filings.toolsItem 1. Financial Statements (Unaudited)
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Item 1. Financial Statements (Unaudited)
DARDEN RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(In millions, except per share data)
(Unaudited)
| Three Months Ended | |||||||||||||||||||||||
| August 25, 2024 | August 27, 2023 | ||||||||||||||||||||||
| Sales | $ | 2,757.0 | $ | 2,730.6 | |||||||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||
| Food and beverage | 846.7 | 851.0 | |||||||||||||||||||||
| Restaurant labor | 889.3 | 875.3 | |||||||||||||||||||||
| Restaurant expenses | 458.2 | 446.6 | |||||||||||||||||||||
| Marketing expenses | 44.7 | 38.6 | |||||||||||||||||||||
| General and administrative expenses | 126.4 | 153.3 | |||||||||||||||||||||
| Depreciation and amortization | 121.5 | 109.8 | |||||||||||||||||||||
| Impairments and disposal of assets, net | 1.0 | 3.1 | |||||||||||||||||||||
| Total operating costs and expenses | $ | 2,487.8 | $ | 2,477.7 | |||||||||||||||||||
| Operating income | 269.2 | 252.9 | |||||||||||||||||||||
| Interest, net | 37.1 | 29.7 | |||||||||||||||||||||
| Earnings before income taxes | 232.1 | 223.2 | |||||||||||||||||||||
| Income tax expense | 24.5 | 28.4 | |||||||||||||||||||||
| Earnings from continuing operations | $ | 207.6 | $ | 194.8 | |||||||||||||||||||
| Losses from discontinued operations, net of tax benefit of $0.4 and $0.1, respectively | (0.4) | (0.3) | |||||||||||||||||||||
| Net earnings | $ | 207.2 | $ | 194.5 | |||||||||||||||||||
| Basic net earnings per share: | |||||||||||||||||||||||
| Earnings from continuing operations | $ | 1.75 | $ | 1.61 | |||||||||||||||||||
| Losses from discontinued operations | — | — | |||||||||||||||||||||
| Net earnings | $ | 1.75 | $ | 1.61 | |||||||||||||||||||
| Diluted net earnings per share: | |||||||||||||||||||||||
| Earnings from continuing operations | $ | 1.74 | $ | 1.60 | |||||||||||||||||||
| Losses from discontinued operations | — | (0.01) | |||||||||||||||||||||
| Net earnings | $ | 1.74 | $ | 1.59 | |||||||||||||||||||
| Average number of common shares outstanding: | |||||||||||||||||||||||
| Basic | 118.5 | 120.9 | |||||||||||||||||||||
| Diluted | 119.2 | 122.0 |
See accompanying notes to our unaudited consolidated financial statements.
DARDEN RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
(Unaudited)
| Three Months Ended | |||||||||||||||||||||||
| August 25, 2024 | August 27, 2023 | ||||||||||||||||||||||
| Net earnings | $ | 207.2 | $ | 194.5 | |||||||||||||||||||
| Change in fair value of derivatives and amortization of unrecognized gains and losses on derivatives, net of taxes of $0.5 and $5.4, respectively | 0.2 | 12.6 | |||||||||||||||||||||
| Net unamortized gain (loss) arising during the period, including amortization of unrecognized net actuarial gain (loss), net of taxes of $0.1 and $0.0, respectively, related to pension and other post-employment benefits | 0.1 | 0.2 | |||||||||||||||||||||
| Other comprehensive income | $ | 0.3 | $ | 12.8 | |||||||||||||||||||
| Total comprehensive income | $ | 207.5 | $ | 207.3 |
See accompanying notes to our unaudited consolidated financial statements.
DARDEN RESTAURANTS, INC.
CONSOLIDATED BALANCE SHEETS
(In millions)
| August 25, 2024 | May 26, 2024 | ||||||||||
| (Unaudited) | |||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 192.5 | $ | 194.8 | |||||||
| Receivables, net | 63.8 | 79.1 | |||||||||
| Inventories | 297.7 | 290.5 | |||||||||
| Prepaid income taxes | 103.6 | 121.7 | |||||||||
| Prepaid expenses and other current assets | 162.0 | 136.7 | |||||||||
| Total current assets | $ | 819.6 | $ | 822.8 | |||||||
| Land, buildings and equipment, net of accumulated depreciation and amortization of $3,844.9 and $3,759.9, respectively | 4,272.8 | 4,184.3 | |||||||||
| Operating lease right-of-use assets | 3,365.5 | 3,429.3 | |||||||||
| Goodwill | 1,391.0 | 1,391.0 | |||||||||
| Trademarks | 1,148.0 | 1,148.0 | |||||||||
| Other assets | 358.6 | 347.6 | |||||||||
| Total assets | $ | 11,355.5 | $ | 11,323.0 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 401.0 | $ | 399.5 | |||||||
| Short-term debt | 293.9 | 86.8 | |||||||||
| Accrued payroll | 161.0 | 190.1 | |||||||||
| Accrued income taxes | 1.7 | 6.1 | |||||||||
| Other accrued taxes | 81.6 | 71.0 | |||||||||
| Unearned revenues | 554.7 | 591.8 | |||||||||
| Other current liabilities | 830.8 | 847.2 | |||||||||
| Total current liabilities | $ | 2,324.7 | $ | 2,192.5 | |||||||
| Long-term debt | 1,385.6 | 1,370.4 | |||||||||
| Deferred income taxes | 236.4 | 232.0 | |||||||||
| Operating lease liabilities - non-current | 3,636.8 | 3,704.7 | |||||||||
| Other liabilities | 1,628.3 | 1,580.9 | |||||||||
| Total liabilities | $ | 9,211.8 | $ | 9,080.5 | |||||||
| Stockholders’ equity: | |||||||||||
| Common stock and surplus | $ | 2,262.3 | $ | 2,252.4 | |||||||
| Retained earnings (deficit) | (144.5) | (35.5) | |||||||||
| Accumulated other comprehensive income | 25.9 | 25.6 | |||||||||
| Total stockholders’ equity | $ | 2,143.7 | $ | 2,242.5 | |||||||
| Total liabilities and stockholders’ equity | $ | 11,355.5 | $ | 11,323.0 |
See accompanying notes to our unaudited consolidated financial statements.
