Darden Restaurants, Inc. (DRI)

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Darden Restaurants (DRI)

Q2 2012 Earnings Call

December 16, 2011 8:30 am ET


Clarence Otis - Executive Chairman, Chief Executive Officer and Chairman of Executive Committee

Eugene I. Lee - President of Specialty Restaurant Group

Andrew H. Madsen - President, Chief Operating Officer and Director

Matthew Stroud - Former Vice President of Investor Relations

C. Bradford Richmond - Chief Financial Officer, Principal Accounting Officer and Senior Vice President


David Palmer - UBS Investment Bank, Research Division

John S. Glass - Morgan Stanley, Research Division

Jeffrey F. Omohundro - Wells Fargo Securities, LLC, Research Division

Matthew J. DiFrisco - Lazard Capital Markets LLC, Research Division

Brad Ludington - KeyBanc Capital Markets Inc., Research Division

John W. Ivankoe - JP Morgan Chase & Co, Research Division

Michael Kelter - Goldman Sachs Group Inc., Research Division

Joseph T. Buckley - BofA Merrill Lynch, Research Division

Todd Duvick - BofA Merrill Lynch, Research Division

David E. Tarantino - Robert W. Baird & Co. Incorporated, Research Division



Ladies and gentlemen, thank you for standing by. Welcome to the second quarter earnings release conference call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Mr. Matthew Stroud. Please go ahead.

Matthew Stroud

Thank you, Ernie. Good morning, everyone. With me today are Clarence Otis, Darden's Chairman and CEO; Drew Madsen, Darden's President and COO; Brad Richmond, Darden's CFO; and Gene Lee, President of Darden's Specialty Restaurant Group. We welcome those of you joining us by telephone or the Internet.

During the course of this conference call, Darden Restaurants' officers and employees may make forward-looking statements concerning the company's expectations, goals or objectives. Forward-looking statements 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 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, including all amendments to those reports.

These risks and uncertainties include food safety and food-borne illness concerns; litigation; unfavorable publicity; federal, state and local regulation of our business, including healthcare reform; labor and insurance costs; technology failures; failure to execute our business continuity plan following a disaster; health concerns, including virus outbreaks; the intensely competitive nature of the restaurant industry; factors impacting our ability to drive sales growth; the impact of the indebtedness we incurred in the RARE acquisition; our plans to expand our newer brands like Bahama Breeze and Seasons 52; our ability to successfully integrate Eddie V's restaurant operations; a lack of suitable new restaurant locations; higher-than-anticipated costs to open, close or remodel restaurants; increased advertising and marketing costs; a failure to develop and recruit effective leaders; the price and availability of key food products and utilities; shortages or interruptions in the delivery of food or other products; volatility in the market value of derivatives; general macroeconomic factors, including unemployment and interest rates; disruptions in the financial markets; risks of doing business with franchisees and vendors in foreign markets; failure to protect our service marks or other intellectual property; a possible impairment in the carrying value of our goodwill or other intangible assets; a failure of our internal controls over financial reporting or changes in accounting standards; and other factors and uncertainties discussed from time to time in reports filed by Darden with the Securities and Exchange Commission.

A copy of our press release announcing our earnings, the Form 8-K used to furnish the release to the Securities and Exchange Commission, and any other financial and statistical information about the period covered in the conference call, including any information required by Regulation G, is available under the heading Investor Relations on our website at darden.com.

We plan to release fiscal 2012 third quarter earnings and same restaurant sales for fiscal December, January and February 2012 on Friday, March 23, 2012, before the market opens with a conference call shortly after. Also, we plan to hold our fiscal 2012 Analyst and Institutional Investor Meeting on Friday, February 24, 2012, in New York City. This meeting will also be webcast for those unable to attend in person.

We released second quarter earnings results this morning. These results are available on PR Newswire and other wire services. We recognize that most of you reviewed our second quarter earnings results, so we won't take the time to go through them in detail once again in an effort to provide more time for your questions. We will offer a line item summary of the P&L and discuss our financial outlook for fiscal 2012, as well as briefly discuss our brand-by-brand operating performance summary.

To begin, Clarence will provide an overview of the quarter and fiscal year. Brad will provide detail about our financial results for the second quarter. Drew will review our operating performance of the larger brands, and Gene will discuss Specialty Restaurant Group. We will then respond to your questions. Clarence?

Clarence Otis

Thank you, Matthew, and good morning, everyone. I'm going to dig [ph] just a couple of comments upfront to put our results for the quarter into context, then I'll hand it over to Brad, Drew and Gene. And let me start with Olive Garden's performance, which is something that Drew is going to discuss in further detail in a moment. Now many of you followed us for some time, and I think one of the things you observed over time is that we are not afraid to make changes. In fact, in an industry as dynamic as ours, we think that our willingness to change is one of the biggest reasons why we've enjoyed success over time. And we’ve certainly demonstrated that we are prepared to change when things are not working well. And I think you see that in our multiyear effort, for example, to refresh the Red Lobster brand, to address an extended period of inconsistent results.

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