Slide 1: FY2015 4th Quarter Earnings Call
FY2015 4th Quarter Earnings Call June 23, 2015
Slide 2: Disclaimer
Disclaimer IMPORTANT NOTICE 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 com
Slide 3: Disclaimer (continued)
Disclaimer IMPORTANT NOTICE (continued) There is no assurance that the REIT transaction described herein will be completed, and there are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements made herein relating to the REIT tran
Slide 4: Non GAAP Information
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 operations.
Slide 5: Today's Topics
Today’s Topics Fourth Quarter and Annual Business Results Real Estate Evaluation Update Financial Update and Fiscal 2016 Outlook 4
Slide 6: Recent performance update – Strong operating performance across Darden
Recent performance update – Strong operating performance across Darden… Darden Sales1 ($bn) Same-restaurant sales growth 3.8% 3.6% $1.88 $1.73 $1.65 $1.62 $1.53 $1.60 $1.49 $1.56 1.5% 0.2% FY14 FY15 FY14 FY15 FY14 FY15 FY14 FY15 Q1 Q2 Q3 Q4 Q1 FY15 Q2 FY15 Q3 FY15 Q4 FY15 Darden Adjusted EPS2 1.2 1
Slide 7: …driving annual results
…driving annual results Darden Total Sales1 ($bn) Same-restaurant sales growth by Brand $6.8 5.4% $6.3 4.8% $5.9 4.4% $5.3 $5.0 3.8% 2.3% 1.8% 1.3% FY11 FY12 FY13 FY14 FY15 Olive LongHorn Capital Eddie V's Yardhouse Seasons Bahama Garden Grille 52 Breeze Darden Adjusted EBIT Margin2 Darden Adjusted
Slide 8: Olive Garden has continued to demonstrate momentum
Olive Garden has continued to demonstrate momentum… Same-restaurant sales growth Total sales ($MM) 1 Ten consecutive months of same-restaurant sales growth 5.5% $3,790 $3,685 $3,643 $3,581 3.0% YoY growth: 2.4% 2.5% 4% 1.6% 0.9% 1.2% 0.6% 0.7% 0.2% Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Ma
Slide 9: … driven by critical initiatives which have been successfully implemented
… driven by critical initiatives which have been successfully implemented Key areas Initiatives Simplified culinary operations for better food quality Operational Streamlined service operations to allow team members to focus on the guest first Simplifications Reduced menu items and culinary co
Slide 10: LongHorn well positioned to build on same-restaurant sales growth and expand margins
LongHorn well positioned to build on same- restaurant sales growth and expand margins Same-restaurant sales growth Total sales ($MM) 1 Five consecutive years of same-restaurant sales growth 5.4% 5.3% $1,545 $1,384 4.4% $1,231 $1,116 $984 YoY 2.7% growth: 12% 1.2% FY11 FY12 FY13 FY14 FY15 1 FY11 FY12
Slide 11: Comprehensive real estate strategic plan
Comprehensive real estate strategic plan Today’s announcement follows a thorough and collaborative real estate assessment process Hired a best-in-class team of advisors with significant transaction expertise Pursued a thorough analytical process considering operational, tax, legal and financia
Slide 12: Strategic rationale for real estate separation
Strategic rationale for real estate separation Improved capital structure Allows Darden to achieve more efficient capital structure with substantially lower funded debt burden Earliest debt maturity occurs in 2035 (after expected repayment of ~$1.0 billion in debt) The REIT is expected to ha
Slide 13: Summary of intended real estate transactions
Summary of intended real estate transactions ~75 properties in process Expected cap rates of approximately 5.5% EBITDAR / rent coverage greater than 3.0x Individual restaurant sale Net Book gain of ~$50 million expected leasebacks Book gain of ~$65 million on majority of property sales wil
Slide 14: Potential impacts to Darden from real estate transactions
Potential impacts to Darden from real estate transactions Cash proceeds from sale leasebacks and debt financing proceeds from the REIT will be used for debt retirement Expect to retire ~$1.0 billion of funded Darden debt Debt structure Will seek bondholder consent to expand current sale leaseb
Slide 15: Strategic real estate actions summary timetable
