Darden Restaurants Almost Completes Debt Retirement, Affirms 2015 Outlook

(RTTNews) - Darden Restaurants Inc. (DRI) said it has completed the repurchase of about $900 million of its previously-announced debt retirement of $1 billion and also affirmed its earnings outlook for fiscal 2015. However, the company forecast earnings for the first quarter below analysts' expectations.

The company's debt repurchase now leaves about $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.

Chuck Ledsinger, non-executive chairman of the board of directors of Darden said, "The completion of this tender offer further reinforces Darden's strong financial foundation. In addition to the debt reduction, the Red Lobster sale proceeds also enable us to increase our capital return to shareholders and support the Company's current dividend despite the change in our operating structure following the sale."

The Orlando, Florida-based full-service restaurants operator affirmed its fiscal 2015 outlook for earnings per share from continuing operations of $1.81 to $1.90 and adjusted earnings per share from continuing operations of $2.22 to $2.30. Analysts expect the company to earn $2.25 per share for the year.

The company's full-year outlook reflects its projection that fiscal 2015 U.S. same-restaurant sales growth for Olive Garden, LongHorn Steakhouse and the Specialty Restaurants will be flat to +1 percent, +1 percent to +2 percent, and about +2 percent, respectively.

The company said it now expects more tempered seasonal and quarterly fluctuations in sales and earnings than it experienced prior to the sale of Red Lobster.

Darden has 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 will reduce its interest expense by about $49 million on an annualized basis. The company noted that the interest expense reduction in fiscal 2015 will be about $38 million, which will affect the second, third and fourth quarters of the fiscal year.

The company has previously said that it entered into agreements with dealers 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.

Under the ASB agreements, the company paid an aggregate of $500 million to the dealers in August 2014 and will receive an initial delivery of about 8.5 million shares in October 2014. This represents about 80 percent of the total shares that will be repurchased under the ASB transactions based on current share prices.

In fiscal 2015, the company expects the ASB program to benefit its net earnings per share by about one cent in the second quarter, about seven cents in the third quarter and about eight cents in the fourth quarter. The company anticipates annualized benefit to net earnings per share in fiscal 2015 to be about 12 cents.

Looking ahead to the first quarter of fiscal 2015, the company expects loss per share from continuing operations in a range of $0.16 to $0.18 per share and adjusted earnings per share from continuing operations of $0.28 to $0.30 per share.

On average, 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 reported and adjusted earnings per share from continuing operations of $0.24 to $0.28. Analysts project second-quarter earnings of $0.22 per share.

The company forecasts reported and adjusted earnings per share from continuing operations of $0.80 to $0.84 for the third quarter, and $0.87 to $0.91 for the fourth quarter.

DRI is trading at $47.03, down $0.18 or 0.38 percent on a volume of 418,457 shares.