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FY2015 Third Quarter Earnings Call
MARCH 20, 2015
Forward-Looking Statement
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, 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 forwardlooking 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 the ability to achieve Darden's strategic plan to enhance shareholder value including
realizing the expected benefits from the sale of Red Lobster, 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 sales growth, our plans to expand our smaller brands
Bahama Breeze, Seasons 52 and Eddie V's, 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, 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.
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
 Outline Operating Philosophy
 Real Estate Evaluation Process Update
 Third Quarter Olive Garden Performance
 Third Quarter Margin Analysis
 Darden Fourth Quarter and Annual Expectations
4
Our Operating Philosophy – “Back to Basics”
 Increasing the Core Operational Fundamentals of the business, providing an
outstanding guest experience rooted in:
• GreatCulinary
food
Engaging
Integrated
Attentive Service
Innovation
Atmosphere
Marketing
 Darden enables brands to reach their full potential by leveraging its scale, insight, and
experience:
• Leverage scale in a way that protects uniqueness and competitive advantages
• Capitalize on Insights to deliver customized one-to-one customer relationship
marketing
• We Operate with a Sense of Urgency to hold ourselves accountable for achieving
our commitments
5
Real Estate Evaluation Process Update
 Continuing to evaluate real estate portfolio
• Various options still being evaluated
• May be multiple, staged transactions
 31 owned properties listed for sale leaseback
to help inform our thinking on value creation
opportunities
• Initially marketed 16 properties with strong
interest and sub 6% cap rates
• Recently added 15 more properties that are also
seeing strong demand and equally low cap rates
 Restaurant Support Center marketed for
potential sale leaseback structure
6
Darden Delivered Strong Third Quarter Results
 Total sales growth of 6.9% versus last year, driven by SameRestaurant Sales growth in all brands, and new unit growth
 Adjusted EBIT margin* as a percent of sales increase of 200 basis
points through improved cost management and sales leverage
 Led to 39% increase in Adjusted Diluted EPS*
7
* Non-GAAP number. Excludes interest and taxes. A reconciliation of GAAP to non-GAAP numbers can be found
on Page 23 of this presentation. The impact of the non-GAAP adjustments to our margin items is shown on Page
17 of this presentation.
8
Seven Consecutive Months of Same-Restaurant Sales
Growth…
Olive Garden Same-Restaurant
Sales Performance
First back-toback quarter
increase since
2010
2.4%
2.2%
2.5%
1.6%
0.9%
0.7%
0.6%
0.5%
0.2%
-1.3%
Q1
9
Q2
Q3
August
September October
November December
January
February
…With Significant Margin Expansion
Olive Garden Restaurant-Level Margin
(% of Sales)
23.0%
20.6%
240 Basis
Point Increase
FY14 Q3
10
Margin Expansion Driven by:
1. Direct Labor Productivity Improvements
2. Reduced Marketing Spending with Fewer
Weeks of Price-Pointed Promotions
FY15 Q3
Note: Restaurant-Level Margins = (Total sales – food & beverage expenses – restaurant labor – restaurant
expenses (excluding rent and pre-opening) – marketing) / Total sales.
Olive Garden Critical Initiatives
Operations
Execution
Food, Service
& Atmosphere
Core Menu
& Beverage
Innovation
New Approach
to Advertising
and Promotions
Restaurant
Reimaging
Improve quality
and intensify
focus on the
guest
Reinforce value
leadership,
expand choice
& variety and
capitalize on
the
convenience
trend
Deliver an
integrated
communication
platform to
enhance brand
relevance
Create superior
experience with
every guest
touch point
Business Model Vibrancy
(Optimize restaurant economics & support costs)
11
Cucina Mia Menu Reduces Need for Constant Price
Pointed Promotions
12
ToGo Capitalizing on Guests’ Need for Convenience with
Strong Results
ToGo Sales per Restaurant Week
($Thousands)
$9.0
$7.4
22%
Increase
Q3 FY14
13
Q3 FY15
Olive Garden Remodel Test Showing Promising Results
 High single digit sales lift vs. control
group in current 13 restaurant test
 Continue to test different investment
levels to Optimize Returns
• Adding 6 restaurants to the test with
refined investment levels
 Tailor future remodels to individual
restaurant’s needs
14
Encouraging Olive Garden’s Results
Seven consecutive months of Same-Restaurant Sales
Growth
240 basis point increase in Restaurant-Level Margin
$23 million Increase in Olive Garden EBIT* in the 3rd
quarter from last year
* Non-GAAP number. Excludes interest and taxes.
