UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended August ~~28, 2022~~27, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

1-13666

Commission File Number

DARDEN RESTAURANTS, INC.

(Exact name of registrant as specified in its charter)


Florida		59-3305930
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1000 Darden Center Drive
Orlando,	Florida	32837
(Address of principal executive offices)		(Zip Code)

407-245-4000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, without par value	DRI	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

Number of shares of common stock outstanding as of September 15, ~~2022: 122,387,059.~~2023: 120,314,697.

Table of Contents

TABLE OF CONTENTS


			Page
Part I -	Financial Information
	Item 1.	Financial Statements (Unaudited)	4
		Consolidated Statements of Earnings	4
		Consolidated Statements of Comprehensive Income	5
		Consolidated Balance Sheets	6
		Consolidated Statements of Changes in Stockholders’ Equity	7
		Consolidated Statements of Cash Flows	8
		Notes to Consolidated Financial Statements	10
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2322
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3029
	Item 4.	Controls and Procedures	3029

Part II -	Other Information
	Item 1.	Legal Proceedings	31
	Item 1A.	Risk Factors	31
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
	Item 5.	Other Information	31
	Item 6.	Exhibits	32

Signature			33

Table of Contents

Cautionary Statement Regarding Forward-Looking Statements

Statements set forth in or incorporated into this report that are not historical facts, including without limitation statements with respect to the financial condition, results of operations, plans, objectives, future performance and business of Darden Restaurants, Inc. and its subsidiaries that are preceded by, followed by or that include words such as “may,” “will,” “expect,” “intend,” “anticipate,” “continue,” “estimate,” “project,” “believe,” “plan”, “outlook” or similar expressions, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. This statement is included for purposes of complying with the safe harbor provisions of that Act. Any forward-looking statements speak only as of the date on which such statements are made, and we undertake no obligation to update such statements for any reason to reflect events or circumstances arising after such date. By their nature, forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by such forward-looking statements. The most significant of these uncertainties are described in Darden’s Form 10-K, Form 10-Q (including this report) and Form 8-K reports.

Table of Contents

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

DARDEN RESTAURANTS, INC.

CONSOLIDATED STATEMENTS OF EARNINGS

(In millions, except per share data)

(Unaudited)


		Three Months Ended					Three Months Ended
		August 28, 2022		August 29, 2021				August 27, 2023		August 28, 2022
Sales	Sales	$	2,446.1	$	2,306.0	Sales		$	2,730.6	$	2,446.1
Costs and expenses:	Costs and expenses:					Costs and expenses:
Food and beverage	Food and beverage	795.3		685.4		Food and beverage		851.0		795.3
Restaurant labor	Restaurant labor	793.8		736.0		Restaurant labor		875.3		793.8
Restaurant expenses	Restaurant expenses	403.5		378.1		Restaurant expenses		446.6		403.5
Marketing expenses	Marketing expenses	30.3		23.9		Marketing expenses		38.6		30.3
General and administrative expenses	General and administrative expenses	88.3		113.0		General and administrative expenses		153.3		88.3
Depreciation and amortization	Depreciation and amortization	95.6		89.0		Depreciation and amortization		109.8		95.6
Impairments and disposal of assets, net	Impairments and disposal of assets, net	(4.9)		—		Impairments and disposal of assets, net		3.1		(4.9)
Total operating costs and expenses	Total operating costs and expenses	$	2,201.9	$	2,025.4	Total operating costs and expenses		$	2,477.7	$	2,201.9
Operating income	Operating income	244.2		280.6		Operating income		252.9		244.2
Interest, net	Interest, net	19.8		15.6		Interest, net		29.7		19.8

Earnings before income taxes	Earnings before income taxes	224.4		265.0		Earnings before income taxes		223.2		224.4
Income tax expense	Income tax expense	30.8		33.3		Income tax expense		28.4		30.8
Earnings from continuing operations	Earnings from continuing operations	$	193.6	$	231.7	Earnings from continuing operations		$	194.8	$	193.6
Losses from discontinued operations, net of tax benefit of $0.0 and $0.5, respectively		(0.6)		(0.8)
Losses from discontinued operations, net of tax benefit of $0.1 and $0.0, respectively						Losses from discontinued operations, net of tax benefit of $0.1 and $0.0, respectively		(0.3)		(0.6)
Net earnings	Net earnings	$	193.0	$	230.9	Net earnings		$	194.5	$	193.0
Basic net earnings per share:	Basic net earnings per share:					Basic net earnings per share:
Earnings from continuing operations	Earnings from continuing operations	$	1.58	$	1.78	Earnings from continuing operations		$	1.61	$	1.58
Losses from discontinued operations	Losses from discontinued operations	(0.01)		(0.01)		Losses from discontinued operations		—		(0.01)
Net earnings	Net earnings	$	1.57	$	1.77	Net earnings		$	1.61	$	1.57
Diluted net earnings per share:	Diluted net earnings per share:					Diluted net earnings per share:
Earnings from continuing operations	Earnings from continuing operations	$	1.56	$	1.76	Earnings from continuing operations		$	1.60	$	1.56
Losses from discontinued operations	Losses from discontinued operations	—		(0.01)		Losses from discontinued operations		(0.01)		—
Net earnings	Net earnings	$	1.56	$	1.75	Net earnings		$	1.59	$	1.56
Average number of common shares outstanding:	Average number of common shares outstanding:					Average number of common shares outstanding:
Basic	Basic	122.9		130.3		Basic		120.9		122.9
Diluted	Diluted	123.9		131.7		Diluted		122.0		123.9

See accompanying notes to our unaudited consolidated financial statements.

Table of Contents

DARDEN RESTAURANTS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)


		Three Months Ended					Three Months Ended
		August 28, 2022		August 29, 2021				August 27, 2023		August 28, 2022
Net earnings	Net earnings	$	193.0	$	230.9	Net earnings		$	194.5	$	193.0

Foreign currency adjustment	Foreign currency adjustment	—		(0.4)		Foreign currency adjustment		—		—
Change in fair value of derivatives and amortization of unrecognized gains and losses on derivatives, net of taxes of $0.6 and $0.0, respectively		2.2		1.8
Net unamortized gain (loss) arising during the period, including amortization of unrecognized net actuarial gain (loss), net of taxes of $0.1 and $0.1, respectively, related to pension and other post-employment benefits		0.1		0.2
Change in fair value of derivatives and amortization of unrecognized gains and losses on derivatives, net of taxes of $5.4 and $0.6, respectively						Change in fair value of derivatives and amortization of unrecognized gains and losses on derivatives, net of taxes of $5.4 and $0.6, respectively		12.6		2.2
Net unamortized gain (loss) arising during the period, including amortization of unrecognized net actuarial gain (loss), net of taxes of $0.0 and $0.1, respectively, related to pension and other post-employment benefits						Net unamortized gain (loss) arising during the period, including amortization of unrecognized net actuarial gain (loss), net of taxes of $0.0 and $0.1, respectively, related to pension and other post-employment benefits		0.2		0.1
Other comprehensive income	Other comprehensive income	$	2.3	$	1.6	Other comprehensive income		$	12.8	$	2.3
Total comprehensive income	Total comprehensive income	$	195.3	$	232.5	Total comprehensive income		$	207.3	$	195.3

See accompanying notes to our unaudited consolidated financial statements.

Table of Contents

DARDEN RESTAURANTS, INC.

CONSOLIDATED BALANCE SHEETS

(In millions)


		August 28, 2022		May 29, 2022			August 27, 2023		May 28, 2023
		(Unaudited)					(Unaudited)
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	377.5	$	420.6	Cash and cash equivalents	$	192.1	$	367.8
Receivables, net	Receivables, net	50.7		72.0		Receivables, net	59.2		80.2
Inventories	Inventories	273.1		270.6		Inventories	287.0		287.9
Prepaid income taxes	Prepaid income taxes	68.8		274.8		Prepaid income taxes	98.8		107.3
Prepaid expenses and other current assets	Prepaid expenses and other current assets	170.9		141.4		Prepaid expenses and other current assets	198.6		154.5

Total current assets	Total current assets	$	941.0	$	1,179.4	Total current assets	$	835.7	$	997.7
Land, buildings and equipment, net of accumulated depreciation and amortization of $3,215.2 and $3,140.9, respectively		3,485.8		3,356.0
Land, buildings and equipment, net of accumulated depreciation and amortization of $3,506.2 and $3,422.0, respectively						Land, buildings and equipment, net of accumulated depreciation and amortization of $3,506.2 and $3,422.0, respectively	3,991.7		3,725.1
Operating lease right-of-use assets	Operating lease right-of-use assets	3,452.8		3,465.1		Operating lease right-of-use assets	3,600.3		3,373.9
Goodwill	Goodwill	1,037.4		1,037.4		Goodwill	1,376.9		1,037.4
Trademarks	Trademarks	806.3		806.3		Trademarks	1,148.0		806.3
Other assets	Other assets	291.2		291.6		Other assets	316.6		301.1
Total assets	Total assets	$	10,014.5	$	10,135.8	Total assets	$	11,269.2	$	10,241.5
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	406.9	$	366.9	Accounts payable	$	419.6	$	426.2

Short-term debt						Short-term debt	95.4		—
Accrued payroll	Accrued payroll	137.2		181.5		Accrued payroll	168.6		173.0
Accrued income taxes	Accrued income taxes	43.0		32.1		Accrued income taxes	8.5		7.8
Other accrued taxes	Other accrued taxes	70.8		64.5		Other accrued taxes	74.3		65.9
Unearned revenues	Unearned revenues	467.9		498.0		Unearned revenues	541.7		512.0

Other current liabilities	Other current liabilities	699.5		704.5		Other current liabilities	786.1		752.5
Total current liabilities	Total current liabilities	$	1,825.3	$	1,847.5	Total current liabilities	$	2,094.2	$	1,937.4
Long-term debt	Long-term debt	895.1		901.0		Long-term debt	1,477.1		884.9
Deferred income taxes	Deferred income taxes	192.4		201.1		Deferred income taxes	231.4		142.2
Operating lease liabilities - non-current	Operating lease liabilities - non-current	3,745.5		3,755.8		Operating lease liabilities - non-current	3,877.5		3,667.6
Other liabilities	Other liabilities	1,292.1		1,232.2		Other liabilities	1,441.0		1,407.9
Total liabilities	Total liabilities	$	7,950.4	$	7,937.6	Total liabilities	$	9,121.2	$	8,040.0
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Common stock and surplus	Common stock and surplus	$	2,215.4	$	2,226.0	Common stock and surplus	$	2,256.8	$	2,230.8
Retained earnings (deficit)	Retained earnings (deficit)	(151.7)		(25.9)		Retained earnings (deficit)	(124.8)		(32.5)
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	0.4		(1.9)		Accumulated other comprehensive income (loss)	16.0		3.2

Total stockholders’ equity	Total stockholders’ equity	$	2,064.1	$	2,198.2	Total stockholders’ equity	$	2,148.0	$	2,201.5
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	10,014.5	$	10,135.8	Total liabilities and stockholders’ equity	$	11,269.2	$	10,241.5

See accompanying notes to our unaudited consolidated financial statements.

