Darden Restaurants Inc. Files 10-Q for Period Ending November 26, 2023

TL;DR

<b>Darden Restaurants Inc. filed its Q2 FY2024 10-Q, detailing financial performance up to November 26, 2023.</b>

AI Summary

DARDEN RESTAURANTS INC (DRI) filed a Quarterly Report (10-Q) with the SEC on January 3, 2024. Darden Restaurants Inc. filed a 10-Q report for the period ending November 26, 2023. The filing covers the second quarter of fiscal year 2024. The company's fiscal year ends on May 26th. The filing includes financial data for periods ending November 26, 2023, and November 27, 2022. Darden Restaurants Inc. is classified under SIC code 5812 (Retail-Eating Places).

Why It Matters

For investors and stakeholders tracking DARDEN RESTAURANTS INC, this filing contains several important signals. This 10-Q filing provides investors with the latest financial snapshot of Darden Restaurants, Inc., crucial for understanding its performance and making informed investment decisions. The detailed financial data allows for comparison with previous periods and industry benchmarks, offering insights into the company's operational health and growth trajectory.

Risk Assessment

Risk Level: low — DARDEN RESTAURANTS INC shows low risk based on this filing. The filing is a standard quarterly report (10-Q) and does not contain unusual or high-risk disclosures, indicating a routine update on the company's financial status.

Analyst Insight

Monitor future earnings reports and investor calls for updates on sales growth, cost management, and expansion strategies for Darden Restaurants.

Key Numbers

• 2023-11-26 — Reporting Period End Date (10-Q filing)
• 2024-01-03 — Filing Date (10-Q filing)
• 5812 — SIC Code (Retail-Eating Places)
• 0526 — Fiscal Year End (Company fiscal year)

Key Players & Entities

• DARDEN RESTAURANTS INC (company) — Filer name
• GENERAL MILLS RESTAURANTS INC (company) — Former company name
• ORLANDO (company) — Business and mailing address city
• FL (company) — Business and mailing address state

Forward-Looking Statements

• Darden's food and beverage sales will continue to be the dominant revenue driver in the next quarter. (DARDEN RESTAURANTS INC) — high confidence, target: 2024-05-26

FAQ

Industry Context

Darden Restaurants Inc. operates in the highly competitive restaurant industry, focusing on casual dining establishments.

Regulatory Implications

As a publicly traded company, Darden Restaurants Inc. is subject to SEC regulations, including the requirement to file quarterly reports (10-Q) under the Securities Exchange Act of 1934.

What Investors Should Do

1. Review the full 10-Q filing for detailed financial statements and management discussion.
2. Compare Darden's Q2 FY2024 results with previous quarters and industry performance.
3. Analyze any disclosed risk factors or forward-looking statements for potential impacts on future performance.

Key Dates

• 2023-11-26: Period End Date — End of the reporting quarter for the 10-Q filing.
• 2024-01-03: Filing Date — Date the 10-Q report was officially filed with the SEC.

Year-Over-Year Comparison

This filing represents the quarterly update for the period ending November 26, 2023, following previous filings for earlier periods.

Filing Documents

• dri-20231126.htm (10-Q) — 1470KB
• ex31aq2fy24.htm (EX-31.A) — 10KB
• ex31bq2fy24.htm (EX-31.B) — 10KB
• ex32aq2fy24.htm (EX-32.A) — 5KB
• ex32bq2fy24.htm (EX-32.B) — 5KB
• 0000940944-24-000005.txt (&nbsp;) — 8113KB
• dri-20231126.xsd (EX-101.SCH) — 48KB
• dri-20231126_cal.xml (EX-101.CAL) — 94KB
• dri-20231126_def.xml (EX-101.DEF) — 257KB
• dri-20231126_lab.xml (EX-101.LAB) — 680KB
• dri-20231126_pre.xml (EX-101.PRE) — 449KB
• dri-20231126_htm.xml (XML) — 1483KB

- Financial Information

Part I - Financial Information

Financial Statements (Unaudited)

