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Earnings CallFiscal 2016 Q2December 18, 2016
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 regarding our expected earnings performance and all other statements that are not
historical facts, including without limitation statements concerning our future economic performance and expenses, are made under the Safe
Harbor provisions of the Private Securities Litigation Reform Act of 1995. Any forward-looking statements speak only as of the date on
which such statements are first made, and we undertake no obligation to update such statements to reflect events or circumstances arising
after such date. We wish to caution investors not to place undue reliance on any such forward-looking statements. By their nature, forward-
looking statements involve risks and uncertainties that could cause actual results to materially differ from those anticipated in the
statements. The most significant of these uncertainties are described in Darden's Form 10-K, Form 10-Q and Form 8-K reports. These risks
and uncertainties include food safety and food-borne illness concerns, litigation, unfavorable publicity, risks relating to public policy changes
and federal, state and local regulation of our business, labor and insurance costs, technology failures including a failure to maintain a secure
cyber network, failure to execute a business continuity plan following a disaster, health concerns including virus outbreaks, intense
competition, failure to drive profitable sales growth, our plans to expand our smaller brands Bahama Breeze, Seasons 52 and Eddie V's, a
lack of availability of suitable locations for new restaurants, higher-than-anticipated costs to open, close, relocate or remodel restaurants, a
failure to execute innovative marketing tactics, a failure to develop and recruit effective leaders, a failure to address cost pressures,
shortages or interruptions in the delivery of food and other products and services, adverse weather conditions and natural disasters,
volatility in the market value of derivatives, economic factors specific to the restaurant industry and general macroeconomic factors including
interest rates, disruptions in the financial markets, risks of doing business with franchisees and vendors in foreign markets, failure to protect
our intellectual property, impairment in the carrying value of our goodwill or other intangible assets, failure of our internal controls over
financial reporting, an inability or failure to manage the accelerated impact of social media and other factors and uncertainties discussed
from time to time in reports filed by Darden with the Securities and Exchange Commission.
IMPORTANT NOTICE
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 operations. The Company’s management uses these non-GAAP measures in its
analysis of the Company’s performance. The Company believes that the presentation of
certain non-GAAP measures provides useful supplemental information that is essential to a
proper understanding of the operating results of the Company’s businesses. These non-
GAAP disclosures should not be viewed as a substitute for operating results determined in
accordance with GAAP, nor are they necessarily comparable to non-GAAP performance
measures that may be presented by other companies.
3
Today’s Topics
Second Quarter Highlights
Financial Update
Framework for Long-Term Value Creation
4
$0.71
$0.54
$0.32 $0.28
$0.99$1.08
$0.68
$0.54
FY14 FY15 FY14 FY15 FY15 FY16 FY15 FY16
Darden Adjusted EPS2
Q3 Q41 Q1 Q21
$1.62 $1.65 $1.60 $1.56$1.73
$1.88$1.69 $1.61
FY14 FY15 FY14 FY15 FY15 FY16 FY15 FY16
Darden Sales ($bn)
Q3 Q41 Q1 Q21
Financial Highlights
1 FY15 Q4 includes the impact of the additional week due to a 53 week fiscal year. FY16 Q2 includes the negative impact of the Thanksgiving holiday shift,
which occurred in Q3 of FY15.2 EPS values adjusted for special items. A reconciliation of GAAP to non-GAAP numbers can be found in the additional information section of this
presentation.
