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EARNINGS CALL
Fiscal 2017 Q2December 20, 2016
1
DISCLAIMER / NON-GAAP INFORMATION
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 technology failures including failure to maintain a secure cyber network, 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, failure to execute a business continuity plan following a disaster, health concerns including food-related pandemics or 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.
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.
IMPORTANT NOTICE
2
$0.99
$1.01
$0.68$0.54
$1.21 $1.10 $0.88
$0.64
FY15 FY16 FY15 FY16 FY16 FY17 FY16 FY17
Darden Adjusted EPS3
Q31 Q42 Q1 Q2
$1.73 $1.75 $1.69 $1.61 $1.85 $1.79 $1.71 $1.64
FY15 FY16 FY15 FY16 FY16 FY17 FY16 FY17
Darden Sales ($bn)
Q31 Q42 Q1 Q2
FISCAL QUARTER HIGHLIGHTS
1 FY15 Q3 includes the Thanksgiving holiday whereas it occurred in Q2 of FY16.2 FY15 Q4 adjusted to exclude $0.13bn in sales and $0.07 in adjusted diluted earnings per share due to the 53rd week. 3 EPS values, except for FY17 Q1 & Q2, are adjusted for special items. A reconciliation of reported to adjusted numbers can be found in the additional information section of this presentation.
4.2%
2.6%
1.3%1.7%
Q3 FY16 Q4 FY16 Q1 FY17 Q2 FY17
Same-Restaurant Sales Growth - Comparable Calendar Basis
3
CONTINUED TOP LINE MOMENTUM
Same-Restaurant Sales
Q2 Highlights
2.8%
4.9%
2.4%2.0%
2.6%
1 FY16 Same-Restaurant Sales on a comparable calendar basis.2 Industry excluding Darden brands.
2.6%Same-Restaurant
Sales
+21%OG To Go Growth
+540bpsSame-Restaurant
Sales Industry
Outperformance2
FY16 Q21 FY16 Q31 FY16 Q41 FY17 Q1 FY17 Q2
4
0.1%Same-Restaurant
Sales
Q2 Highlights
+290bpsSame-Restaurant
Sales Industry
Outperformance3
1 Segment profit margin calculated as (sales less costs of food & beverage, restaurant labor, restaurant expenses and marketing expenses) / sales.2 Segment profit margin adjusted to exclude the impact of incremental rent and other tax expense from the fiscal 2016 real estate transactions.3 Industry excluding Darden brands.
16.3%20.0%
17.8% 19.0%
14.9% 15.6% 15.0% 14.4%
1.3%1.3%
1.5%0.4% 1.6%
FY15Q3
FY16Q3
FY15Q4
FY16Q4
FY16Q1
FY17Q1
FY16Q2
FY17Q2
21.3%220.3%2
15.4%2
Segment Profit Margin Percent1
Rent and other tax expense impact on Segment Profit Margin
from fiscal 2016 real estate transactions
17.1%2
+60bpsAdjusted Segment
Profit Margin % vs.
Last Year (Basis Point
Diff)2
STRENGTHENING BUSINESS MODEL
16.0%2
5
THANK YOU TO OUR 150,000
TEAM MEMBERS!
FINANCIAL UPDATE
7
FISCAL SECOND QUARTER HIGHLIGHTS
1.7%Same-Restaurant Sales
$0.64Diluted EPS from Continuing
Operations
~$70 millionDividends Paid
18.5%Adjusted Diluted EPS Growth
vs Last Year1
$19 millionShare Repurchases
1 Prior year EPS values adjusted for special items. A reconciliation of reported to adjusted numbers can be found in the additional information section of this presentation.
~0.3 million Shares Repurchased
8
EAT MARGIN INCREASED
50 BASIS POINTS
Fiscal Q2 2017
($ millions) % of Sales
vs. PY* (bps) Favorable/(Unfavorable)
Sales $1,642.5
Food & Beverage $478.1 29.1% 90
Restaurant Labor $538.1 32.8% (20)
Restaurant Expenses $305.3 18.6% (130)
Marketing $57.1 3.5% 10
Restaurant-Level EBITDA $263.9 16.1% (50)
G&A $79.5 4.8% (40)
Depreciation & Amortization $67.8 4.1% 60
Impairments $0.1 0.0% 50
EBIT $116.5 7.1% 10
Interest Expense $9.5 0.6% 70
EBT $107.0 6.5% 80
Income Tax ExpenseNote: Effective Tax Rate
$27.3 1.7%25.5%
(40)
EAT $79.7 4.9% 50
Note: Percentages may not foot due to rounding. * Compared to FY16 Q2 adjusted performance. A reconciliation of reported to adjusted numbers can be found in the additional information section of this presentation.
9
1 Segment profit margin calculated as (sales less costs of food & beverage, restaurant labor, restaurant expenses and marketing expenses) / sales.2 Segment profit margin adjusted to exclude the impact of incremental rent and other tax expense from the fiscal 2016 real estate transactions.
Segment sales growth ($ millions)
…with strong Segment Profit Margin, excluding incremental rent from real estate transactions1
17.6% 16.8%
0.8% 2.5%
FY16 Q2 FY17 Q2
15.0% 14.4%
0.4% 1.6%
FY16 Q2 FY17 Q2
18.2%
18.2%
0.1%
FY16 Q2 FY17 Q2
14.2% 14.8%
0.1%0.6%
FY16 Q2 FY17 Q2
SEGMENT PERFORMANCE
$892 $915
FY16 Q2 FY17 Q2
$365 $365
FY16 Q2 FY17 Q2
$123 $129
FY16 Q2 FY17 Q2
-%
$228 $234
FY16 Q2 FY17 Q2
Fine Dining Other
Fine Dining Other
19.3%2
16.0%2
18.3%2
15.4%2
Rent and other tax expense impact on Segment Profit Margin from fiscal 2016 real estate transactions
18.4%2
15.4%2
14.3%2
10
FISCAL 2017 ANNUAL OUTLOOK
Note: Dollars in millions except per share amounts.
