Darden Restaurants sells meals mainly to U.S. diners through Olive Garden, LongHorn Steakhouse and other full-service restaurant brands. In its first quarter of fiscal 2027, ended August 30, 2026, sales rose 5.1%, but LongHorn supplied most of the increase while Olive Garden served fewer guests at comparable restaurants. Darden is adding restaurants and working to rebuild Olive Garden’s visits. Dividends and share repurchases meanwhile exceeded cash left after property spending, increasing its reliance on borrowing.
Research cutoff: October 15, 2026, New York date. Financial results are through August 30; management’s latest operating update verified here is September 24, followed by the October 2 filing. A current Olive Garden promotion was also checked, but it provides no later sales results.
1. LongHorn supplied most of the growth, including more guests
LongHorn’s combination of more visits and more restaurants carried the quarter’s growth. Its sales increased by $84.5 million, supplying 54.3% of Darden’s $155.6 million sales increase. It also supplied 75.8% of the increase in profit across the four restaurant segments, before corporate adjustments.
That matters because Olive Garden remains the larger business. Its modest growth could not contribute as much additional profit as LongHorn’s faster expansion. Darden finished the quarter with 2,218 company-owned restaurants, 53 more than a year earlier. LongHorn accounted for 29 of that net increase, while Olive Garden accounted for 20.
| Restaurant segment, USD millions | Sales: first quarter FY2026 | Sales: first quarter FY2027 | Segment profit: first quarter FY2026 | Segment profit: first quarter FY2027 |
|---|---|---|---|---|
| Olive Garden | 1,301.1 | 1,329.8 | 267.6 | 270.8 |
| LongHorn Steakhouse | 776.4 | 860.9 | 134.9 | 154.6 |
| Fine Dining | 286.5 | 304.2 | 38.7 | 39.6 |
| Other Business | 680.7 | 705.4 | 109.3 | 111.5 |
Reporting basis: Each reporting period covers 13 weeks. Segment profit is sales after food, restaurant labor, restaurant expenses and marketing. It excludes corporate overhead, depreciation, opening costs and certain noncash property expenses, so it is not consolidated operating profit. Fine Dining includes Ruth’s Chris, The Capital Grille and Eddie V’s. Other Business includes the remaining brands and franchise-related revenue. Prior-year Olive Garden sales include the Canadian restaurants until their July 14, 2025 sale.
Source: Darden fiscal 2027 first-quarter Form 10-Q, Note 6, pp. 13–14, and restaurant counts, p. 21.
To understand whether existing restaurants became busier, sales growth needs to be separated into guest visits and the average amount spent. On that test, LongHorn was the only segment with rising guest counts. Higher average checks offset fewer visits elsewhere. Average checks include what customers ordered and the sales mix, as well as menu prices.
| Change: first quarter FY2027 vs FY2026, fiscal calendar | Olive Garden | LongHorn | Fine Dining | Other Business |
|---|---|---|---|---|
| Sales change | 1.1% | 6.2% | 1.6% | 3.8% |
| Guest-count change | -2.2% | 1.6% | -2.0% | -1.8% |
| Average-check change | 3.4% | 4.5% | 3.7% | 5.7% |
Reporting basis: The measure includes restaurants operated by Darden for at least 16 months and excludes Bahama Breeze, which is being closed or converted. Olive Garden’s average-check increase includes a 0.5% contribution from off-premise catering. Guest and check changes compound; rounded percentages need not add exactly to sales growth.
Source: Form 10-Q, “Sales,” p. 22.
Olive Garden’s slowdown is meaningful even after allowing for a strong comparison. In the first quarter of fiscal 2026, its same-restaurant sales had risen 5.9%; LongHorn’s had risen 5.5%. The current fiscal-calendar increases are 1.1% and 6.2%, respectively. These comparisons show that the two large brands are moving at different speeds. Last year’s consolidated sales growth also included the Chuy’s acquisition, making it a poor measure of the current pace of expansion at existing restaurants.
Sources: Darden’s September 18, 2025 results release, first-quarter highlights and same-restaurant sales table; Form 10-Q, p. 22.