15
Today’s Topics
 Outline Operating Philosophy
 Real Estate Evaluation Process Update
 Third Quarter Olive Garden Performance
 Third Quarter Margin Analysis
 Darden Fourth Quarter and Annual Expectations
16
Fiscal 2015 Third Quarter Margins
As Reported
Q3 2015
As Adjusted
Q3 2015
vs. Q3 2014 (Bps)
Favorable/(Unfavorable)
Food & Beverage
30.7%
30.7%
(70)
Restaurant Labor
30.9%
30.9%
50
Restaurant Expenses
15.9%
15.9%
80
22.5%
22.5%
70
SG&A
7.8%
7.6%
120
Impairments
0.3%
0.0%
0
Depreciation & Amortization
4.6%
4.6%
10
9.8%
10.3%
200
1.3%
1.3%
70
8.5%
9.0%
270
1.1%
1.7%
(130)
12.7%
19.2%
7.4%
7.2%
Gross Margin
EBIT
Interest Expense
EBT
Income Tax Expense
Note: Effective Tax Rate
EAT
17
140
FY2015 Fourth Quarter and Annual Outlook
Same-Restaurant Sales
Q4E*
2.0% - 3.0%
1.5% - 2.5%
4.0% - 5.0%
2.5% - 3.5%
Darden Blended
Olive Garden
LongHorn Steakhouse
Specialty Restaurants
Fiscal 2015 Reported to Adjusted Earnings Reconciliation
Q4E*
AnnualE*
Diluted Net EPS from Continuing Operations
Red Lobster-Related Shared Support Costs
Other Strategic Action Plan Costs
Debt Breakage Costs
Asset Impairments and Other One-Time Costs
Adjusted Diluted Net EPS
Adjusted EPS Growth vs Fiscal 2014
* Reflects the additional operating week vs Fiscal 2014
$0.91 - $0.94
$0.91 - $0.94
$0.37 - $0.40
$1.50 - $1.53
0.02
0.12
0.42
0.40
$2.45 - $2.48
$0.74 - $ 0.77
Fiscal 2015 Growth Sources
Annual
Adjusted EPS
$0.45 - $0.48
0.17
0.07
0.05
$0.74 - $0.77
Annual
% Growth
26% - 28%
10%
4%
3%
43% - 45%
Business Improvement
Reduced Interest Expense
Dilutive Share Count
53rd Week
Total Growth vs Fiscal 2014
18
AnnualE*
2.0% to 2.5%
0.5% to 1.0%
3.5% to 4.0%
3.0% to 3.5%
Since October 2014, We Have Identified $90 - $100 million
in Annualized Cost Efficiencies Once Fully Implemented
Estimated Annual Cost Savings ($Millions)
$15 - $20
$90 - $100
Supply
Chain
and
Other
Margin
$40 - $50
~$30
SG&A
Fiscal 2015
19
Fiscal 2016
Fiscal 2017
Cumulative
Thank You to Our 150,000 Team Members!
20
Questions
21
Additional Information
22
Fiscal 2015 and 2014
Quarterly Reported to Adjusted Earnings Reconciliation
Diluted Net EPS from Continuing Operations
Red Lobster-Related Shared Support Costs
Other Strategic Action Plan Costs
Debt Breakage Costs
Asset Impairments and Other One-Time Costs
Adjusted Diluted Net EPS from Continuing Operations
Adjusted FY15 EPS vs FY14 Adjusted EPS
* Reflects the additional operating week vs Fiscal 2014
Diluted Net EPS from Continuing Operations
Red Lobster-Related Shared Support Costs
Other Strategic Action Plan Costs
Asset Impairments and Other One-Time Costs
Adjusted Diluted Net EPS from Continuing Operations
23
Fiscal 2015
Q1
($0.14)
0.02
0.03
0.37
0.04
$0.32
($0.04)
Fiscal 2014
Q1
$0.32
0.04
$0.36
Q2
($0.24)
0.00
0.08
0.05
0.39
$0.28
$0.16
Q3
$1.01
0.00
0.01
0.00
(0.03)
$0.99
$0.28
Q4E*
$0.91 - $0.94
$0.91 - $0.94
$0.37 - $0.40
AnnualE*
$1.50 - $1.53
0.02
0.12
0.42
0.40
$2.45 - $2.48
$0.74 - $0.77
Q2
$0.05
0.04
0.03
0.00
$0.12
Q3
$0.65
0.04
0.01
0.01
$0.71
Q4E
$0.36
0.04
0.09
0.04
$0.54
AnnualE
$1.38
0.15
0.13
0.05
$1.71
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.