 years after any of the events specified in (i), (ii)
or (iii), his or her outstanding Stock Options at that date of termination
shall become immediately exercisable for a period of 3 months.
With respect to Stock Option grants outstanding as of the date of any such
Change of Control which require the deposit of owned Common Stock as a
condition to obtaining rights: (a) said deposit requirement shall be
terminated as of the date of the Change of Control and any such deposited
stock shall be promptly returned to the Participant; and (b) any
restrictions on the sale of shares issued in respect of any such Stock
Option shall lapse.
In the event of a Change of Control, a Participant shall vest in all shares
of Restricted Stock and Restricted Stock Units, effective as of the date of
such Change of Control, and any deposited shares of Common Stock shall be
promptly returned to the Participant.
13. TERMINATION OF EMPLOYMENT
A. Termination of Employment
-------------------------
If the Participant's employment by the Company terminates for any
reason other than as specified herein or in subsections B, C or D, the
Participant's Stock Options shall terminate 3 months after such
termination and all shares of Restricted Stock and all Restricted Stock
Units which are subject to restriction as of said termination date
shall be forfeited by the Participant to the Company. In the event a
Participant's employment with the Company is terminated for the
convenience of the Company, as determined by the Committee, the
Committee, in its sole discretion, may vest such Participant in all or
any portion of outstanding Stock Options (which shall become
exercisable) and/or shares of Restricted Stock or Restricted Stock
Units awarded to such Participant, effective as of the date of such
termination.
17
<PAGE>
B. Death
-----
If a Participant should die while employed by the Company, any Stock
Option previously granted under this Plan may be exercised (i) by the
person designated in such Participant's last will and testament or,
(ii) in the absence of such designation, by the Participant's estate,
or (iii) by the donee of a Stock Option made pursuant to Section 10
(iii), to the full extent that such Stock Option could have been
exercised by such Participant immediately prior to death. Further, with
respect to outstanding Stock Option grants which, as of the date of
death, are not yet exercisable, any such option grant shall vest and
become exercisable in a pro-rata amount, based on the full months of
employment completed during the full vesting period of the Stock Option
from the date of grant to the date of death.
With respect to Stock Option grants which require the deposit of owned
Common Stock as a condition to obtaining exercise rights, in the event
a Participant should die while employed by the Company, said Stock
Options may be exercised as provided in the first paragraph of this
Section 13B, subject to the following special conditions:
(i) any restrictions on the sale of shares issued in respect of any
such Stock Option shall cease; and
(ii) any owned Common Stock deposited by the Participant pursuant to
said grant shall be promptly returned to the person designated in
such Participant's last will and testament or, in the absence of
such designation, to the Participant's estate, and all
requirements regarding deposit by the Participant shall be
terminated.
A Participant who dies during any applicable restricted period shall
vest in a proportionate number of shares of Restricted Stock or
Restricted Stock Units, effective as of the date of death. Such
proportionate vesting shall be pro-rata, based on the number of full
months of employment completed during the restricted period prior to
the date of death, as a percentage of the applicable restricted period.
C. Retirement
----------
The Committee shall determine, at the time of grant, the treatment of
the Stock Option upon the retirement of the Participant. Unless other
terms are specified in the original Stock Option grant, if the
termination of employment is due to a Participant's retirement on or
after age 55 with 10 years of service with the Company, the Participant
may exercise a Stock Option, subject to the original terms and
conditions of the Stock Option. With respect to Stock Option grants
which require the deposit of owned Common Stock as a condition to
obtaining rights, any restrictions on the sale of shares issued in
respect of any such Stock Option shall lapse at the date of any such
retirement.
A Participant who retires on or after the date he or she attains age 65
shall fully vest in all shares of Restricted Stock or Restricted Stock
Units, effective as of the date of retirement (unless any such award
specifically provides otherwise).
A Participant who takes early retirement (after age 55, but prior to
age 65) during any applicable restricted period may elect either of the
following alternatives with respect to Restricted Stock or Restricted
Stock Units (unless any such award specifically provides otherwise):
(a) Leave owned shares on deposit with the Company and vest in all
shares of Restricted Stock or Restricted Stock Units, effective as
of the earlier of the date the Participant attains age 65 or the
termination date of the applicable restricted period; or
(b) Withdraw owned shares and vest in a proportionate number of shares
of Restricted Stock or Restricted Stock Units, effective as of the
date the shares on deposit are withdrawn. Such proportionate
vesting shall be pro-rata, based on the number of full months of
employment completed during the restricted period prior to the
date of early retirement, as a percentage of the applicable
restricted period.
