On March 20, Darden Restaurants (NYSE:DRI) released third-quarter earnings for the period ended Feb. 25.

  • Sales for the quarter increased 4.7%. Same-stores sales rose at its Red Lobster and Olive Garden segments, but were partially offset by falling same-restaurant sales at its Smokey Bones unit.
  • The company expects same-restaurant sales at Red Lobster and Olive Garden to rise between 2% and 3% in fiscal 2007.
  • The company plans to open 35 to 40 net new restaurants; as a result, sales growth is expected to rise 5% with EPS growth of 10% to 12% in fiscal 2007.

(Figures in millions, except per-share data)

Income Statement Highlights

Q3 2007

Q3 2006

Change

Sales

$1,542.9

$1,474.2

4.7%

Net Profit

$106.4

$105.3

1%

EPS

$0.72

$0.67

7.5%

Diluted Shares

148.3

156.9

(5.5%)

Get back to basics with the income statement.

Margin Checkup

Q3 2007

Q3 2006

Change*

Gross Margin

23.4%

23.4%

0.1

Operating Margin

9.6%

10.1%

(0.5)

Net Margin

6.9%

7.1%

(0.2)

*Expressed in percentage points

Margins are the earnings engine.

Balance Sheet Highlights

Assets

Q3 2007

Q3 2006

Change

Cash + ST Invest.

$53.8

$53.1

1.3%

Accounts Rec.

$43.7

$39.2

11.4%

Inventory

$282.4

$245.3

15.1%

Liabilities

Q3 2007

Q3 2006

Change

Accounts Payable

$220.9

$222.5

(0.7%)

Long-Term Debt

$492.3

$645.1

(23.7%)

The balance sheet reflects the company's health.

Cash Flow Highlights

The company did not include a cash flow statement in its press release.

Free cash flow is a Fool's best friend.

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