Darden Restaurants, Inc. · NYSE:DRI
Darden Restaurants — Investor Presentation (January 2016)
46 slides from Darden Restaurants's investor presentation, Jan 11, 2016
Slide 1: Investor Presentation January 2016
Investor Presentation January 2016
Slide 2: Disclaimer
1 Disclaimer The following slides are part of a presentation by Darden Restaurants, Inc. (the "Company") and are intended to be viewed as part of that presentation (the "Presentation"). No representation is made that the Presentation is complete. Forward-looking statements in this communication rega
Slide 3: Non-GAAP Information
2 Non-GAAP Information The information in this communication includes financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (“GAAP”), such as adjusted net earnings per diluted share from continuing operation
Slide 4: Darden Restaurants: An Attractive Investment For 2016 & Beyond
3 Premier full-service restaurant company with unifying mission and compelling strategy for generating attractive shareholder returns Darden’s competitive advantages drive sales and expand margins Differentiated and iconic brands positioned to increase market share Value-creating business mo
Slide 5: Back-To-Basics Operating Philosophy
4 Back-To-Basics Operating Philosophy Premier Full-Service Restaurant Company 7 Iconic Brands 1 Driving Philosophy 1 Mission Be financially successful through great people consistently delivering outstanding food, drinks and service in an inviting atmosphere making every guest loyal. Culinary Inno
Slide 6: The Darden Advantage
5 The Darden Advantage Support best-in-class restaurant brands helping them reach their full potential by leverage scale, insight, and experience Support best-in-class restaurant brands by helping them reach their full potential Significant Scale Extensive Data & Insights Rigorous Strategic Planni
Slide 7: Significant Scale Enables Supply Chain, G&A, and People Advantages
6 G&A Scale enables deep relationships with vendor partners Use supplier negotiation expertise and leverage Consolidate vendors to achieve meaningful supplier relationships Extend favorable Darden product pricing across all brands Optimize logistics network Darden will deliver $165 million i
Slide 8: Emerging Trends Illustrate Progress on Scale Advantage
7 6.0% 4.8% FY16 Darden (Guided) FY15 Darden Last Fiscal Year Competition* ~$300 $260 $160 FY16 Darden (Guided) FY15 Darden Last Fiscal Year Competition* Significant Scale Emerging Trends Illustrate Progress on Scale Advantage Significant Cash Generation ~$4.5 $4.4 $3.4 FY16 Darden (Guided) FY15 D
Slide 9: Scale Drives G&A Advantage
8 50 500 5,000 A d justed G & A % o f S a le s Sales (Log Scale)es ca Source: Piper Jaffray Restaurant Benchmark Analysis, June 2015 Industry: BBRG, BJRI, BWLD, CAKE, CBRL, CHUY, CMG, COSI, DENN, DFRG, EAT, FRGI, HABT, IRG, KONA, LOCO, LUB, NDLS, PBPB, PLAY, PNRA, QSR, RRGB, RT, RUTH, SHAK, TAST, TX
Slide 10: From a Complex, Centralized Organization
9 From a Complex, Centralized Organization Darden Executive Team Growth Team Operating Team Marketing Leadership Team Operating Leadership Team CMO CROO Enterprise Marketing Enterprise Operations Complicated Structure Lacking Clear Accountability Olive Garden LongHorn Specialty Restaurants Concept
Slide 11: To a Decentralized, Operations-focused Organization
10 To a Decentralized, Operations-focused Organization Centralized Support Where Scale Matters CEO Olive Garden President Operations Marketing Finance Human Resources LongHorn President Operations Marketing Finance Human Resources Specialty Restaurants President Operations Marketing Finance Human
Slide 12: Extensive Data and Insights