The calendar shift does not erase that difference. Fiscal 2026 had 53 weeks, moving the current quarter’s comparison by one week. When Darden aligns the same calendar weeks, Olive Garden’s same-restaurant growth is 1.0%, LongHorn’s is 6.8%, and consolidated growth is 3.2%, versus 3.1% on the fiscal calendar. Darden’s practical challenge is therefore to broaden guest growth beyond LongHorn while continuing to open restaurants successfully.
Source: Form 10-Q, Note 1 and “Sales,” pp. 10 and 22. Exact comparison dates appear in the reporting notes below.
2. Smaller asset-sale gains explain the profit decline, but margins made little progress
Reported profit fell mainly because last year’s Canada sale gain did not repeat. After management’s adjustments, operating earnings increased modestly, with little change in the share of sales kept as profit.
| Consolidated reported measure | First quarter FY2026 | First quarter FY2027 |
|---|---|---|
| Operating profit, USD millions | 339.2 | 319.3 |
| Operating margin | 11.14% | 9.98% |
| Net earnings, USD millions | 257.8 | 233.4 |
| Diluted earnings per share, total company, USD | 2.19 | 2.04 |
Calculation notes: Operating margin is operating profit divided by sales. Net earnings include discontinued operations; continuing operations earned $257.9 million and $234.3 million, respectively. Reported operating profit fell 5.9%, and total net earnings fell 9.5%.
Source: Form 10-Q, Consolidated Statements of Earnings, p. 4.
Last year, selling the Canadian Olive Garden restaurants produced a $42.0 million pretax gain. This quarter, land and building disposals produced $4.4 million of gains, partly offset by $0.5 million associated with discontinued software. The resulting net benefit fell by $38.1 million—more than the $19.9 million decline in operating profit.
Management’s adjusted comparison also removes last year’s Chuy’s integration and restaurant-closure costs. On that basis, operating profit rose from $303.9 million to $319.3 million, almost exactly matching sales growth. Operating margin was essentially unchanged at 9.98%. The adjustment changes the interpretation from falling operating earnings to modest growth, but it does not show improving consolidated margins. The current quarter’s $3.9 million net disposal benefit remains in management’s adjusted result.
Sources: Form 10-Q, Note 7, p. 15; September 24 earnings presentation, slide 14. The complete pretax, tax and after-tax adjustment table appears in the calculation notes.
The cost pattern explains the limited margin progress. Food and beverages used 30.8 cents of each sales dollar, up from 30.5 cents. Darden attributes the increase to inflation and a greater share of sales from brands with higher food costs, partly offset by higher selling prices. A shift toward steak restaurants can raise the group’s food-cost percentage even when those restaurants improve their own performance.
Restaurant labor moved in the other direction, declining from 32.4% to 32.2% of sales. Higher sales, the mix of brands and better productivity offset wage inflation. Restaurant expenses stayed near 16.6% of sales, while marketing, depreciation and opening costs rose. General and administrative expenses fell slightly because the prior year included integration and closure costs.
Source: Form 10-Q, “Costs and Expenses,” p. 23.
LongHorn improved its segment margin from 17.4% to 18.0%, with lower food, labor and restaurant costs relative to sales. Olive Garden’s margin slipped from 20.6% to 20.4%, Fine Dining’s from 13.5% to 13.0%, and Other Business’s from 16.1% to 15.8%. The portfolio helped absorb weakness, but the gains were concentrated.
Source: Form 10-Q, “Segment Results,” p. 24. These are the company’s rounded margins.
A competitor’s results show why rising restaurant sales alone are insufficient. Texas Roadhouse reported 6.2% comparable-restaurant sales growth for its 13 weeks ended June 30, 2026, yet its restaurant margin fell as commodity costs rose 7.0%. Its period and margin definition differ from Darden’s, so this is evidence of the competitive cost environment, not a direct margin ranking. LongHorn’s improvement is meaningful in that setting, while Darden’s other brands still need enough additional sales to cover higher costs.
Source: Texas Roadhouse’s August 6, 2026 results release, second-quarter operating highlights.
Interest and taxes further narrowed the improvement reaching Darden’s bottom line. Net interest expense rose from $45.4 million to $50.3 million, primarily because of higher short-term borrowing. Continuing earnings were only 1.3% above last year’s adjusted amount. The effective tax rate was 12.9%, versus 10.5% on last year’s adjusted basis; the reported prior-year rate was 12.2%. Darden attributes the reported tax-rate increase mainly to market-value changes in hedges connected with deferred employee compensation.