Table of Contents

DARDEN RESTAURANTS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the Three Months Ended August ~~28, 2022~~27, 2023 and August ~~29, 2021~~28, 2022

(In millions)

(Unaudited)


	Common Stock And Surplus
	Shares	Amount		Retained Earnings (Deficit)		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity











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

Common Stock
And Surplus
Shares Amount Retained
Earnings Accumulated
Other
Comprehensive
Income (Loss) Total
Stockholders’
Equity
Balance at May 29, 2022 123.9 $ 2,226.0 $ (25.9) $ (1.9) $ 2,198.2
Net earnings — — 193.0 — 193.0
Other comprehensive income — — — 2.3 2.3
Dividends declared ($1.21 per share) — — (150.0) — (150.0)
Stock option exercises 0.1 3.6 — — 3.6
Stock-based compensation — 12.1 — — 12.1
Repurchases of common stock (1.7) (30.2) (168.8) — (199.0)
Issuance of stock under Employee Stock Purchase Plan and other plans 0.2 2.8 — — 2.8
Other — 1.1 — — 1.1
Balance at August 28, 2022 122.5 $ 2,215.4 $ (151.7) $ 0.4 $ 2,064.1


Balance at May 30, 2021		130.8	$	2,286.6	$	522.3	$	4.2	$	2,813.1
Balance at May 29, 2022											Balance at May 29, 2022	123.9	$	2,226.0	$	(25.9)	$	(1.9)	$	2,198.2
Net earnings	Net earnings	—	—		230.9		—		230.9		Net earnings	—	—		193.0		—		193.0
Other comprehensive income		—	—		—		1.6		1.6
Dividends declared ($1.10 per share)		—	—		(144.1)		—		(144.1)
Other comprehensive income (loss)											Other comprehensive income (loss)	—	—		—		2.3		2.3
Dividends declared ($1.21 per share)											Dividends declared ($1.21 per share)	—	—		(150.0)		—		(150.0)
Stock option exercises	Stock option exercises	0.3	17.0		—		—		17.0		Stock option exercises	0.1	3.6		—		—		3.6
Stock-based compensation	Stock-based compensation	—	16.3		—		—		16.3		Stock-based compensation	—	12.1		—		—		12.1
Repurchases of common stock	Repurchases of common stock	(1.3)	(23.1)		(163.2)		—		(186.3)		Repurchases of common stock	(1.7)	(30.2)		(168.8)		—		(199.0)
Issuance of stock under Employee Stock Purchase Plan and other plans	Issuance of stock under Employee Stock Purchase Plan and other plans	0.2	2.6		—		—		2.6		Issuance of stock under Employee Stock Purchase Plan and other plans	0.2	2.8		—		—		2.8
Other	Other	—	1.3		—		—		1.3		Other	—	1.1		—		—		1.1
Balance at August 29, 2021		130.0	$	2,300.7	$	445.9	$	5.8	$	2,752.4
Balance at August 28, 2022											Balance at August 28, 2022	122.5	$	2,215.4	$	(151.7)	$	0.4	$	2,064.1

See accompanying notes to our unaudited consolidated financial statements.

Table of Contents

DARDEN RESTAURANTS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


		Three Months Ended					Three Months Ended
		August 28, 2022		August 29, 2021			August 27, 2023		August 28, 2022
Cash flows—operating activities	Cash flows—operating activities					Cash flows—operating activities
Net earnings	Net earnings	$	193.0	$	230.9	Net earnings	$	194.5	$	193.0
Losses from discontinued operations, net of tax	Losses from discontinued operations, net of tax	0.6		0.8		Losses from discontinued operations, net of tax	0.3		0.6
Adjustments to reconcile net earnings from continuing operations to cash flows:	Adjustments to reconcile net earnings from continuing operations to cash flows:					Adjustments to reconcile net earnings from continuing operations to cash flows:
Depreciation and amortization	Depreciation and amortization	95.6		89.0		Depreciation and amortization	109.8		95.6
Impairments and disposal of assets, net	Impairments and disposal of assets, net	(4.9)		—		Impairments and disposal of assets, net	3.1		(4.9)
Stock-based compensation expense	Stock-based compensation expense	20.3		27.6		Stock-based compensation expense	30.3		20.3
Change in current assets and liabilities	Change in current assets and liabilities	133.5		(151.8)		Change in current assets and liabilities	(59.5)		133.5
Contributions to pension and postretirement plans	Contributions to pension and postretirement plans	(0.5)		(0.5)		Contributions to pension and postretirement plans	(0.4)		(0.5)
Deferred income taxes	Deferred income taxes	(9.6)		(5.4)		Deferred income taxes	4.2		(9.6)
Change in other assets and liabilities	Change in other assets and liabilities	(4.2)		(5.4)		Change in other assets and liabilities	(10.4)		(4.2)

Other, net	Other, net	4.0		(4.9)		Other, net	(2.8)		4.0
Net cash provided by operating activities of continuing operations	Net cash provided by operating activities of continuing operations	$	427.8	$	180.3	Net cash provided by operating activities of continuing operations	$	269.1	$	427.8
Cash flows—investing activities	Cash flows—investing activities					Cash flows—investing activities
Purchases of land, buildings and equipment	Purchases of land, buildings and equipment	(122.8)		(82.7)		Purchases of land, buildings and equipment	(150.9)		(122.8)
Proceeds from disposal of land, buildings and equipment	Proceeds from disposal of land, buildings and equipment	10.4		3.4		Proceeds from disposal of land, buildings and equipment	1.6		10.4

Cash used in business acquisitions, net of cash acquired						Cash used in business acquisitions, net of cash acquired	(699.9)		—
Purchases of capitalized software and other assets	Purchases of capitalized software and other assets	(5.8)		(5.5)		Purchases of capitalized software and other assets	(5.2)		(5.8)
Other, net	Other, net	0.1		1.1		Other, net	0.2		0.1
Net cash used in investing activities of continuing operations	Net cash used in investing activities of continuing operations	$	(118.1)	$	(83.7)	Net cash used in investing activities of continuing operations	$	(854.2)	$	(118.1)
Cash flows—financing activities	Cash flows—financing activities					Cash flows—financing activities
Proceeds from issuance of common stock	Proceeds from issuance of common stock	6.4		19.6		Proceeds from issuance of common stock	22.3		6.4
Dividends paid	Dividends paid	(148.5)		(143.5)		Dividends paid	(158.5)		(148.5)
Repurchases of common stock	Repurchases of common stock	(199.0)		(186.3)		Repurchases of common stock	(142.9)		(199.0)
Proceeds from issuance of short-term debt						Proceeds from issuance of short-term debt	872.1		—
Repayments of short-term debt						Repayments of short-term debt	(776.7)		—

Proceeds from issuance of long-term debt						Proceeds from issuance of long-term debt	600.0		—
Principal payments on finance leases						Principal payments on finance leases	(5.5)		(4.3)
Payments of debt issuance costs						Payments of debt issuance costs	(1.4)		—
Net cash provided by (used in) financing activities of continuing operations						Net cash provided by (used in) financing activities of continuing operations	$	409.4	$	(345.4)
Cash flows—discontinued operations						Cash flows—discontinued operations
Net cash used in operating activities of discontinued operations						Net cash used in operating activities of discontinued operations	—		(0.5)

Principal payments on finance leases		(4.3)		(2.6)

Net cash used in financing activities of continuing operations		$	(345.4)	$	(312.8)
Cash flows—discontinued operations
Net cash (used in) provided by operating activities of discontinued operations		(0.5)		0.8

Net cash (used in) provided by discontinued operations		$	(0.5)	$	0.8
Net cash used in discontinued operations						Net cash used in discontinued operations	$	—	$	(0.5)

Decrease in cash, cash equivalents, and restricted cash	Decrease in cash, cash equivalents, and restricted cash	(36.2)		(215.4)		Decrease in cash, cash equivalents, and restricted cash	(175.7)		(36.2)
Cash, cash equivalents, and restricted cash - beginning of period	Cash, cash equivalents, and restricted cash - beginning of period	472.1		1,214.7		Cash, cash equivalents, and restricted cash - beginning of period	416.2		472.1
Cash, cash equivalents, and restricted cash - end of period	Cash, cash equivalents, and restricted cash - end of period	$	435.9	$	999.3	Cash, cash equivalents, and restricted cash - end of period	$	240.5	$	435.9


Reconciliation of cash, cash equivalents, and restricted cash:	Reconciliation of cash, cash equivalents, and restricted cash:	August 28, 2022		August 29, 2021		Reconciliation of cash, cash equivalents, and restricted cash:	August 27, 2023		August 28, 2022
Cash and cash equivalents	Cash and cash equivalents	$	377.5	$	947.8	Cash and cash equivalents	$	192.1	$	377.5
Restricted cash included in prepaid expenses and other current assets	Restricted cash included in prepaid expenses and other current assets	58.4		51.5		Restricted cash included in prepaid expenses and other current assets	48.4		58.4
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	435.9	$	999.3	Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	240.5	$	435.9

Table of Contents

DARDEN RESTAURANTS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(In millions)

(Unaudited)


		Three Months Ended					Three Months Ended
		August 28, 2022		August 29, 2021			August 27, 2023		August 28, 2022
Cash flows from changes in current assets and liabilities	Cash flows from changes in current assets and liabilities					Cash flows from changes in current assets and liabilities
Receivables, net	Receivables, net	21.3		0.8		Receivables, net	29.5		21.3
Inventories	Inventories	(2.5)		(20.0)		Inventories	9.4		(2.5)
Prepaid expenses and other current assets	Prepaid expenses and other current assets	(28.0)		(11.8)		Prepaid expenses and other current assets	(40.1)		(28.0)
Accounts payable	Accounts payable	12.6		14.7		Accounts payable	(16.0)		12.6
Accrued payroll	Accrued payroll	(44.3)		(23.1)		Accrued payroll	(13.7)		(44.3)
Prepaid/accrued income taxes	Prepaid/accrued income taxes	217.0		33.0		Prepaid/accrued income taxes	20.8		217.0
Other accrued taxes	Other accrued taxes	6.3		7.4		Other accrued taxes	7.8		6.3
Unearned revenues	Unearned revenues	(30.2)		(27.1)		Unearned revenues	(32.1)		(30.2)
Other current liabilities	Other current liabilities	(18.7)		(125.7)		Other current liabilities	(25.1)		(18.7)
Change in current assets and liabilities	Change in current assets and liabilities	$	133.5	$	(151.8)	Change in current assets and liabilities	$	(59.5)	$	133.5

See accompanying notes to our unaudited consolidated financial statements.