DARDEN RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
For the Three Months Ended August 25, 2024 and August 27, 2023
(In millions)
(Unaudited)
| Common Stock And Surplus | |||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Retained Earnings (Deficit) | Accumulated Other Comprehensive Income | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||
| Balance at May 26, 2024 | 118.9 | $ | 2,252.4 | $ | (35.5) | $ | 25.6 | $ | 2,242.5 | ||||||||||||||||||||||||||||||||
| Net earnings | — | — | 207.2 | — | 207.2 | ||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | 0.3 | 0.3 | ||||||||||||||||||||||||||||||||||||
| Dividends declared ($1.40 per share) | — | — | (166.4) | — | (166.4) | ||||||||||||||||||||||||||||||||||||
| Stock option exercises | 0.1 | 6.6 | — | — | 6.6 | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | 24.1 | — | — | 24.1 | ||||||||||||||||||||||||||||||||||||
| Repurchases of common stock | (1.2) | (22.6) | (149.8) | — | (172.4) | ||||||||||||||||||||||||||||||||||||
| Issuance of stock under Employee Stock Purchase Plan and other plans | 0.2 | 3.1 | — | — | 3.1 | ||||||||||||||||||||||||||||||||||||
| Other | — | (1.3) | — | — | (1.3) | ||||||||||||||||||||||||||||||||||||
| Balance at August 25, 2024 | 118.0 | $ | 2,262.3 | $ | (144.5) | $ | 25.9 | $ | 2,143.7 |
| Balance at May 28, 2023 | 121.1 | $ | 2,230.8 | $ | (32.5) | $ | 3.2 | $ | 2,201.5 | ||||||||||||||||||||||||||||||||
| Net earnings | — | — | 194.5 | — | 194.5 | ||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | 12.8 | 12.8 | ||||||||||||||||||||||||||||||||||||
| Dividends declared ($1.31 per share) | — | — | (160.1) | — | (160.1) | ||||||||||||||||||||||||||||||||||||
| Stock option exercises | 0.2 | 19.4 | — | — | 19.4 | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | 20.6 | — | — | 20.6 | ||||||||||||||||||||||||||||||||||||
| Repurchases of common stock | (0.9) | (16.2) | (126.7) | — | (142.9) | ||||||||||||||||||||||||||||||||||||
| Issuance of stock under Employee Stock Purchase Plan and other plans | 0.3 | 2.9 | — | — | 2.9 | ||||||||||||||||||||||||||||||||||||
| Other | — | (0.7) | — | — | (0.7) | ||||||||||||||||||||||||||||||||||||
| Balance at August 27 2023 | 120.7 | $ | 2,256.8 | $ | (124.8) | $ | 16.0 | $ | 2,148.0 |
See accompanying notes to our unaudited consolidated financial statements.
DARDEN RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
| Three Months Ended | |||||||||||
| August 25, 2024 | August 27, 2023 | ||||||||||
| Cash flows—operating activities | |||||||||||
| Net earnings | $ | 207.2 | $ | 194.5 | |||||||
| Losses from discontinued operations, net of tax | 0.4 | 0.3 | |||||||||
| Adjustments to reconcile net earnings from continuing operations to cash flows: | |||||||||||
| Depreciation and amortization | 121.5 | 109.8 | |||||||||
| Impairments and disposal of assets, net | 1.0 | 3.1 | |||||||||
| Stock-based compensation expense | 34.7 | 30.3 | |||||||||
| Change in current assets and liabilities | (77.8) | (59.5) | |||||||||
| Contributions to pension and postretirement plans | (0.4) | (0.4) | |||||||||
| Deferred income taxes | 5.0 | 4.2 | |||||||||
| Change in other assets and liabilities | (11.0) | (10.4) | |||||||||
| Other, net | (7.4) | (2.8) | |||||||||
| Net cash provided by operating activities of continuing operations | $ | 273.2 | $ | 269.1 | |||||||
| Cash flows—investing activities | |||||||||||
| Purchases of land, buildings and equipment | (145.2) | (150.9) | |||||||||
| Proceeds from disposal of land, buildings and equipment | — | 1.6 | |||||||||
| Cash used in business acquisitions, net of cash acquired | — | (699.9) | |||||||||
| Purchases of capitalized software and other assets | (6.3) | (5.2) | |||||||||
| Other, net | 1.8 | 0.2 | |||||||||
| Net cash used in investing activities of continuing operations | $ | (149.7) | $ | (854.2) | |||||||
| Cash flows—financing activities | |||||||||||
| Proceeds from issuance of common stock | 9.7 | 22.3 | |||||||||
| Dividends paid | (166.0) | (158.5) | |||||||||
| Repurchases of common stock | (172.4) | (142.9) | |||||||||
| Proceeds from the issuance of commercial paper, net | 207.1 | 95.4 | |||||||||
| Proceeds from issuance of long-term debt | — | 600.0 | |||||||||
| Principal payments on finance leases | (5.1) | (5.5) | |||||||||
| Payments of debt issuance costs | — | (1.4) | |||||||||
| Net cash (used in) provided by financing activities of continuing operations | $ | (126.7) | $ | 409.4 | |||||||
| Cash flows—discontinued operations | |||||||||||
| Net cash provided by operating activities of discontinued operations | — | — | |||||||||
| Net cash provided by discontinued operations | $ | — | $ | — | |||||||
| Decrease in cash, cash equivalents, and restricted cash | (3.2) | (175.7) | |||||||||
| Cash, cash equivalents, and restricted cash - beginning of period | 220.1 | 416.2 | |||||||||
| Cash, cash equivalents, and restricted cash - end of period | $ | 216.9 | $ | 240.5 | |||||||
| Reconciliation of cash, cash equivalents, and restricted cash: | August 25, 2024 | August 27, 2023 | ||||||||||||
| Cash and cash equivalents | $ | 192.5 | $ | 192.1 | ||||||||||
| Restricted cash included in prepaid expenses and other current assets | 24.4 | 48.4 | ||||||||||||
| Total cash, cash equivalents, and restricted cash shown in the statement of cash flows | $ | 216.9 | $ | 240.5 |
DARDEN RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In millions)
(Unaudited)
| Three Months Ended | |||||||||||
| August 25, 2024 | August 27, 2023 | ||||||||||
| Cash flows from changes in current assets and liabilities | |||||||||||
| Receivables, net | 15.3 | 29.5 | |||||||||
| Inventories | (7.7) | 9.4 | |||||||||
| Prepaid expenses and other current assets | (26.2) | (40.1) | |||||||||
| Accounts payable | 8.0 | (16.0) | |||||||||
| Accrued payroll | (29.1) | (13.7) | |||||||||
| Prepaid/accrued income taxes | 13.7 | 20.8 | |||||||||
| Other accrued taxes | 10.5 | 7.8 | |||||||||
| Unearned revenues | (37.1) | (32.1) | |||||||||
| Other current liabilities | (25.2) | (25.1) | |||||||||
| Change in current assets and liabilities | $ | (77.8) | $ | (59.5) |
See accompanying notes to our unaudited consolidated financial statements.