Fewer shares helped earnings per share grow faster than profit. Average diluted shares fell 2.7%, from 117.6 million to 114.4 million. Continuing earnings per share of $2.05 were 4.1% above last year’s adjusted $1.97, although below the reported $2.19. At last year’s share count, this quarter’s continuing profit would have produced approximately $1.99 per share. Repurchases helped the per-share result, but they also required cash.
Sources: Form 10-Q, statements of earnings, Note 4 and “Interest Expense,” pp. 4, 12 and 23; September 24 results release, earnings reconciliation. The $1.99 figure is a calculation using rounded reported earnings and shares, not a company forecast.
3. Olive Garden is spending on value to rebuild visits
The strategy is to attract more visits and expand successful brands, with some immediate cost to margins. Management says Olive Garden’s smaller portions widen customers’ price choices, funded partly by delivery profits. In the quarter, those options reduced average-check growth by about 0.5 percentage points and segment margin by about 0.3 points.
Management also identified weekday lunch as a recovery opportunity and planned renewed marketing and a new lunch-platform test during the second quarter. It reported improving traffic into September after earlier World Cup and lettuce-related consumer concerns. Those are management’s explanations and early observations, not a measured post-filing recovery.
Source: September 24 earnings-call transcript, pp. 4, 6, 8 and 16–17.
The intended benefit is straightforward: a smaller, lower-priced meal can attract a guest who would otherwise skip the visit. The business succeeds if those additional visits and repeat orders more than offset the lower amount earned on some existing orders. The first-quarter guest decline shows that the overall traffic recovery was not yet established.
Olive Garden’s official promotion page, checked for this report, advertises Never-Ending Pasta Bowl starting at $14.99, with protein toppings priced separately. Prices and availability can vary by location, and refills are for dining in. This confirms an active offer aimed at bringing people into the restaurant; it does not establish the offer’s sales or profit contribution.
Source: Olive Garden’s Never-Ending Pasta Bowl page, accessed October 15, 2026.
Darden is also directing development toward brands with room to expand. Management planned 13 Yard House openings in fiscal 2027, including five Bahama Breeze conversions, and said a smaller prototype would lower construction costs and broaden suitable locations. Yard House’s comparable-calendar sales growth was 10% in the quarter, although management attributed part of that strength to World Cup business.
Source: September 24 earnings-call transcript, pp. 4–5.
Converting sites gives Darden another use for locations it no longer wants to operate as Bahama Breeze. The company had completed two conversions by August 30. It had previously closed 14 Bahama Breeze restaurants and expects the remaining brand locations to close or convert by the fourth quarter of fiscal 2027. Conversion benefits therefore arrive gradually, while the company still bears transition costs and some continuing property obligations.
Source: Form 10-Q, Note 1 and “Outlook,” pp. 10 and 21.
The physical investment is visible in the accounts. Land, buildings and equipment rose by $73.6 million to $5,122.2 million during the quarter. Cash purchases were $175.3 million, while depreciation, disposals and lease accounting also affected the asset balance. Darden says increased construction and remodeling explain the slightly higher cash spending. Another $71.5 million of property purchases had been recorded but not yet paid at quarter-end.
For the full year, management expects approximately $875 million of capital spending for new restaurants, remodeling, maintenance and technology, alongside 75–80 new restaurant openings. These are plans, not completed spending. The filing does not divide that budget into maintenance and growth amounts. More restaurants can increase sales, but construction payments and opening expenses arrive before a new location establishes its normal business.
Source: Form 10-Q, balance sheet, Note 3, “Outlook” and “Liquidity and Capital Resources,” pp. 6, 12, 21 and 26.
4. Changes in operating assets and obligations absorbed more cash, leaving less for distributions
Greater cash absorption from changes in operating assets and obligations left less cash available for distributions. Cash from continuing operations fell 18.5%, from $342.5 million to $279.0 million. Changes in short-term operating assets and obligations absorbed $138.6 million, compared with $79.2 million a year earlier.
Customers generally pay Darden promptly. Receivables fell by $11.9 million, and inventory fell by $5.3 million, both adding cash in the statement of cash flows. Receivables also include items such as derivative assets, so their decline cannot be treated entirely as faster customer collections.
