Darden Reports First-Quarter Results, Announces Red Lobster Operating Initiatives And Increased Stock Buyback
ORLANDO, Fla., Sept. 19, 1996 - At today's annual meeting, Darden Restaurants (NYSE: DRI) released first-quarter
results and announced significant menu and service changes which began this week at all Red Lobster restaurants. In
addition, the Company announced that its Board of Directors authorized an increased stock buyback program and declared
the regular semi- annual dividend.
For the first quarter ended August 25, 1996, sales of $805.6 million were down 3.6 percent compared to last year.
Approximately half the sales decline related to the discontinued China Coast stores which were closed last August, and the
remaining shortfall was attributable to Red Lobster. First-quarter earnings after tax were $20.5 million or 13 cents per
share, compared to earnings after tax before restructuring charges of $32.8 million or 21 cents per share in the first quarter
of fiscal 1996. The decline in first- quarter earnings was primarily attributable to significantly lower earnings at Red
In last year's first quarter, the company recorded a $75 million pre-tax restructuring charge ($44.8 million after tax or $0.28
per share) to discontinue China Coast. After this unusual item, last year's first quarter showed a net loss of $12.1 million or
$0.08 per share.
This week, Red Lobster launched a significant new sales and customer building campaign that brings together new food and
flavors with in-store operational improvements in an upbeat, energetic atmosphere. This program was launched on
September 16, with an extensive marketing campaign highlighting everyday low prices, quality ingredients and attentive
service. Customers will find a large number of menu items priced under $10, half portions available on many favorite
entrees, and new flavorful menu items such as Jay's Jump'n Jambalaya, Shrimp Cozumel and Louisiana Lacy's Catfish. In-
store operations have been simplified and additional emphasis has been placed on training throughout the restaurants to
deliver a more consistent, satisfying customer dining experience. Also, an 800 number has been created to continuously
measure customer satisfaction.
Joe Lee, Chairman and Chief Executive Officer, said "The first- quarter operating results are very disappointing, but I
believe we have the right strategies and action plans in place to improve Red Lobster's performance. I'm excited about the
new, lower priced menu and the in-store operational changes we are making to give each customer a great dining
experience. Because of one-time costs to implement the changes at Red Lobster and the time required for customer traffic to
build, however, we expect Darden's second fiscal quarter to be unprofitable."
After obtaining a favorable legal opinion, the Darden Board of Directors authorized the buyback of an additional 6% of the
Company's common stock, bringing the total buyback authorization to 10% of shares outstanding or 15.8 million shares.
These shares will be bought back opportunistically on the open market based on price and operating performance
considerations. The Board also declared the regular, semi-annual dividend of 4 cents per share payable on November 1,
1996 to shareholders of record on October 10, 1996.
FIRST QUARTER OPERATING HIGHLIGHTS
Food and beverage costs for the quarter were 33.2% of sales, approximately the same as last year. Restaurant labor
increased to 30.6% of sales compared to 29.4% last year due to wage rate inflation and higher manager compensation paid
in response to competitive market conditions. Restaurant expenses increased modestly to 15.3% of sales compared to
14.9% last year as smallwares expenses related to the Red Lobster operating initiatives were higher. As a result of the sales
decline and increased labor and store expenses, the store- level profit margin decreased to 20.8% in the first quarter of
fiscal 1997 from 22.5% last year. The increase in first-quarter selling, general and administrative expenses to 12.3% of
sales compared to 11.4% of sales last year was primarily attributable to the completion of the staffing required as a
separate public company and to provide better direct support to our restaurants.
The effective tax rate for the first quarter of fiscal 1997 was 29.1% compared to 37.0% in last year s first quarter. The
estimated effective annual tax rate for fiscal 1997 is approximately 29%, which is down from last year s effective tax rate
before unusual items of 36.8% because of expectations for higher tax credits and lower pretax income for the year.
