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Selling, general, and administrative expenses
decreased in fiscal 2002 primarily as a result of decreased
national television marketing expenses and the favorable impact
of higher sales volumes in fiscal 2002, which were partially
offset by the Company’s fiscal 2002 donation made as
a result of the industry’s Dine Out for America benefit
and other incremental fiscal 2002 donations to the Darden
Restaurants, Inc. Foundation. Selling, general, and administrative
expenses in fiscal 2001 were less than fiscal 2000 expenses
primarily as a result of reduced marketing expenses and the
favorable impact of higher sales volumes in fiscal 2001, which
were partially offset by additional labor costs associated
with new concept expansion and development.
Depreciation and amortization expense increased
in fiscal 2002 and 2001 primarily as a result of new restaurant
and remodel activity, partially offset by the favorable impact
of higher sales volumes.
Net interest expense in fiscal 2002 was comparable
to fiscal 2001 primarily because increased interest expense
associated with higher debt levels was offset by the impact
of higher fiscal 2002 sales volumes. Net interest expense
in fiscal 2001 increased over fiscal 2000 primarily due to
increased interest expense associated with higher debt levels
in fiscal 2001, which was only partially offset by the impact
of higher fiscal 2001 sales volumes.
Pre-tax restructuring credits of $2.6 million
and $8.6 million were recorded in fiscal 2002 and 2000, respectively.
The reversals resulted primarily because lease terminations
in connection with the Company’s fiscal 1997 restructuring
were more favorable than projected. During fiscal 2000, an
asset impairment charge of $2.6 million was recognized related
to write-downs of the value of certain properties held for
disposition. These amounts had no effect on the Company’s
cash flow. No restructuring credit or asset impairment expense
was recognized in earnings during fiscal 2001. As of May 26,
2002, there was a remaining restructuring liability balance
of $1.9 million, which relates primarily to lease buy-out
costs associated with one closed leased property in which
the lease term does not expire until March 2011.
The effective income tax rate for fiscal 2002, 2001,
and 2000 was 34.6 percent, 34.6 percent, and 35.5 percent,
respectively. The comparability of fiscal 2002 and 2001 effective
rates was primarily a result of increased tax expense associated
with higher fiscal 2002 pre-tax earnings, which was offset
by fiscal 2002 deductions that were not available in fiscal
2001. The decrease from fiscal 2000 to 2001 resulted primarily
from increases in income tax credits and deductions that were
not available in fiscal 2000, which was only partially offset
by increased tax expense associated with higher fiscal 2001
pre-tax earnings.
Net earnings for fiscal 2002 were $237.8 million ($1.30
per diluted share) compared with net earnings for fiscal 2001
of $197.0 million ($1.06 per diluted share) and net earnings
for fiscal 2000 of $176.7 million ($.89 per diluted share).
Net earnings and diluted net earnings per
share for fiscal 2002 increased 20.7 percent and 22.6 percent,
respectively, compared to fiscal 2001. Excluding the after-tax
restructuring credit of $1.6 million taken in fiscal 2002,
net earnings and diluted net earnings per share for fiscal
2002 increased 19.9 percent and 21.7 percent, respectively,
compared to fiscal 2001. The increase in both net earnings
and diluted net earnings per share was primarily due to increases
in sales at both Red Lobster and Olive Garden and decreases
in food and beverage costs and restaurant labor as a percent
of sales. Diluted net earnings per share also reflected a
reduction in the average diluted shares outstanding from fiscal
2001 to fiscal 2002 because of the Company’s continuing
repurchase of its outstanding common stock.
Net earnings and diluted net earnings per
share for fiscal 2001 increased 11.5 percent and 19.1 percent,
respectively, compared to fiscal 2000. Excluding the after-tax
restructuring and asset impairment net credit of $3.6 million
taken in fiscal 2000, net earnings and diluted net earnings
per share for fiscal 2001 increased 13.8 percent and 20.5
percent, respectively, compared to fiscal 2000. The increase
in both net earnings and diluted net earnings per share was
primarily due to increases in sales at both Red Lobster and
Olive Garden and decreases in restaurant labor as a percent
of sales. Diluted net earnings per share also reflected a
reduction in average diluted shares outstanding due to the
Company’s share repurchase activities.
The Company’s sales volumes fluctuate seasonally. In
fiscal 2002, 2001, and 2000, the Company’s sales were
highest in the spring, lowest in the fall, and comparable
during winter and summer. Holidays, severe weather, storms,
and similar conditions may impact sales volumes seasonally
in some operating regions. Because of the seasonality of the
Company’s business, results for any quarter are not necessarily
indicative of the results that may be achieved for the full
fiscal year.
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