The larger cash uses reflected net changes in accrued obligations. Payroll and employee-benefit balances used $51.8 million of cash, versus $27.5 million a year earlier. Other current liabilities used $76.3 million, versus $35.5 million. Prepaid expenses and other current assets also absorbed more cash. These net changes reduced cash available even though the restaurants remained profitable; they do not establish larger payments without reconciling new accruals and other movements.
Source: Form 10-Q, cash-flow statements and Note 10, pp. 8–9 and 17.
A significant payment was the $38.6 million settlement on August 18 of an interest-rate swap, a contract used to manage borrowing-rate exposure. Darden’s accounting policy places payments on these contracts in operating cash flow. Settling the contract used cash now, while the associated debt adjustment will enter interest expense over the remaining life of the related bonds. That timing helps explain why cash and current profit moved differently.
Sources: Form 10-Q, Note 10, p. 17; fiscal 2026 Form 10-K, Note 1, derivative cash-flow policy.
Gift cards explain another recurring timing difference. Customers activated $123.5 million of cards, while redemptions and the recognition of amounts unlikely to be redeemed totaled $161.8 million. That reduced gross deferred gift-card revenue from $636.7 million to $598.4 million. When diners use cards bought earlier, the restaurant records sales without receiving the same amount of new cash that day. After discounts and other items, unearned revenue declined by $34.5 million.
Source: Form 10-Q, Note 2, p. 11.
The following comparison tests whether operating cash covered property spending and cash distributions. It uses cash actually paid, rather than dividends declared or repurchases recorded in equity.
| Cash generation and allocation, USD millions | First quarter FY2026 | First quarter FY2027 |
|---|---|---|
| Cash from continuing operations | 342.5 | 279.0 |
| Property and equipment purchases | 174.1 | 175.3 |
| Cash remaining after those purchases | 168.4 | 103.7 |
| Dividends paid | 175.1 | 184.2 |
| Share repurchases, including excise taxes paid | 182.7 | 220.8 |
| Distributions exceeding that remainder | 189.4 | 301.3 |
Calculation notes: “Cash remaining” is operating cash minus purchases of land, buildings and equipment, a narrowly defined free-cash-flow measure. It does not deduct software and other investing payments or finance-lease principal. The final row is dividends plus repurchases minus that remainder; it is not the total change in cash.
Source: Form 10-Q, Consolidated Statements of Cash Flows, p. 8.
Darden borrowed $285.9 million net through commercial paper, compared with $142.0 million a year earlier. Together with share-issuance proceeds and other cash movements, that allowed unrestricted cash to end almost unchanged at $220.5 million. Stable cash therefore depended on financing as well as restaurant operations.
The summer quarter is historically weaker than spring and winter, so multiplying this quarter’s cash result by four would misrepresent the business. Even so, the funding question extends beyond one quarter. For the full 53-week fiscal 2026, operating cash of $1,853.1 million less property spending of $734.0 million left $1,119.1 million. Paid dividends and repurchases totaled $1,364.7 million, exceeding that amount by $245.6 million before other cash uses. Darden’s cash generation is substantial, but its chosen distributions have also been substantial.
Sources: Form 10-Q, “Seasonality” and liquidity discussion, pp. 24–26; SEC company financial facts, annual continuing operating cash, property purchases, dividends and repurchases for May 26, 2025–May 31, 2026, checked against fiscal 2026 Form 10-K, p. 50.
5. Available credit supports the plan, while 2027 maturities make cash choices matter
Darden has financing capacity, but larger borrowings now compete with expansion and distributions for future cash. Borrowings recorded on the balance sheet rose from $2,331.3 million to $2,615.8 million during the quarter, excluding lease liabilities. Commercial paper outstanding rose from $194.0 million to $480.0 million.
The company also faces two sizeable bond payments: $500.0 million in May 2027 and $400.0 million in October 2027. The latter falls in fiscal 2028, although both mature in calendar 2027. Darden says it may use cash, operating inflows, credit facilities, commercial paper or refinancing to repay the May maturity.
At August 30, the $1.25 billion revolving credit facility had no direct borrowings, but commercial-paper backing reduced available capacity to $770.0 million. Adding unrestricted cash gives $990.5 million of cash and available credit. The $770.0 million already allows for commercial-paper backing. Darden can use this remaining capacity for debt repayment, construction and other cash needs.