Item 1. Financial Statements (Unaudited) 4 Consolidated Statements of Earnings 4 Consolidated Statements of Comprehensive Income 5 Consolidated Balance Sheets 6 Consolidated Statements of Changes in Stockholders' Equity 7 Consolidated Statements of Cash Flows 8

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements 10

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 25

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 34

Controls and Procedures

Item 4. Controls and Procedures 34

- Other Information

Part II - Other Information

Legal Proceedings

Item 1. Legal Proceedings 35

Risk Factors

Item 1A. Risk Factors 35

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 35

Other Information

Item 5. Other Information 35

Exhibits

Item 6. Exhibits 36 Signature 37 2 Table of Contents Cautionary Statement Regarding Forward-Looking Statements Statements set forth in or incorporated into this report that are not historical facts, including without limitation statements with respect to the financial condition, results of operations, plans, objectives, future performance and business of Darden Restaurants, Inc. and its subsidiaries that are preceded by, followed by or that include words such as "may," "will," "expect," "intend," "anticipate," "continue," "estimate," "project," "believe," "plan", "outlook" or similar expressions, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. This statement is included for purposes of complying with the safe harbor provisions of that Act. Any forward-looking statements speak only as of the date on which such statements are made, and we undertake no obligation to update such statements for any reason to reflect events or circumstances arising after such date. By their nature, forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by such forward-looking statements. The most significant of these uncertainties are described in Darden's Form 10-K, Form 10-Q (including this report) and Form 8-K reports. 3 Table of Contents PART I FINANCIAL INFORMATION

Financial Statements (Unaudited)

Item 1. Financial Statements (Unaudited) DARDEN RESTAURANTS, INC. CONSOLIDATED STATEMENTS OF EARNINGS (In millions, except per share data) (Unaudited) Three Months Ended Six Months Ended November 26, 2023 November 27, 2022 November 26, 2023 November 27, 2022 Sales $ 2,727.3 $ 2,486.5 $ 5,457.9 $ 4,932.6 Costs and expenses: Food and beverage 845.8 818.3 1,696.8 1,613.6 Restaurant labor 880.9 808.5 1,756.2 1,602.3 Restaurant expenses 450.4 417.0 897.0 820.5 Marketing expenses 36.9 31.1 75.5 61.4 General and administrative expenses 114.8 90.4 268.1 178.7 Depreciation and amortization 112.5 96.8 222.3 192.4 Impairments and disposal of assets, net 7.5 ( 8.8 ) 10.6 ( 13.7 ) Total operating costs and expenses $ 2,448.8 $ 2,253.3 $ 4,926.5 $ 4,455.2 Operating income 278.5 233.2 531.4 477.4 Interest, net 37.1 19.8 66.8 39.6 Earnings before income taxes 241.4 213.4 464.6 437.8 Income tax expense 29.1 25.9 57.5 56.7 Earnings from continuing operations $ 212.3 $ 187.5 $ 407.1 $ 381.1 Losses from discontinued operations, net of tax benefit of $ 0.3 , $ 0.3 , $ 0.4 and $ 0.3 , respectively ( 0.2 ) ( 0.3 ) ( 0.5 ) ( 0.9 ) Net earnings $ 212.1 $ 187.2 $ 406.6 $ 380.2 Basic net earnings per share: Earnings from continuing operations $ 1.77 $ 1.54 $ 3.38 $ 3.11 Losses from discontinued operations — ( 0.01 ) — ( 0.01 ) Net earnings $ 1.77 $ 1.53 $ 3.38 $ 3.10 Diluted net earnings per share: Earnings from continuing operations $ 1.76 $ 1.52 $ 3.35 $ 3.09 Losses from discontinued operations — — — ( 0.01 ) Net earnings $ 1.76 $ 1.52 $ 3.35 $ 3.08 Average number of common shares outstanding: Basic 119.9 122.1 120.4 122.5 Diluted 120.8 123.1 121.4 123.5 See accompanying notes to our unaudited consolidated financial statements. 4 Table of Contents DARDEN RESTAURANTS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions) (Unaudited) Three Months Ended Six Months Ended November 26, 2023 November 27, 2022 November 26, 2023