DARDEN RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
**Note 1.**Basis of Presentation
Darden Restaurants, Inc. (we, our, Darden or the Company) owns and operates full-service dining restaurants in the United States and Canada under the trade names Olive Garden®, LongHorn Steakhouse®, Cheddar’s Scratch Kitchen®, Yard House®, Ruth’s Chris Steak House® (Ruth’s Chris), The Capital Grille®, Seasons 52®, Bahama Breeze®, Eddie V’s Prime Seafood® (Eddie V’s) and The Capital Burger®. As of August 25, 2024, through subsidiaries, we own and operate all of our restaurants in the United States and Canada, except for 2 joint venture restaurants managed by us, 4 managed locations operating under contractual agreements and 91 franchised restaurants. We also have 58 franchised restaurants in operation located in Latin America, the Caribbean, Asia, and the Middle East.
On July 17, 2024, we entered into an agreement to acquire all of the outstanding shares of Chuy’s Holdings, Inc. (Chuy’s Holdings), a Delaware corporation, for $37.50 per share in an all-cash transaction with an enterprise value of approximately $605 million. The transaction has been approved by our Board of Directors and is subject to the satisfaction of customary conditions, including, among others, the approval of Chuy’s Holdings shareholders. The acquisition is expected to be completed in the second quarter of fiscal 2025 and we expect to fund the purchase price through the issuance of debt.
We have prepared these consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally presented in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal recurring nature. We operate on a 52/53-week fiscal year which ends on the last Sunday in May. Our fiscal year ending May 25, 2025 will contain 52 weeks of operation. Operating results for interim periods presented are not necessarily indicative of results that may be expected for the full fiscal year.
These statements should be read in conjunction with the consolidated financial statements and related notes to consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended May 26, 2024. We prepare our consolidated financial statements in conformity with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of sales and costs and expenses during the reporting period. Actual results could differ from those estimates.
We have reclassified certain amounts in prior-period financial statements to conform to the current period’s presentation.
Recently Issued Accounting Standards
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied retrospectively to all prior periods presented in the financial statements. Management is currently evaluating this ASU to determine its impact on the Company's disclosures. We plan to adopt in the fourth quarter of fiscal 2025.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which updates income tax disclosures related to the rate reconciliation and requires disclosure of income taxes paid by jurisdiction. The amendments also provide further disclosure comparability. The amendments are effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied prospectively; however, retrospective application is permitted. Management is currently evaluating this ASU to determine its impact on the Company’s disclosures. We plan to adopt in fiscal 2026.
In March 2024, the SEC adopted its final rules intended to enhance and standardize climate-related disclosures in registration statements and annual reports. The new rules will require disclosure of material climate-related risks, including disclosure of the Board of Directors’ oversight and risk management activities, the material impacts of these risks to the Company and the quantification of material impacts to the Company as a result of severe weather events and other natural conditions. The rules also require disclosure of material greenhouse gas emissions and any material climate-related targets and goals. The new rules will be effective for annual reporting periods beginning in fiscal year 2026, except for the greenhouse gas emissions disclosures which will be effective for annual reporting periods beginning in fiscal year 2027. On April 4, 2024, the
DARDEN RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
SEC issued a voluntary stay on its final rules pending multiple legal challenges. The Company is currently evaluating the impact of these new rules.
Note 2. Revenue Recognition
Deferred revenue liabilities from contracts with customers included on our accompanying consolidated balance sheets was comprised of the following:
| (in millions) | August 25, 2024 | May 26, 2024 | ||||||||||||
| Unearned revenues | ||||||||||||||
| Deferred gift card revenue | $ | 579.5 | $ | 620.6 | ||||||||||
| Deferred gift card discounts | (25.5) | (29.5) | ||||||||||||
| Other | 0.7 | 0.7 | ||||||||||||
| Total | $ | 554.7 | $ | 591.8 | ||||||||||
| Other liabilities | ||||||||||||||
| Deferred franchise fees - non-current | $ | 4.9 | $ | 4.9 |
The following table presents a rollforward of deferred gift card revenue.