Strategic real estate actions summary timetable Filed Private Letter Ruling request with IRS on April 17th Through April 2015 Sought rating agency feedback on contemplated transactions Expecting neutral to positive outcomes Announcement of broader real estate strategy Today (June 23rd) Lau
Slide 16: Fiscal 2015 Fourth Quarter Margins
Fiscal 2015 Fourth Quarter Margins As Reported As Adjusted Continuing Operations Q4 2015 Q4 2015 vs. Q4 2014 (Bps) Favorable/(Unfavorable) Food & Beverage 30.2% 30.2% 40 Restaurant Labor 31.1% 31.1% 80 Restaurant Expenses 15.7% 15.7% 160 Marketing 3.5% 3.5% 60 Gross Margin 19.5% 19.5% 340 G&A 6.4% 5
Slide 17: Introduced Segment Level Reporting – 4th Quarter Results
Introduced Segment Level Reporting – 4th Quarter Results All of our segments had positive sales1 growth… Fine Dining Other Same-restaurant Sales Growth +3.4% +5.2% $1,037 $926 $438 $376 $266 $229 $120 $137 Q4 FY14 Q4 FY15 Q4 FY14 Q4 FY15 Q4 FY14 Q4 FY15 Q4 FY14 Q4 FY15 …coupled with significant Segm
Slide 18: FY2016 Annual Outlook Summary
FY2016 Annual Outlook Summary Excludes the impact of real estate transactions and any related cash or capital restructure activities Same restaurant sales growth of 2.0% to 2.5% Adjusted earnings per diluted share growth1 from continuing operations of approximately 20% to 25% or $3.05 to $3.20
Slide 19: FY2016 Annual Growth Outlook
FY2016 Annual Growth Outlook FY2015 Adjusted Diluted Net EPS from Continuing Operations1 $2.63 Remove 53rd Week Impact in Fiscal 2015 (In Q4) (0.07) FY2015 52 Week Adjusted Diluted Net EPS from Continuing Operations1 $2.56 Growth from FY15 (52 Week Year) to FY162 Per Share % Growth Update Operating
Slide 20: FY2016 Annual Outlook Details
FY2016 Annual Outlook Details New Restaurant Openings 18 to 22 Olive Garden 1 to 2 LongHorn Steakhouse 8 to 10 The Capital Grille 1 to 2 Restaurant Openings Yard House 6 to 8 Seasons 52 0 to 1 Bahama Breeze 1 to 2 Eddie V’s 0 to 1 Olive Garden +1.5% to +2.5% Same-Restaurant LongHorn Steakhouse +2.5%
Slide 21: FY2016 Annual Inflation and Pricing Outlook
FY2016 Annual Inflation and Pricing Outlook FY16 FY13 FY14 FY15 (Outlook) Overall Inflation 2.1% 2.6% 2.4% 1.5% - 2.0% 1.3% 3.2% 2.5% 0.5% - 1.0% Food & Beverage 2.6% 2.2% 2.4% 2.0% - 3.0% All Other Costs Pricing 1.8% 2.1% 1.9% ~ 1.5% 20
Slide 22: Annual Cost Reduction Outlook
Annual Cost Reduction Outlook Comprehensive cost reductions underway without impacting the guest experience Estimated cost reduction ($millions) COGS Restaurant expenses & labor costs SG&A expenses $15 ‐ $20 $100 ‐ $110 $50 ‐ $55 $35 FY 2015 FY 2016 FY 2017 Cumulative We have identified $100 - $11
Slide 23: Thank you to our 150,000 Team Members!
Thank you to our 150,000 Team Members! 22
Slide 24: FY2015 4th Quarter Earnings Call
FY2015 4th Quarter Earnings Call June 23, 2015
Slide 25: Additional Information
J DARDEN ADDITIONAL INFORMATION
Slide 26: Fiscal 2015 Annual Margins
Fiscal 2015 Annual Margins As Reported As Adjusted Continuing Operations 2015 2015 vs. 2014 (Bps) Favorable/(Unfavorable) Food & Beverage 30.8% 30.8% (70) Restaurant Labor 31.6% 31.6% 50 Restaurant Expenses 16.6% 16.6% 60 Marketing 3.6% 3.6% 40 Gross Margin 17.4% 17.4% 90 G&A 6.4% 5.2% 50 Impairment
Slide 27: Introduced Segment Level Reporting – Annual Results
Introduced Segment Level Reporting – Annual Results All of our segments had positive sales1 growth… Fine Dining Other Same-Restaurant Sales Growth +1.3% +4.4% $3,6 $3,790 43 $1,54 $1,38 5 4 $930 $817 $442 $500 FY14 FY15 FY14 FY15 FY14 FY15 FY14 FY15 …coupled with significant Segment Profit2 growth (
Slide 28: Fiscal 2015 and 2014 Quarterly Reported to Adjusted Earnings Reconciliation
Fiscal 2015 and 2014 Quarterly Reported to Adjusted Earnings Reconciliation Fiscal 2015 Q1 Q2 Q3 Q4* Annual* Diluted Net EPS from Continuing Operations ($0.14) ($0.24) $1.01 $0.92 $1.51 Red Lobster‐Related Shared Support Costs 0.02 0.00 0.00 0.00 0.02 Other Strategic Action Plan Costs 0.04 0.21 0.01
Slide 29: FY2016 Annual Outlook
FY2016 Annual Outlook Product Breakdown and Contract Coverage For Fiscal 2016 Coverage Spend by Jun-Nov Category FY2016 Outlook Beef 19% 53% Mid single-digit inflation Produce 13% 80% Low single-digit inflation Dairy / Oil 1 12% 63% Low double-digit deflation Seafood 11% 65% Mid single-digit defla