3.6%3.8%
3.4%
2.9%
Q3 FY15 Q4 FY15 Q1 FY16 Q2 FY16
Same-Restaurant Sales Growth - Comparable Calendar Basis
5
Olive Garden: Momentum continued…
2.8%Calendar
Same-Restaurant Sales
+300bpsSame-Restaurant Sales1
Industry Outperformance
5th
Consecutive Qtr. of Same-
Restaurant Sales Growth
0.9%Calendar Same-
Restaurant Guest Count
100%Restaurants w/
Table-Top Tablets
32%OG To Go
2-Year Growth
Same-Restaurant Sales1
OG To Go Sales
Q2 Highlights
0.5%
2.2%
3.4%
2.5%2.8%
FY15 Q2 FY15 Q3 FY15 Q4 FY16 Q1 FY16 Q2
1 FY16 Same-Restaurant Sales on a comparable calendar basis
14% 15%22% 23%
18% 17%
Q1 Q2 Q3 Q4
FY15 FY16
6
Longhorn: Strong topline momentum…
3.6%Calendar
Same-Restaurant Sales 5.4% 5.2%4.8%
3.6%
FY15 Q3 FY15 Q4 FY16 Q1 FY16 Q2
Same-Restaurant Sales1
Q2 Highlights
+400bpsSame-Restaurant Sales1
Industry Outperformance
11th
Consecutive Qtr. of Same-
Restaurant Sales Growth
1.5%Calendar Same-
Restaurant Guest Count
17Menu Items Removed to
Simplify Operations
2Guest-Driving Promotions
1 FY16 Same-Restaurant Sales on a comparable calendar basis
7
Same-Restaurant Sales1
Specialty Restaurants: Same-restaurant sales growth at all five brands…
5.8%
3.8%
2.4%
0.9%
3.2%
1 FY16 Same-Restaurant Sales on a comparable calendar basis
5.4%3.2% 3.6%
2.4%
FY15 Q3 FY15 Q4 FY16 Q1 FY16 Q2
6.1%4.4%
6.4%
0.9%
FY15 Q3 FY15 Q4 FY16 Q1 FY16 Q2
5.2%
3.1% 3.8% 3.8%
FY15 Q3 FY15 Q4 FY16 Q1 FY16 Q2
9.6%
5.2% 3.9% 3.2%
FY15 Q3 FY15 Q4 FY16 Q1 FY16 Q2
3.2%1.7%
2.5%
5.8%
FY15 Q3 FY15 Q4 FY16 Q1 FY16 Q2
Financial Update
9
Fiscal 2016 Q2 Adjusted Earnings Growth Drivers
Fiscal 2016 Q2 Adjusted Earnings Growth Drivers1
Fiscal 2015 Q2 Adjusted Diluted Net EPS from Continuing Operations $0.28
Operating Performance Improvement Growth 0.27
Net Legal Settlements (G&A) 0.05
Restaurant Impairments (0.04)
Net Incremental Impact from Real Estate Transactions (0.02)
Fiscal 2016 Q2 Adjusted Diluted Net EPS from Continuing Operations $0.54
Fiscal 2016 Q2 Adjusted Diluted EPS vs. Fiscal 2015 Q2 Adjusted Diluted EPS $0.26
Growth % 92.9%
Net Incremental Impact for Real Estate Transactions
Estimated
Three Months Ended
Twelve Months Ended
($ millions, except per share) 11/29/2015 5/29/2016
GAAP Rent and Other Taxes $10 $75 to $78
Depreciation & Amortization (5) (36)
Reduction in Interest Expense 0 (24)
Net Incremental Expense $5 $15 to $18
Net Incremental Reduction to EPS $0.02 ~$0.08
1 EPS values adjusted for special items. A reconciliation of GAAP to non-GAAP numbers can be found in the additional information section of this presentation.
10
Fiscal 2016 Second Quarter Margins
As ReportedContinuing
Operations
As Adjusted
Q2 2016 Q2 2016 vs. Q2 2015 (Bps)Favorable/(Unfavorable)
Food & Beverage 30.0% 30.0% 110
Restaurant Labor 32.6% 32.6% (10)
Restaurant Expenses 17.3% 17.3% 60
Marketing 3.6% 3.6% 40
Restaurant-Level EBITDA 16.6% 16.6% 200
G&A 6.2% 4.4% 110
Depreciation & Amortization 4.7% 4.7% 40
Impairments 0.5% 0.5% (50)
EBIT 5.1% 7.0% 300
Interest Expense 3.6% 1.3% 20
EBT 1.5% 5.7% 320
Income Tax ExpenseNote: Effective Tax Rate
(0.4)%(23.0)%
1.3%22.9%
(110)
EAT 1.9% 4.4% 210
Note Continuing operations, values may not tie due to rounding
111 Segment profit calculated as sales less costs of food & beverage, restaurant labor, restaurant expenses and marketing expenses.
