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Darden Restaurants F3Q08 (Qtr End 2/24/08) Earnings Call Transcript

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2008-03-19 09:09:07.0

Tags: Darden Restaurants Inc.

Question-and-Answer Session

Operator

(Operator Instructions) We’ll go to the line of Steven Kron with Goldman Sachs. Please go ahead.

Steven Kron - Goldman Sachs

Thanks. Good morning, guys. A couple of questions on margins, if I could. I guess Brad, if I look at the operating margins for the quarter on a reported basis, it was around -- a little bit over 10. If we back out the contribution to the Darden Foundation and the integration costs, I think you are up at around 11. Can you maybe give some perspective of what that number would have looked like last year had you been operating the RARE brands? And that’s the first question, and then I have a follow-up to that.

Brad Richmond

That’s going to take me a few minutes to work through that, Steve. Let me work on that and come back to you just in a second, okay?

Steven Kron - Goldman Sachs

Okay, that’s fine. Just as I guess as a layer to that, it looks like SG&A, backing out some of these items for comparability is significantly lower I think than what you report in the second quarter as a percentage of revenues. You have a full year guidance out there of just under 10% as a percentage of revenues. Can you maybe comment on that? Are these faster-than-expected synergies coming out of that line, in which case we should expect a lower number for the year?

Brad Richmond

In terms of the guidance for the year, no, that wouldn’t change but you are pointing out, this isn’t an area where we are seeing some of the synergies in our planning process, estimating process that we would achieve those quicker than some of the others. They are easier, quicker, more timely to act upon.

So no, that’s pretty much on track with the expectations and guidance we gave out in mid-February, so that’s pretty much on track.

To your first question though, trying to look back at last year on a continuing operations basis, in terms of the gross margin, if I look at that, after food and beverage, restaurant labor, and restaurant expenses, that number last year would have been around the 24% range. If you take that down to the operating profit or EBIT line, that would be just above 11% for the best apples-to-apples comparison.

Operator

Thank you. We’ll go to the line of Jeff Bernstein with Lehman Brothers. Please go ahead.

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