Sources: Form 10-Q, balance sheet and “Liquidity and Capital Resources,” pp. 6 and 25; fiscal 2026 Form 10-K, Note 7, commercial paper at May 31.
The facility expires on October 23, 2028. Its lending agreement limits debt relative to earnings under a contract-defined leverage ratio of 3.50 times. A temporary limit of 4.00 times is available for qualifying acquisitions. Darden reported compliance, although the filing does not give the actual ratio needed to calculate its remaining room under that limit.
At the disclosed BBB credit-rating level, borrowing from the facility at its term-SOFR option would cost that market interest benchmark plus 1.10 percentage points. Existing bond coupons imply approximately $106.4 million of annual contractual interest at the listed principal amounts, before maturities or refinancing. That calculation excludes commercial-paper interest, lease interest and accounting adjustments. Borrowing costs are already affecting earnings: quarterly net interest rose by $4.9 million.
Source: Form 10-Q, pp. 23 and 25. Bond amounts and the coupon calculation are listed in the notes below.
Restaurant leases add substantial obligations beyond borrowing. At August 30, operating-lease liabilities were $4,214.0 million and finance-lease liabilities were $1,760.3 million. Finance leases are reported within other liabilities rather than the debt lines used above. Total lease liabilities increased by $295.1 million during the quarter.
The latest annual payment schedule, measured at May 31, called for $440.2 million of operating-lease payments and $114.6 million of finance-lease payments during fiscal 2027. Those are full-year scheduled payments including interest, not the amount still due after August. The quarter subsequently added leases and modified existing ones.
Sources: Form 10-Q, Note 3, p. 12; fiscal 2026 Form 10-K, Note 11, pp. 69–70.
These leases also explain part of the growing asset base. Operating rights to use leased properties rose by $280.7 million to $3,713.8 million. The quarter included $163.7 million of new operating-lease assets and a $187.6 million net change in lease assets mainly related to modifications and category reclassifications. These noncash changes are not equivalent to construction spending or a count of new restaurants. They do, however, reinforce the need to keep restaurant sales high enough to support property commitments.
Source: Form 10-Q, balance sheet and Note 3, pp. 6 and 12.
6. Distributions reduced equity, while acquired brands and old leases remain exposures
Darden’s smaller equity balance reflects distributions and repurchases despite a profitable quarter. Equity—the recorded value of assets after liabilities—declined by $139.1 million to $2,068.4 million. Declared dividends and part of the repurchase cost were charged against accumulated profits, widening the retained-earnings deficit even as current operations earned money.
Darden bought approximately 1.1 million shares, while employee options and share plans added approximately 0.3 million shares. Shares outstanding fell from 114.1 million to 113.3 million, using the equity statement’s rounded figures. The company’s stated policy is to retire repurchased shares, removing them from those outstanding instead of holding them as treasury shares. That reduces the number of shares sharing future earnings, while using cash that could otherwise fund development or debt repayment.
Sources: Form 10-Q, equity statement, p. 7, and repurchase disclosures, p. 29; fiscal 2026 Form 10-K, Note 10, share-retirement policy. The equity reconciliation below distinguishes amounts recorded from cash paid.
Management presents repurchases as part of returning cash alongside dividends while maintaining an investment-grade balance sheet. The program is discretionary, giving Darden a way to retain more cash if construction or debt payments require it.
Sources: September 24 earnings presentation, slide 3; Form 10-Q, repurchase program, p. 29.
Employee compensation partly offsets the share reduction. Of $26.6 million in stock-based compensation expense, $12.0 million related to awards paid in cash. The equity statement recorded the remaining $14.6 million. Awards payable in shares can increase the future share count, which is why diluted earnings per share allow for more shares than the basic calculation. Darden therefore faces both employee cash payments and potential new shares.
Source: Form 10-Q, Notes 5 and 9 and the equity statement, pp. 7, 12 and 15–16.
Goodwill and trademarks remained unchanged at a combined $3,004.6 million. These balances represent acquisition-related value and brand rights whose usefulness depends on future business performance. The quarter did not show a material write-down of those balances. Their stability does not establish that every acquired brand is performing equally well: Fine Dining and Other Business both reported lower segment margins.
Source: Form 10-Q, balance sheet, Note 11 and segment results, pp. 6, 18–19 and 24.