Red Lobster sales of $475.1 million were down 4.7% compared to the first quarter of last year. Same-store sales in the U.S.
were down 6.4% as featured promotions ran high preferences, but did not increase customer traffic. Because of the sales
shortfall, Red Lobster operating profits for the first quarter were significantly below the prior year. During the first quarter,
Red Lobster opened four new stores and closed three for a total of 730 stores compared to 713 stores last year. Red Lobster
has reduced its new store openings and plans to open only 10 additional stores for the remainder of this fiscal year. Also,
Red Lobster relocated six stores during the quarter, four of which utilized former China Coast sites, and plans to relocate 16
more stores during the remainder of the fiscal year, 12 of which will utilize former China Coast sites. During the first
quarter, 43 restaurants were remodeled with the wharfside decor package. Currently, 475 restaurants or 65% of the total
have been remodeled or opened with this package. The balance of restaurants scheduled for remodeling are expected to be
completed during the next 12 months with costs per remodel decreasing to approximately $200,000 to $250,000 per unit,
versus prior costs of $350,000 to $400,000 per unit.
The Olive Garden continued its steady course of improvement with a 2.2% increase in sales to $328.9 million. Same-store
sales in the U.S. increased 0.2%, representing the eighth consecutive quarter of same-store sales increases. First-quarter
operating profits decreased slightly compared to last year, primarily due to an unfavorable shift in the lunch/dinner traffic
mix. The Olive Garden opened three new units during the quarter for a total of 490 stores compared to 475 stores at the end
of last year's first quarter. Three additional new stores are planned for the remainder of this year.
Because both Red Lobster and The Olive Garden have meaningfully reduced new store expansion, this year's capital
expenditure budget has been reduced from earlier plans by approximately $50 million to a current estimate of $200 million.
Furthermore, future new store opening commitments have been sharply reduced. This will enable management to focus on its
top priority of improving current operating performance.
Jeff O'Hara, President and Chief Operating Officer commented, "Red Lobster has successfully responded to many
competitive challenges over its 28-year history. I am excited about the changes we re making and confident we will see
improved customer traffic and operating performance as the year progresses."
At the Company's annual meeting, shareholders elected the nine nominees to the Board of Directors, approved the
appointment of KPMG Peat Marwick as independent auditors, and approved the proposed stock option and incentive plans.
Darden Restaurants, with headquarters in Orlando, Florida is the world's largest publicly traded casual dining company,
with 1,221 restaurants operating under the Red Lobster, The Olive Garden and Bahama Breeze brands, approximately
115,000 employees and annual sales of $3.2 billion.
DARDEN RESTAURANTS, INC.
FIRST QUARTER FY 1997 FINANCIAL HIGHLIGHTS
(In Millions, Except per Share Data)
13 Weeks Ended
Sales $805.6 $836.0
Net Earnings (Loss) $20.5 -$12.1
Earnings (Loss) per Share $0.13 -$0.08
Average Common Shares Outstanding 157.7 158.3
Earnings Before Restructuring Charges
Earnings After Tax before
restructuring charges $20.5 $32.8
EPS After Tax before
restructuring charges $0.13 $0.21
DARDEN RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
(In Thousands, Except per Share Data)
13 Weeks Ended
Sales $805,555 $836,021
Costs and Expenses:
Cost of sales:
Food and beverages 267,692 277,350
Restaurant labor 246,711 245,956
Restaurant expenses 123,217 124,436
Total Cost of Sales 637,620 647,742
Selling, general and administrative(1) 99,076 95,649
Depreciation and amortization 35,033 35,260
Interest, net 4,933 5,366
Restructuring 0 75,000
Total Costs and Expenses 776,662 859,017
Earnings (Loss) before Income Taxes 28,893 -22,996
Income Taxes -8,420 10,933
Net Earnings (Loss) $20,473 -$12,063
Earnings (Loss) per Share $0.13 -$0.08
Average Common Shares Outstanding 157,700 158,300
(1) Includes marketing expense.
(2) Operating results before restructuring charges were as follows:
13 Weeks Ended
Pretax Earnings before Restructuring $28,893 $52,004
Income Taxes -8,420 -19,218
Net Earnings before Restructucturing $20,473 $32,786
Earnings per Share before Restructuring
Charges $0.13 $0.21
(3) The after tax effect of the fiscal year 1996 restructuring charges
was $44,849 ($0.28 per share). The restructuring charges
to the closing of all China Coast Restaurants.