18
<PAGE>
D. Spin-offs
---------
If the termination of employment is due to the cessation, transfer, or
spin-off of a complete line of business of the Company, the Committee,
in its sole discretion, shall determine the treatment of all
outstanding Awards under the Plan.
14. AMENDMENTS OF THE PLAN
The Plan may be terminated, modified, or amended by the Board of Directors
of the Company. The Committee may from time to time prescribe, amend and
rescind rules and regulations relating to the Plan. Subject to the approval
of the Board of Directors, the Committee may at any time terminate, modify,
or suspend the operation of the Plan, provided that no action shall be
taken by the Board of Directors or the Committee without the approval of
the stockholders of the Company which would:
(i) materially increase the number of shares which may be issued under the
Plan;
(ii) materially increase the benefits accruing to Participants under the
Plan; or
(iii)materially modify the requirements as to eligibility for
participating in the Plan.
The Board of Directors shall have authority to cause the Company to take
any action related to the Plan which may be required to comply with the
provisions of the Securities Act of 1933, as amended, the 1934 Act, and the
rules and regulations prescribed by the Securities and Exchange Commission.
Any such action shall be at the expense of the Company.
No termination, modification, suspension, or amendment of the Plan shall
alter or impair the rights of any Participant pursuant to a prior Award
without the consent of the Participant. There is no obligation for
uniformity of treatment of Participants under the Plan.
15. FOREIGN JURISDICTIONS
The Committee may adopt, amend, and terminate such arrangements, not
inconsistent with the intent of the Plan, as it may deem necessary or
desirable to make available tax or other benefits of the laws of any
foreign jurisdiction, to employees of the Company who are subject to such
laws and who receive Awards under the Plan.
16. NOTICE
All notices to the Company regarding the Plan shall be in writing,
effective as of actual receipt by the Company, and shall be sent to:
Darden Restaurants, Inc.
5900 Lake Ellenor Dr.
Orlando, FL 32809
Attn: General Counsel
Effective May 28, 1995; Restated as of September 23, 1999
19
Exhibit 12
DARDEN RESTAURANTS, INC.
COMPUTATION OF RATIO OF CONSOLIDATED EARNINGS TO FIXED CHARGES
(Dollar Amounts in Thousands)
Thirteen Weeks Ended
- --------------------------------------------------------------------------------
August 29, 1999 August 30, 1998
- --------------------------------------------------------------------------------
Consolidated Earnings from Operations
before Income Taxes...................... $ 73,227 $ 53,871
Plus Fixed Charges......................... 9,865 10,526
Less Capitalized Interest.................. (441) (260)
--------- ---------
Consolidated Earnings from Operations
Before Income Taxes Available to
Cover Fixed Charges...................... $ 82,651 $ 64,137
========= =========
Ratio of Consolidated Earnings to
Fixed Charges............................ 8.38 6.09
========= =========
20
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements of Darden Restaurants, Inc. and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-28-2000
<PERIOD-END> AUG-29-1999
<CASH> 30,285
<SECURITIES> 0
<RECEIVABLES> 22,858
<ALLOWANCES> (332)
<INVENTORY> 192,492
<CURRENT-ASSETS> 358,212
<PP&E> 2,417,524
<DEPRECIATION> (948,895)
<TOTAL-ASSETS> 1,929,323
<CURRENT-LIABILITIES> 526,407
<BONDS> 315,876
0
0
<COMMON> 1,341,274
<OTHER-SE> (345,571)
<TOTAL-LIABILITY-AND-EQUITY> 1,929,323
<SALES> 929,391
<TOTAL-REVENUES> 929,391
<CGS> 298,828
<TOTAL-COSTS> 726,068
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,576
<INCOME-PRETAX> 73,227
<INCOME-TAX> 25,914
<INCOME-CONTINUING> 47,313
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47,313
<EPS-BASIC> 0.36
<EPS-DILUTED> 0.35
</TABLE>