Old property commitments deserve attention as well. Darden guarantees up to $80.4 million of lease payments on properties assigned to third parties, mainly following the Red Lobster disposition and Canadian Olive Garden sale. It recorded $10.4 million for expected credit losses under those guarantees. The larger figure is the maximum potential payment, not a forecast loss; the smaller figure does not remove the risk if a tenant defaults. The guarantees expire over fiscal 2027–2035.
The filing also describes ordinary-course lawsuits and claims. Management does not expect their final resolution to materially harm financial condition, results or liquidity, and it does not provide a separate reasonably possible loss range. Tax positions totaling $1.3 million could change within 12 months as examinations or limitation periods conclude. These matters remain possible demands on future cash.
Source: Form 10-Q, Notes 4 and 12, pp. 12 and 19.
Darden’s daily business helps support its liability structure: guests generally pay immediately, while suppliers are typically paid in 5–90 days. That permits current liabilities to exceed current assets. Yet the quarter’s increase in current liabilities came mainly from borrowing. The company’s operating model provides cash flexibility; the recent increase in financing needs still requires active management.
Source: Form 10-Q, “Liquidity and Capital Resources” and “Financial Condition,” pp. 24–26.
7. The business remains profitable, but the next improvement needs broader guest growth
Darden’s strongest evidence of progress is LongHorn’s profitable guest growth; its central unfinished task is extending that progress across the portfolio. The prior-year Canada gain makes reported profit look weaker than the restaurant comparison warrants. Once management’s adjustments are applied, however, consolidated operating margin is still almost unchanged, and continuing profit growth is modest.
Management retained its fiscal 2027 plan for $13.60–$13.75 billion of sales and 2.5%–3.5% same-restaurant sales growth. The first-quarter result supports continued expansion, but Olive Garden’s lunch and menu initiatives need to bring in enough additional visits to repay their immediate margin cost. New restaurants and conversions can add another source of growth as they begin operating.
Source: Form 10-Q, “Outlook,” p. 21. These are management forecasts, not achieved results.
The financial condition is workable because Darden generates substantial cash and retains available credit. Its flexibility would improve if restaurant growth translated into more cash after investment, or if it reduced discretionary repurchases while meeting bond maturities. A broader recovery in guest visits would strengthen both profit and funding. Continued dependence on higher checks, alongside distributions above cash left after investment, would leave more of the expansion plan dependent on borrowing.
Reporting basis and calculation notes
Reporting basis: Darden Restaurants, Inc., CIK 0000940944, consolidated U.S. GAAP accounts including subsidiaries; Form 10-Q, accession 0000940944-26-000042, filed October 2, 2026. The SEC identifies August 30, 2026 as the reporting date. The quarter covers June 1–August 30, 2026, compared with May 26–August 24, 2025. Both are 13-week periods. Balance-sheet comparisons use May 31 and August 30, 2026. The supplemental comparable-calendar sales measure instead uses June 2–August 31, 2025 as its prior-year period. Fiscal 2027 has 52 weeks; fiscal 2026 had 53.
Sources: SEC filing index; Form 10-Q, cover, Note 1 and p. 22. Supporting annual accounts are from accession 0000940944-26-000025, filed July 24, 2026. SEC financial facts were checked by accession, actual dates, units and accounting scope; calendar-quarter labels were not used to identify Darden’s fiscal quarter.
Calculation notes — reported and adjusted earnings: The table shows exactly what management removes from continuing operations. Amounts are USD millions except earnings per share. A positive tax adjustment increases adjusted tax expense. The Canada removal reduces both profit and its associated tax expense. The current quarter has no management adjustments.
| Continuing-operations reconciliation | Pretax earnings | Income-tax expense | After-tax earnings | Diluted EPS, USD |
|---|---|---|---|---|
| First quarter FY2026, reported | 293.8 | 35.9 | 257.9 | 2.19 |
| Add back Chuy’s transaction and integration costs | 3.6 | 0.9 | 2.7 | 0.02 |
| Add back closed-restaurant costs | 3.1 | 0.8 | 2.3 | 0.02 |
| Remove Canada sale gain | -42.0 | -10.5 | -31.5 | -0.26 |
| First quarter FY2026, adjusted | 258.5 | 27.1 | 231.4 | 1.97 |
| First quarter FY2027, reported and adjusted | 269.0 | 34.7 | 234.3 | 2.05 |
Adjusted operating profit for the prior year is $339.2 million + $3.6 million + $3.1 million − $42.0 million = $303.9 million. Current operating profit is $319.3 million. Their respective margins are $303.9 million ÷ $3,044.7 million and $319.3 million ÷ $3,200.3 million, both approximately 9.98%. Adjusted prior-year tax rate is $27.1 million ÷ $258.5 million = 10.5%. EPS adjustments are the company’s rounded disclosures.