DARDEN RESTAURANTS, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS August 25, 1996 May 26,1996
Cash and cash equivalents $31,602 $30,343
Receivables 29,363 24,772
Inventories 119,525 120,725
Net assets held for disposal 34,762 31,762
Prepaid expenses and other current assets 16,670 17,298
Deferred income taxes 61,656 63,080
Total Current Assets $293,578 $287,980
Land, Buildings and Equipment 1,700,702 1,702,861
Other Assets 96,812 97,663
Total Assets $2,091,092 $2,088,504
LIABILITIES AND STOCKHOLDERS EQUITY
Accounts payable $139,150 $128,196
Short-term debt 33,700 72,600
Current portion of long-term debt 54 54
Accrued payroll 50,763 53,677
Accrued income taxes 10,020 12,522
Other accrued taxes 22,373 18,921
Other current liabilities 154,021 159,336
Total Current Liabilities $410,081 $445,306
Long-term Debt 318,078 301,151
Deferred Income Taxes 102,032 101,109
Other Liabilities 18,666 18,301
Total Liabilities $848,857 $865,867
Common stock and surplus $1,267,704 $1,266,212
Retained Earnings 82,181 61,708
Treasury Stock -27,943 -25,037
Cumulative foreign currency adjustment -10,118 -10,351
Unearned compensation -69,589 -69,895
Total Stockholders Equity $1,242,235 $1,222,637
Total Liabilities and Stockholders $2,091,092 $2,088,504
DARDEN RESTAURANTS, INC.
NUMBER OF RESTAURANTS
5/26/96 8/27/95 8/25/96
677 Red Lobster USA 659 678
52 Red Lobster Canada 54 52
729 Total Red Lobster 713 730
471 Olive Garden USA 458 474
16 Olive Garden Canada 17 16
487 Total Olive Garden 475 490
1 Bahama Breeze 0 1
1,217 Total Restaurants 1,188 1,221
SOURCE Darden Restaurants, Inc./CONTACT: Analysts, Ted Blood, 407-245-5212, or Media, Rick Walsh,407-245-5366,
both of Darden Restaurants/
Business as Usual from Pudgie's Chicken
UNIONDALE, N.Y., Sept. 19, 1996 - In response to shareholder inquiries, Steve Wasserman, President and Chief
Executive Officer of Pudgie's Chicken, Inc. (Nasdaq: PUDG) stated, "Our Company's restaurants are open today, providing
our customers with the same value and quality service they have come to expect. Our food service distributors and suppliers
have assured us there will be no interruption of deliveries. In short, its business as usual. The Company is not insolvent or
going out of business.
"The Company's announcement on September 18, 1996 to file a Chapter 11 Petition for Reorganization is a proactive and
defensive measure to protect our assets and interests in view of the unanticipated size of an award rendered against the
Company by the American Arbitration Association," Mr. Wasserman added.
"Pudgie's will continue its strategic business focus to expand its national presence by entering new markets," Mr.
Wasserman continued. "Our multi-unit franchise developer in Los Angeles will open their first Pudgie's Chicken restaurant
next month. In addition, Pudgie's franchise developer in Nevada will open its first restaurant this Fall."
Pudgie's Chicken operates and franchises quick service Pudgie's Famous Chicken restaurants.
SOURCE Pudgie's Chicken, Inc./CONTACT: Robert Rattet of Pudgie's Chicken, 914-381-7400; or Joe Calabrese or Kerry
Thalheim of the Financial Relations Board, 212-661-8030/
Tundra Environmental - Company Update
MARKHAM, Ontario--Sept. 19, 1996--Tundra Environmental Corporation Limited (TUNDRA) (ASE:TUN) announces the
1. The Corporation's subsidiary, Massachusetts - based Tundra Corporation, has filed for protection under Chapter 11 of the
United States Bankruptcy Code. The filing was precipitated by Tundra's secured lender making demand for immediate
repayment of all obligations and "setting-off" approximately $98,000 (U.S.$) of the company's fund's on deposit with the
2. A Federal Court hearing has been set for October 3rd in Boston.
3. Tundra Environmental Corp. Ltd. has scheduled a special shareholder meeting for October 31st in Toronto to discuss the
status of its subsidiary as well as to elect a Board of Directors. Place and time will be advised in the notice of the meeting.