Total Sales Growth
1.7% to 2.7%
Same Restaurant Sales
1.0% to 2.0%
New Restaurants
24 to 28
Capital Spending
$310 to $350
Cost Savings
$30
Total Inflation
1.5% to 2.0%
Effective Tax Rate
26% to 27%
Sales Margin
Earnings per Diluted Share
$3.87 to $3.97(~126 million Weighted Average Diluted Shares Outstanding)
ADDITIONAL INFORMATION
12
SECOND QUARTER SAME-RESTAURANT
SALES GROWTH
1.2%
-0.3%
2.7%
2.6%
0.7%
13
Product Breakdown and Contract Coverage For 2nd Half of Fiscal 2017
¹ Includes cheese, cream, butter, and shortening
² Includes breadsticks and pasta
COMMODITIES OUTLOOK –
2nd HALF OF FISCAL 2017
Dec-May
FY2017
Spend by
Category Coverage Outlook
Beef 20% 55% Low Single Digit Deflation
Produce 12% 80% Low Single Digit Inflation
Dairy / Oil1 12% 60% Low Single Digit Inflation
Seafood 10% 90% Mid Single Digit Inflation
Wheat2 7% 95% Flat
Chicken 7% 95% Low Single Digit Inflation
Non-Perishable / Other 32% 65% Low Single Digit Inflation
Weighted Average
Coverage100% ~70%
14
REPORTED TO ADJUSTED EARNINGS
RECONCILIATIONS
Note: The sum of the quarterly Diluted EPS amounts do not total the annual EPS amounts due to the impact of the timing of share repurchases
on the weighted average share count. Values may not foot due to rounding. A detailed reconciliation of reported to adjusted earnings can be found in the Investor Relations section of the
Darden website (www.darden.com) under Non-GAAP Reporting.
Fiscal 2016
Q1 Q2 Q3 Q4 Annual
Reported Diluted Net EPS from Continuing Operations $0.63 $0.23 $0.84 $1.10 $2.78
Real Estate Plan Implementation 0.05 0.16 0.03 - 0.26
Debt Retirement Costs - 0.17 0.34 - 0.51
Strategic Action Plan and Other Costs - (0.02) - - (0.02)
Adjusted Diluted Net EPS from Continuing Operations $0.68 $0.54 $1.21 $1.10 $3.53
Fiscal 2015
Q3 Q4*
Reported Diluted Net EPS from Continuing Operations $1.01 $0.92
Debt Retirement Costs 0.00 0.00
Strategic Action Plan and Other Costs (0.02) 0.16
Adjusted Diluted Net EPS from Continuing Operations $0.99 $1.08
Remove 53rd Week Impact (0.07)
Adjusted Diluted Net EPS from Continuing Operations (52-Week Basis) $0.99 $1.01
* Reflects an extra week of operations due to a 53 week year
15
REPORTED TO ADJUSTED EBIT MARGIN
AND EARNINGS RECONCILIATIONS
Change
(in millions) 11/27/2016 11/29/2015 (bps)
Sales - as reported 1,642.5$ 1,608.8$
Earnings from continuing operations - as reported 79.7$ 30.1$
Interest, net - as reported 9.5 57.3
Income taxes - as reported 27.3 (5.7)
EBIT from continuing operations 116.5$ 81.7$
EBIT Margin from continuing operations 7.1% 5.1% 200
EBIT Impacts -$ 31.0$ (1)
Adjusted EBIT from continuing operations 116.5$ 112.7$ Adjusted EBIT Margin from continuing operations 7.1% 7.0% 10
Earnings from continuing operations - as reported 79.7$ 30.1$
EBIT Impacts - 31.0 (1)
Interest expense impacts - 35.6 (2)
Income tax impacts of adjustments - (26.2)
Adjusted earnings from continuing operations 79.7$ 70.5$
Adjusted earnings margin from continuing operations 4.9% 4.4% 50
(1) Represents costs associated with the real estate implementation
(2) Represents costs associated with debt retirement
Quarter Ended
16
FISCAL AND COMPARABLE
CALENDAR DATES
Fiscal 2016 Same-Restaurant Sales Calculation Dates
Fiscal Calendar Basis Comparable Calendar Basis
Q1
June 1, 2015 – August 30, 2015
vs.
May 26, 2014 – August 24, 2014
June 1, 2015 – August 30, 2015
vs.
June 2, 2014 – August 31, 2014
Q2
August 31, 2015 - November 29, 2015
vs.
August 25, 2014 - November 23, 2014
August 31, 2015 - November 29, 2015
vs.
September 1, 2014 - November 30, 2014
Q3
November 30, 2015 – February 28, 2016
vs.
November 24, 2014 – February 22, 2015
November 30, 2015 – February 28, 2016
vs.
December 1, 2014 – March 1,2015
Q4
February 29, 2016 - May 29, 2016
vs.
February 23, 2015 - May 24, 2015
February 29, 2016 - May 29, 2016
vs.
March 2, 2015 - May 31, 2015