All of our segments had positive sales growth…
…coupled with significant Segment Profit1 growth ($mm)
$140.5 $157.1
FY15 Q2 FY16 Q2
$42.8 $54.8
FY15 Q2 FY16 Q2
$21.1 $22.4
FY15 Q2 FY16 Q2
15.9% 17.6% 12.4% 15.0% 17.5% 18.2%
$23.0 $32.3
FY15 Q2 FY16 Q2
10.9% 14.2%
Sales and profit increases in all segments…
$882 $892
FY15 Q2 FY16 Q2
$346 $365
FY15 Q2 FY16 Q2
$120 $123
FY15 Q2 FY16 Q2
$211 $228
FY15 Q2 FY16 Q2
Segment Profit
Margin %
Fine Dining Other
Fine Dining Other
12
Real Estate Transaction Summary
Number of Properties Net Proceeds to Date
Transactions Status Completed Remaining ($ millions)
Four Corners Property Trust, Inc. - REIT Completed 424 0 $315
Restaurant Sale Leasebacks In Process 62 2 $199
Restaurant Support Center Sale Leaseback Completed 1 0 $117
Total 487 2 $631
Net Incremental Impact for Real Estate Transactions
Estimated
($ millions, except per share) Annualized Impact
GAAP Rent and Other Taxes $130 to $135
Depreciation & Amortization (60)
Reduction in Interest Expense (50)
Net Incremental Expense $20 to $25
Net Incremental Reduction to EPS $0.10 to $0.12
13
Dividend & Share Repurchase
New Share Repurchase Program
Updated Dividend
• $500 million authorization
• No expiration date
• Replaces all other outstanding share repurchase authorizations
• Represents approximately 6.7% of the Company’s outstanding shares1
DRI Annualized DPS - Pre Spin ($0.55 per quarter) $2.20
Minimum DRI Updated Annualized DPS - Post Spin ($0.4375 per quarter) $1.75
FCPT Estimated Annualized DPS ($1.35, adjusted for 1:3 spin ratio) $0.45
Aggregate DRI and FCPT annualized DPS - Post Spin $2.20
Actual Q2 DRI Annualized DPS - Announced 12/18/15 ($0.50 per quarter) $2.00
Minimum DRI Updated Annualized DPS - Post Spin ($0.4375 per quarter) $1.75
Growth 14.3%
1 As of the last trading day of the second quarter fiscal 2016.
14
Restaurant Openings New Restaurant Openings 18 to 22
Same-Restaurant
Sales
Total +2.5% to +3.0%
Olive Garden +1.5% to +2.5%
LongHorn Steakhouse +3.0% to +4.0%
Specialty Restaurants Approximately 3%
Tax Rate Annual Effective Rate 23% to 25%
Capital Expenditures
($M)
Total $230 - $255
New Restaurants $85
Refresh/Maintenance/Other $145 - $170
Adjusted Earnings
per Diluted Share1
Total $3.25 to $3.35
Growth2 27% to 31%
1 Excludes real estate implementation and debt retirement costs.2 Assumes a 52 week fiscal year for 2015. Non-GAAP number. A reconciliation of GAAP to non-GAAP numbers can be found in the additional information section of
this presentation.
FY2016 Annual Outlook
15
$35
$80 - $90
$30 - $40 $145- $165
FY 2015 FY 2016 FY 2017 Cumulative
Annual Cost Reduction Outlook
Estimated cost reduction ($millions)
Restaurant expenses & labor costs
COGS
SG&A expenses
Comprehensive cost reductions underway without impacting the guest experience
We have identified $145 - $165 million annualized cost reduction
opportunities to be achieved by FY17
Previous Outlook
$35 $100 - $110$15 - $20$50 - $55
Long-Term Value Creation Framework
17
Strategy for Long-Term Performance
1Driving Philosophy
Culinary
Innovation
& Execution
Attentive
Service
Engaging
Atmosphere
Integrated
Marketing
Back-To-Basics Operating Philosophy
4Competitive
Advantages
Significant
Scale
Extensive
Data & Insights
Rigorous
Strategic Planning
Results-
Oriented Culture
18
Long-Term Value Creation Framework
Annual Target, Over Time
Business
Performance
(EAT Growth)
Same-Restaurant Sales 1% - 3%
New Restaurant Growth 2% - 3% 7% - 10%
EBIT Margin Expansion 10 - 40bps
Return of
Cash
Dividend Payout Ratio 50% - 60%3% - 5%
Share Repurchase ($millions) $100 - $200
Total Shareholder Return (EPS Growth + Dividend Yield) 10% - 15%
Note: Growth in the individual components will vary year-to-year.