| Three Months Ended | ||||||||||||||||||||||||||
| (in millions) | August 25, 2024 | August 27, 2023 | ||||||||||||||||||||||||
| Beginning balance | $ | 620.6 | $ | 537.0 | ||||||||||||||||||||||
| Acquired deferred gift card revenue | — | 61.8 | ||||||||||||||||||||||||
| Activations | 122.4 | 130.1 | ||||||||||||||||||||||||
| Redemptions and breakage | (163.5) | (165.5) | ||||||||||||||||||||||||
| Ending balance | $ | 579.5 | $ | 563.4 |
DARDEN RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 3. Additional Financial Information
Supplemental Balance Sheet Information
The components of lease assets and liabilities on the consolidated balance sheet were as follows:
| (in millions) | Balance Sheet Classification | August 25, 2024 | May 26, 2024 | |||||||||||||||||
| Operating lease right-of-use assets | Operating lease right-of-use assets | $ | 3,365.5 | $ | 3,429.3 | |||||||||||||||
| Finance lease right-of-use assets | Land, buildings and equipment, net | 1,160.1 | 1,106.3 | |||||||||||||||||
| Total lease assets, net | $ | 4,525.6 | $ | 4,535.6 | ||||||||||||||||
| Operating lease liabilities - current | Other current liabilities | $ | 200.6 | $ | 198.8 | |||||||||||||||
| Finance lease liabilities - current | Other current liabilities | 16.2 | 15.3 | |||||||||||||||||
| Operating lease liabilities - non-current | Operating lease liabilities - non-current | 3,636.8 | 3,704.7 | |||||||||||||||||
| Finance lease liabilities - non-current | Other liabilities | 1,423.9 | 1,357.1 | |||||||||||||||||
| Total lease liabilities | $ | 5,277.5 | $ | 5,275.9 |
Supplemental Cash Flow Information
| Cash paid for interest and income taxes were as follows: | Three Months Ended | |||||||||||||
| (in millions) | August 25, 2024 | August 27, 2023 | ||||||||||||
| Interest, net of amounts capitalized | $ | 36.3 | $ | 34.3 | ||||||||||
| Income taxes, net of refunds | 4.6 | 2.0 |
| Non-cash investing and financing activities were as follows: | Three Months Ended | |||||||||||||
| (in millions) | August 25, 2024 | August 27, 2023 | ||||||||||||
| Increase in land, buildings and equipment through accrued purchases | $ | 33.8 | $ | 64.0 | ||||||||||
| Right-of-use assets obtained in exchange for new operating lease liabilities(1) | 7.1 | 298.0 | ||||||||||||
| Right-of-use assets obtained in exchange for new finance lease liabilities | 35.8 | 45.3 | ||||||||||||
| Net change in right-of-use assets mainly due to lease modifications resulting in reclassification of leases from operating to finance | 19.9 | 2.1 |
(1) Right-of-use assets obtained in fiscal 2024 includes $291.6 million from the acquisition of Ruth’s Chris.
We had restricted cash of $24.4 million as of August 25, 2024 and $25.3 million as of May 26, 2024, which represents cash held as security for a standby letter of credit. Restricted cash is included in Prepaid Expenses and Other Current Assets on our consolidated balance sheet. See Note 12, Commitments and Contingencies, for further details around standby letters of credit.
Note 4. Income Taxes
The effective income tax rate for continuing operations for the three months ended August 25, 2024 was 10.6 percent compared to an effective income tax rate for the three months ended August 27, 2023 of 12.7 percent. The decrease in the tax rate is primarily driven by the release of federal tax reserves and the favorable impact of mark to market hedges.
Included in our remaining balance of unrecognized tax benefits is $1.7 million related to tax positions for which it is reasonably possible that the total amounts could change within the next 12 months based on the outcome of examinations or as a result of the expiration of the statute of limitations for specific jurisdictions.
DARDEN RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 5. Net Earnings per Share
Outstanding stock options, restricted stock and equity-settled performance stock units granted by us represent the only dilutive effect reflected in diluted weighted average shares outstanding, none of which impact the numerator of the diluted net earnings per share computation. Stock options, restricted stock and equity-settled performance stock units excluded from the calculation of diluted net earnings per share because the effect would have been anti-dilutive, were as follows:
| Three Months Ended | ||||||||||||||||||||||||||
| (in millions) | August 25, 2024 | August 27, 2023 | ||||||||||||||||||||||||
| Anti-dilutive stock-based compensation awards | 0.3 | — |
Note 6. Segment Information
We manage our restaurant brands, Olive Garden, LongHorn Steakhouse, Cheddar’s Scratch Kitchen, Yard House, Ruth’s Chris, The Capital Grille, Seasons 52, Bahama Breeze, Eddie V’s, and The Capital Burger in North America as operating segments. The brands operate principally in the U.S. within full-service dining. We aggregate our operating segments into reportable segments based on a combination of the size, economic characteristics and sub-segment of full-service dining within which each brand operates. We have four reportable segments: (1) Olive Garden, (2) LongHorn Steakhouse, (3) Fine Dining and (4) Other Business.
The Olive Garden segment includes the results of our company-owned Olive Garden restaurants in the U.S. and Canada. The LongHorn Steakhouse segment includes the results of our company-owned LongHorn Steakhouse restaurants in the U.S. The Fine Dining segment aggregates our premium brands that operate within the fine-dining sub-segment of full-service dining and includes the results of our company-owned Ruth’s Chris, The Capital Grille and Eddie V’s restaurants in the U.S. The Other Business segment aggregates our remaining brands and includes the results of our company-owned Cheddar’s Scratch Kitchen, Yard House, Seasons 52, Bahama Breeze and The Capital Burger restaurants in the U.S. and results from our franchise operations.
External sales are derived principally from food and beverage sales. We do not rely on any major customers as a source of sales, and the customers and long-lived assets of our reportable segments are predominantly in the U.S. There were no material transactions among reportable segments.
Our management uses segment profit as the measure for assessing performance of our segments. Segment profit includes revenues and expenses directly attributable to restaurant-level results of operations (sometimes referred to as restaurant-level earnings). These expenses include food and beverage costs, restaurant labor costs, restaurant expenses and marketing expenses (collectively “restaurant and marketing expenses”). Non-cash lease-related expenses included in restaurant expenses (which is a component of segment profit) and lease-related depreciation and amortization are reported at the corporate level as these are expenses for which our operating segments are not being evaluated. Additionally, our lease-related right-of-use assets are not managed or evaluated at the operating segment level, but rather at the corporate level.