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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®, The Capital Grille®, Seasons 52®, Bahama Breeze®, Eddie V’s Prime Seafood® and The Capital Burger®. As of August ~~28, 2022,~~27, 2023, 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 3492 franchised restaurants. We also have 2853 franchised restaurants in operation located in Latin America, the Caribbean, Asia, and the ~~Caribbean.~~Middle East.

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 ~~28, 2023~~26, 2024 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 ~~29, 2022.~~28, 2023. 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.

~~COVID-19 Pandemic~~

Note 2.Acquisition of Ruth’s Chris Steak House

On June 14, 2023, we acquired 100 percent of the equity interest of Ruth’s Chris Steak House (Ruth’s Chris) for $724.6 million in total consideration. We funded the acquisition with the proceeds from the issuance of a $600.0 million Term Loan (Term Loan Agreement) combined with cash on hand.

The acquired operations of Ruth’s Chris included 77 company-owned locations, 74 franchisee-owned locations and ~~Other Impacts~~4 managed locations operating under contractual agreement. The results of Ruth’s Chris operations are included in our consolidated financial statements from the date of acquisition.

The Term Loan Agreement is a senior unsecured $600 million 3-year credit 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 our existing revolving credit agreement. The Term Loan Agreement bears interest at a rate of:

(a) Term SOFR (which is defined, for the applicable interest period, as the Term SOFR Screen Rate two U.S. Government Securities Business Days prior to ~~our Operating Environment~~the commencement of such interest period with a term equivalent to such interest period) plus a Term SOFR adjustment of 0.10 percent plus the relevant margin determined by reference to a ratings-based pricing grid (Applicable Margin); or

~~During fiscal 2022, increasing numbers~~(b) The base rate (which is defined as the highest of ~~COVID-19 cases throughout~~ the ~~United States including~~BOA prime rate, the ~~Omicron variant which significantly impacted our restaurants~~Federal Funds rate plus 0.500 percent, and the Term SOFR plus 1.00 percent) plus the relevant Applicable Margin.

Assuming a “BBB” equivalent credit rating level, the Applicable Margin under the Term Loan Agreement is 1.125 percent for Term SOFR loans and 0.125 percent for base rate loans. The Term Loan Agreement matures on the third anniversary of the funding date thereunder, June 14, 2023.

The assets and liabilities of Ruth’s Chris were recorded at their respective fair values as of the date of acquisition. We are in the ~~third quarter, mostly in January 2022, subjected some~~process of ~~our restaurants to COVID-19-related restrictions such as mask and/or vaccine requirements for team members, guests or both. Exclusions~~confirming, through internal studies and ~~quarantines~~third-party valuations, the fair value of ~~restaurant team members or groups thereof disrupt an individual restaurant’s operations~~these assets, including land, buildings and often come with little or no notice to the local restaurant management. During fiscal 2022, along with COVID-19, our operating results were impacted by geopolitical and other macroeconomic events, leading to higher than usual inflation on wages and other cost of goods sold. These events further impacted the availability of team members needed to staff our restaurants and caused additional disruptions in our product supply chain.

The ongoing effects of COVID-19 and its variants, along with other geopolitical and macroeconomic events could lead to further capacity restrictions, mask and vaccination mandates, wage inflation, staffing challenges, product cost inflation and disruptions in the supply chain that impact our restaurants’ ability to obtain the products needed to support their operations.

~~Recently Adopted Accounting Standards~~

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832), which requires annual disclosures that increase the transparency of transactions involving government grants, including (i) information about the nature of the transactions and related accounting policy used to account for the transactions; (ii) the line items on the balance sheetequipment, intangible assets, and income ~~statement affected by these transactions including amounts applicable~~tax assets and liabilities. The fair values set forth below are based on preliminary valuations and are subject to ~~each line; and (iii) significant terms and conditions of~~adjustment as additional information is obtained. When the ~~transactions, including commitments and contingencies. The guidance~~valuation process is effective for annual periods beginning after December 15, 2021. The Company adopted this guidance in the first quarter of fiscal 2023, but the adoption did not have a material impact on our financial statements.

completed, adjustments to goodwill may result.

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DARDEN RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The preliminary allocation of the purchase price is as follows:


	Balances at
(in millions)	June 14, 2023
Current assets	$	45.6
Land, buildings and equipment	170.5
Operating lease right-of-use assets	291.6
Trademark	341.7
Other assets	12.0
Goodwill	339.5
Total assets acquired	$	1,200.9
Current liabilities	113.5
Deferred income taxes	79.5
Operating lease liabilities - non-current	276.3
Other liabilities	7.0
Total liabilities assumed	$	476.3
Net assets acquired	$	724.6

The excess of the purchase price over the aggregate fair value of net assets acquired was allocated to goodwill. Of the $339.5 million recorded as goodwill, $15.2 million is deductible for tax purposes. The portion of the purchase price attributable to goodwill represents benefits expected because of the acquisition, including sales and unit growth opportunities in addition to supply-chain and support-cost synergies. The trademark has an indefinite life based on the expected use of the asset and the regulatory and economic environment within which it is being used. The trademark represents a highly respected brand with positive connotations, and we intend to cultivate and protect the use of this brand. Goodwill and indefinite-lived trademarks are not amortized but are reviewed annually for impairment or more frequently if indicators of impairment exist. Buildings and equipment will be depreciated over a period of 2 years to 30 years.

As a result of the acquisition and related integration efforts, we incurred expenses of approximately $24.8 million during the quarter ended August 27, 2023, which are included in general and administrative expenses in our consolidated statements of earnings. Pro-forma financial information of the combined entities for periods prior to the acquisition is not presented due to the immaterial impact of the financial results of Ruth’s Chris on our consolidated financial statements.

Note 2.3. Revenue Recognition

Deferred revenue liabilities from contracts with customers included on our accompanying consolidated balance sheets iswas comprised of the following:

(in millions) August 28, 2022 May 29, 2022
Unearned revenues
Deferred gift card revenue $ 488.5 $ 521.1
Deferred gift card discounts (21.1) (23.5)
Other 0.5 0.4
Total $ 467.9 $ 498.0
Other liabilities
Deferred franchise fees - non-current $ 2.7 $ 2.8

~~The following table presents a rollforward of deferred gift card revenue.~~

Three Months Ended
(in millions) August 28, 2022 August 29, 2021
Beginning balance $ 521.1 $ 494.3
Activations 114.4 106.6
Redemptions and breakage (147.0) (135.9)
Ending balance $ 488.5 $ 465.0


(in millions)	August 27, 2023		May 28, 2023
Unearned revenues
Deferred gift card revenue	$	563.4	$	537.0
Deferred gift card discounts	(22.4)		(25.5)
Other	0.7		0.5
Total	$	541.7	$	512.0

Other liabilities
Deferred franchise fees - non-current	$	4.9	$	2.7

Table of Contents

DARDEN RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table presents a rollforward of deferred gift card revenue.


	Three Months Ended
(in millions)		August 27, 2023		August 28, 2022
Beginning balance		$	537.0	$	521.1
Acquired deferred gift card revenue		61.8		—
Activations		130.1		114.4
Redemptions and breakage		(165.5)		(147.0)
Ending balance		$	563.4	$	488.5

Note 3.4. Additional Financial Information

Supplemental Balance Sheet Information

The components of lease assets and liabilities on the consolidated balance sheet ~~are~~were as follows:


(in millions)	(in millions)	Balance Sheet Classification	August 28, 2022		May 29, 2022		(in millions)	Balance Sheet Classification	August 27, 2023		May 28, 2023
Operating lease right-of-use assets	Operating lease right-of-use assets	Operating lease right-of-use assets	$	3,452.8	$	3,465.1	Operating lease right-of-use assets	Operating lease right-of-use assets	$	3,600.3	$	3,373.9
Finance lease right-of-use assets	Finance lease right-of-use assets	Land, buildings and equipment, net	898.8		838.1		Finance lease right-of-use assets	Land, buildings and equipment, net	1,006.5		958.1
Total lease assets, net	Total lease assets, net		$	4,351.6	$	4,303.2	Total lease assets, net		$	4,606.8	$	4,332.0

Operating lease liabilities - current	Operating lease liabilities - current	Other current liabilities	$	181.1	$	185.8	Operating lease liabilities - current	Other current liabilities	$	193.9	$	182.5
Finance lease liabilities - current	Finance lease liabilities - current	Other current liabilities	17.5		16.6		Finance lease liabilities - current	Other current liabilities	12.5		13.5
Operating lease liabilities - non-current	Operating lease liabilities - non-current	Operating lease liabilities - non-current	3,745.5		3,755.8		Operating lease liabilities - non-current	Operating lease liabilities - non-current	3,877.5		3,667.6
Finance lease liabilities - non-current	Finance lease liabilities - non-current	Other liabilities	1,087.7		1,018.6		Finance lease liabilities - non-current	Other liabilities	1,229.0		1,172.6
Total lease liabilities	Total lease liabilities		$	5,031.8	$	4,976.8	Total lease liabilities		$	5,312.9	$	5,036.2

Supplemental Cash Flow Information


Cash paid for interest and income taxes are as follows:		Three Months Ended
Cash paid for interest and income taxes were as follows:						Cash paid for interest and income taxes were as follows:	Three Months Ended
(in millions)	(in millions)	August 28, 2022		August 29, 2021		(in millions)	August 27, 2023		August 28, 2022
Interest, net of amounts capitalized	Interest, net of amounts capitalized	$	21.1	$	15.3	Interest, net of amounts capitalized	$	34.3	$	21.1
Income taxes, net of refunds	Income taxes, net of refunds	(176.7)		4.2		Income taxes, net of refunds	2.0		(176.7)


Non-cash investing and financing activities are as follows:		Three Months Ended
Non-cash investing and financing activities were as follows:						Non-cash investing and financing activities were as follows:	Three Months Ended
(in millions)	(in millions)	August 28, 2022		August 29, 2021		(in millions)	August 27, 2023		August 28, 2022
Increase in land, buildings and equipment through accrued purchases	Increase in land, buildings and equipment through accrued purchases	$	75.9	$	35.0	Increase in land, buildings and equipment through accrued purchases	$	64.0	$	75.9
Right-of-use assets obtained in exchange for new operating lease liabilities(1)	Right-of-use assets obtained in exchange for new operating lease liabilities(1)	49.6		3.6		Right-of-use assets obtained in exchange for new operating lease liabilities(1)	298.0		49.6
Right-of-use assets obtained in exchange for new finance lease liabilities	Right-of-use assets obtained in exchange for new finance lease liabilities	41.5		67.8		Right-of-use assets obtained in exchange for new finance lease liabilities	45.3		41.5
Net change in right-of-use assets mainly due to lease modifications resulting in reclassification of leases from operating to finance	Net change in right-of-use assets mainly due to lease modifications resulting in reclassification of leases from operating to finance	25.3		73.5		Net change in right-of-use assets mainly due to lease modifications resulting in reclassification of leases from operating to finance	2.1		25.3

(1) Right-of-use assets obtained in fiscal 2024 includes $291.6 million from the acquisition of Ruth’s Chris.