11 Drive in-restaurant behavior and experience Recognize and reward Develop relevant, targeted content Tailor message to anticipate guest need Communicate across multiple touchpoints Build guest relationships Validated, insight-driven decisions Breadth and depth of data leads to richer insights Deep
Slide 13: Rigorous Strategic Planning
12 Determine the distinct advantages of each brand and strategic role in the portfolio Develop deep understanding of the changes in competitive landscape Identify and cultivate a clear distinctive positioning for each brand Hold each brand accountable for delivering on its commitment Utilize
Slide 14: Results-Oriented 'People' Culture
13 Focused talent and development strategy Preserve unique operating cultures Behavior Uphold value and reward results Accountability Coach employees and provide feedback Differentiation Recognize the best performance in unique ways Transparency Let every employee know where they stand Performance S
Slide 15: Portfolio of Iconic Brands
14 Portfolio of Iconic Brands Restaurant Locations* 844 479 62 37 42 54 16 Total Sales* $3.8 B $1.6 B $492 M $212 M $253 M $410 M $102 M Average Annual Restaurant Sales* $4.4 M $3.3 M $8.2 M $5.7 M $5.8 M $7.4 M $6.4 M 1,534$6.9 B $4.4 M * Twelve months ending November 29, 2015
Slide 16: Olive Garden
15 Olive Garden The Essence Italy Family Value The Purpose Olive Garden is where people of all ages gather to enjoy the abundance of great Italian food and wine and be treated like family The Advantage Never-ending abundance Welcomed by people who treat you like family Craveable Italian
Slide 17: Olive Garden Brand-Building Imperatives
16 Culinary Innovation & Execution Integrated Marketing Olive Garden Attentive Service Engaging Atmosphere Craveable Italian food with a passion for wine Flawless execution of the guest experience Modern, relaxing & family-friendly environment Disruptive, real-time & personalized engagement Brand-
Slide 18: Olive Garden Growth Drivers
17 Olive Garden Consistently Great Experiences Breakthrough Communications More Relevant Occasions Restaurant Openings & Refresh Operations Excellence Beverage Focus Everyday Value To-Go Catering Delivery Large Parties Customized Refresh Package New Prototype Unique Activations 360-Degree
Slide 19: LongHorn Steakhouse
18 LongHorn Steakhouse The Essence Legendary Steaks Real People The Purpose LongHorn is the place for hardworking, uncompromising people who crave a flavorful, boldly seasoned steak at a place that feels like home The Advantage Relentless commitment to steak expertise Bold, unique proprietar
Slide 20: LongHorn Steakhouse Brand-Building Imperatives
19 Culinary Innovation & Execution Integrated Marketing LongHorn Steakhouse Attentive Service Engaging Atmosphere Steak that is perfectly seasoned and expertly grilled Guest loyalty through service that over delivers Natural, warm setting of a rancher’s home Powerful campaign pulled through multip
Slide 21: LongHorn Steakhouse Growth Drivers
20 Executional Improvements Targeted Communications LongHorn Steakhouse Enhanced Guest Experience New Restaurants Focus on quality and simplicity Value-creating expansion Market-specific activations Growth Drivers Convenience through technology
Slide 22: The Capital Grille
21 The Capital Grille The Essence A private club open to the public The Purpose The Capital Grille is the ultimate relationship brand offering a welcoming and club-like dining experience The Advantage Exceptional and personalized service Hand-carved steaks, dry aged in-house Distinctive wine
Slide 23: Eddie V's
22 Eddie V’s The Essence The modern-day Gatsby The Purpose Eddie V’s is the destination for a glamourous night-out The Advantage Food as art Seafood flown in daily from around the world Vibrant, high-energy lounge with live jazz Stylish, yet sophisticated atmosphere Genuinely attentive s