19
Thank you to our 150,000 Team Members!
Additional Information
21
Reported to Adjusted Earnings Reconciliations
Note: For Fiscal 2015, the sum of the quarterly Diluted EPS amounts do not total the annual EPS amounts due to the impact of the Accelerated Share Repurchase program on the weighted average share count. Values may not tie due to rounding.
Fiscal 2015
Q1 Q2 Q3 Q4* Annual*
Reported Diluted Net EPS from Continuing Operations ($0.14) ($0.24) $1.01 $0.92 $1.51
Debt Retirement Costs 0.37 0.05 0.00 0.00 0.42
Strategic Action Plan and Other Costs 0.09 0.47 (0.02) 0.16 0.70
Adjusted Diluted Net EPS from Continuing Operations $0.32 $0.28 $0.99 $1.08 $2.63
* Reflects the additional operating week vs Fiscal 2014
Fiscal 2014
Q1 Q2 Q3 Q4 Annual
Reported Diluted Net EPS from Continuing Operations $0.32 $0.05 $0.65 $0.36 $1.38
Red Lobster-Related Shared Support Costs 0.04 0.04 0.04 0.04 $0.15
Other Strategic Action Plan Costs 0.03 0.01 0.09 $0.13
Asset Impairments and Other Costs 0.00 0.01 0.04 $0.05
Adjusted Diluted Net EPS from Continuing Operations $0.36 $0.12 $0.71 $0.54 $1.71
Fiscal 2016
Q1 Q2
Reported Diluted Net EPS from Continuing Operations $0.63 $0.23
Real Estate Plan Implementation 0.05 0.16
Debt Retirement Costs 0.17
Strategic Action Plan and Other Costs (0.02)
Adjusted Diluted Net EPS from Continuing Operations $0.68 $0.54
Fiscal 2016 Adj. Diluted EPS vs. Fiscal 2015 Adj. Diluted EPS $0.36 $0.26
22
Product Breakdown and Contract Coverage For Fiscal 2016
¹ Includes cheese, cream, butter, and shortening
² Includes breadsticks and pasta
Commodities Outlook
Dec-May
FY2016
Spend by
Category Coverage Outlook
Beef 19% 55% Low Single Digit Inflation
Produce 13% 80% Low Single Digit Inflation
Dairy / Oil1 12% 65% Low Single Digit Inflation
Seafood 11% 95% Low Single Digit Deflation
Wheat2 7% 95% Low Single Digit Inflation
Chicken 6% 45% Low Single Digit Deflation
Non-Perishable / Other 32% 40% Low Single Digit Inflation
Weighted Average
Coverage100% 60%
23
Updated FY2016 Annual Earnings Growth Outlook
Update
1 Represents non-GAAP measure. A reconciliation of GAAP to non-GAAP numbers can be found in the additional information section of this presentation.2 Estimated
Per Share % Growth
Fiscal 2015 Adjusted Diluted Net EPS from Continuing Operations1 $2.63
Remove 53rd Week Impact in Fiscal 2015 (In Q4) (0.07)
Fiscal 2015 52 Week Adjusted Diluted Net EPS from Continuing Operations1 $2.56
Growth from Fiscal 2015 (52 Week Year) to Fiscal 20162
Operating Performance $0.73 – 0.83 28 – 32%
Net Incremental Real Estate Expenses (0.08) (3)%
Reduced Interest Expense related to FY15 Debt Retirement (FY16 Q1) 0.04 2%
Total Growth From Fiscal 2015 (52 Week Year) to Fiscal 2016 $0.69 - $0.79 27% - 31%
Fiscal 2016 Adjusted Diluted Net EPS from Continuing Operations Outlook $3.25 - $3.35
24
Calendar Comparable Basis - Defined
1 Represents non-GAAP measure. A reconciliation of GAAP to non-GAAP numbers can be found in the additional information section of this presentation.2 Estimated
Q1 Comparable CalendarJune 1, 2015 – August 30, 2015
vs.
June 2, 2014 – August 31, 2014
Q2 Comparable CalendarAugust 31, 2015 - November 29, 2015
vs.
September 1, 2014 - November 30, 2014