We ~~have~~had restricted cash of ~~$58.4 million and $51.5~~$48.4 million as of August ~~28, 2022~~27, 2023 and May ~~29, 2022, respectively,~~28, 2023, which represents cash held as security for a standby letter of ~~credit and cash held in escrow related to the sale of a property.~~credit. Restricted cash is included in Prepaid Expenses and Other Current Assets on ~~the~~our consolidated balance sheet. See Note ~~12,~~13, Commitments and Contingencies, for further details around standby letters of credit.

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DARDEN RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 4.5. Income Taxes

The effective income tax rate for continuing operations for the ~~quarter~~three months ended August ~~28, 2022~~27, 2023 was ~~13.7~~12.7 percent compared to an effective income tax rate for the ~~quarter~~three months ended August ~~29, 2021~~28, 2022 of ~~12.6~~13.7 percent. The ~~change was primarily~~decrease in the tax rate is driven by ~~a decrease~~an increase in ~~excess~~certain tax credits, primarily attributable to Ruth’s Chris, and higher tax benefits related to option exercises ~~and equity vesting,~~partially offset by ~~lower net earnings from continuing operations for the quarter ended August 28, 2022 compared to the quarter ended August 29, 2021.~~certain non-deductible acquisition related costs.

Included in our remaining balance of unrecognized tax benefits is ~~$7.9~~$8.4 million related to tax positions for which it is reasonably possible that the total amounts could change within the next twelve months based on the outcome of examinations or as a result of the expiration of the statute of limitations for specific jurisdictions.

The Inflation Reduction Act (“IRA”) was enacted on August 16, 2022. The IRA includes provisions imposing a 1%1 percent excise tax on share repurchases that occur after December 31, 2022 and introduces a ~~15%~~15 percent corporate alternative minimum tax (“CAMT”) on adjusted financial statement income. The IRA excise tax and CAMT ~~will be effective for us beginning in fiscal 2024. We currently~~ are ~~not expecting the IRA to have a material adverse impact~~immaterial to our consolidated financial ~~statements.~~

statements for the three months ended August 27, 2023.

~~Table of Contents~~

~~DARDEN RESTAURANTS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Note 5.6. 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, ~~are~~were as follows:

Three Months Ended

(in millions)

August ~~28,~~27,
~~2022~~2023

August ~~29,~~28,
~~2021~~2022

Anti-dilutive stock-based compensation awards

~~0.5~~—

—0.5

Note 6.7. 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~~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.

~~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 28, 2022
Sales $ 1,130.7 $ 604.6 $ 183.4 $ 527.4 $ — $ 2,446.1
Restaurant and marketing expenses 914.6 512.6 153.4 455.1 (12.8) 2,022.9
Segment profit $ 216.1 $ 92.0 $ 30.0 $ 72.3 $ 12.8 $ 423.2
Depreciation and amortization $ 35.8 $ 16.8 $ 8.9 $ 24.3 $ 9.8 $ 95.6
Impairments and disposal of assets, net — — — — (4.9) (4.9)
Purchases of land, buildings and equipment 56.1 28.0 11.3 25.6 1.8 122.8

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DARDEN RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(in millions) Olive Garden LongHorn Steakhouse Fine Dining Other Business Corporate Consolidated
For the three months ended August 29, 2021
Sales $ 1,090.4 $ 567.1 $ 168.8 $ 479.7 $ — $ 2,306.0
Restaurant and marketing expenses 837.1 459.6 135.3 394.9 (3.5) 1,823.4
Segment profit $ 253.3 $ 107.5 $ 33.5 $ 84.8 $ 3.5 $ 482.6
Depreciation and amortization $ 35.3 $ 16.0 $ 8.2 $ 24.1 $ 5.4 $ 89.0
Purchases of land, buildings and equipment 35.3 20.1 8.7 17.9 0.7 82.7

The following tables reconcile our segment results to our consolidated results reported in accordance with GAAP.


(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 forward.

(in millions)	Olive Garden		LongHorn Steakhouse		Fine Dining		Other Business		Corporate		Consolidated
For the three months ended August 28, 2022
Sales	$	1,130.7	$	604.6	$	183.4	$	527.4	$	—	$	2,446.1
Restaurant and marketing expenses	914.6		512.6		153.4		455.1		(12.8)		2,022.9
Segment profit	$	216.1	$	92.0	$	30.0	$	72.3	$	12.8	$	423.2

Depreciation and amortization	$	35.8	$	16.8	$	8.9	$	24.3	$	9.8	$	95.6
Impairments and disposal of assets, net	—		—		—		—		(4.9)		(4.9)
Purchases of land, buildings and equipment	56.1		28.0		11.3		25.6		1.8		122.8

A reconciliation of segment profit to earnings from continuing operations before income taxes is below.


		Three Months Ended					Three Months Ended
(in millions)	(in millions)	August 28, 2022		August 29, 2021		(in millions)		August 27, 2023		August 28, 2022
Segment profit	Segment profit	$	423.2	$	482.6	Segment profit		$	519.1	$	423.2
Less general and administrative expenses	Less general and administrative expenses	(88.3)		(113.0)		Less general and administrative expenses		(153.3)		(88.3)
Less depreciation and amortization	Less depreciation and amortization	(95.6)		(89.0)		Less depreciation and amortization		(109.8)		(95.6)
Less impairments and disposal of assets, net	Less impairments and disposal of assets, net	4.9		—		Less impairments and disposal of assets, net		(3.1)		4.9
Less interest, net	Less interest, net	(19.8)		(15.6)		Less interest, net		(29.7)		(19.8)

Earnings before income taxes	Earnings before income taxes	$	224.4	$	265.0	Earnings before income taxes		$	223.2	$	224.4

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DARDEN RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 7.8. Impairments and Disposal of Assets, Net

Impairments and disposal of assets, net, in our accompanying consolidated statements of earnings ~~are~~were comprised of the following:

~~Three Months Ended~~

~~(in millions)~~

~~August 28, 2022~~

~~August 29, 2021~~

~~Restaurant impairments~~

—


	Three Months Ended
(in millions)		August 27, 2023		August 28, 2022
Restaurant impairments		$	0.3	$	—
Disposal (gains) losses		4.9		(4.9)
Other		(2.1)		—
Impairments and disposal of assets, net		$	3.1	$	(4.9)

Restaurant impairments and disposal (gains) losses for the quarter ended August 27, 2023 were related to the decision to close four locations. Disposal (gains) losses

~~(4.9)~~

—

~~Other~~

—

~~Impairments and disposal of assets, net~~

~~(4.9)~~

—

~~Disposal gains~~ for the quarter ended August 28, 2022 were ~~primarily~~ related to the sale of properties.

Other impacts for the quarter ended August 27, 2023 related to right-of-use asset adjustments on early lease terminations.

~~Table of Contents~~

~~DARDEN RESTAURANTS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Note 8.9. Stockholders’ Equity

Accumulated Other Comprehensive Income (Loss) (AOCI)

The components of ~~accumulated other comprehensive income (loss),~~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 (Loss)





Balance 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

The components of AOCI, net of tax, for the quarter ended August 28, 2022 ~~are~~were as follows:

(in millions) Foreign Currency Translation Adjustment Unrealized Gains (Losses) on Derivatives Benefit Plan Funding Position Accumulated Other Comprehensive Income (Loss)
Balance at May 29, 2022 $ 4.8 $ (0.4) $ (6.3) $ (1.9)
Gain (loss) — 1.5 — 1.5
Reclassification realized in net earnings — 0.7 0.1 0.8
Balance at August 28, 2022 $ 4.8 $ 1.8 $ (6.2) $ 0.4

~~The components of accumulated other comprehensive income (loss), net of tax, for the quarter ended August 29, 2021 are as follows:~~


(in millions)	(in millions)	Foreign Currency Translation Adjustment		Unrealized Gains (Losses) on Derivatives		Benefit Plan Funding Position		Accumulated Other Comprehensive Income (Loss)		(in millions)	Foreign Currency Translation Adjustment		Unrealized Gains (Losses) on Derivatives		Benefit Plan Funding Position		Accumulated Other Comprehensive Income (Loss)

Balances at May 30, 2021		$	5.2	$	7.9	$	(8.9)	$	4.2
Balances at May 29, 2022										Balances at May 29, 2022	$	4.8	$	(0.4)	$	(6.3)	$	(1.9)
Gain (loss)	Gain (loss)	(0.4)		2.6		—		2.2		Gain (loss)	—		1.5		—		1.5
Reclassification realized in net earnings	Reclassification realized in net earnings	—		(0.8)		0.2		(0.6)		Reclassification realized in net earnings	—		0.7		0.1		0.8
Balance at August 29, 2021		$	4.8	$	9.7	$	(8.7)	$	5.8
Balance at August 28, 2022										Balance at August 28, 2022	$	4.8	$	1.8	$	(6.2)	$	0.4

1615

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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								Amount Reclassified from AOCI into Net Earnings
			Three Months Ended								Three Months Ended
(in millions) AOCI Components	(in millions) AOCI Components	Location of Gain (Loss) Recognized in Earnings			August 28, 2022		August 29, 2021		(in millions) AOCI Components	Location of Gain (Loss) Recognized in Earnings		August 27, 2023		August 28, 2022
Derivatives	Derivatives								Derivatives
Commodity contracts	Commodity contracts	(1)			$	0.1	$	—	Commodity contracts	(1)		$	(1.9)	$	0.1
Equity contracts	Equity contracts	(2)			(0.8)		0.8		Equity contracts	(2)		1.3		(0.8)

Interest rate contracts									Interest rate contracts	(3)		—		—
Total before tax	Total before tax				$	(0.7)	$	0.8	Total before tax			$	(0.6)	$	(0.7)
Tax (expense) benefit	Tax (expense) benefit				—		—		Tax (expense) benefit			0.5		—
Net of tax	Net of tax				$	(0.7)	$	0.8	Net of tax			$	(0.1)	$	(0.7)

Benefit plan funding position	Benefit plan funding position								Benefit plan funding position
Recognized net actuarial loss - pension/postretirement plans		(3)			$	—	$	(0.1)

Recognized net actuarial gain (loss) - other plans	Recognized net actuarial gain (loss) - other plans	(3)			(0.2)		(0.2)		Recognized net actuarial gain (loss) - other plans	(4)		(0.2)		(0.2)
Total before tax	Total before tax				$	(0.2)	$	(0.3)	Total before tax			$	(0.2)	$	(0.2)
Tax (expense) benefit	Tax (expense) benefit				0.1		0.1		Tax (expense) benefit			—		0.1
Net of tax	Net of tax				$	(0.1)	$	(0.2)	Net of tax			$	(0.2)	$	(0.1)

(1)Primarily included in food and beverage costs and restaurant expenses. See Note 1011 for additional details.

