Red Lobster 2009 Annual Report Download

Download and view the complete annual report

Please find the complete 2009 Red Lobster annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 74

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74

2 0 0 9 A N N UA L R E P O RT
SM
A Brand-Building Company

Table of contents

  • Page 1
    SM 2 0 0 9 A n n uA l R e p o R t A Brand-Building Company

  • Page 2
    ... builds brand loyalty. In fiscal 2009, the company delivered valuecreating new restaurant growth, opening 38 net new restaurants for a total of 691 in North America. In fiscal 2009, Olive Garden continued to deliver total sales and operating profit over prior year with total sales of $3.29 billion...

  • Page 3
    ... The Capital Grille for the full year, as well as new restaurant growth at each brand, the effect of an additional operating week in fiscal 2009 and same-restaurant sales growth at Olive Garden. • Net earnings from continuing operations for fiscal 2009 were $371.8 million, a 0.6 percent increase...

  • Page 4
    ... the long-term health of our brands and our business model. Darden's performance in 2009 confirms that the Company is well positioned to succeed in difficult times. More importantly, because we were able to deliver strong financial results while continuing to invest in our long-term future, we are...

  • Page 5
    ... through superior talent management practices; and making changes in how we work that enable our brand builders to spend more time doing just that - building brands - and less time on brand support and other activities. The long-term cost dynamics we see mean that the brand support we provide must...

  • Page 6
    ... supply chain, facilities management and energy and water usage. In addition, we're continuing to open new restaurants that generate strong returns, and there are cost efficiencies that come with the increased scale. Q What is the importance of leadership at Darden? and A Earnings Per Share...

  • Page 7
    ... and The Capital Grille. We have diversified our brand offerings to consumers, which is helping us capture more dining occasions and thus more market share. We've increased our scale, which has led to reduced costs in many areas, especially in food and beverage costs and general and administrative...

  • Page 8
    ... our guests and employees, and Darden's portfolio of restaurant brands reflects decades of doing just that. We have strong, trusted brands because we work hard - using proven processes - to understand what consumers want, how and when they want it, and what it takes to deliver on those expectations...

  • Page 9
    ...-term business risks and dynamics, while continuing to make the investments necessary for industry-leading, long-term sales and profit growth. Given this imperative, we are working in a number of areas to fundamentally change and significantly reduce the cost of delivering and supporting our brands...

  • Page 10
    .... Wood-Fire Grill In developing its new Wood-Fire Grill, Red Lobster studied consumer preferences for 17 cooking methods, conducted numerous focus groups and tested the new cooking platform for more than a year. The new Wood-Fire Grill is a key component of delivering Red Lobster's brand promise...

  • Page 11
    ... the new Wood-Fire Grill. Red Lobster Guest Satisfaction 76% 74% 72% 70% 68% 05 06 07 08 09 The percentage of Red Lobster guests who rate their experience as excellent continues to improve. Red Lobster Gap to Knapp Track Same-Restaurant Sales 4.2% 3.4% 2.8% 2.0% Today's Fresh Fish Menu The...

  • Page 12
    ... integrate, support and realize value from the acquisition of additional brands. Our scale and the range and depth of our support expertise sets Darden apart and positions us for sustainable and profitable market share growth. Our goal is to develop an even more cost-effective brand support platform...

  • Page 13
    ... initiatives are under way is Facilities Management. We are testing centralized support for our restaurant facilities in order to increase the use of more cost-effective regional and national service contracts. This new approach will also enable us to better meet the repair and maintenance needs...

  • Page 14
    ... Fiscal year 2009 demonstrated the need for balance. We successfully executed several near-term costcontrol and sales-building initiatives. At the same time, we invested in the future by opening 71 net new restaurants and elevating the employee experience. To support nearly 1,800 restaurants across...

  • Page 15
    ... us to highlight compelling new food offerings to a broad audience. Purchasing Our purchasing power has grown since broadening our portfolio and welcoming LongHorn Steakhouse and The Capital Grille into our family of brands. As a result, we purchase several food and other commodities - especially...

  • Page 16
    ... influential position in our company is the General Manager or Managing Partner of each of our restaurants. These are the men and women who most directly set the standard for our guests and employees each day. As a result of our focus on developing and supporting these leaders, the turnover rate for...

  • Page 17
    ... Diamond Club Each year, the Darden Diamond Club recognizes and honors the top-performing General Managers and Managing Partners from every Darden operating company throughout North America. Training To Win Talented individuals coming together as a team to work toward a common goal is what takes...

  • Page 18
    ...) Darden's new Restaurant Support Center is intended to bring all of our Orlando-based employees under one roof to foster even greater collaboration and stronger performance while honoring our heritage. The new RSC, together with the introduction of a more contemporary and progressive corporate logo...

