Darden Restaurants Inc. Files 10-Q for Period Ending February 25, 2024

TL;DR

<b>Darden Restaurants Inc. filed its quarterly report (10-Q) for the period ending February 25, 2024, detailing its financial performance and operational status.</b>

AI Summary

DARDEN RESTAURANTS INC (DRI) filed a Quarterly Report (10-Q) with the SEC on April 2, 2024. Darden Restaurants Inc. filed a 10-Q report for the period ending February 25, 2024. The company's fiscal year ends on May 26th. The filing covers the third quarter of the fiscal year. The company was formerly known as General Mills Restaurants Inc. Darden Restaurants Inc. is incorporated in Florida.

Why It Matters

For investors and stakeholders tracking DARDEN RESTAURANTS INC, this filing contains several important signals. This filing provides investors with an update on Darden's financial health and operational performance for the third quarter of its fiscal year, enabling informed investment decisions. Understanding the company's financial position and any disclosed risks is crucial for assessing its future growth prospects and stock valuation.

Risk Assessment

Risk Level: medium — DARDEN RESTAURANTS INC shows moderate risk based on this filing. The filing is a standard 10-Q, which typically contains detailed financial information but may also highlight evolving risks in the restaurant industry, such as operational challenges or market shifts, which require careful investor scrutiny.

Analyst Insight

Review the detailed financial statements and risk factors within the 10-Q to assess Darden's performance against industry benchmarks and identify potential investment opportunities or concerns.

Key Numbers

• 2024-02-25 — Period End Date (Conformed period of report)
• 2024-04-02 — Filing Date (Filed as of date)
• 0526 — Fiscal Year End (Fiscal year end)
• 5812 — SIC Code (Standard Industrial Classification)

Key Players & Entities

• DARDEN RESTAURANTS INC (company) — Filer name
• GENERAL MILLS RESTAURANTS INC (company) — Former company name
• FL (location) — State of incorporation
• 5812 (industry_code) — Standard Industrial Classification
• 0000940944 (company_id) — Central Index Key
• 2024-02-25 (date) — Conformed period of report
• 2024-04-02 (date) — Filed as of date
• 1000 DARDEN CENTER DRIVE (address) — Business address

FAQ

Industry Context

Darden Restaurants Inc. operates in the highly competitive casual dining sector of the restaurant industry, facing trends in consumer spending and dining preferences.

Regulatory Implications

As a publicly traded company, Darden Restaurants Inc. is subject to SEC regulations and reporting requirements, including the timely filing of quarterly (10-Q) and annual (10-K) reports.

What Investors Should Do

1. Analyze the financial statements for revenue, net income, and other key performance indicators.
2. Review any disclosed risk factors and management's discussion and analysis for insights into operational challenges and strategies.
3. Compare the reported period's performance with previous periods and industry averages.

Key Dates

• 2024-02-25: Period End Date — End of the reporting quarter for the 10-Q filing.
• 2024-04-02: Filing Date — Date the 10-Q report was officially filed with the SEC.

Year-Over-Year Comparison

This is the 10-Q filing for the period ending February 25, 2024, providing an update from the previous filings.

Filing Documents

• dri-20240225.htm (10-Q) — 1449KB
• ex31aq3fy24.htm (EX-31.A) — 10KB
• ex31bq3fy24.htm (EX-31.B) — 10KB
• ex32aq3fy24.htm (EX-32.A) — 5KB
• ex32bq3fy24.htm (EX-32.B) — 5KB
• 0000940944-24-000017.txt (&nbsp;) — 8070KB
• dri-20240225.xsd (EX-101.SCH) — 48KB
• dri-20240225_cal.xml (EX-101.CAL) — 95KB
• dri-20240225_def.xml (EX-101.DEF) — 265KB
• dri-20240225_lab.xml (EX-101.LAB) — 631KB
• dri-20240225_pre.xml (EX-101.PRE) — 455KB
• dri-20240225_htm.xml (XML) — 1482KB

- 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 33

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 Nine Months Ended February 25, 2024 February 26, 2023 February 25, 2024 February 26, 2023 Sales $ 2,974.8 $ 2,786.2 $ 8,432.7 $ 7,718.8 Costs and expenses: Food and beverage 920.2 887.0 2,617.0 2,500.6 Restaurant labor 937.1 874.2 2,693.3 2,476.5 Restaurant expenses 471.9 440.3 1,368.9 1,260.8 Marketing expenses 31.7 28.2 107.2 89.6 General and administrative expenses 108.2 107.0 376.3 285.7 Depreciation and amortization 117.9 98.3 340.2 290.7 Impairments and disposal of assets, net 0.4 1.3 11.0 ( 12.4 ) Total operating costs and expenses $ 2,587.4 $ 2,436.3 $ 7,513.9 $ 6,891.5 Operating income 387.4 349.9 918.8 827.3 Interest, net 36.5 19.6 103.3 59.2 Earnings before income taxes 350.9 330.3 815.5 768.1 Income tax expense 37.5 43.5 95.0 100.2 Earnings from continuing operations $ 313.4 $ 286.8 $ 720.5 $ 667.9 Losses from discontinued operations, net of tax benefit of $ 0.6 , $ 0.2 , $ 1.0 and $ 0.5 , respectively ( 0.5 ) ( 0.2 ) ( 1.0 ) ( 1.1 ) Net earnings $ 312.9 $ 286.6 $ 719.5 $ 666.8 Basic net earnings per share: Earnings from continuing operations $ 2.62 $ 2.36 $ 6.00 $ 5.47 Losses from discontinued operations — — ( 0.01 ) ( 0.01 ) Net earnings $ 2.62 $ 2.36 $ 5.99 $ 5.46 Diluted net earnings per share: Earnings from continuing operations $ 2.60 $ 2.34 $ 5.95 $ 5.42 Losses from discontinued operations — — — ( 0.01 ) Net earnings $ 2.60 $ 2.34 $ 5.95 $ 5.41 Average number of common shares outstanding: Basic 119.4 121.4 120.1 122.2 Diluted 120.4 122.5 121.0 123.2 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 Nine Months Ended February 25, 2024 February 26, 2023 February 25