(2)Included in general and administrative expenses. See Note 1011 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 9.10. 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~~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							Three Months Ended
		August 28, 2022			August 29, 2021				August 27, 2023			August 28, 2022
Weighted-average fair value	Weighted-average fair value	$	36.20		$	41.02		Weighted-average fair value	$	55.56		$	36.20
Dividend yield	Dividend yield	3.8		%	3.2		%	Dividend yield	3.4		%	3.8		%
Expected volatility of stock	Expected volatility of stock	42.0		%	39.6		%	Expected volatility of stock	42.2		%	42.0		%
Risk-free interest rate	Risk-free interest rate	2.8		%	0.9		%	Risk-free interest rate	4.0		%	2.8		%
Expected option life (in years)	Expected option life (in years)	5.9			6.3			Expected option life (in years)	5.9			5.9
Weighted-average exercise price per share	Weighted-average exercise price per share	$	121.47		$	148.20		Weighted-average exercise price per share	$	169.02		$	121.47

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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							Three Months Ended
		August 28, 2022			August 29, 2021				August 27, 2023			August 28, 2022
Dividend yield (1)	Dividend yield (1)	0.0		%	0.0		%	Dividend yield (1)	0.0		%	0.0		%
Expected volatility of stock	Expected volatility of stock	55.5		%	53.4		%	Expected volatility of stock	32.3		%	55.5		%
Risk-free interest rate	Risk-free interest rate	2.9		%	0.4		%	Risk-free interest rate	4.5		%	2.9		%
Expected life (in years)	Expected life (in years)	2.8			2.8			Expected life (in years)	2.9			2.8
Weighted-average grant date fair value per unit	Weighted-average grant date fair value per unit	$	137.73		$	172.34		Weighted-average grant date fair value per unit	$	217.11		$	137.73

(1)Assumes a reinvestment of dividends.

The following table presents a summary of our stock-based compensation activity for the three months ended August ~~28, 2022.~~27, 2023.


(in millions)	(in millions)	Stock Options	Restricted Stock/ Restricted Stock Units	Equity-Settled Performance Stock Units	Cash-Settled Darden Stock Units	(in millions)	Stock Options	Restricted Stock/ Restricted Stock Units	Equity-Settled Performance Stock Units	Cash-Settled Darden Stock Units
Outstanding beginning of period	Outstanding beginning of period	1.81	0.25	0.41	0.82	Outstanding beginning of period	1.62	0.28	0.36	0.81
Awards granted	Awards granted	0.18	0.05	0.10	0.20	Awards granted	0.13	0.05	0.16	0.14
Awards granted performance impact	Awards granted performance impact	—	—	(0.04)	—	Awards granted performance impact	—	—	—	—
Awards exercised/vested	Awards exercised/vested	(0.07)	(0.04)	(0.11)	(0.14)	Awards exercised/vested	(0.23)	(0.08)	(0.16)	(0.15)
Awards forfeited	Awards forfeited	—	—	—	(0.02)	Awards forfeited	—	—	—	(0.01)
Outstanding end of period	Outstanding end of period	1.92	0.26	0.36	0.86	Outstanding end of period	1.52	0.25	0.36	0.79

We recognized expense from stock-based compensation as follows:


		Three Months Ended						Three Months Ended
(in millions)	(in millions)		August 28, 2022		August 29, 2021		(in millions)		August 27, 2023		August 28, 2022
Stock options	Stock options		$	2.6	$	3.4	Stock options		$	4.2	$	2.6
Restricted stock/restricted stock units	Restricted stock/restricted stock units		2.8		3.8		Restricted stock/restricted stock units		4.6		2.8
Equity-settled performance stock units	Equity-settled performance stock units		5.6		8.1		Equity-settled performance stock units		10.5		5.6
Cash-settled Darden stock units	Cash-settled Darden stock units		8.2		11.3		Cash-settled Darden stock units		9.7		8.2
Employee stock purchase plan	Employee stock purchase plan		0.7		0.7		Employee stock purchase plan		0.7		0.7
Director compensation program/other	Director compensation program/other		0.4		0.3		Director compensation program/other		0.6		0.4
Total stock-based compensation expense	Total stock-based compensation expense		$	20.3	$	27.6	Total stock-based compensation expense		$	30.3	$	20.3

Note ~~10.~~11. 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 ~~change in~~

1817

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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. ~~Our~~We have two interest rate swap ~~agreements are~~agreements. One is designated as a fair value ~~hedges~~hedge of the related ~~debt.~~debt and the other is designated as a cash flow hedge of the floating rate interest payments on the Term Loan Agreement entered into June 2023 or any related refinancing of the Term Loan. Further, we entered into equity forward contracts to hedge the risk of changes in future cash flows associated with recognized, employee-directed investments in ~~Darden~~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 ~~Darden~~our common stock investments in the non-qualified deferred compensation plan.

The notional and fair values of our derivative contracts ~~are~~were as follows:


						Fair Values													Fair Values
(in millions, except per share data)	(in millions, except per share data)	Number of Shares Outstanding	Weighted-Average Per Share Forward Rates	Notional Values		Derivative Assets (1)				Derivative Liabilities (1)				(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 28, 2022				August 28, 2022		May 29, 2022		August 28, 2022		May 29, 2022			August 27, 2023				August 27, 2023		May 28, 2023		August 27, 2023		May 28, 2023
Equity forwards:	Equity forwards:													Equity forwards:
Designated	Designated	0.4	$125.13	$	44.4	$	—	$	—	$	2.6	$	0.1	Designated	0.3	$139.71	$	41.3	$	—	$	2.2	$	1.7	$	—
Not designated	Not designated	0.4	125.28	52.8		—		—		3.0		0.2		Not designated	0.5	128.59	58.7		—		5.1		2.6		—
Total equity forwards (2)	Total equity forwards (2)					$	—	$	—	$	5.6	$	0.3	Total equity forwards (2)					$	—	$	7.3	$	4.3	$	—
Commodity contracts:	Commodity contracts:													Commodity contracts:
Designated	Designated	N/A	N/A	$	9.1	$	3.1	$	0.6	$	—	$	—	Designated	N/A	N/A	$	22.3	$	0.7	$	—	$	2.6	$	5.6
Not designated	Not designated	N/A	N/A	—		—		—		—		—		Not designated	N/A	N/A	—		—		—		—		—
Total commodity contracts (3)	Total commodity contracts (3)					$	3.1	$	0.6	$	—	$	—	Total commodity contracts (3)					$	0.7	$	—	$	2.6	$	5.6
Interest rate related	Interest rate related													Interest rate related
Designated		N/A	N/A	$	300.0	$	—	$	—	$	34.2	$	28.0
Designated - Fair Value Hedge														Designated - Fair Value Hedge	N/A	N/A	$	300.0	$	—	$	—	$	52.3	$	45.4
Designated - Cash Flow Hedge														Designated - Cash Flow Hedge	N/A	N/A	500.0		17.6		—		—		—
Not designated	Not designated	N/A	N/A			—		—		—		—		Not designated	N/A	N/A			—		—		—		—
Total interest rate related	Total interest rate related					$	—	$	—	$	34.2	$	28.0	Total interest rate related					$	17.6	$	—	$	52.3	$	45.4
Total derivative contracts	Total derivative contracts					$	3.1	$	0.6	$	39.8	$	28.3	Total derivative contracts					$	18.3	$	7.3	$	59.2	$	51.0

(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 ~~2026 and April 2027, respectively.~~2027.

(3)Commodity contracts extend through ~~May 2023.~~June 2024.

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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 ~~are~~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 28, 2022		August 29, 2021		August 28, 2022		August 29, 2021
Equity (1)	$	(0.5)	$	2.7	$	(0.8)	$	0.8
Commodity (2)	2.6		(0.1)		0.1		—

Total	$	2.1	$	2.6	$	(0.7)	$	0.8

										Amount of Gain (Loss) Recognized in AOCI				Amount of Gain (Loss) Reclassified from AOCI to Earnings
										Three Months Ended				Three Months Ended
(in millions)									(in millions)	August 27, 2023		August 28, 2022		August 27, 2023		August 28, 2022
Equity (1)									Equity (1)	$	(2.2)	$	(0.5)	$	1.3	$	(0.8)
Commodity (2)									Commodity (2)	1.7		2.6		(1.9)		0.1
Interest rate (3)									Interest rate (3)	17.9		—		—		—
Total									Total	$	17.4	$	2.1	$	(0.6)	$	(0.7)

(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.

~~Table of Contents~~

~~DARDEN RESTAURANTS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

The effects of derivative instruments in fair value hedging relationships in the consolidated statement of earnings ~~are~~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 28, 2022		August 29, 2021		August 28, 2022		August 29, 2021
Interest rate (1)(2)	$	(6.3)	$	6.7	$	6.3	$	(6.7)

										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)									(in millions)	August 27, 2023		August 28, 2022		August 27, 2023		August 28, 2022

Interest rate (1)(2)									Interest rate (1)(2)	$	(6.9)	$	(6.3)	$	6.9	$	6.3

(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 ~~are~~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 28, 2022 August 29, 2021
Food and beverage costs and restaurant expenses $ — $ 0.1
General and administrative expenses (1.1) 5.1
Total $ (1.1) $ 5.2


		Amount of Gain (Loss) Recognized in Earnings
(in millions)	Three Months Ended
Location of Gain (Loss) Recognized in Earnings on Derivatives		August 27, 2023			August 28, 2022
Food and beverage costs and restaurant expenses			$	—		$	—
General and administrative expenses			(0.1)			(1.1)
Total			$	(0.1)		$	(1.1)

Based on the fair value of our derivative instruments designated as cash flow hedges as of August ~~28, 2022,~~27, 2023, we expect to reclassify ~~$3.3~~$7.4 million of net gains on derivative instruments from ~~accumulated other comprehensive income (loss)~~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.

