This summary is based on the third quarter fiscal 2008 earnings call conducted by Darden Restaurants Inc. (DRI: chart) on March 19, 2008.

Management:

CEO and Chairman: Clarence Otis
President COO and Director: Andrew H. Madsen
CFO: Brad Richmond
President, Specialty Restaurant Group: Gene Lee
IR: Matthew Stroud

Key Investor Issues:

- Diluted net EPS from continuing operations were 80 cents versus 79 cents last year.
- Total restaurants increased from 1,325 last year quarter to 1,683.
- Total sales growth for fiscal 2008 forecast to grow by 19% to 20% from $5.57 billion.

Third-Quarter Financial Highlights:

The net earnings from continuing operations were $115.6 million, or 80 cents per diluted share, on sales of $1.81 billion.

- In the past year quarter, the net earnings from continuing operations were $117.7 million, or 79 cents per diluted share on sales on $1.45 billion.
- Excluding the estimated integration costs and purchase accounting adjustments of about five cents, the net earnings from continuing operations were 85 cents per diluted share.

The quarterly total sales increase includes an incremental $292 million of sales from LongHorn Steakhouse and The Capital Grille.

- The management has made progress in integrating both companies and expects meaningful operational and financial synergies from the acquisition.
- The net earnings for the quarter were $126 million inclusive the results from discontinued operations.
- In the prior year quarter, the net earnings inclusive of the results from discontinued operations were $106.4 million.
- The diluted net EPS from continuing operations were negatively impacted by about four cents due to a significant contribution to the Darden Foundation and other items included in the G&A expenses.

The company’s effective tax rate was lower than the forecasts of about 29%.

This was due to the favorable resolution of tax matters expensed in prior years. The item increased diluted net EPS by about four cents. The resultant effective tax rate for the quarter was 26.3%.

In the third quarter, the various brands recorded mixed sales results.

Olive Garden

- The third quarter total sales were $802.8 million, 11.1% higher than in the past year, aided by U.S. same-restaurant sales increase of 5.7% and revenue from 40 net new restaurants.
- The U.S. same-restaurant sales increase represents the 54th consecutive quarter of same-restaurant sales growth and was helped by a strong broad brand appeal and advertising.
- On a percentage of sales basis, the company’s increased food and beverage expenses, restaurant labor expenses and restaurant expenses were partly offset by lower SG&A expenses.
- Olive Garden has potential to operate 800 to 900 restaurants in North America compared with the current 637.

Red Lobster

- The third quarter sales were $671.7 million, 1.8% lower compared with the past year quarter.
- U.S same-restaurant sales decreased by 2%.
- On a percentage basis, the company’s increased labor expenses and restaurant expenses were partially offset by lower food and beverage expenses and SG&A expenses resulting in a decrease in operating profit.
- During the current fiscal year, the company will focus on refreshing the brand and accelerating guest count growth.

LongHorn Steakhouse’s

- Third quarter sales were $224.3 million, 7.7% higher than the same period last year.
- The sales increase was driven by 28 net new restaurants.
- Same-restaurant sales dipped 3.3% and were below the Knapp-Track industry benchmark.
- The key driver of the unfavorable comparison to the national Knapp-Track benchmark is the company’s geographic concentration in Florida and South Atlantic, being two of the weakest markets in which the company competes.
- On a percentage basis, the company’s increased food and beverage expenses, restaurant expenses and SG&A were partly offset by lower restaurant labor expenses.
- The SG&A expenses and depreciation and amortization expenses were negatively impacted by integration-related costs and purchase accounting adjustments.
- The management targets a potential 600 to 800 restaurants in North America.
- Guest satisfaction improved versus prior year and set a new record.
- Terry Stanley, previously the Senior VP of culinary and beverage at Olive Garden, was promoted to EVP of Marketing at LongHorn.