  • Page 19
    ...is right, holding everyone to high standards, nourishing our rich diversity and learning from one another. We are as passionate about providing exceptional employee experiences and rewarding great results as we are about providing outstanding dining experiences to the guests visiting our restaurants...

  • Page 20
    ... Corporate Social Responsibility Building Darden is a company that strives to make a positive difference in the lives of others. That is the cornerstone of our culture and is reflected in our passion for our guests and employees. But our desire to make a difference extends beyond our restaurants...

  • Page 21
    ...Red lobster executive and operating teams Darden Restaurants, Inc. Robert McAdam Senior Vice president, Government and Community Affairs Barry Moullet Senior Vice president, Supply Chain Daisy ng Senior Vice president, Human Resources David pickens Senior Vice president, president, olive Garden...

  • Page 22
    ... J. (CJ) Fraleigh Chief operating officer of Sara lee north America and executive Vice president of Sara lee Corporation, a global manufacturer and marketer of brand name consumer products. David H. Hughes Retired Chairman of the Board of Hughes Supply, Inc., a building supply company. Charles...

  • Page 23
    ...on Internal Control Over Financial Reporting Report of Independent Registered Public Accounting Firm Consolidated Statements of Earnings Consolidated Balance Sheets C onsolidated Statements of Changes in Stockholders' Equity and Accumulated Other Comprehensive Income (Loss) Consolidated...

  • Page 24
    ...fiscal year, the addition of  net new olive Gardens,  net new longHorn Steakhouses, 0 net new Red lobsters and five new the Capital Grilles, the impact of the rd week and same-restaurant sales increases at olive Garden. Although our combined same-restaurant sales for olive Garden, Red lobster...

  • Page 25
    ... 2009. olive Garden sales of $.29 billion in fiscal 2009 were .2 percent above last year. olive Garden opened  net new restaurants during fiscal 2009. on a 2-week basis, annual u.S. same-restaurant sales for olive Garden increased 0. percent due to a 2. percent increase in average guest check...

  • Page 26
    ...200 due to a .0 percent increase in average guest check and a .9 percent increase in samerestaurant guest counts. Average annual sales per restaurant for olive Garden were $.9 million in fiscal 200 compared to $. million in fiscal 200. Red lobster's sales of $2. billion in fiscal 200 were...

  • Page 27
    ... wage rates, benefit costs and manager compensation. Restaurant expenses (which include lease, property tax, credit card, utility, workers' compensation, insurance, new restaurant pre-opening and other restaurant-level operating expenses) increased $0. million, or 0.9 percent, from $.02 billion...

  • Page 28
    ... sheets as a component of buildings, are amortized over the lesser of the expected lease term, including cancelable option periods, or the estimated useful lives of the related assets using the straight-line method. equipment is depreciated over estimated useful lives ranging from two to ten years...

  • Page 29
    ... financial statements, we utilize the reporting provisions for discontinued operations. Assets whose disposal is not probable within one year remain in land, buildings and equipment until their disposal is probable within one year. We account for exit or disposal activities, including restaurant...

  • Page 30
    ...is discounted using a weighted-average cost of capital that reflects current market conditions. the projection uses management's best estimates of economic and market conditions over the projected period including growth rates in sales, costs and number of units, estimates of future expected changes...

  • Page 31
    ... balance sheets. penalties, when incurred, are recognized in selling, general and administrative expenses. We base our estimates on the best available information at the time that we prepare the provision. We generally file our annual income tax returns several months after our fiscal year...

  • Page 32
    ... of land, buildings and equipment, to pay dividends to our shareholders and to repurchase shares of our common stock. Since substantially all of our sales are for cash and cash equivalents, and accounts payable are generally due in five to 0 days, we are able to carry current liabilities in excess...

  • Page 33
    ...rate $. million commercial bank loan due in December 20 that is used to support a loan from us to the employee Stock ownership plan portion of the Darden Savings plan. through our shelf registration statement on file with the SeC, depending on conditions prevailing in the public capital markets...

  • Page 34
    ... on unrecognized income tax benefits of $10.2 million, $2.9 million of which relates to contingencies expected to be resolved within one year. (6) Includes letters of credit for $104.5 million of workers' compensation and general liabilities accrued in our consolidated financial statements, $47...

  • Page 35
    ... equipment, remodel existing restaurants and complete our new restaurant support center. Capital expenditures related to continuing operations were $. million in fiscal 2009, compared to $29.2 million in fiscal 200 and $.2 million in fiscal 200. excluding the $.20 billion in net cash...

  • Page 36
    ... long-term rate of return on plan assets and expected health care cost trend rates. We set the discount rate assumption annually for each plan at its valuation date to reflect the yield of high quality fixed-income debt instruments, with lives that approximate the maturity of the plan benefits. At...

