Red Lobster 2000 Annual Report Download - page 25

22 DARDEN RESTAURANTS 2000 ANNUAL REPORT
Darden Restaurants, Inc. (Darden or the Company)
operates 1,139 Red 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 and the consolidated
financial statements and related notes found elsewhere
in this report. Darden's fiscal year ends on the last
Sunday in May.
Revenues
Total revenues in 2000 (52 weeks) were $3.70 billion,
a seven percent increase from 1999 (52 weeks). Total
revenues in 1999 were $3.46 billion, a five percent
increase from 1998 (53 weeks).
Costs and Expenses
Food and beverage costs for 2000 were 32.4 percent of
sales, a decrease of 0.4 percentage points from 1999 and
a decrease of 0.6 percentage points from 1998. The lower
level of food and beverage costs for 2000, as a percent-
age of sales, is primarily attributable to pricing, margin
improving initiatives such as waste reduction, and a
lower-margin promotion run by Red Lobster during the
first quarter last year.
Restaurant labor decreased in 2000 to 31.9 per-
cent of sales compared to 32.3 percent of sales in 1999
and 1998 primarily due to efficiencies resulting from
higher sales volumes.
Restaurant expenses (primarily lease expenses,
property taxes, utilities and workers’ compensation
costs) decreased in 2000 to 14.1 percent of sales com-
pared to 14.3 percent in 1999 and 14.7 percent in
1998 primarily as a result of higher sales volumes and
the fixed component of these expenses which are not
impacted by higher sales volumes.
Selling, general and administrative expenses
decreased in 2000 to 10.3 percent of sales compared to
10.4 percent in 1999 and 10.9 percent in 1998. The
decreases in 2000 and 1999 in comparison to 1998 are
principally a result of reduced marketing expenses as a
percent of sales offset by additional labor costs associ-
ated with new concept expansion and development.
Depreciation and amortization expense of 3.5 per-
cent of sales in 2000 decreased from 3.6 percent in
1999 and 3.8 percent in 1998 primarily as a result of
increased sales levels. Interest expense was comparable
from year to year at 0.6 percent of sales.
Income From Operations
Pre-tax earnings before net restructuring and asset
impairment credit increased by 29.2 percent in 2000 to
$268.0 million, compared to $207.4 million in 1999
and $153.7 million in 1998. The increase in 2000 was
mainly attributable to annual same-restaurant sales
increases in the U.S. for both Red Lobster and Olive
Garden totaling 7.6 percent and 7.2 percent, respectively.
The increase in 1999 was mainly attributable to annual
same-restaurant sales increases in the U.S. for both Red
Lobster and Olive Garden totaling 7.4 percent and 9.0
percent, respectively. Red Lobster and Olive Garden have
enjoyed ten and 23 consecutive quarters of U.S. same-
restaurant sales increases, respectively.
Provision for Income Taxes
The effective tax rate for 2000 before net restructuring
and asset impairment credit was 35.4 percent com-
pared to 34.8 percent in 1999 and 33.8 percent in
1998. The increase in the effective tax rates each year is
a result of higher annual pre-tax earnings.
MANAGEMENT’S DISCUSSION
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
DARDEN RESTAURANTS