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DARDEN RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note ~~11.~~12. Fair Value Measurements

The fair values of cash equivalents, receivables, net, accounts payable, ~~and~~ short-term debt and the Term Loan approximate their carrying amounts due to their short ~~duration.~~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 ~~28, 2022~~27, 2023 and May ~~29, 2022~~28, 2023.


Items Measured at Fair Value at August 28, 2022
Items Measured at Fair Value at August 27, 2023											Items Measured at Fair Value at August 27, 2023
(in millions)	(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)		(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:	Derivatives:										Derivatives:
Commodities futures, swaps & options	Commodities futures, swaps & options	(1)	$	3.1	$	—	$	3.1	$	—	Commodities futures, swaps & options	(1)	$	(1.9)	$	—	$	(1.9)	$	—
Equity forwards	Equity forwards	(2)	$	(5.6)	$	—	$	(5.6)	$	—	Equity forwards	(2)	(4.3)		—		(4.3)		$	—
Interest rate swaps		(3)	(34.2)		—		(34.2)		—
Interest rate swaps - fair value hedge											Interest rate swaps - fair value hedge	(3)	(52.3)		—		(52.3)		—
Interest rate swaps - cash flow hedge											Interest rate swaps - cash flow hedge	(3)	17.6		—		17.6		—
Total	Total		$	(36.7)	$	—	$	(36.7)	$	—	Total		$	(40.9)	$	—	$	(40.9)	$	—

~~Table of Contents~~

~~DARDEN RESTAURANTS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~


Items Measured at Fair Value at May 29, 2022
Items Measured at Fair Value at May 28, 2023											Items Measured at Fair Value at May 28, 2023
(in millions)	(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)		(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:	Derivatives:										Derivatives:
Commodities futures, swaps & options	Commodities futures, swaps & options	(1)	$	0.6	$	—	$	0.6	$	—	Commodities futures, swaps & options	(1)	$	(5.6)	$	—	$	(5.6)	$	—
Equity forwards	Equity forwards	(2)	(0.3)		—		(0.3)		—		Equity forwards	(2)	7.3		—		7.3		—
Interest rate swaps		(3)	(28.0)		—		(28.0)		—
Interest rate swaps - fair value hedge											Interest rate swaps - fair value hedge	(3)	(45.4)		—		(45.4)		—
Total	Total		$	(27.7)	$	—	$	(27.7)	$	—	Total		$	(43.7)	$	—	$	(43.7)	$	—

(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 ~~28, 2022,~~27, 2023, was ~~$895.1 million~~$1.48 billion and ~~$872.7 million,~~$1.45 billion, respectively. The carrying value and fair value of long-term debt as of May ~~29, 2022,~~28, 2023, was ~~$901.0~~$884.9 million and ~~$896.9 billion,~~$857.0 million, respectively. The fair value of long-term debt, ~~which is~~ 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 ~~28, 2022~~27, 2023 and May ~~29, 2022,~~28, 2023, 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 ~~28, 2022,~~27, 2023, adjustments to the fair values of non-financial assets, classified as Level 3, were not material. As of May ~~29, 2022,~~28, 2023, long-lived assets held and used with a carrying amount of ~~$4.9~~$10.0 million, primarily related to one

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DARDEN RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

underperforming restaurant, were determined to have a fair value of ~~$0.9~~$8.4 million resulting in an impairment charge of ~~$4.0~~$1.6 million.

Note ~~12.~~13. 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 ~~28, 2022~~27, 2023 and May ~~29, 2022,~~28, 2023, we had ~~$85.4~~$79.6 million and ~~$104.8~~$85.3 million, respectively, of standby letters of credit related to workers’ compensation and general liabilities accrued in our consolidated financial statements. As of August ~~28, 2022~~27, 2023 and May ~~29, 2022,~~28, 2023, we had ~~$18.7~~$16.1 million and ~~$18.8~~$15.2 million, respectively, of surety bonds related to other payments. Most surety bonds are renewable annually.

As of August ~~28, 2022~~27, 2023 and May ~~29, 2022,~~28, 2023, we had ~~$94.1~~$84.3 million and ~~$101.0~~$82.0 million, respectively, of guarantees associated with leased properties that have been assigned to third parties. 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 ~~28, 2022~~27, 2023 and May ~~29, 2022,~~28, 2023, amounted to ~~$78.1~~$68.8 million and ~~$83.6~~$68.4 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. These guarantees expire over their respective lease terms, which range from fiscal ~~2023~~2024 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

~~Table of Contents~~

~~DARDEN RESTAURANTS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

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.~~14. Subsequent Events

On September ~~20, 2022,~~19, 2023, the Board of Directors declared a cash dividend of ~~$1.21~~$1.31 per share ~~to be paid~~payable on November 1, ~~2022~~2023 to all shareholders of record as of the close of business on October 10, ~~2022.~~2023.

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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

The discussion and analysis below for the Company, which contains forward-looking statements, should be read in conjunction with the unaudited consolidated financial statements and the notes to such financial statements included elsewhere in this quarterly report on Form 10-Q (Form 10-Q) and the audited consolidated financial statements and the notes thereto included in our Form 10-K for the fiscal year ended May 28, 2023 (Form 10-K). In addition to historical consolidated financial information, this discussion contains forward-looking statements that reflect our plans, estimates, and beliefs and involve numerous risks and uncertainties, including but not limited to those described in the “Item 1A. Risk Factors” section of the Form 10-K. Actual results may differ materially from those contained in any forward-looking statements. You should carefully read “Forward-Looking Statements” included elsewhere in this Form 10-Q.

To facilitate review of our discussion and analysis, the following table sets forth our financial results for the periods indicated. All information is derived from the unaudited consolidated statements of earnings for the quarters and three months ended August ~~28, 2022~~27, 2023 and August ~~29, 2021.~~28, 2022.


		Three Months Ended									Three Months Ended
(in millions)	(in millions)	August 28, 2022			August 29, 2021			% Chg		(in millions)		August 27, 2023			August 28, 2022			% Chg
Sales	Sales	$	2,446.1		$	2,306.0		6.1%		Sales		$	2,730.6		$	2,446.1		11.6%
Costs and expenses:	Costs and expenses:									Costs and expenses:
Food and beverage	Food and beverage	795.3			685.4			16.0		Food and beverage		851.0			795.3			7.0
Restaurant labor	Restaurant labor	793.8			736.0			7.9		Restaurant labor		875.3			793.8			10.3
Restaurant expenses	Restaurant expenses	403.5			378.1			6.7		Restaurant expenses		446.6			403.5			10.7
Marketing expenses	Marketing expenses	30.3			23.9			26.8		Marketing expenses		38.6			30.3			27.4
General and administrative expenses	General and administrative expenses	88.3			113.0			(21.9)		General and administrative expenses		153.3			88.3			73.6
Depreciation and amortization	Depreciation and amortization	95.6			89.0			7.4		Depreciation and amortization		109.8			95.6			14.9
Impairments and disposal of assets, net	Impairments and disposal of assets, net	(4.9)			—			NM		Impairments and disposal of assets, net		3.1			(4.9)			NM
Total costs and expenses	Total costs and expenses	$	2,201.9		$	2,025.4		8.7		Total costs and expenses		$	2,477.7		$	2,201.9		12.5
Operating income	Operating income	244.2			280.6			(13.0)		Operating income		252.9			244.2			3.6
Interest, net	Interest, net	19.8			15.6			26.9		Interest, net		29.7			19.8			50.0

Earnings before income taxes	Earnings before income taxes	224.4			265.0			(15.3)		Earnings before income taxes		$	223.2		$	224.4		(0.5)
Income tax expense (1)	Income tax expense (1)	30.8			33.3			(7.5)		Income tax expense (1)		28.4			30.8			(7.8)
Earnings from continuing operations	Earnings from continuing operations	$	193.6		$	231.7		(16.4)		Earnings from continuing operations		$	194.8		$	193.6		0.6
Losses from discontinued operations, net of tax	Losses from discontinued operations, net of tax	(0.6)			(0.8)			(25.0)		Losses from discontinued operations, net of tax		(0.3)			(0.6)			(50.0)
Net earnings	Net earnings	$	193.0		$	230.9		(16.4)		Net earnings		$	194.5		$	193.0		0.8%
Diluted net earnings per share:	Diluted net earnings per share:									Diluted net earnings per share:
Earnings from continuing operations	Earnings from continuing operations	$	1.56		$	1.76		(11.4)		Earnings from continuing operations		$	1.60		$	1.56		2.6%
Losses from discontinued operations	Losses from discontinued operations	—			(0.01)			(100.0)		Losses from discontinued operations		(0.01)			—			NM
Net earnings	Net earnings	$	1.56		$	1.75		(10.9)		Net earnings		$	1.59		$	1.56		1.9%

(1) Effective tax rate	(1) Effective tax rate	13.7		%	12.6		%			(1) Effective tax rate		12.7		%	13.7		%
NM- Percentage not considered meaningful.	NM- Percentage not considered meaningful.								NM- Percentage not considered meaningful.

2322

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The following table details the number of company-owned restaurants currently reported in continuing operations that were open at the end of the first quarter of fiscal ~~2023,~~2024, compared with the number open at the end of fiscal ~~2022~~2023 and the end of the first quarter of fiscal ~~2022.~~2023.


		August 28, 2022	May 29, 2022	August 29, 2021		August 27, 2023	May 28, 2023	August 28, 2022
Olive Garden	Olive Garden	887	884	877	Olive Garden	906	905	887
LongHorn Steakhouse	LongHorn Steakhouse	549	546	535	LongHorn Steakhouse	562	562	549
Cheddar’s Scratch Kitchen	Cheddar’s Scratch Kitchen	174	172	170	Cheddar’s Scratch Kitchen	183	180	174
Yard House	Yard House	85	85	82	Yard House	86	86	85
Ruth’s Chris Steak House					Ruth’s Chris Steak House	77	—	—
The Capital Grille	The Capital Grille	61	62	61	The Capital Grille	64	62	61
Seasons 52	Seasons 52	45	45	44	Seasons 52	44	44	45
Bahama Breeze	Bahama Breeze	42	42	42	Bahama Breeze	42	42	42
Eddie V’s	Eddie V’s	29	28	27	Eddie V’s	30	29	29
The Capital Burger	The Capital Burger	3	3	3	The Capital Burger	4	4	3
Total	Total	1,875	1,867	1,841	Total	1,998	1,914	1,875

OVERVIEW OF OPERATIONS

~~COVID-19 Pandemic~~

During fiscal 2022, increasing numbers of COVID-19 cases throughout the United States including the Omicron variant which significantly impacted our restaurants in the third quarter, mostly in January 2022, subjected some of our restaurants to COVID-19-related restrictions such as mask and/or vaccine requirements for team members, guests or both. Exclusions and quarantines of restaurant team members or groups thereof disrupt an individual restaurant’s operations and often come with little or no notice to the local restaurant management. During fiscal 2022, along with COVID-19, our operating results were impacted by geopolitical and other macroeconomic events, leading to higher than usual inflation on wages and other cost of goods sold. These events further impacted the availability of team members needed to staff our restaurants and caused additional disruptions in our product supply chain.