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1. Basis of Presentation Darden Restaurants, Inc. (we, our, Darden or the Company) owns and operates full-service dining restaurants in the United States and Canada under the trade names Olive Garden , LongHorn Steakhouse , Cheddar's Scratch Kitchen , Yard House , Ruth's Chris Steak House , The Capital Grille , Seasons 52 , Bahama Breeze , Eddie V's Prime Seafood and The Capital Burger . As of November 26, 2023, through subsidiaries, we own and operate all of our restaurants in the United States and Canada, except for 2 joint venture restaurants managed by us, 4 managed locations operating under contractual agreements and 91 franchised restaurants. We also have 54 franchised restaurants in operation located in Latin America, the Caribbean, Asia, and the Middle East. We have prepared these consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally presented in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal recurring nature. We operate on a 52/53-week fiscal year which ends on the last Sunday in May. Our fiscal year ending May 26, 2024 will contain 52 weeks of operation. Operating results for interim periods presented are not necessarily indicative of results that may be expected for the full fiscal year. These statements should be read in conjunction with the consolidated financial statements and related notes to consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended May 28, 2023. We prepare our consolidated financial statements in conformity with GAAP. The preparation of these finan

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) The assets and liabilities of Ruth's Chris were recorded at their respective fair values as of the date of acquisition. We are in the process of confirming, through internal studies and third-party valuations, the fair value of these assets, including land, buildings and equipment, intangible assets, and income tax assets and liabilities. The fair values set forth below are based on preliminary valuations and are subject to adjustment as additional information is obtained. When the valuation process is completed, adjustments to goodwill may result. The preliminary allocation of the purchase price is as follows: Balances at Balances at (in millions) June 14, 2023 Adjustments November 26, 2023 Cash $ 24.7 $ — $ 24.7 Other current assets 20.9 — 20.9 Land, buildings and equipment 170.5 ( 26.7 ) 143.8 Operating lease right-of-use assets 291.6 7.9 299.5 Trademark 341.7 — 341.7 Other assets 12.0 12.4 24.4 Goodwill 339.5 16.0 355.5 Total assets acquired $ 1,200.9 $ 9.6 $ 1,210.5 Current liabilities 113.5 ( 1.5 ) 112.0 Deferred income taxes 79.5 3.1 82.6 Operating lease liabilities - non-current 276.3 7.5 283.8 Other liabilities 7.0 0.5 7.5 Total liabilities assumed $ 476.3 $ 9.6 $ 485.9 Net assets acquired $ 724.6 $ — $ 724.6 The excess of the purchase price over the aggregate fair value of net assets acquired was allocated to goodwill. Of the $ 355.5 million recorded as goodwill, $ 15.2 million is deductible for tax purposes. The portion of the purchase price attributable to goodwill represents benefits expected because of the acquisition, including sales and unit growth opportunities in addition to supply-chain and support-cost synergies. The trademark has an indefinite life based on the expected use of the asset and the regulatory and economic environment within which it is being used. The trademark represents a highly respected brand with positive connotations, and we intend to cultivate and p