DARDEN RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following tables reconcile our segment results to our consolidated results reported in accordance with GAAP.
| (in millions) | Olive Garden | LongHorn Steakhouse | Fine Dining | Other Business | Corporate | Consolidated | ||||||||||||||||||||||||||||||||
| For the three months ended August 25, 2024 | ||||||||||||||||||||||||||||||||||||||
| Sales | $ | 1,209.1 | $ | 713.5 | $ | 278.9 | $ | 555.5 | $ | — | $ | 2,757.0 | ||||||||||||||||||||||||||
| Restaurant and marketing expenses | 960.1 | 585.9 | 241.3 | 471.8 | (20.2) | 2,238.9 | ||||||||||||||||||||||||||||||||
| Segment profit | $ | 249.0 | $ | 127.6 | $ | 37.6 | $ | 83.7 | $ | 20.2 | $ | 518.1 | ||||||||||||||||||||||||||
| Depreciation and amortization | $ | 45.3 | $ | 20.3 | $ | 16.8 | $ | 25.7 | $ | 13.4 | $ | 121.5 | ||||||||||||||||||||||||||
| Impairments and disposal of assets, net | — | — | — | — | 1.0 | 1.0 | ||||||||||||||||||||||||||||||||
| Purchases of land, buildings and equipment | 55.7 | 36.0 | 26.6 | 27.0 | (0.1) | 145.2 | ||||||||||||||||||||||||||||||||
| (in millions) | Olive Garden | LongHorn Steakhouse | Fine Dining1 | Other Business | Corporate | Consolidated | ||||||||||||||||||||||||||||||||
| For the three months ended August 27, 2023 | ||||||||||||||||||||||||||||||||||||||
| Sales | $ | 1,227.9 | $ | 669.8 | $ | 273.5 | $ | 559.4 | $ | — | $ | 2,730.6 | ||||||||||||||||||||||||||
| Restaurant and marketing expenses | 965.6 | 552.4 | 233.8 | 475.1 | (15.4) | 2,211.5 | ||||||||||||||||||||||||||||||||
| Segment profit | $ | 262.3 | $ | 117.4 | $ | 39.7 | $ | 84.3 | $ | 15.4 | $ | 519.1 | ||||||||||||||||||||||||||
| Depreciation and amortization | $ | 39.6 | $ | 18.2 | $ | 15.6 | $ | 25.1 | $ | 11.3 | $ | 109.8 | ||||||||||||||||||||||||||
| Impairments and disposal of assets, net | 0.2 | — | — | — | 2.9 | 3.1 | ||||||||||||||||||||||||||||||||
| Purchases of land, buildings and equipment | 65.8 | 34.5 | 23.5 | 26.6 | 0.5 | 150.9 |
1 Includes Ruth’s Chris results from the date of acquisition (June 14, 2023) forward.
A reconciliation of segment profit to earnings from continuing operations before income taxes is below.
| Three Months Ended | ||||||||||||||||||||||||||
| (in millions) | August 25, 2024 | August 27, 2023 | ||||||||||||||||||||||||
| Segment profit | $ | 518.1 | $ | 519.1 | ||||||||||||||||||||||
| Less general and administrative expenses | (126.4) | (153.3) | ||||||||||||||||||||||||
| Less depreciation and amortization | (121.5) | (109.8) | ||||||||||||||||||||||||
| Less impairments and disposal of assets, net | (1.0) | (3.1) | ||||||||||||||||||||||||
| Less interest, net | (37.1) | (29.7) | ||||||||||||||||||||||||
| Earnings before income taxes | $ | 232.1 | $ | 223.2 |
DARDEN RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 7. Impairments and Disposal of Assets, Net
Impairments and disposal of assets, net, in our accompanying consolidated statements of earnings were comprised of the following:
| Three Months Ended | ||||||||||||||||||||||||||
| (in millions) | August 25, 2024 | August 27, 2023 | ||||||||||||||||||||||||
| Restaurant impairments | $ | — | $ | 0.3 | ||||||||||||||||||||||
| Disposal (gains) losses | 0.1 | 4.9 | ||||||||||||||||||||||||
| Other | 0.9 | (2.1) | ||||||||||||||||||||||||
| Impairments and disposal of assets, net | $ | 1.0 | $ | 3.1 |
Disposal (gains) losses for the quarter ended August 25, 2024 were related to previously impaired locations. Restaurant impairments and disposal (gains) losses for the quarter ended August 27, 2023 were related to the decision to close four locations. Other impacts for the quarter ended August 25, 2024 were related to right-of-use asset adjustments on early lease terminations and product loss from a facility fire in our distribution network. Other impacts for the quarter ended August 27, 2023 were related to right-of-use asset adjustments on early lease terminations.
Note 8. Stockholders’ Equity
Accumulated Other Comprehensive Income (AOCI)
The components of AOCI, net of tax, for the quarter ended August 25, 2024 were as follows:
| (in millions) | Foreign Currency Translation Adjustment | Unrealized Gains (Losses) on Derivatives | Benefit Plan Funding Position | Accumulated Other Comprehensive Income | ||||||||||||||||||||||
| Balance at May 26, 2024 | $ | 4.6 | $ | 24.5 | $ | (3.5) | $ | 25.6 | ||||||||||||||||||
| Gain (loss) | — | 0.4 | — | 0.4 | ||||||||||||||||||||||
| Reclassification realized in net earnings | — | (0.2) | 0.1 | (0.1) | ||||||||||||||||||||||
| Balance at August 25, 2024 | $ | 4.6 | $ | 24.7 | $ | (3.4) | $ | 25.9 |
The components of AOCI, net of tax, for the quarter ended August 27, 2023 were as follows:
| (in millions) | Foreign Currency Translation Adjustment | Unrealized Gains (Losses) on Derivatives | Benefit Plan Funding Position | Accumulated Other Comprehensive Income | ||||||||||||||||||||||
| Balances at May 28, 2023 | $ | 4.5 | $ | 3.9 | $ | (5.2) | $ | 3.2 | ||||||||||||||||||
| Gain (loss) | — | 12.5 | — | 12.5 | ||||||||||||||||||||||
| Reclassification realized in net earnings | — | 0.1 | 0.2 | 0.3 | ||||||||||||||||||||||
| Balance at August 27 2023 | $ | 4.5 | $ | 16.5 | $ | (5.0) | $ | 16.0 |
DARDEN RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents the amounts and line items in our consolidated statements of earnings where adjustments reclassified from AOCI into net earnings were recorded.
