Darden Restaurants, Inc. (DRI)

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Darden Restaurants (DRI)

Q2 2013 Earnings Call

December 20, 2012 8:30 am ET


Matthew Stroud - Vice President of Investor Relations

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

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

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

Eugene I. Lee - President of Specialty Restaurant Group


John S. Glass - Morgan Stanley, Research Division

Joseph T. Buckley - BofA Merrill Lynch, Research Division

Michael Tamas - Oppenheimer & Co. Inc., Research Division

Jason West - Deutsche Bank AG, Research Division

David Palmer - UBS Investment Bank, Research Division

Nicole Miller Regan - Piper Jaffray Companies, Research Division

Will Slabaugh - Stephens Inc., Research Division

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

Jeffrey D. Farmer - Wells Fargo Securities, LLC, Research Division



Welcome, and thank you for standing by. [Operator Instructions] The call is being recorded. If you have any objections, you may disconnect at this time. Now I'll turn the call over to your host, Mr. Matthew Stroud. Mr. Stroud, you may begin.

Matthew Stroud

Thank you. 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; risks relating to public policy changes; and federal, state and local regulation of our business, including healthcare reform, labor and insurance cost; technology failures; failure to execute a business continuity plan following a disaster; health concerns, including virus outbreaks; intense competition; failure to drive sales growth; failure to successfully integrate the Yard House business and the additional indebtedness incurred to finance the Yard House acquisition; our plans to expand our newer brands, like Bahama Breeze and Seasons 52 and Eddie V's; a lack of suitable new restaurant locations; higher-than-anticipated cost to open, close or remodel restaurants; a failure to execute innovative marketing tactics and increased advertising and marketing costs; a failure to develop and recruit effective leaders; a failure to address cost pressures; shortages or interruptions in the delivery of the food and other products; 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 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 2013 third quarter earnings and same-restaurant sales for fiscal December, January and February 2013 on Friday, March 22, 2013 before the market opens with a conference call shortly after. Also, we are planning to host our annual analyst and institutional investor meeting here in Orlando on February 25 and 26, 2013, and this meeting will also be webcast for those unable to attend.

We released second quarter earnings results this morning. These results were available in PR Newswire and other wire services. And we recognize that most of you have reviewed our second quarter earnings results. So we won't take the time to go through them in detail in an effort to provide more time for your questions. We will offer a quick line-item summary of the P&L and discuss our financial outlook for fiscal 2013 and discuss our brand-by-brand operating performance summary.

To begin, Clarence will offer some opening remarks. Brad will provide detail about our financial results for the second quarter, and Drew will review the operating performance of our brands. And we'll then response your questions.

With that, let me turn it over to Clarence.

Clarence Otis

Thank you, Matthew, and good morning, everyone. I'll make a few comments up front just to provide some context for our results for the quarter. And then, as Matthew said, I'll turn it over to Brad and Drew, and they'll get into more detail.

From a big-picture perspective, the results this quarter really reflect 2 things. First, we need increased promotional innovation and increased promotional intensity around affordability at our 3 big brands, and this was made particularly clear this quarter, which has long been the most value-sensitive time of the year. Second, our results this quarter reinforce to us what we need to do beyond promotions to regain momentum at our largest brand, Olive Garden, and ensure we build on rather than lose the underlying momentum we've established over the last 2 years at Red Lobster and LongHorn.

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