Red Lobster 2000 Annual Report Download

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4 Great
Reasons
To invest in our industry.
To invest in Darden.
Darden Restaurants 2000 Annual Report

Table of contents

  • Page 1
    Darden Restaurants 2000 Annual Report 4 Great Reasons To invest in our industry. To invest in Darden.

  • Page 2
    ... publicly traded casual dining company in the world, serving almost 300 million meals a year at 1,139 restaurants in 49 states across the United States and Canada. Total sales for fiscal 2000 exceeded $3.7 billion. Darden's flagship brands, Red Lobster ® and Olive Garden® , hold dominant shares...

  • Page 3
    ... ever-better dining experiences. The company seeks to provide guests with hospitality they can taste and touch. Red Lobster has delivered 10 consecutive quarters of same-restaurant sales increases and in fiscal 2000 surpassed $2 billion in sales for the first time. Olive Garden is a family of local...

  • Page 4
    some appetizing facts... First, DARDEN RESTAURANTS 2000 ANNUAL REPORT 1

  • Page 5
    Americans' favorite food when they dine out is seafood.*

  • Page 6
    Red Lobster has a dominant 46% share of seafood casual dining. *Source: Darden Market Structure Study 2000

  • Page 7
    Italian casual dining is a $4.4 billion business.*

  • Page 8
    Olive Garden has an industry-leading 34% share of Italian casual dining. *Source: Consumer Reports on Eating Share Trends (CREST)

  • Page 9
    American diners crave bolder, more sophisticated flavors.

  • Page 10
    Bahama Breeze delivers distinctive, flavorful, awardwinning food rated "excellent" in the Zagat Dining Guide.

  • Page 11
    Casual diners also seek new and different experiences.

  • Page 12
    Darden has created some of the most successful new restaurant concepts in the business.

  • Page 13
    ... financial performance reflects continued progress toward our goal - being the best company in casual dining, now and for generations. • Revenues increased 7% to $3.7 billion, driven by strong same-restaurant sales growth at Red Lobster and Olive Garden and continued expansion of Bahama Breeze...

  • Page 14
    ... profile that offers flexible, cost-effective access to capital to fund our growth. These leadership and financial resources provide a terrific platform for sustaining and growing Darden well into the future. Our growth strategy starts with keeping our core concepts - Red Lobster and Olive Garden...

  • Page 15
    ...every day." I want to thank our more than 122,000 terrific employees for their contributions to Darden's operating success in fiscal 2000. Without their personal commitment to delivering outstanding food and service to our guests, we couldn't even dream of becoming the best casual dining company now...

  • Page 16
    The industry. Darden. Themaincourse. DARDEN RESTAURANTS 2000 ANNUAL REPORT 13

  • Page 17
    ... the market - that's nearly four percentage points greater than the next closest competitor. The Company's 1,139 restaurants serve more than five million guests every week and deliver almost 300 million dining experiences every year. With Red Lobster and Olive Garden, Darden is the only company that...

  • Page 18
    BAHAMA BREEZE SMOKEY BONES Red Lobster Total Sales (In billions) $2.07 $1.96 $1.89 Red Lobster Average Restaurant Sales (In millions) $3.2 $2.9 $2.7 New Menu Items •Salmon New Orleans •Teriyaki Fresh Fish with Island Salsa •Bacon-Wrapped Stuffed Shrimp •Golden Calamari with Veggies ...

  • Page 19
    ...45

  • Page 20
    ...Expanded wine list from 19 to 33 offerings •Wine Sampling Program in Olive Garden lobbies •Sponsored Italy's Team Rafanelli for the American Le Mans Series racing championship Concept Profile •469 restaurants •Growth potential: 150-200 restaurants DARDEN RESTAURANTS 2000 ANNUAL REPORT 17

  • Page 21
    ... nearly universal appeal, Red Lobster differentiates itself from the competition by offering unique regional dishes; traffic-building promotions like its signature Lobsterfest; welltrained, highly motivated crew members; remodeled bar areas; and a lively, festive dining atmosphere. Olive Garden has...

  • Page 22

  • Page 23
    RED LOBSTER OLIVE GARDEN 4. THE INDUSTRY DARDEN There are huge market share opportunities for strong multi-restaurant operators. Casual dining chains account for only 27% of total segment sales. The majority of the restaurants in the segment are owned and operated independently. In contrast, ...

