• | The Sale of Red Lobster; |
• | The anticipated redemption of $1.0 billion of long-term debt funded from the proceeds of the Sale; and |
• | The anticipated repurchase of $500.0 million of outstanding Darden common stock funded from the proceeds of the Sale. |
May 25, 2014 | |||||||||||||||
Historical (1) | Red Lobster Disposition (2) | Debt Retirement (3)/ Share Repurchase (4) | Pro Forma | ||||||||||||
ASSETS | |||||||||||||||
Current assets: | |||||||||||||||
Cash and cash equivalents | $ | 98.3 | $ | 2,106.3 | $ | (1,542.6 | ) | $ | 662.0 | ||||||
Receivables, net | 83.8 | 83.8 | |||||||||||||
Inventories | 196.8 | 196.8 | |||||||||||||
Prepaid income taxes | 10.9 | (10.9 | ) | — | |||||||||||
Prepaid expenses and other current assets | 72.3 | 72.3 | |||||||||||||
Deferred income taxes | 124.0 | 26.3 | 150.3 | ||||||||||||
Assets held for sale | 1,390.3 | (1,390.3 | ) | — | |||||||||||
Total current assets | $ | 1,976.4 | $ | 731.4 | $ | (1,542.6 | ) | $ | 1,165.2 | ||||||
Land, buildings and equipment, net | 3,381.0 | 3,381.0 | |||||||||||||
Goodwill | 872.5 | 872.5 | |||||||||||||
Trademarks | 574.6 | 574.6 | |||||||||||||
Other assets | 296.2 | (8.1 | ) | 288.1 | |||||||||||
Total assets | $ | 7,100.7 | $ | 731.4 | $ | (1,550.7 | ) | $ | 6,281.4 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||||
Current liabilities: | |||||||||||||||
Accounts payable | $ | 233.1 | $ | 233.1 | |||||||||||
Short-term debt | 207.6 | 207.6 | |||||||||||||
Accrued payroll | 125.7 | 125.7 | |||||||||||||
Accrued income taxes | — | 371.7 | (35.1 | ) | 336.6 | ||||||||||
Other accrued taxes | 64.5 | 64.5 | |||||||||||||
Unearned revenues | 299.7 | 299.7 | |||||||||||||
Current portion of long-term debt | 15.0 | 15.0 | |||||||||||||
Other current liabilities | 457.4 | 457.4 | |||||||||||||
Liabilities associated with assets held for sale | 215.5 | (215.5 | ) | — | |||||||||||
Total current liabilities | $ | 1,618.5 | $ | 156.2 | $ | (35.1 | ) | $ | 1,739.6 | ||||||
Long-term debt, less current portion | 2,481.4 | (1,000.0 | ) | 1,481.4 | |||||||||||
Deferred income taxes | 286.1 | 15.8 | 301.9 | ||||||||||||
Deferred rent | 206.2 | 206.2 | |||||||||||||
Obligations under capital leases, net of current installments | 52.0 | 52.0 | |||||||||||||
Other liabilities | 299.6 | 299.6 | |||||||||||||
Total liabilities | $ | 4,943.8 | $ | 156.2 | $ | (1,019.3 | ) | $ | 4,080.7 | ||||||
Stockholders’ equity: | — | ||||||||||||||
Common stock and surplus | 1,302.2 | (500.0 | ) | 802.2 | |||||||||||
Retained earnings | 995.8 | 575.2 | (56.6 | ) | 1,514.4 | ||||||||||
Treasury stock | (7.8 | ) | (7.8 | ) | |||||||||||
Accumulated other comprehensive income (loss) | (128.1 | ) | 25.2 | (102.9 | ) | ||||||||||
Unearned compensation | (5.2 | ) | (5.2 | ) | |||||||||||
Total stockholders’ equity | $ | 2,156.9 | $ | 575.2 | $ | (531.4 | ) | $ | 2,200.7 | ||||||
Total liabilities and stockholders’ equity | $ | 7,100.7 | $ | 731.4 | $ | (1,550.7 | ) | $ | 6,281.4 |
Fiscal Year Ended May 25, 2014 | |||||||||||
Historical (1) | Pro Forma Adjustments | Pro Forma | |||||||||
Sales | $ | 6,285.6 | $ | 6,285.6 | |||||||
Costs and expenses: | |||||||||||
Cost of sales: | |||||||||||
Food and beverage | 1,892.2 | 1,892.2 | |||||||||
Restaurant labor | 2,017.6 | 2,017.6 | |||||||||
Restaurant expenses | 1,080.7 | 1,080.7 | |||||||||
Total cost of sales, excluding restaurant depreciation and amortization | $ | 4,990.5 | $ | — | $ | 4,990.5 | |||||
Selling, general and administrative (5) | 663.5 | 663.5 | |||||||||
Depreciation and amortization | 304.4 | 304.4 | |||||||||
Interest, net (6) | 134.3 | (49.5 | ) | 84.8 | |||||||
Asset impairment, net | 18.3 | 18.3 | |||||||||
Total costs and expenses | $ | 6,111.0 | $ | (49.5 | ) | $ | 6,061.5 | ||||
Earnings before income taxes | 174.6 | 224.1 | |||||||||
Income taxes | (8.6 | ) | 18.9 | 10.3 | |||||||
Earnings from continuing operations | $ | 183.2 | $ | (18.9 | ) | $ | 213.8 | ||||
Net earnings per share from continuing operations (7): | |||||||||||
Basic | $ | 1.40 | $ | 1.77 | |||||||
Diluted | $ | 1.38 | $ | 1.74 | |||||||
Average number of common shares outstanding (7): | |||||||||||