| Amount Reclassified from AOCI into Net Earnings | |||||||||||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||||||||||
| (in millions) AOCI Components | Location of Gain (Loss) Recognized in Earnings | August 25, 2024 | August 27, 2023 | ||||||||||||||||||||||||||
| Derivatives | |||||||||||||||||||||||||||||
| Commodity contracts | (1) | $ | (0.4) | $ | (1.9) | ||||||||||||||||||||||||
| Equity contracts | (2) | (0.1) | 1.3 | ||||||||||||||||||||||||||
| Interest rate contracts | (3) | 0.9 | — | ||||||||||||||||||||||||||
| Total before tax | $ | 0.4 | $ | (0.6) | |||||||||||||||||||||||||
| Tax (expense) benefit | (0.2) | 0.5 | |||||||||||||||||||||||||||
| Net of tax | $ | 0.2 | $ | (0.1) | |||||||||||||||||||||||||
| Benefit plan funding position | |||||||||||||||||||||||||||||
| Recognized net actuarial gain (loss) - other plans | (4) | (0.2) | (0.2) | ||||||||||||||||||||||||||
| Total before tax | $ | (0.2) | $ | (0.2) | |||||||||||||||||||||||||
| Tax (expense) benefit | 0.1 | — | |||||||||||||||||||||||||||
| Net of tax | $ | (0.1) | $ | (0.2) |
(1)Primarily included in food and beverage costs and restaurant expenses. See Note 10 for additional details.
(2)Included in general and administrative expenses. See Note 10 for additional details.
(3)Included in interest, net on our consolidated statement of earnings.
(4)Included in the computation of net periodic benefit costs, which is a component of general and administrative expenses.
Note 9. Stock-Based Compensation
We grant stock options for a fixed number of shares to certain employees with an exercise price equal to the fair value of the shares at the date of grant. We also grant restricted stock, restricted stock units and performance stock units with a fair value generally determined based on our closing stock price on the date of grant. In addition, we grant cash-settled stock units (Darden stock units) which are classified as liabilities and are marked to market as of the end of each period.
The weighted-average fair value of non-qualified stock options and the related assumptions used in the Black-Scholes option pricing model for options granted during the periods presented, were as follows:
| Three Months Ended | |||||||||||
| August 25, 2024 | August 27, 2023 | ||||||||||
| Weighted-average fair value | $ | 44.79 | $ | 55.56 | |||||||
| Dividend yield | 3.6 | % | 3.4 | % | |||||||
| Expected volatility of stock | 40.8 | % | 42.2 | % | |||||||
| Risk-free interest rate | 4.1 | % | 4.0 | % | |||||||
| Expected option life (in years) | 6.3 | 5.9 | |||||||||
| Weighted-average exercise price per share | $ | 139.43 | $ | 169.02 |
DARDEN RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The weighted-average grant date fair value of market-based performance stock units and the related assumptions used in the Monte Carlo simulation to record stock-based compensation for units granted during the periods presented, were as follows:
| Three Months Ended | |||||||||||
| August 25, 2024 | August 27, 2023 | ||||||||||
| Dividend yield (1) | 0.0 | % | 0.0 | % | |||||||
| Expected volatility of stock | 26.5 | % | 32.3 | % | |||||||
| Risk-free interest rate | 4.2 | % | 4.5 | % | |||||||
| Expected life (in years) | 2.9 | 2.9 | |||||||||
| Weighted-average grant date fair value per unit | $ | 181.65 | $ | 217.11 |
(1)Assumes a reinvestment of dividends.
The following table presents a summary of our stock-based compensation activity for the three months ended August 25, 2024.
| (in millions) | Stock Options | Restricted Stock/ Restricted Stock Units | Equity-Settled Performance Stock Units | Cash-Settled Darden Stock Units | ||||||||||||||||||||||
| Outstanding beginning of period | 1.34 | 0.26 | 0.35 | 0.76 | ||||||||||||||||||||||
| Awards granted | 0.17 | 0.05 | 0.11 | 0.17 | ||||||||||||||||||||||
| Awards granted performance impact | — | — | 0.02 | — | ||||||||||||||||||||||
| Awards exercised/vested | (0.09) | (0.04) | (0.15) | (0.25) | ||||||||||||||||||||||
| Awards forfeited | — | — | — | (0.01) | ||||||||||||||||||||||
| Outstanding end of period | 1.42 | 0.27 | 0.33 | 0.67 |
We recognized expense from stock-based compensation as follows:
| Three Months Ended | ||||||||||||||||||||||||||
| (in millions) | August 25, 2024 | August 27, 2023 | ||||||||||||||||||||||||
| Stock options | $ | 4.8 | $ | 4.2 | ||||||||||||||||||||||
| Restricted stock/restricted stock units | 5.5 | 4.6 | ||||||||||||||||||||||||
| Equity-settled performance stock units | 12.5 | 10.5 | ||||||||||||||||||||||||
| Cash-settled Darden stock units | 10.6 | 9.7 | ||||||||||||||||||||||||
| Employee stock purchase plan | 0.8 | 0.7 | ||||||||||||||||||||||||
| Director compensation program/other | 0.5 | 0.6 | ||||||||||||||||||||||||
| Total stock-based compensation expense | $ | 34.7 | $ | 30.3 |
Note 10. Derivative Instruments and Hedging Activities
We enter into derivative instruments for risk management purposes only, including derivatives designated as hedging instruments as provided by FASB ASC Topic 815, Derivatives and Hedging, and those utilized as economic hedges. We use financial derivatives to manage interest rate, commodity and compensation risks inherent in our business operations. Cash flows related to derivatives are included in operating activities.
By using these instruments, we expose ourselves, from time to time, to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes us, which creates credit risk for us. We minimize this credit risk by entering into transactions with high quality counterparties. Market risk is the adverse effect on the value of a financial instrument that results from a
DARDEN RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
change in interest rates, commodity prices, or the market price of our common stock. We minimize this market risk by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken.
We designate commodity contracts and equity forward contracts as cash flow hedging instruments. We have two interest rate swap agreements. One is designated as a fair value hedge of the related debt and the other is designated as a cash flow hedge of the benchmark interest rate on debt expected to be issued in fiscal 2025. Further, we entered into equity forward contracts to hedge the risk of changes in future cash flows associated with recognized, employee-directed investments in our common stock within the non-qualified deferred compensation plan. We did not elect hedge accounting with the expectation that changes in the fair value of the equity forward contracts would offset changes in the fair value of our common stock investments in the non-qualified deferred compensation plan.