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 3. Revenue Recognition Deferred revenue liabilities from contracts with customers included on our accompanying consolidated balance sheets was comprised of the following: (in millions) November 26, 2023 May 28, 2023 Unearned revenues Deferred gift card revenue $ 580.7 $ 537.0 Deferred gift card discounts ( 34.1 ) ( 25.5 ) Other 0.7 0.5 Total $ 547.3 $ 512.0 Other liabilities Deferred franchise fees - non-current $ 4.9 $ 2.7 The following table presents a rollforward of deferred gift card revenue. Three Months Ended Six Months Ended (in millions) November 26, 2023 November 27, 2022 November 26, 2023 November 27, 2022 Beginning balance $ 563.4 $ 488.5 $ 537.0 $ 521.1 Acquired deferred gift card revenue — — 61.8 — Activations 145.7 119.9 275.8 234.3 Redemptions and breakage ( 128.4 ) ( 123.5 ) ( 293.9 ) ( 270.5 ) Ending balance $ 580.7 $ 484.9 $ 580.7 $ 484.9 12 Table of Contents DARDEN RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 4. Additional Financial Information Supplemental Balance Sheet Information The components of lease assets and liabilities on the consolidated balance sheet were as follows: (in millions) Balance Sheet Classification November 26, 2023 May 28, 2023 Operating lease right-of-use assets Operating lease right-of-use assets $ 3,539.7 $ 3,373.9 Finance lease right-of-use assets Land, buildings and equipment, net 1,027.1 958.1 Total lease assets, net $ 4,566.8 $ 4,332.0 Operating lease liabilities - current Other current liabilities $ 196.0 $ 182.5 Finance lease liabilities - current Other current liabilities 14.4 13.5 Operating lease liabilities - non-current Operating lease liabilities - non-current 3,815.3 3,667.6 Finance lease liabilities - non-current Other liabilities 1,258.1 1,172.6 Total lease liabilities $ 5,283.8 $ 5,036.2 Supplemental Cash Flow Information Cash paid for interest and income taxes were as follows: Six Months Ended (in millions) November 26, 2023 November 27, 2022 Interest, net of amounts capitalized $ 63.4 $ 38.1 Income taxes, net of refunds 63.4 ( 68.2 ) Non-cash investing and financing activities were as follows: Six Months Ended (in millions) November 26, 2023 November 27, 2022 Increase in land, buildings and equipment through accrued purchases $ 60.5 $ 79.2 Right-of-use assets obtained in exchange for new operating lease liabilities (1) 315.5 69.1 Right-of-use assets obtained in exchange for new finance lease liabilities 55.7 41.5 Net change in right-of-use assets mainly due to lease modifications resulting in reclassification of leases from operating to finance 5.8 37.4 (1) Right-of-use assets obtained in fiscal 2024 includes $ 299.5 million from the acquisition of Ruth's Chris. We had restricted cash of $ 24.2 million as of November 26, 2023 and $ 48.4 million as of May 28, 2023, which represents cash held as security for a standby letter of credit. R

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) tax (CAMT) on adjusted financial statement income. The impact of the IRA excise tax and CAMT are immaterial to our consolidated financial statements for the quarter and six months ended November 26, 2023. Note 6. Net Earnings per Share Outstanding stock options, restricted stock and equity-settled performance stock units granted by us represent the only dilutive effect reflected in diluted weighted average shares outstanding, none of which impact the numerator of the diluted net earnings per share computation. Stock options, restricted stock and equity-settled performance stock units excluded from the calculation of diluted net earnings per share because the effect would have been anti-dilutive, were as follows: Three Months Ended Six Months Ended (in millions) November 26, 2023 November 27, 2022 November 26, 2023 November 27, 2022 Anti-dilutive stock-based compensation awards 0.3 0.3 0.2 0.3 Note 7. Segment Information We manage our restaurant brands, Olive Garden, LongHorn Steakhouse, Cheddar's Scratch Kitchen, Yard House, Ruth's Chris, The Capital Grille, Seasons 52, Bahama Breeze, Eddie V's, and The Capital Burger in North America as operating segments. The brands operate principally in the U.S. within full-service dining. We aggregate our operating segments into reportable segments based on a combination of the size, economic characteristics and sub-segment of full-service dining within which each brand operates. We have four reportable segments: (1) Olive Garden, (2) LongHorn Steakhouse, (3) Fine Dining and (4) Other Business. The Olive Garden segment includes the results of our company-owned Olive Garden restaurants in the U.S. and Canada. The LongHorn Steakhouse segment includes the results of our company-owned LongHorn Steakhouse restaurants in the U.S. The Fine Dining segment aggregates our premium brands that operate within the fine-dining sub-segment of full-service dining and includes