Sources: September 24 results release, earnings reconciliation; earnings presentation, slide 14; Form 10-Q, p. 4.
Calculation notes — restaurant contribution: LongHorn’s $84.5 million sales increase divided by the consolidated $155.6 million increase equals 54.3%. Its $19.7 million segment-profit increase divided by the four segments’ combined $26.0 million increase equals 75.8%. The latter excludes the separate corporate adjustment. In fiscal 2027’s first quarter, restaurant segments contributed $576.5 million, and the $26.4 million corporate adjustment brought the disclosed segment-profit reconciliation total to $602.9 million. Subtracting opening costs of $8.5 million, overhead of $134.8 million and depreciation of $144.2 million, then adding the $3.9 million net disposal benefit, gives $319.3 million of consolidated operating profit.
Source: Form 10-Q, Note 6, pp. 13–14. The prior-year equivalent is $550.5 million + $23.8 million − $5.9 million − $136.1 million − $135.1 million + $42.0 million = $339.2 million.
Calculation notes — profit to operating cash: This bridge explains why profit and cash differ, using continuing operations and USD millions. Depreciation spreads past asset costs over time; it does not represent a new payment in this quarter. Deferred taxes reflect differences in when tax expense and tax payments are recognized.
| Continuing-operations cash bridge, USD millions | First quarter FY2026 | First quarter FY2027 |
|---|---|---|
| Continuing earnings | 257.9 | 234.3 |
| Add depreciation and amortization | 135.1 | 144.2 |
| Remove net disposal gains and other asset adjustments | -42.0 | -3.9 |
| Add stock-based compensation adjustment | 25.0 | 26.6 |
| Changes in short-term operating assets and liabilities | -79.2 | -138.6 |
| Deferred income taxes | 53.9 | 23.5 |
| Changes in other assets and liabilities | 8.5 | -3.9 |
| Remove unrealized life-insurance investment gains | -16.7 | -3.2 |
| Cash from continuing operations | 342.5 | 279.0 |
Cash taxes were $14.9 million in the current quarter, compared with a $2.7 million net refund a year earlier. These payments are already reflected in operating cash; they are not an additional deduction from the bridge. Total operating cash, including discontinued operations, was $276.7 million in fiscal 2027’s first quarter and $342.5 million in the comparison quarter.
Source: Form 10-Q, cash-flow statements and Note 3, pp. 8–9 and 12.
Calculation notes — opening to closing cash: All amounts are USD millions. Beginning cash including restricted cash of $227.6 million + continuing operating cash of $279.0 million − investing cash use of $171.3 million − financing cash use of $104.4 million − discontinued-operation cash use of $2.3 million = ending cash of $228.6 million. Restricted cash was $8.1 million at both the beginning and end, leaving unrestricted cash of $219.5 million and $220.5 million.
Investing cash use equals property purchases of $175.3 million + software and other net payments of $4.8 million − disposal proceeds of $8.8 million. Financing cash use equals paid dividends of $184.2 million + repurchases of $220.8 million + finance-lease principal of $5.3 million − share-issuance proceeds of $20.0 million − net short-term borrowing of $285.9 million. The prior-year cash reconciliation is $254.5 million + $342.5 million − $159.3 million − $212.2 million = $225.5 million, including $14.5 million of restricted cash.
Source: Form 10-Q, p. 8. Restricted cash secures a standby letter of credit, as explained in Note 3.