Slide 24: Yard House
23 Yard House The Essence Great Food Classic Rock 100+ Beer Taps The Purpose Yard House is the modern American gathering place where beer and food lovers unite The Advantage Eclectic, food-forward culture Broad and innovative beer and drink offering Relevant, lively atmosphere with caref
Slide 25: Seasons 52
24 Seasons 52 The Essence Celebrating living well The Purpose Seasons 52 is the restaurant of choice for conscientious adults celebrating the goodness of life without compromise The Advantage Seasonally inspired, artisanal food, wine and spirits Nationally sourced local treasures 52 wines by
Slide 26: Bahama Breeze
25 Bahama Breeze The Essence Your island oasis from the everyday The Purpose Bahama Breeze is the destination to disconnect, lighten up and have fun The Advantage Accessible, island-style cuisine Cocktails and music inspired by a Caribbean way of life Unique marketing initiatives tied to cul
Slide 27: International Franchising
26 6 11 21 31 39 ~150 FY12 FY13 FY14 FY15 FY16TD ADA * International Franchise Restaurants * Number of restaurants subject to Area Development Agreements with current international partners as of the end of Fiscal 2015 The Brands Olive Garden LongHorn The Capital Grille The Purpose Leverage Dard
Slide 28: International Franchise Partners
27 CMR (Mexico) ROI (Puerto Rico) IMC (Brazil, Colombia, Panama, Dominican Republic) Grupo Piramide (Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica) Dosil S.A. (Peru) Colombia Panama HondurasGuatemala Costa Rica NicaraguaEl Salvador Peru Dominican Republic Puerto Rico Mexico Brazil Malaysia
Slide 29: Value Creating Business Model
28 History of Stable and Growing Cash Flows Strong Balance Sheet with Investment Grade Profile Significant Return of Capital Improving Financial Performance Fiscal 2016 Annual Outlook Commitment to Superior Long-Term Total Shareholder Return Value Creating Business Model An Attractive
Slide 30: History of Stable and Growing Cash Flows
29 $655 $698 $679 $630 $749 $876 Fiscal 2011 Fiscal 2012 Fiscal 2013 Fiscal 2014 Fiscal 2015 Fiscal 2016 TTM Q2 Adjusted EBITDA1 from Continuing Operations ($M) History of Stable and Growing Cash Flows 1 Excludes impairments and disposal of assets. A reconciliation of GAAP to non-GAAP numbers can
Slide 31: Strong Balance Sheet – Investment Grade Profile
30 3.1x 2.0x 1.4x ~0.6x Fiscal 2014 Fiscal 2015 TTM Q2 FY16 Fiscal 2016 Estimate 3.6x 2.8x 2.3x ~1.8x Strong Balance Sheet – Investment Grade Profile Investment grade credit profile provides meaningful competitive advantages Flexible access to cost-effective debt financing Better pricing on
Slide 32: History of Returning Significant Capital
31 $13 $59 $66 $101 $110 $140 $175 $224 $259 $288 $279 $279 $312 $434 $371 $159 $145 $85 $385 $375 $52 $1 $502 $86 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 Q2 TTM Dividends Share Repurchase History of Returning Significant Capital Note: Fiscal year ends in May. $ in millions, ex
Slide 33: Improving Financial Performance
32 $6.42 $6.78 FY15 FY16 Improving Financial Performance Disciplined Cost Management $1.91 $3.19 FY15 FY16 Adjusted EPS1,2 TTM Q2 67% Growth 6.0% 8.9% FY15 FY16 Adjusted EBIT Margin2 TTM Q2 +270 bps improvement Strong Total Sales Growth Value Creating Earnings Growth 1 TTM Q2FY16 values exclude th
Slide 34: FY2016 Annual Outlook
33 Restaurant Openings New Restaurant Openings 18 to 22 Same-Restaurant Sales Total +2.5% to +3.0% Olive Garden +1.5% to +2.5% LongHorn Steakhouse +3.0% to +4.0% Specialty Restaurants Approximately 3% Tax Rate Annual Effective Rate 23% to 26% Capital Expenditures ($M) Total $230 - $255 New Restauran
Slide 35: Long-Term Value Creation Framework