  • Page 37
    ... method to measure value at risk, over time horizons ranging from one week to one year, at the 9 percent confidence level. At May , 2009, our potential losses in future net earnings resulting from changes in foreign currency exchange rate instruments, commodity instruments, equity forwards and...

  • Page 38
    ...growth, and capital expenditures in fiscal 200, and all other statements that are not historical facts, including without limitation statements concerning or related to the financial condition, results of operations, plans, objectives, future performance and business of Darden Restaurants, Inc. and...

  • Page 39
    ...• the price and availability of food, ingredients and utilities, including the general risk of inflation; • the impact of shortages or interruptions in the delivery of food and other supplies from third party vendors; • labor and insurance costs, including increased labor costs as a result of...

  • Page 40
    ... public accounting firm, is retained to audit our consolidated financial statements and the effectiveness of our internal control over financial reporting. their reports follow. Clarence otis, Jr. Chairman of the Board and Chief Executive Officer  Darden Restaurants, Inc. 2009 Annual Report

  • Page 41
    ...standards of the public Company Accounting oversight Board (united States), the consolidated balance sheets of Darden Restaurants, Inc. as of May , 2009 and May 2, 200, and the related consolidated statements of earnings, changes in stockholders' equity and accumulated other comprehensive income...

  • Page 42
    ...Statement of Financial Accounting Standards no. , Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, in 200. We have also audited, in accordance with the standards of the public Company Accounting oversight Board (united States), Darden Restaurants, Inc.'s internal...

  • Page 43
    ... respectively Selling, general and administrative Depreciation and amortization Interest, net Asset impairment, net total costs and expenses earnings before income taxes Income taxes earnings from continuing operations earnings (losses) from discontinued operations, net of tax expense (benefit) of...

  • Page 44
    ...total current liabilities long-term debt, less current portion Deferred income taxes Deferred rent obligations under capital leases, net of current installments other liabilities total liabilities Stockholders' equity: Common stock and surplus, no par value. Authorized 00.0 shares; issued 22.9 and...

  • Page 45
    ... Stock option exercises (. shares) Stock-based compensation eSop note receivable repayments Income tax benefits credited to equity purchases of common stock for treasury (. shares) Issuance of treasury stock under employee Stock purchase plan and other plans (0. shares) Balances at May , 2009...

  • Page 46
    ... plan loss on disposal of land, buildings and equipment Change in cash surrender value of trust-owned life insurance Deferred income taxes Change in deferred rent Change in other liabilities Income tax benefits from exercise of stock-based compensation credited to goodwill other, net net...

  • Page 47
    ... the accompanying consolidated financial statements include the operations of Darden Restaurants, Inc. and its wholly owned subsidiaries (Darden, the Company, we, us or our). We own and operate the Red lobster®, olive Garden®, longHorn Steakhouse®, the Capital Grille®, Bahama Breeze®, Seasons...

  • Page 48
    ...is discounted using a weighted-average cost of capital that reflects current market conditions. the projection uses management's best estimates of economic and market conditions over the projected period including growth rates in sales, costs and number of units, estimates of future expected changes...

  • Page 49
    ... our annual long-range plan; assumed royalty rates that could be payable if we did not own the trademarks; and a discount rate. We recognize an impairment loss when the estimated fair value of the indefinite-lived intangible asset is less than its carrying value. We completed our impairment test of...

  • Page 50
    ...the purchase of a vendor's products are recognized as a reduction of the related food and beverage costs as earned. Advance payments are made by the vendors based on estimates of volume to be purchased from the vendors and the terms of the agreement. As we make purchases from the vendors each period...

  • Page 51
    ...-BASED COMPENSATION effective May 29, 200, we adopted the provisions of SFAS no. 2(R), "Share-Based payment," which requires companies to recognize in the financial statements the cost of employee services received in exchange for awards of equity instruments based on the grant date fair value of...

  • Page 52
    ... fair value of cash flow hedges and recognition of the funded status and amortization of unrecognized net actuarial gains and losses related to our pension and other postretirement plans. See note  - Stockholders' equity for additional information. 0 Darden Restaurants, Inc. 2009 Annual Report

  • Page 53
    ...-service dining industry, providing similar products to similar customers. the concepts also possess similar economic characteristics, resulting in similar long-term expected financial performance characteristics. Revenues from external customers are derived principally from food and beverage sales...

  • Page 54
    ... future cash flows. the results of operations for all Red lobster, olive Garden and longHorn restaurants permanently closed in fiscal 2009, 200 and 200 that would otherwise have met the criteria for discontinued operations reporting are not material to our consolidated financial position, results...

  • Page 55
    ... of our Restaurant Support Center (RSC) for $.2 million. the RSC houses all of our executive offices, shared service functions and concept administrative personnel. the transaction was completed in anticipation of moving the RSC to a new facility approximately three years from the date of sale. As...