Financial Highlights - Consolidated

•Total sales increased ~~6.1%~~11.6% to $2.73 billion for the first quarter of fiscal 2024 compared to $2.45 billion for the first quarter of fiscal 2023 ~~compared to $2.31 billion for the first quarter fiscal 2022~~ driven by a blended same-restaurant sales ~~increase~~increases of ~~4.2%~~5.0%1 and sales from 34the addition of 77 Ruth's Chris Steak House (Ruth’s Chris) restaurants and 46 other net new restaurants.

•Our net earnings from continuing operations were $194.8 million for the first quarter of fiscal 2024 compared $193.6 million for the first quarter of fiscal ~~2023 compared to $231.7 million for the first quarter of fiscal 2022.~~2023.

•Reported diluted net earnings per share from continuing operations were $1.60 for the first quarter of fiscal 2024 compared to $1.56 for the first quarter of fiscal ~~2023 compared to $1.76 for the first quarter of fiscal 2022.~~2023.

Outlook

We expect sales for fiscal ~~2023~~2024 to be between ~~$10.2~~$11.5 and ~~$10.4~~$11.6 billion, driven by same-restaurant sales growth of 42.5 to 63.5 percent1 and ~~55 to 60~~approximately 50 new restaurant openings inclusive of Ruth’s Chris new restaurant openings. Additionally, we expect capital expenditures incurred to build new restaurants, remodel and maintain existing restaurants and for technology initiatives to be ~~$500~~$550 to ~~$550~~$600 million.

1 Same-restaurant sales results excludes Ruth's Chris as they have not yet been owned and operated by Darden for a 16-month period.

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SALES

The following table presents our sales by segment for the periods indicated.


		Three Months Ended								Three Months Ended
(in millions)	(in millions)	August 28, 2022		August 29, 2021		% Chg		SRS (1)			(in millions)	August 27, 2023		August 28, 2022		% Chg		SRS (1)
Olive Garden	Olive Garden	$	1,130.7	$	1,090.4	3.7	%	2.3	%		Olive Garden	$	1,227.9	$	1,130.7	8.6	%	6.1	%
LongHorn Steakhouse	LongHorn Steakhouse	$	604.6	$	567.1	6.6	%	4.2	%		LongHorn Steakhouse	$	669.8	$	604.6	10.8	%	8.1	%
Fine Dining	Fine Dining	$	183.4	$	168.8	8.6	%	7.6	%		Fine Dining	$	273.5	$	183.4	49.1	%	(2.8)	%
Other Business	Other Business	$	527.4	$	479.7	9.9	%	7.6	%		Other Business	$	559.4	$	527.4	6.1	%	1.7	%

(1)Same-restaurant sales is a year-over-year comparison of each period’s sales volumes for a 52-week year and is limited to restaurants that have been open, and operated by Darden, for at least 16 months. Accordingly, Ruth’s Chris results will not be included in this calculation until the third quarter of fiscal 2025.

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Olive Garden’s sales increase for the first quarter of fiscal ~~2023~~2024 was primarily driven by U.S. same-restaurant sales increases combined with revenue from new restaurants. The increase in U.S. same-restaurant sales for the first quarter of fiscal ~~2023~~2024 resulted from a ~~9.0~~5.9 percent increase in average check ~~offset by~~combined with a ~~6.1~~0.3 percent ~~decrease~~increase in same-restaurant guest counts.

LongHorn Steakhouse’s sales increase for the first quarter and months of fiscal ~~2023~~2024 was primarily driven by same-restaurant sales increases combined with revenue from new restaurants. The increase in same-restaurant sales for the first quarter of fiscal ~~2023~~2024 resulted from a ~~6.3~~6.5 percent increase in average check ~~offset by~~combined with a ~~2.0~~1.5 percent ~~decrease~~increase in same-restaurant guest counts.

Fine Dining’s sales increase for the first quarter of fiscal ~~2023~~2024 was primarily driven by the acquisition of Ruth’s Chris, offset by same restaurant sales decreases. The decrease in same-restaurant sales for the first quarter of fiscal 2024 resulted from a 6.9 percent decrease in same-restaurant guest counts offset by a 4.5 percent increase in average check.

Other Business’ sales increase for the first quarter of fiscal 2024 was primarily driven by same-restaurant sales increases combined with revenue from new restaurants. The increase in same-restaurant sales for the first quarter of fiscal ~~2023~~2024 resulted from a ~~6.0~~3.4 percent increase in average check ~~combined with~~offset by a ~~1.5~~1.6 percent ~~increase in same-restaurant guest counts.~~

Other Business’ sales increase for the first quarter of fiscal 2023 was primarily driven by same-restaurant sales increases combined with revenue from new restaurants. The increase in same-restaurant sales for the first quarter of fiscal 2023 resulted from a 6.9 percent increase in average check combined with a 0.7 percent increasedecrease in same-restaurant guest counts.

COSTS AND EXPENSES

The following table sets forth selected operating data as a percent of sales for the periods indicated. All information is derived from the unaudited consolidated statements of earnings for the quarters ended August ~~28, 2022~~27, 2023 and August ~~29, 2021.~~28, 2022.

Three Months Ended
August 28, 2022 August 29, 2021
Sales 100.0 % 100.0 %
Costs and expenses:
Food and beverage 32.5 29.7
Restaurant labor 32.5 31.9
Restaurant expenses 16.5 16.4
Marketing expenses 1.2 1.0
General and administrative expenses 3.6 4.9
Depreciation and amortization 3.9 3.9
Impairments and disposal of assets, net (0.2) —
Total operating costs and expenses 90.0 % 87.8 %
Operating income 10.0 12.2
Interest, net 0.8 0.7
Earnings before income taxes 9.2 11.5
Income tax expense 1.3 1.4
Earnings from continuing operations 7.9 % 10.0 %

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	Three Months Ended
		August 27, 2023		August 28, 2022
Sales		100.0	%	100.0	%
Costs and expenses:
Food and beverage		31.2		32.5
Restaurant labor		32.1		32.5
Restaurant expenses		16.4		16.5
Marketing expenses		1.4		1.2
General and administrative expenses		5.6		3.6
Depreciation and amortization		4.0		3.9
Impairments and disposal of assets, net		0.1		(0.2)
Total operating costs and expenses		90.7	%	90.0	%
Operating income		9.3		10.0
Interest, net		1.1		0.8

Earnings before income taxes		8.2		9.2
Income tax expense		1.0		1.3
Earnings from continuing operations		7.1	%	7.9	%

Quarter Ended August ~~28, 2022~~27, 2023 Compared to Quarter Ended August ~~29, 2021~~28, 2022

•Food and beverage costs ~~increased~~decreased as a percent of sales primarily due to a ~~4.3%~~2.0% impact from pricing leverage, partially offset by a 0.4% impact from inflation and a ~~0.6%~~0.3% impact from ~~menu~~ mix ~~partially offset by a 2.1% impact from pricing.~~and other.

•Restaurant labor costs ~~increased as a percent of sales primarily due to 1.5% impact from inflation and a 0.9% impact from~~ decreased ~~productivity, partially offset by a 1.8% impact from sales and pricing leverage.~~

•~~Restaurant expenses increased~~ as a percent of sales primarily due to a ~~0.5%~~1.6% impact from ~~higher utility costs~~pricing and sales leverage, a 0.3% productivity improvement and a ~~0.4%~~0.2% impact ~~from higher repairs and maintenance expenses,~~related to brand mix including Ruth’s Chris, partially offset by a ~~0.9%~~1.8% impact from inflation.

•Restaurant expenses decreased as a percent of sales primarily due to a 0.8% impact from pricing and ~~pricing leverage.~~sales leverage, partially offset by a 0.5% impact from inflation and a 0.2% impact related to brand mix including Ruth’s Chris.

•Marketing expenses increased as a percent of sales primarily due to ~~higher television~~increased marketing and ~~media marketing.~~media.

•General and administrative expenses ~~decreased~~increased as a percent of sales primarily due to a ~~0.7%~~1.0% impact from ~~lower~~Ruth’s Chris transaction and integration costs, a 0.5% impact from incentive pay, a 0.3% impact related to stock compensation, and ~~0.3%~~a 0.1% impact related to mark to market ~~on deferred compensation plans.~~adjustments.

•Depreciation and amortization expenses ~~were flat.~~increased as a percent of sales primarily due to the acquisition of Ruth’s Chris.

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•Impairment and disposal of assets, net ~~decreased~~increased as a percent of sales primarily due to four properties that either closed or will close during fiscal 2024 compared to gains ~~recognized~~ on the sale of ~~properties.~~properties last year.

INTEREST EXPENSE

Net interest expense increased as a percent of sales for the first quarter of fiscal 2024 primarily due interest on the $600 million 3-year Term Loan Credit Agreement for the Ruth’s Chris acquisition.

INCOME TAXES

The effective income tax rate for continuing operations for the quarter ended August ~~28, 2022~~27, 2023 was ~~13.7~~12.7 percent compared to an effective income tax rate for the quarter ended August ~~29, 2021~~28, 2022 of ~~12.6~~13.7 percent. The ~~change was primarily~~decrease in the tax rate is driven by ~~a decrease~~an increase in ~~excess~~certain tax credits, primarily attributable to Ruth’s Chris, and higher tax benefits related to option exercises ~~and equity vesting,~~partially offset by ~~lower net earnings from continuing operations for the quarter ended August 28, 2022 compared to the quarter ended August 29, 2021.~~certain non-deductible acquisition related costs.

LOSSES FROM DISCONTINUED OPERATIONS

On an after-tax basis, losses from discontinued operations for the first quarter of fiscal ~~2023~~2024 were ~~$0.6~~$0.3 million ($~~0.00~~0.01 per diluted share) compared with losses from discontinued operations for the first quarter of fiscal ~~2022~~2023 of ~~$0.8~~$0.6 million ($~~0.01~~0.00 per diluted share).

SEGMENT RESULTS

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. 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. Our four reportable segments are: (1) Olive Garden, (2) LongHorn Steakhouse, (3) Fine Dining and (4) Other Business (see Note 67 to our unaudited consolidated financial statements in Part I, Item 1 of ~~this report)~~Form 10-Q).