The notional and fair values of our derivative contracts were as follows:
| Fair Values | |||||||||||||||||||||||||||||||||||||||||
| (in millions, except per share data) | Number of Shares Outstanding | Weighted-Average Per Share Forward Rates | Notional Values | Derivative Assets (1) | Derivative Liabilities (1) | ||||||||||||||||||||||||||||||||||||
| August 25, 2024 | August 25, 2024 | May 26, 2024 | August 25, 2024 | May 26, 2024 | |||||||||||||||||||||||||||||||||||||
| Equity forwards: | |||||||||||||||||||||||||||||||||||||||||
| Designated | 0.3 | $143.26 | $ | 37.7 | $ | 2.6 | $ | — | $ | — | $ | 0.8 | |||||||||||||||||||||||||||||
| Not designated | 0.4 | 135.31 | 47.7 | 3.5 | — | — | 2.4 | ||||||||||||||||||||||||||||||||||
| Total equity forwards (2) | $ | 6.1 | $ | — | $ | — | $ | 3.2 | |||||||||||||||||||||||||||||||||
| Commodity contracts: | |||||||||||||||||||||||||||||||||||||||||
| Designated | N/A | N/A | $ | 15.8 | $ | — | $ | 0.1 | $ | 1.6 | $ | 0.7 | |||||||||||||||||||||||||||||
| Not designated | N/A | N/A | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Total commodity contracts (3) | $ | — | $ | 0.1 | $ | 1.6 | $ | 0.7 | |||||||||||||||||||||||||||||||||
| Interest rate related | |||||||||||||||||||||||||||||||||||||||||
| Designated - Fair Value Hedge | N/A | N/A | $ | 300.0 | $ | — | $ | — | $ | 37.2 | 51.8 | ||||||||||||||||||||||||||||||
| Designated - Cash Flow Hedge | N/A | N/A | 600.0 | — | — | 0.3 | — | ||||||||||||||||||||||||||||||||||
| Not designated | N/A | N/A | — | — | — | — | |||||||||||||||||||||||||||||||||||
| Total interest rate related | $ | — | $ | — | $ | 37.5 | $ | 51.8 | |||||||||||||||||||||||||||||||||
| Total derivative contracts | $ | 6.1 | $ | 0.1 | $ | 39.1 | $ | 55.7 |
(1)Derivative assets and liabilities are included in receivables, net and other current liabilities, as applicable, on our consolidated balance sheets.
(2)Designated and undesignated equity forwards extend through July 2028.
(3)Commodity contracts extend through June 2025.
DARDEN RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The effects of derivative instruments accounted for as cash flow hedging instruments in the consolidated statements of earnings were as follows:
| Amount of Gain (Loss) Recognized in AOCI | Amount of Gain (Loss) Reclassified from AOCI to Earnings | |||||||||||||||||||||||||||||||||||||
| Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||||||||||||
| (in millions) | August 25, 2024 | August 27, 2023 | August 25, 2024 | August 27, 2023 | ||||||||||||||||||||||||||||||||||
| Equity (1) | $ | 1.7 | $ | (2.2) | $ | (0.1) | $ | 1.3 | ||||||||||||||||||||||||||||||
| Commodity (2) | (1.4) | 1.7 | (0.4) | (1.9) | ||||||||||||||||||||||||||||||||||
| Interest rate (3) | (0.3) | 17.9 | 0.9 | — | ||||||||||||||||||||||||||||||||||
| Total | $ | — | $ | 17.4 | $ | 0.4 | $ | (0.6) |
(1)Location of the gain (loss) reclassified from AOCI to earnings is general and administrative expenses.
(2)Location of the gain (loss) reclassified from AOCI to earnings is food and beverage costs and restaurant expenses.
(3)Location of the gain (loss) reclassified from AOCI to earnings is interest, net.
The effects of derivative instruments in fair value hedging relationships in the consolidated statement of earnings were as follows:
| Amount of Gain (Loss) Recognized in Earnings on Derivatives | Amount of Gain (Loss) Recognized in Earnings on Related Hedged Item | |||||||||||||||||||||||||||||||||||||
| Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||||||||||||
| (in millions) | August 25, 2024 | August 27, 2023 | August 25, 2024 | August 27, 2023 | ||||||||||||||||||||||||||||||||||
| Interest rate (1)(2) | $ | 14.6 | $ | (6.9) | $ | (14.6) | $ | 6.9 | ||||||||||||||||||||||||||||||
(1) Location of the gain (loss) recognized in earnings on derivatives and related hedged item is interest, net.
(2) Hedged item in fair value hedge relationship is debt.
The effects of derivatives not designated as hedging instruments in the consolidated statements of earnings were as follows:
| Amount of Gain (Loss) Recognized in Earnings | ||||||||||||||||||||||||||
| (in millions) | Three Months Ended | |||||||||||||||||||||||||
| Location of Gain (Loss) Recognized in Earnings on Derivatives | August 25, 2024 | August 27, 2023 | ||||||||||||||||||||||||
| General and administrative expenses | 2.5 | (0.1) | ||||||||||||||||||||||||
Based on the fair value of our derivative instruments designated as cash flow hedges as of August 25, 2024, we expect to reclassify $3.1 million of net gains on derivative instruments from AOCI to earnings during the next 12 months based on the maturity of our contracts. However, the amounts ultimately realized in earnings may change and will be dependent on the fair value of the contracts on the respective settlement dates.
DARDEN RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 11. Fair Value Measurements
The fair values of cash equivalents, receivables, net, accounts payable and short-term debt approximate their carrying amounts due to their short duration or market based interest rates.