  • Page 24
    BAHAMA BREEZE SMOKEY BONES Investment in Training Red Lobster Index: Fiscal 96 = 100 Investment in Training Olive Garden Index: Fiscal 96 = 100 257 224 202 174 164 132 100 100 241 173 96 97 98 99 00 96 97 98 99 00 General Manager Turnover Red Lobster General Manager Turnover Olive ...

  • Page 25
    ... Lobster, Olive Garden, Bahama Breeze and Smokey Bones restaurants in the U.S. and Canada and licenses 35 restaurants in Japan. All of the restaurants in the U.S. and Canada are operated by the Company with no franchising. This discussion should be read in conjunction with the business information...

  • Page 26
    ..., and interest-rate swap termination costs. Darden's long-term debt also includes a $66.9 million commercial bank loan with an outstanding principal balance of $52.6 million as of May 28, 2000, that is used to support two loans from the Company to the Employee Stock Ownership Plan portion of the...

  • Page 27
    ... activity at Olive Garden and Red Lobster restaurants. The 2000, 1999 and 1998 capital expenditures, treasury stock purchases and dividend requirements were financed primarily through the issuance of commercial paper and internally generated funds. This has resulted in the Company carrying current...

  • Page 28
    ...employees have full and free access to the Audit Committee at any time. KPMG LLP, independent certified public accountants, are retained to audit the consolidated financial statements. Their report follows. Joe R. Lee Chairman of the Board and Chief Executive Officer DARDEN RESTAURANTS 2000 ANNUAL...

  • Page 29
    ...require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the 26 DARDEN RESTAURANTS 2000 ANNUAL REPORT financial...

  • Page 30
    ...N I N G S DARDEN RE STAURANTS Fiscal Year Ended (In thousands, except per share data) May 28, 2000 $3,701,256 May 30, 1999 $3,458,107 May 31, 1998 $3,287,017 Sales Costs and Expenses: Cost of sales: Food and beverage Restaurant labor Restaurant expenses Total Cost of Sales Selling, general and...

  • Page 31
    ...stock, 43,785 and 32,541 shares, at cost Accumulated other comprehensive income Unearned compensation Total Stockholders' Equity Total Liabilities and Stockholders' Equity See accompanying notes to consolidated financial...12,115) (63,751) $ 964,036 $1,890,247 28 DARDEN RESTAURANTS 2000 ANNUAL REPORT

  • Page 32
    ... receivable repayments Income tax benefit credited to equity 5,506 Proceeds from issuance of equity put options 1,814 Purchases of common stock for treasury (11,487 shares) Issuance of treasury stock under Employee Stock Purchase Plan (243 shares) 1,741 Balance at May 28, 2000 $1,351,707 $(41,706...

  • Page 33
    ... from issuance of common stock Income tax benefit credited to equity Dividends paid Purchases of treasury stock ESOP note receivable repayments Increase (decrease) in short-term debt Proceeds from issuance of long-term debt Repayment of long-term debt Payment of loan costs Proceeds from issuance of...

  • Page 34
    ... their fair value. Restaurant sites and certain identifiable intangibles to be disposed of are reported at the lower of their carrying amount or fair value, less estimated costs to sell. LIQUOR LICENSES Inventories are valued at the lower of weighted average cost or market. LAND, BUILDINGS AND...

  • Page 35
    ... or other The Company may, from time to time, use financial and commodities derivatives in the management of interest rate and commodities pricing risks that are inherent in its business operations. The Company may also use financial derivatives as part of its stock repurchase program as described...

  • Page 36
    ..., 2000, the Company operated 1,139 Red Lobster, Olive Garden, Bahama Breeze and Smokey Bones restaurants in North America as part of a single operating segment. The restaurants operate principally in the United States within the casual dining industry, providing similar products to similar customers...

  • Page 37
    ... fair value and carrying value of impaired assets. The asset impairment charges relate to low-performing restaurant properties and other long-lived assets, including restaurants that have been closed. Fair value is generally determined based on appraisals or sales prices of comparable properties...