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 February 25, 2024, 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 55 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 acquired operations of Ruth's Chris included 77 company-owned locations, 74 franchisee-owned locations and 4 managed locations operating under contractual agreement. The results of Ruth's Chris operations are included in our consolidated financial statements from the date of acquisition. 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, income tax assets, unearned revenues and other 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 February 25, 2024 Cash $ 24.7 $ — $ 24.7 Other current assets 20.9 ( 0.2 ) 20.7 Land, buildings and equipment 170.5 ( 27.0 ) 143.5 Operating lease right-of-use assets 291.6 10.0 301.6 Goodwill 339.5 20.9 360.4 Trademark 341.7 — 341.7 Other assets 12.0 12.4 24.4 Total assets acquired $ 1,200.9 $ 16.1 $ 1,217.0 Current liabilities 113.5 1.2 114.7 Deferred income taxes 79.5 5.1 84.6 Operating lease liabilities - non-current 276.3 9.5 285.8 Other liabilities 7.0 0.3 7.3 Total liabilities assumed $ 476.3 $ 16.1 $ 492.4 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 $ 360.4 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 opportuniti

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) February 25, 2024 May 28, 2023 Unearned revenues Deferred gift card revenue $ 666.6 $ 537.0 Deferred gift card discounts ( 41.3 ) ( 25.5 ) Other 0.7 0.5 Total $ 626.0 $ 512.0 Other liabilities Deferred franchise fees - non-current $ 5.0 $ 2.7 The following table presents a rollforward of deferred gift card revenue. Three Months Ended Nine Months Ended (in millions) February 25, 2024 February 26, 2023 February 25, 2024 February 26, 2023 Beginning balance $ 580.7 $ 484.9 $ 537.0 $ 521.1 Acquired deferred gift card revenue — — 61.8 — Activations 350.6 343.1 626.4 577.4 Redemptions and breakage ( 264.7 ) ( 250.1 ) ( 558.6 ) ( 520.6 ) Ending balance $ 666.6 $ 577.9 $ 666.6 $ 577.9 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 February 25, 2024 May 28, 2023 Operating lease right-of-use assets Operating lease right-of-use assets $ 3,494.3 $ 3,373.9 Finance lease right-of-use assets Land, buildings and equipment, net 1,053.5 958.1 Total lease assets, net $ 4,547.8 $ 4,332.0 Operating lease liabilities - current Other current liabilities $ 192.6 $ 182.5 Finance lease liabilities - current Other current liabilities 13.8 13.5 Operating lease liabilities - non-current Operating lease liabilities - non-current 3,774.4 3,667.6 Finance lease liabilities - non-current Other liabilities 1,294.7 1,172.6 Total lease liabilities $ 5,275.5 $ 5,036.2 Supplemental Cash Flow Information Cash paid for interest and income taxes were as follows: Nine Months Ended (in millions) February 25, 2024 February 26, 2023 Interest, net of amounts capitalized $ 97.6 $ 64.3 Income taxes, net of refunds 86.6 ( 29.5 ) Non-cash investing and financing activities were as follows: Nine Months Ended (in millions) February 25, 2024 February 26, 2023 Increase in land, buildings and equipment through accrued purchases $ 44.8 $ 82.1 Right-of-use assets obtained in exchange for new operating lease liabilities (1) 333.2 131.5 Right-of-use assets obtained in exchange for new finance lease liabilities 70.2 41.5 Net change in right-of-use assets mainly due to lease modifications resulting in reclassification of leases from operating to finance 23.2 53.1 (1) Right-of-use assets obtained in fiscal 2024 includes $ 301.6 million from the acquisition of Ruth's Chris. We had restricted cash of $ 24.2 million as of February 25, 2024 and $ 48.4 million as of May 28, 2023, which represents cash held as security for a standby letter of credi

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) The Inflation Reduction Act (IRA) was enacted on August 16, 2022. The IRA includes provisions imposing a 1 percent excise tax on share repurchases that occur after December 31, 2022 and introduced a 15 percent corporate alternative minimum 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 nine months ended February 25, 2024. 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 Nine Months Ended (in millions) February 25, 2024 February 26, 2023 February 25, 2024 February 26, 2023 Anti-dilutive stock-based compensation awards 0.1 0.1 0.1 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 S