The following tables summarize the fair values of financial instruments measured at fair value on a recurring basis as of August 25, 2024 and May 26, 2024.
| Items Measured at Fair Value at August 25, 2024 | |||||||||||||||||||||||||||||
| (in millions) | Fair value of assets (liabilities) | Quoted prices in active market for identical assets (liabilities) (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | |||||||||||||||||||||||||
| Derivatives: | |||||||||||||||||||||||||||||
| Commodities futures, swaps & options | (1) | $ | (1.6) | $ | — | $ | (1.6) | $ | — | ||||||||||||||||||||
| Equity forwards | (2) | 6.1 | — | 6.1 | $ | — | |||||||||||||||||||||||
| Interest rate swaps - fair value hedge | (3) | (37.2) | — | (37.2) | — | ||||||||||||||||||||||||
| Interest rate swaps - cash flow hedge | (3) | (0.3) | — | (0.3) | — | ||||||||||||||||||||||||
| Total | $ | (33.0) | $ | — | $ | (33.0) | $ | — |
| Items Measured at Fair Value at May 26, 2024 | |||||||||||||||||||||||||||||
| (in millions) | Fair value of assets (liabilities) | Quoted prices in active market for identical assets (liabilities) (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | |||||||||||||||||||||||||
| Derivatives: | |||||||||||||||||||||||||||||
| Commodities futures, swaps & options | (1) | $ | (0.6) | $ | — | $ | (0.6) | $ | — | ||||||||||||||||||||
| Equity forwards | (2) | (3.2) | — | (3.2) | — | ||||||||||||||||||||||||
| Interest rate swaps - fair value hedge | (3) | (51.8) | — | (51.8) | — | ||||||||||||||||||||||||
| Total | $ | (55.6) | $ | — | $ | (55.6) | $ | — |
(1)The fair value of our commodities futures, swaps and options is based on closing market prices of the contracts, inclusive of the risk of nonperformance.
(2)The fair value of equity forwards is based on the closing market value of Darden stock, inclusive of the risk of nonperformance.
(3)The fair value of our interest rate swap agreements is based on current and expected market interest rates, inclusive of the risk of nonperformance.
The carrying value and fair value of long-term debt as of August 25, 2024, was $1.39 billion and $1.43 billion, respectively. The carrying value and fair value of long-term debt as of May 26, 2024, was $1.37 billion. The fair value of long-term debt, classified as Level 2 in the fair value hierarchy, is determined based on market prices or, if market prices are not available, the present value of the underlying cash flows discounted at our incremental borrowing rates.
The fair value of non-financial assets measured at fair value on a non-recurring basis, classified as Level 2 in the fair value hierarchy, is determined based on third-party market appraisals. As of August 25, 2024 and May 26, 2024, adjustments to the fair values of non-financial assets measured at fair value on a non-recurring basis, classified as Level 2, were not material.
The fair value of non-financial assets measured at fair value on a non-recurring basis, classified as Level 3 in the fair value hierarchy, is determined based on appraisals, sales prices of comparable assets, or estimates of discounted future cash flows. As of August 25, 2024, adjustments to the fair values of non-financial assets, classified as Level 3, were not material. As of May 26, 2024, long-lived assets held and used with a carrying amount of $4.8 million, primarily related to three underperforming restaurants, were determined to have a fair value of $1.5 million resulting in an impairment charge of $3.3 million.
DARDEN RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 12. Commitments and Contingencies
As collateral for performance on contracts and as credit guarantees to banks and insurers, we are contingently liable for guarantees of subsidiary obligations under standby letters of credit. As of August 25, 2024 and May 26, 2024, we had $94.5 million and $79.5 million, respectively, of standby letters of credit related to workers’ compensation and general liabilities accrued in our consolidated financial statements. As of August 25, 2024 and May 26, 2024, we had $16.1 million and $16.8 million, respectively, of surety bonds related to other payments. Most surety bonds are renewable annually.
As of August 25, 2024 and May 26, 2024, we had $69.8 million and $71.0 million, respectively, of guarantees associated with leased properties that have been assigned to third parties, primarily related to the disposition of Red Lobster in fiscal 2015. These amounts represent the maximum potential amount of future payments under the guarantees. The fair value of the maximum potential future payments discounted at our weighted-average cost of capital as of August 25, 2024 and May 26, 2024, amounted to $55.6 million and $57.7 million, respectively. In the event of default by a third party, the indemnity and default clauses in our assignment agreements govern our ability to recover from and pursue the third party for damages incurred as a result of its default. We do not hold any third-party assets as collateral related to these assignment agreements, except to the extent that the assignment allows us to repossess the building and personal property. The liability recorded for our expected credit losses under these leases as of May 26, 2024 was $10.6 million. These guarantees expire over their respective lease terms, which range from fiscal 2025 through fiscal 2034.
We are subject to private lawsuits, administrative proceedings and claims that arise in the ordinary course of our business. A number of these lawsuits, proceedings and claims may exist at any given time. These matters typically involve claims from guests, employees and others related to operational issues common to the restaurant industry, and can also involve infringement of, or challenges to, our trademarks. While the resolution of a lawsuit, proceeding or claim may have an impact on our financial results for the period in which it is resolved, we believe that the final disposition of the lawsuits, proceedings and claims in which we are currently involved, either individually or in the aggregate, will not have a material adverse effect on our financial position, results of operations or liquidity.
Note 13. Subsequent Events
On September 18, 2024, the Board of Directors declared a cash dividend of $1.40 per share payable on November 1, 2024 to all shareholders of record as of the close of business on October 10, 2024.
On September 16, 2024, the Company entered into Amendment No. 1 (the Amendment) to the Company’s existing $1,250,000,000 Revolving Credit Agreement, dated as of October 23, 2023 (as amended, the Revolving Credit Agreement), with Bank of America, N.A., as administrative agent, the lenders and other agents party thereto. The Amendment replaces the prior financial covenant (which provided for a maximum consolidated total debt to total capitalization ratio) with a new financial covenant requiring the Company to maintain, measured as of the end of each fiscal quarter, a maximum consolidated leverage ratio of 3.50 to 1.00 (which may be temporarily increased to 4.00 to 1.00 upon the election of the Company as a result of a covered acquisition, subject to customary limitations set forth in the Revolving Credit Agreement). All other material terms and conditions of the Revolving Credit Agreement were unchanged.
On September 16, 2024, the Company entered into a senior unsecured $600 million 2-year Term Loan Credit Agreement (the Term Loan Agreement) with Bank of America, N.A., as administrative agent, the lenders and other agents party thereto, the material terms of which are consistent with the Revolving Credit Agreement, as amended by the Amendment. The Term Loan Agreement provides for a single borrowing on any business day until February 17, 2025 (the Funding Date) and matures on the second anniversary of the Funding Date. The Company has not drawn on the Term Loan as of the date of this filing. The proceeds may be used to finance the Company’s anticipated acquisition of Chuy’s Holdings.
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