  • Page 38
    ... has been recognized in the accompanying consolidated financial statements for the deferred tax assets because the Company believes that sufficient projected future taxable income will be generated to fully utilize the benefits of these deductible amounts. DARDEN RESTAURANTS 2000 ANNUAL REPORT 35

  • Page 39
    ...interest expense over the life of the notes and debentures. The effective annual interest rate is 7.57 percent for the notes and 7.82 percent for the debentures, after consideration of loan costs, issuance discounts and interest-rate swap termination costs. 36 DARDEN RESTAURANTS 2000 ANNUAL REPORT

  • Page 40
    ...long-term debt 306,586 284,835 316,451 306,806 Note 10 Equity Put Options As a part of its stock repurchase program, the Company issued equity put options that entitle the holder to sell shares of Company common stock to the Company, at a specified price, if the holder exercises the option. In 2000...

  • Page 41
    ... defined benefit pension plans for salaried employees with various benefit formulas and a group of hourly employees with a frozen level of benefits. The Company also sponsors a contributory plan that provides health-care benefits to its salaried retirees. 38 DARDEN RESTAURANTS 2000 ANNUAL REPORT

  • Page 42
    ... benefit plan obligations: Defined Benefit Plans 2000 1999 Discount rate Expected long-term rate of return on plan assets Rate of future compensation increases 8.0% 10.4% 4.5% Post-retirement Benefit Plan 2000 1999 8.0% N/A N/A 7.0% 10.4% 4.5% 7.0% N/A N/A DARDEN RESTAURANTS 2000 ANNUAL REPORT...

  • Page 43
    ...health care cost trend rate has a significant effect on amounts reported for retiree health care plans. A one-percentage-point increase in the assumed health care cost trend rate would increase or decrease the total of the service and interest cost components of net periodic post-retirement benefit...

  • Page 44
    ... shares of common stock may be issued under this plan and all options have an exercise price equal to the fair market value of the shares at the date of grant. The Darden Restaurants Compensation Plan for Non-Employee Directors provides that non-employee directors may elect to receive their annual...

  • Page 45
    ...DARDEN RES TAURANTS The Company applies APB 25 in accounting for its stock option plans and, accordingly, no compensation cost has been recognized in the Company's consolidated financial statements for stock options granted under any of its stock plans. Had the Company determined compensation cost...

  • Page 46
    ... have completed one year of service an opportunity to purchase shares of its common stock, subject to certain limitations. Under the plan, employees may elect to purchase shares at the lower of 85 percent of the fair market value of the Company's common stock as of the first or last trading days of...

  • Page 47
    ...250 $ 294,032 213,905 12,647 0.08 $ 239,526 119,100 1,217 $ 14.000 9.750 11.750 Cash Flow from Operations Capital Expenditures Dividends Paid Dividends Paid per Share Advertising Expense Number of Employees Number of Restaurants Stock Price: High Low Close 44 DARDEN RESTAURANTS 2000 ANNUAL REPORT

  • Page 48
    ... Olive Garden's Pasta for Pennies campaign, benefiting the Leukemia Society of America. Through community Family Centers and program sites, the "Y" annually serves hundreds of thousands of men, women and children of all ages, abilities, races, income brackets and religions. The Darden Restaurants...

  • Page 49
    .... Darden Restaurants Junior Achievement Volunteer Al Green teaches business basics to an 8th grade class at Carver Middle School in Orlando. F L O R I D A C I T R U S S P O R T S F O U N D AT I O N Police officers serve as celebrity servers at the College Station, Texas, Red Lobster, helping...

  • Page 50
    ... R VA N C Y Darden has supported the GLAAACC for years, sponsoring events, participating on boards and teaming up with local Red Lobster and Olive Garden restaurants for community fundraisers. In recognition of our contributions to the Southern California African American community and our national...

  • Page 51
    ..., Red Lobster and Executive Vice President, Darden Restaurants, Inc. Rita P. Wilson President, Allstate Indemnity Company C O R P O R AT E O F F I C E R S Linda J. Dimopoulos Senior Vice President, Chief Information Officer Barry Moullet Senior Vice President, Purchasing, Distribution and Food...

  • Page 52
    ... Services Notice of Annual Meeting The Annual Meeting of Shareholders will be held at 11 a.m. Eastern Daylight Time, Wednesday, September 20, 2000, at the Renaissance Orlando Resort Hotel, 6677 Sea Harbor Drive, Orlando, Florida. Markets New York Stock Exchange Stock Exchange Symbol: DRI Web Site...

  • Page 53