Darden Closes Repurchase Of $900 Mln Debt Retirement; Backs FY EPS View

(RTTNews) - Darden Restaurants Inc. (DRI) said it has completed the repurchase of approximately $900 million of the previously announced $1 billion debt retirement leaving approximately $1.6 billion of debt on its balance sheet. The remaining $100 million of debt has been called for redemption and is expected to be retired later in August 2014.

As previously indicated, the company used after-tax proceeds from its sale of Red Lobster to consummate the debt retirement and to initiate a $500 million accelerated stock buyback or ASB program.

As a result of the debt retirements, Darden said it will reduce its interest expense by approximately $49 million on an annualized basis. The interest expense reduction in fiscal 2015 will be approximately $38 million, which will affect the second, third and fourth quarters of the fiscal year.

As noted, the Company has initiated an ASB program. Previously, the company announced that it entered into agreements with Goldman, Sachs & Co. and Wells Fargo Bank, National Association to repurchase an aggregate of $500 million of the Company's common stock under the ASB program.

As per the ASB agreements, the Company paid an aggregate of $500 million to the Dealers in August 2014 and will receive an initial delivery of approximately 8.5 million shares in October 2014, which represents approximately 80% of the total shares that will be repurchased under the ASB transactions based on current share prices.

In fiscal 2015, the company anticipates that the ASB program will benefit diluted net earnings per share by approximately one cent in the second quarter, approximately seven cents in the third quarter and approximately eight cents in the fourth quarter. The annualized benefit to net earnings per share in fiscal 2015 is expected to be approximately 12 cents.

Looking ahead for the first-quarter, the company expects loss per share from continuing operations to be in the range of $0.16 - $0.18 and adjusted earnings per share from continuing operations of $0.28 - $0.30. Analysts polled by Thomson Reuters expected the company to report earnings of $0.47 per share for the first-quarter. Analysts' estimates typically exclude special items.

For the second-quarter, the company anticipates earnings per share from continuing operations to be between $0.24 and $0.28. Analysts project second-quarter earnings of $0.22 per share.

Earnings per share from continuing operations are expected to be in the range of $0.80 - $0.84 for the third-quarter.

Earnings per share from continuing operations are expected to be in the range of $0.87 - $0.91 for the fourth-quarter.

Darden affirmed its annual earnings per share outlook for fiscal 2015, which is $1.81 to $1.90 for earnings from continuing operations. On an adjusted basis, the Company continues to anticipate net earnings per share from continuing operations of $2.22 to $2.30 for the year. Analysts project annual earnings per share of $2.25. These expectations reflect the Company's projection that fiscal 2015 U.S. same-restaurant sales growth for Olive Garden, LongHorn Steakhouse and the Specialty Restaurants will be flat to +1%, +1% to +2% and approximately +2%, respectively.