  • Page 56
    .... All changes in the fair value of our economic hedge contracts are recorded currently in earnings in the 2009 Annual Report note 0 DeriVatiVe inStrumentS anD HeDging actiVitieS In March 200, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS...

  • Page 57
    ... income (loss). these changes in fair value will subsequently be reclassified into earnings as a component of food and beverage expenses when the product is purchased for use in our restaurants. Ineffectiveness measured in the hedging relationship is recorded currently in earnings in the period...

  • Page 58
    ... are not included in current earnings but are reported as accumulated other comprehensive income (loss). As the Darden stock units vest, we will de-designate that portion of the equity forward contract that no longer qualifies for hedge accounting and changes in fair value associated with that...

  • Page 59
    ...statements of earnings for the years ended May , 2009 and May 2, 200, are as follows: location of Gain (loss) Recognized in Income on Derivatives Amount of Gain (loss) Recognized in Income May , 2009 May 2,200 (In millions) Commodity contracts Equity forwards Equity forwards Cost of Sales...

  • Page 60
    ... million of trading securities related to the RARe Supplemental Deferred Compensation plan and $29. million of available-for-sale securities related to insurance funding requirements for our workers' compensation and general liability claims. the following table summarizes cost and market value for...

  • Page 61
    ...of the u.S. statutory income tax rate to the effective income tax rate from continuing operations included in the accompanying consolidated statements of earnings: Fiscal Year 2009 200 200 Interest expense Imputed interest on capital leases Capitalized interest Interest income Interest, net $113...

  • Page 62
    ... , 2009 May 2, 200 Accrued liabilities Compensation and employee benefits Deferred rent and interest income Asset disposition Other Gross deferred tax assets Trademarks and other acquisition related intangibles Buildings and equipment Prepaid pension costs Prepaid interest Capitalized software...

  • Page 63
    ...this change in measurement date resulted in a $0. million, net of tax, adjustment to the beginning balance of our retained earnings. the following provides a reconciliation of the changes in the plan benefit obligation, fair value of plan assets and the funded status of the plans as of May , 2009...

  • Page 64
    ... defined benefit pension plans. A quarter percentage point change in the defined benefit plans' discount rate and the expected long-term rate of return on plan assets would increase or decrease earnings before income taxes by $0. million and $0. million, respectively. the assumed health care cost...

  • Page 65
    notes to Consolidated Financial Statements Components of net periodic benefit cost included in continuing operations are as follows: Defined Benefit plans (In millions) 2009 200 200 2009 postretirement Benefit plan 200 200 Service cost Interest cost Expected return on plan assets Amortization...

  • Page 66
    ... interest rate of 0.9 percent at May , 2009, is due to be repaid no later than December 20. the shares acquired under this loan are accounted for in accordance with Statement of position (Sop) 9-, "employers' Accounting for employee Stock ownership plans." Fluctuations in our stock price are...

  • Page 67
    ...the Company for the first time; (c) an additional award of non-qualified stock options to purchase .0 thousand shares of common stock annually upon election or re-election to the Board; and (d) an annual award of common stock with a fair market value of $0. million on the date of grant. Directors...

  • Page 68
    ... our stock plans. this cost is expected to be recognized over a weighted-average period of . years. the total fair value of stock options that vested during fiscal 2009 was $. million. Restricted stock and RSus are granted at a value equal to the market price of our common stock on the date of...

  • Page 69
    ...cost related to unvested performance stock units granted under our stock plans. this cost is expected to be recognized over a weighted-average period of 2.9 years. the total fair value of performance stock units that vested in fiscal 2009 was $2. million. We maintain an employee Stock purchase plan...

  • Page 70
    ...and misleading statements in press releases and public filings that misrepresented and failed to disclose certain information about Darden's prospects and earnings guidance for fiscal 200, and that certain defendants benefited from these false and misleading statements in selling Darden stock at an...

  • Page 71
    ...Basic net earnings per share: Earnings from continuing operations (Losses) earnings from discontinued operations Net earnings Diluted net earnings per share: Earnings from continuing operations (Losses) earnings from discontinued operations Net earnings Dividends paid per share Stock price: High Low...

  • Page 72
    ... operations earnings (losses) from discontinued operations net earnings Average number of common shares outstanding: Basic Diluted Financial Position total assets land, buildings and equipment, net Working capital (deficit) long-term debt, less current portion Stockholders' equity Stockholders...

  • Page 73
    ..., orlando, Florida 32827. As of the close of business on June 30th, 2009, we had 39,597 registered shareholders of record. mARKets new york stock exchange stock exchange symbol: DRI CeRtIFICAtIons We have filed as exhibits to our Annual Report on Form 10-K for the year ended may 31, 2009, the Chief...

  • Page 74
    SM Darden Restaurants, Inc. 5900 lake ellenor Drive orlando, Fl 32809 (407) 245-4000 www.darden.com