34 Long-Term Value Creation Framework Annual Target, Over Time Business Performance (EAT Growth) Same-Restaurant Sales 1% - 3% New Restaurant Growth 2% - 3% 7% - 10% EBIT Margin Expansion 10 - 40bps Return of Cash Dividend Payout Ratio 50% - 60% 3% - 5% Share Repurchase ($millions) $100 - $200 Tot
Slide 36: Value Creating Business Model: An Attractive Investment
35 History of stable and growing cash flows Significant free cash flow after healthy investment in underlying business Strong balance sheet with investment grade profile Flexible access to cost-effective debt financing Opportunities to add more leverage as needed within investment grade pr
Slide 37: Results-Oriented 'People' Culture (CEO quote)
36 Results-Oriented ‘People’ Culture “Our ‘Back-to-Basics’ operating philosophy exemplifies a value creating culture. This simple approach acknowledges that our brands come to life every day through our 150,000 team members. In our business, every guest matters and every employee matters.” Gene Lee
Slide 38: Darden Restaurants: An Attractive Investment For 2016 & Beyond
37 Darden’s competitive advantages drive sales and expand margins Premier full-service restaurant company with unifying mission and compelling strategy for generating attractive shareholder returns Differentiated and iconic brands positioned to increase market share Value-creating business m
Slide 39: Additional Information
= == me i = A uN = - -, wen Additional Information XE DARDEN RESTAURANTS, hy Midian Tae | ai
Slide 40: Large and Stable Casual Dining Industry
39 $85 $85 $86 $87 $91 $94 2011 2012 2013 2014 2015E 2016E 37% 40% 2009 2014 Source: NPD Crest Casual dining industry is expected to show stable growth… … with major chains grabbing share from small chains and independent casual diners Casual dining restaurant dollars ($B) Share of major casual dini
Slide 41: Non-GAAP Reporting - G&A Expenses and Net Operating Income
40 $ in Millions Fiscal 2015 Sales 6,764.0$ Earnings from continuing operations 196.4$ Performance adjustments: Strategic action costs 68.5 Red Lobster shared costs 3.5 Asset impairment and other one-time costs 69.5 Debt retirement costs 90.5 Income tax impact of performance adjustments (85.3) Adjus
Slide 42: Non-GAAP Reporting - Adjusted EBITDA
41 Fiscal Year Ended Trailing Twelve Months Ended a + b - c = d Adjusted EBITDA ($ in Millions) 5/31/2015 11/29/2015 11/23/2014 11/29/2015 5/25/2014 5/23/2013 5/27/2012 5/29/2011 Earnings from continuing operations 196.4$ 111.1$ (50.1)$ 357.6$ 183.2$ 237.3$ 279.2$ 269.9$ Interest, net 192.3 79.7 145
Slide 43: Non-GAAP Reporting - EBITDAR and Debt
42 Trailing Twelve Months Ended $ in Millions 5/25/2014 5/31/2015 11/29/2015 11/23/2014 11/29/2015 a + b - c = d Net earnings 286.2$ 709.5$ 129.6$ 470.4$ 368.7$ Interest, net 134.4 192.3 79.7 145.0 127.0 Income taxes (1) 23.7 323.7 28.4 271.0 81.1 Depreciation and amortization (1) 429.0 319.5 156.4
Slide 44: Quarterly Data - Unaudited
43 Quarterly Data - Unaudited $ in Millions 11/29/2015 11/23/2014 % r 11/29/2015 8/30/2015 5/31/2015 2/22/2015 11/23/2014 8/24/2014 5/25/2014 2/23/2014 Sales $ 6,905.0 $ 6,423.4 7.5% 1,608.8$ 1,687.0$ 1,878.3$ 1,730.9$ 1,559.0$ 1,595.8$ 1,650.1$ 1,618.5$ 53 week sales (124.5) - (124.5) Adjusted Sale
Slide 45: GAAP to Non-GAAP Reconciliations
44 Per Share Fiscal 2015 Adjusted Diluted Net EPS from Continuing Operations $2.63 Remove 53rd Week Impact in Fiscal 2015 (In Q4) (0.07) Fiscal 2015 52 Week Adjusted Diluted Net EPS from Continuing Operations $2.56 Fiscal 2015 Annual* Reported Diluted Net EPS from Continuing Operations $1.51 Debt Re
Slide 46: NN IE
NN IE = STEAKHOUSE i = E uN = - = a J. DARDEN RESTAURANTS, hy Midian Saar % sais
Darden Restaurants — Investor Presentation (January 2016) on 6ix