THE CONTENTS OF THIS PRESS RELEASE HAVE NEITHER BEEN APPROVED NOR DISAPPROVED OF BY THE
ALBERTA STOCK EXCHANGE.
CONTACT: Tundra Environmental Corporation Limited Gary Glaser, 617/871-6040
Leominster Man Sentenced for Bankruptcy Fraud, U.S. Attorney Reports
BOSTON, MA - Sept. 19, 1996 - United States Attorney Donald K. Stern announced that DAVID M. FLANAGAN, 41, of
640 Central Street, Leominster, Massachusetts, was sentenced yesterday by United States District Judge Nathaniel M.
Gorton to one year in prison for concealing assets and making false statements in his bankruptcy.
FLANAGAN pled guilty in June to concealing from his bankruptcy creditors and the bankruptcy trustee his ownership in the
property he lived in. In addition, FLANAGAN pled guilty to making a false statement by claiming to pay rent for living at
that same address, and also for making a false statement denying that he was an officer and director of a company called
Corporate Realty, Inc., which owned an apartment building with commercial space located at 100-104 Daniels Street,
As restitution, Judge Gorton ordered that FLANAGAN transfer title to the 640 Central Street property to the bankruptcy
trustee in his bankruptcy case. Judge Gorton also imposed a $3,000 fine and ordered FLANAGAN to serve three years of
supervised release upon completion of his prison sentence.
The case was investigated by the Federal Bureau of Investigation, and was referred by the U.S. Trustee's Office in Boston
and Worcester. The case was prosecuted by Assistant U.S. Attorney Mark J. Balthazard of Stern's Economic Crimes Unit.
SOURCE U.S. Attorney's Office/CONTACT: Joy Fallon or Amy Rindskopf of U.S. Attorney's Office, 617-223-9445/
CliniCorp signs MOU to formulate plan of reorganization with Trident Medical Concepts
WEST PALM BEACH, Fla.--Sept. 19, 1996--href="chap11.clinicorp.html">CliniCorp Inc. (OTC:CLNI) announced
Thursday that it has signed a Letter of
Intent ("LOI") with Trident Medical Concepts Inc.
("Trident"), a newly formed Florida based healthcare corporation that specializes in physician group management and the
integration of physician specialty and other related services, to work cooperatively with Trident in seeking to formulate a
Plan of Reorganization (the "Plan") that will cause Trident and CliniCorp to jointly establish an integrated healthcare
service delivery system. Subject to the approval of the United States Bankruptcy Court For The Southern District of Florida,
the execution of definitive agreements, and other factors, Trident, as a result of the Plan, will likely become the controlling
shareholder of the company.
In addition, the company announced the resignation of Lawrence T. Markson, D.C., as its chairman and chief executive
officer. Dr. Markson left the company to devote his full time and attention to Markson Management Services Inc.
The company also announced that it entered into an Employment Agreement with Haim Zitman to become the President and
Chief Operating Officer of CliniCorp in order to oversee the day-to-day operations of the company. Zitman will have
primary responsibility for the formulation of the Plan of Reorganization with Trident.
Finally, the company announced that it has signed a Tri-Party Stipulation with 1325 Associates, L.L.C. ("1325"), a New
York limited liability corporation, and Capital Healthcare Financing, a division of Capital Factors Inc. ("Capital"), pursuant
to which 1325 agreed to provide up to $300,000 to the company on an interim secured lending basis to cover shortfalls in
the company's operating expenditures that are not covered by the company's accounts receivable lending line with Capital.
The Tri-Party Stipulation has been approved by the Court. CliniCorp is a chiropractic and integrated healthcare center
owner listed on the OTC Bulletin Board (symbol:CLNI) with corporate headquarters located at 1601 Belvedere Road,
Suite 500 East, West Palm Beach, Fla. 33406. Telephone 561/684-2225.
CONTACT: CliniCorp Inc., West Palm Beach, Craig T. Cuden, 561/684-2225.