Basic | 131.0 | 120.9 | |||||||||
Diluted | 133.2 | 123.1 | |||||||||
(1) | Reflects the historical balance sheet and statement of earnings of Darden as reported in our fiscal 2014 Annual Report on Form 10-K. As of and for the year ended May 25, 2014, Red Lobster was classified as a discontinued operation. |
(2) | Reflects the sale of Red Lobster and certain related assets and associated liabilities for $2.1 billion in cash, which were included in Darden’s fiscal 2014 consolidated financial statements as Held for Sale. Also includes impact of the estimated gain on Sale, net of estimated disposal costs and related tax effects. |
a. | Gain on Sale estimated to be approximately $930.0 million based on assets and liabilities classified as held for sale as of May 25, 2014. As the Sale did not close until July 28, 2014, assets and liabilities ultimately disposed of and the resulting gain recognized on the Sale could change. |
b. | Tax effects of gain, net of disposal costs based on Darden’s blended statutory rate of 38.25%. |
(3) | Reflects the retirement of $610.0 million aggregate principal amount of publicly issued notes via a tender offer process anticipated to close on August 8, 2014, the redemption of $100 million aggregate principal amount of publicly issued debentures anticipated to close on August 27, 2014 and the repurchase of $290.0 million aggregate principal amount of senior notes issued in a private placement transaction, which closed on July 31, 2014. Also includes the impact of breakage and other costs associated with the retirement of the debt, including the accelerated amortization of deferred losses on derivative contracts associated with the retired debt and related tax effects. |
a. | Early tender and other premiums associated with retiring the $1.0 billion in principal estimated to be approximately $42.6 million. |
b. | Deferred losses currently in accumulated other comprehensive income (loss) of approximately $41.0 million anticipated to be reclassified to earnings as losses are associated with future interest payments that are deemed probable not to occur. |
c. | Original issuance discounts and deferred issuance costs of $8.1 million associated with debt expected to be retired. |
d. | Tax effects of breakage and other costs based on Darden’s blended statutory rate of 38.25%. |
(4) | Reflects the repurchase of $500.0 million of outstanding common stock, which is anticipated to be acquired via an accelerated stock repurchase agreement projected to be completed in or prior to December 2014. |
(5) | For the fiscal year ended May 25, 2014, Selling General and Administrative expenses include certain costs and expenses which are not expected to be incurred on an ongoing basis. As disclosed in our 2014 Annual Report on Form 10-K, we incurred costs related to Darden’s strategic action plan and workforce reductions included in fiscal 2014 earnings from continuing operations of $20.3 million and $9.8 million, respectively. These costs were not included in the pro forma adjustments as they are not directly related to the Sale. |
(6) | Reflects a reduction in interest expense based on the anticipated retirement of approximately $1.0 billion of long-term debt. The impact is inclusive of an approximately $4.8 million reduction of amortization of deferred losses on derivatives settled at the inception of certain of the retired debt tranches. These impacts will vary based the specific notes retired, however, is not expected to vary materially from this amount. |
(7) | Reflects a reduction in outstanding shares and a corresponding increase in net earnings per share due to the anticipated repurchase of $500.0 million of Darden’s outstanding common stock. Assuming the repurchase is completed as of the beginning of fiscal 2014 and based on our fiscal 2014 year-end stock price of $49.55 per share, the pro formas reflect a reduction of 10.1 million outstanding shares. The amount of shares repurchased will vary based on the amount of cash available and average price of Darden stock as the shares are repurchased. The impact on net earnings per share will vary based on the timing of the repurchases. |