Darden retires $1 billion of debt, including $270 million in fiscal Q2

By Lisa Kerner

Charlotte, N.C., Dec. 18 – Darden Restaurants, Inc. used $631 million of proceeds from real estate transactions, plus cash on the balance sheet, to retire about $1 billion of total debt, according to chief financial officer and senior vice president Jeff Davis.

During the company’s fiscal 2016 second-quarter earnings call on Friday, Davis said, “$270 million was retired by the end of the quarter, and $743 million was retired after the close of the quarter.

“This strengthens our balance sheet and credit profile and is expected to positon us within our adjusted debt-to-EBITDAR targeted leverage range of 2 to 2.5 times.”

Darden continues to identify cost reductions and is on track to deliver $30 million to $35 million of savings in addition to its prior outlook of $50 million to $55 million.

The company has identified between $145 million and $165 million of annualized cost reductions from fiscal 2015 through fiscal year 2017.

Darden is continuing to return value to shareholders, according to Davis. The board increased the cash dividend by 14% to $0.50 and authorized a new $500 million share repurchase program.

The company ended the fiscal quarter on Nov. 29 with cash and cash equivalents of about $858 million and long-term debt, less current portion, of about $440 million. This compares with $536 million and $1.45 billion, respectively, at May 31, according to the earnings release.

Financial highlights

Darden’s second-quarter total sales from continuing operations were up 3.2% year over year at $1.61 million.

Adjusted diluted net earnings per share from continuing operations increased 92.9% to $0.54. The increase was driven by improved operating performance and the favorable settlement of legal matters, Davis said.

Same-restaurant sales were up 1.6% with all brands posting growth and delivering margin improvement, according to chief executive officer Gene Lee. The company added 14 net new restaurants in the fiscal second quarter.

During the quarter, Darden completed the spin-off of the Four Corners Property Trust that included 424 restaurant properties. Darden also completed 62 of 64 planned restaurant sale leasebacks and the sale leaseback of its restaurant support center.

Looking ahead, the Orlando, Fla.-based casual dining operator increased its outlook for fiscal 2016 same-restaurant sales to 2.5% to 3% and adjusted diluted net earnings per share to $3.25 to $3.35.

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