Calculation notes — debt maturities and contractual interest: The following are principal amounts and annual coupon rates as disclosed at August 30, 2026. Annual interest is principal multiplied by the coupon, before repayment, refinancing or changes to a contractual rate.
| Bond maturity | Principal, USD millions | Annual coupon rate |
|---|---|---|
| May 2027 | 500.0 | 3.850% |
| October 2027 | 400.0 | 4.350% |
| October 2029 | 350.0 | 4.550% |
| October 2033 | 500.0 | 6.300% |
| August 2035 | 96.3 | 6.000% |
| October 2037 | 42.8 | 6.800% |
| February 2048 | 300.0 | 4.550% |
| Total principal | 2,189.1 | — |
Multiplying each principal amount by its annual coupon and adding the results gives approximately $106.4 million of annual bond interest.
The October 2037 rate can rise by up to two percentage points following specified ratings changes; no increase had occurred. Bond principal differs from the balance-sheet carrying amount because accounting includes discounts, issuance costs and hedge adjustments. Current debt of $979.7 million plus noncurrent debt of $1,636.1 million equals $2,615.8 million of recorded borrowings, including commercial paper. Lease liabilities are additional and separately described above.
Source: Form 10-Q, pp. 6 and 25; fiscal 2026 Form 10-K, Note 7, for the debt accounting presentation.
Calculation notes — balance sheet and equity: The selected balances below preserve the distinction between cash, assets used to operate restaurants and obligations to others. All amounts are USD millions.
| Consolidated balance | May 31, 2026 | August 30, 2026 |
|---|---|---|
| Cash and cash equivalents | 219.5 | 220.5 |
| Receivables, net | 129.9 | 118.0 |
| Inventory | 326.3 | 321.0 |
| Total current assets | 942.9 | 953.1 |
| Land, buildings and equipment, net | 5,048.6 | 5,122.2 |
| Operating-lease assets | 3,433.1 | 3,713.8 |
| Goodwill and trademarks, combined | 3,004.6 | 3,004.6 |
| Total assets | 12,862.4 | 13,226.6 |
| Total liabilities | 10,654.9 | 11,158.2 |
| Total equity | 2,207.5 | 2,068.4 |
Assets reconcile to liabilities plus equity at both dates: $10,654.9 million + $2,207.5 million = $12,862.4 million, and $11,158.2 million + $2,068.4 million = $13,226.6 million. Property assets include $1,404.1 million of finance-lease assets at August 30, so those assets must not be added a second time.
Accounts payable increased by $42.3 million, from $427.7 million to $470.0 million, but the operating cash-flow contribution was $24.4 million. The full balance movement is not an operating-cash inflow; the accounts also contain noncash and investing-related movements. Deferred tax liabilities rose by $24.0 million to $367.6 million, broadly alongside the deferred-tax adjustment in operating cash. Prepaid taxes rose by $6.5 million, and prepaid expenses and other current assets rose by $19.9 million.
The following equity bridge separates capital recorded for shares from accumulated profits and gains recorded outside current earnings. All amounts are USD millions; negative amounts reduce equity.
| First quarter FY2027 movement | Common stock and surplus | Retained earnings | Other comprehensive income | Total equity |
|---|---|---|---|---|
| May 31 opening balance | 2,296.3 | -108.4 | 19.6 | 2,207.5 |
| Net earnings | 0.0 | 233.4 | 0.0 | 233.4 |
| Dividends declared | 0.0 | -185.6 | 0.0 | -185.6 |
| Option exercises and employee-plan issuance | 20.0 | 0.0 | 0.0 | 20.0 |
| Stock-based compensation recorded in equity | 14.6 | 0.0 | 0.0 | 14.6 |
| Repurchases, including applicable excise tax | -23.4 | -198.9 | 0.0 | -222.3 |
| Other comprehensive income, mainly derivatives | 0.0 | 0.0 | 0.8 | 0.8 |
| August 30 closing balance | 2,307.5 | -259.5 | 20.4 | 2,068.4 |
Option exercises supplied $16.6 million of the $20.0 million issuance total, and employee plans supplied $3.4 million. The $222.3 million recorded repurchase amount differs from $220.8 million paid in cash. Dividends declared likewise differ from cash paid. A separate $1.62-per-share dividend declared September 23 is payable November 2, after the first quarter.
Sources: Form 10-Q, pp. 5–9, Notes 3, 8 and 13. May 31 balances use the quarter’s comparative presentation, which moved $412 million from other current liabilities to payroll and benefits without changing total liabilities or cash flow.
This report is for general information and business analysis. It is not investment advice.