Our management uses segment profit as the measure for assessing performance of our segments. The following table presents segment profit margin1 for the periods indicated.

Three Months Ended

Segment

August 28, 2022

August 29, 2021

Change

Segment

August 27, 2023

August 28, 2022

Change

Olive Garden

19.1%

23.2%

(410) BPS

Olive Garden

21.4%

19.1%

230

BPS

LongHorn Steakhouse

15.2%

19.0%

(380) BPS

LongHorn Steakhouse

17.5%

15.2%

230

BPS

Fine Dining

16.4%

19.8%

(340) BPS

Fine Dining

14.5%

16.4%

(190)

BPS

Other Business

13.7%

17.7%

(400) BPS

Other Business

15.1%

13.7%

140

BPS

1 Segment profit margin calculated as (sales less costs of food & beverage, restaurant labor, restaurant expenses and marketing expenses) / sales.

The ~~decrease~~increase in Olive ~~Garden, LongHorn Steakhouse, Fine Dining and Other Business’~~Garden’s segment profit ~~margins~~margin for the first quarter of fiscal ~~2023 were~~2024 was driven primarily by ~~higher~~positive same-restaurant sales, lower food and beverage and restaurant labor costs and restaurant expense, partially offset by increased marketing costs. The increase in Longhorn Steakhouse’s segment profit margin for the first quarter of fiscal 2024 was driven primarily by positive ~~same restaurants sales.~~

~~Table~~same-restaurant sales as well as lower food and beverage, restaurant labor and restaurant expenses. The decrease in Fine Dining’s segment profit margin for the first quarter of ~~Contents~~

fiscal 2024 was driven primarily by negative same-restaurant sales, higher restaurant labor costs and restaurant expenses, partially offset by lower food and beverages costs. The increase in Other Business’ segment profit margin for the first quarter of fiscal 2024 was driven primarily by positive same-restaurant sales, increased franchise revenue with the addition of Ruth’s Chris and lower food and beverage costs, partially offset by increased restaurant labor costs.

SEASONALITY

Our sales volumes fluctuate seasonally. Typically, our average sales per restaurant are highest in the winter and spring, followed by the summer, and lowest in the fall. Holidays, changes in the economy, severe weather, effects of ~~the COVID-19 pandemic and similar~~other conditions

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may impact sales volumes seasonally in some operating regions. Because of the seasonality of our business, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year.

LIQUIDITY AND CAPITAL RESOURCES

Typically, cash flows generated from operating activities are our principal source of liquidity, which we use to finance capital expenditures for new restaurants and to remodel and maintain existing restaurants, to pay dividends to our shareholders and to repurchase shares of our common stock. Since substantially all of our sales are for cash and cash equivalents, and accounts payable are generally paid in 5 to 90 days, we are typically able to carry current liabilities in excess of current assets.

We currently manage our business and financial ratios to target an investment-grade bond rating, which has historically allowed flexible access to financing at reasonable costs. Our publicly issued long-term debt currently carries the following ratings:

•Moody’s Investors Service “Baa2”;

•Standard & Poor’s “BBB”; and

•Fitch “BBB”.

Our commercial paper has ratings of:

•Moody’s Investors Service “P-2”;

•Standard & Poor’s “A-2”; and

•Fitch “F-2”.

These ratings are as of the date of the filing of this Form 10-Q and have been obtained with the understanding that Moody’s Investors Service, Standard & Poor’s and Fitch will continue to monitor our credit and make future adjustments to these ratings to the extent warranted. The ratings are not a recommendation to buy, sell or hold our securities, may be changed, superseded or withdrawn at any time and should be evaluated independently of any other rating.

On September 10, 2021, we entered into a $1 billion Revolving Credit Agreement (Revolving Credit Agreement) with Bank of America, N.A. (BOA), as administrative agent, and the lenders and other agents party thereto. The Revolving Credit Agreement is a senior unsecured credit commitment to the Company and contains customary representations and affirmative and negative covenants (including limitations on liens and subsidiary debt and a maximum consolidated lease adjusted total debt to total capitalization ratio of 0.75 to 1.00) and events of default usual for credit facilities of this type. As of August ~~28, 2022,~~27, 2023, we had no outstanding balances and we were in compliance with all covenants under the Revolving Credit Agreement. As of August 27, 2023, $95.4 million of commercial paper was outstanding, which was backed by this facility. After consideration of commercial paper backed by the Revolving Credit Agreement, as of August 27, 2023, we had $904.6 million of credit available under the Revolving Credit Agreement.

The Revolving Credit Agreement matures on September 10, 2026, and the proceeds may be used for working capital and capital expenditures, the refinancing of certain indebtedness, certain acquisitions and general corporate purposes. ~~Loans~~

Effective May 31, 2023, we entered into an amendment to the Revolving Credit Agreement, which (i) replaced the LIBOR-based interest rate applicable to borrowings under the Revolving Credit Agreement with a Term SOFR-based interest rate in advance of the cessation of LIBOR, and (ii) made certain other conforming changes. All other material terms and conditions of the Revolving Credit Agreement were unchanged. Effective May 31, 2023, loans under the Revolving Credit Agreement bear interest at a rate of ~~LIBOR~~(a)Term SOFR (which is defined, for the applicable interest period, as the Term SOFR Screen Rate two U.S. Government Securities Business Days prior to the commencement of such interest period with a term equivalent to such interest period) plus a Term SOFR adjustment of 0.10 percent plus the relevant margin determined by reference to a ratings-based pricing grid (Applicable Margin), or (b) the base rate (which is defined as the highest of the BOA prime rate, the Federal Funds rate plus 0.500 percent, and the ~~Eurodollar Rate~~Term SOFR plus 1.00 percent) plus the relevant Applicable Margin. Assuming a “BBB” equivalent credit rating level, the Applicable Margin under the Revolving Credit Agreement ~~will be~~is 1.000 percent for ~~LIBOR~~Term SOFR loans and 0.000 percent for base rate loans.

On May 31, 2023, the Company also entered into a senior unsecured $600 million 3-year Term Loan Credit Agreement (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. The Term Loan Agreement provided for a single borrowing on any business day up to 90 days after May 31, 2023, and matures on the third anniversary of the funding date thereunder, June 14, 2023. We borrowed $600 million under the Term Loan Agreement to fund a portion of the consideration paid in connection with the acquisition of Ruth’s Chris.

As of August ~~28, 2022,~~27, 2023, our outstanding long-term debt consisted principally of:

•$600.0 million of unsecured 1-Month Term SOFR senior notes due in June 2026;

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•$500.0 million of unsecured 3.850 percent senior notes due in May 2027;

•$96.3 million of unsecured 6.000 percent senior notes due in August 2035;

•$42.8 million of unsecured 6.800 percent senior notes due in October 2037; and

•$300.0 million of unsecured 4.550 percent senior notes due in February 2048.

The interest rate on our $42.8 million senior notes due in October 2037 is subject to adjustment from time to time if the debt rating assigned to such series of notes is downgraded below a certain rating level (or subsequently upgraded). The maximum adjustment is 2.000 percent above the initial interest rate and the interest rate cannot be reduced below the initial interest rate. As of August ~~28, 2022,~~27, 2023, no such adjustments are made to this rate.

WeThrough our shelf registration statement on file with the SEC, depending on conditions prevailing in the public capital markets, we may from time to time issue equity securities or unsecured debt securities in one or more series, which may consist of notes, debentures or other evidences of indebtedness in one or more offerings.

From time to time, we or our affiliates, may repurchase our ~~remaining~~ outstanding debt in privately negotiated ~~transactions.~~transactions, open-market transactions or otherwise. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

The amounts involved may be material.

From time to time we enter into interest rate derivative instruments. See Note 1011 to our unaudited consolidated financial statements in Part I, Item 1 of this report, which is incorporated by reference.

Net cash flows provided by operating activities of continuing operations ~~increased~~decreased to ~~$427.8~~$269.1 million for the first three months of fiscal ~~2023,~~2024, from ~~$180.3~~$427.8 million for the ~~first~~ three months of fiscal ~~2022.~~2023. Net cash flows provided by operating activities include net earnings from continuing operations of ~~$193.6~~$194.8 million and ~~$231.7~~$193.6 million in the first three months of fiscal ~~2023~~2024 and ~~2022,~~2023, respectively. Net cash flows provided by operating activities ~~increased~~decreased in fiscal ~~2023~~2024 primarily due to the change in working capital compared to fiscal ~~2022 offset by lower net earnings from continuing operations.~~2023.

Net cash flows used in investing activities of continuing operations were $854.2 million for the first three months of fiscal 2024, compared to $118.1 million for the first three months of fiscal ~~2023, compared~~2023. Capital expenditures increased to ~~$83.7~~$150.9 million for the first three months of fiscal ~~2022. Capital expenditures increased to~~2024 from $122.8 million for the first three months of fiscal 2023 ~~from $82.7 million for the first three months of fiscal 2022~~ reflecting an increase in new restaurant construction and remodel activity during fiscal ~~2023.~~2024. Net cash used in the acquisition of Ruth’s Chris was $699.9 million during fiscal 2024.

Net cash flows ~~used in~~provided by financing activities of continuing operations were $409.4 million for the first three months of fiscal 2024, compared to net cash used by financing activities of $345.4 million for the first three months of fiscal ~~2023, compared to $312.8 million~~2023. Net cash flows provided by financing activities for the first three months of fiscal ~~2022.~~2024 included net proceeds from issuance of short term debt of $95.4 million and proceeds from the Term Loan Agreement of $600.0 million, dividends paid of $158.5 million and share repurchases of $142.9 million. Net cash flows used in financing activities for the first three months of fiscal 2023 included dividends paid of $148.5 million and share repurchases of $199.0 million, partially offset by proceeds from the exercise of employee stock options. Net cash flows used in financing activities for the first three months of fiscal 2022 included dividends paid of $143.5 million and share repurchases of $186.3 million partially offset by proceeds from the exercise of employee stock options. Dividends declared by our Board of Directors totaled ~~$1.21~~$1.31 and ~~$1.10~~$1.21 per share for the first three months of fiscal ~~2023~~2024 and ~~2022,~~2023, respectively.

On June 22, 2022, our Board of Directors authorized a new share repurchase program under which we may repurchase up to $1 billion of our outstanding common stock. This repurchase program does not have an ~~expiration and replaces the existing share repurchase authorization.~~expiration. During the quarter ended August ~~28, 2022,~~27, 2023, we repurchased 0.9 million shares of our common stock, respectively, compared to 1.7 million shares of our common stock, ~~compared to 1.3 million shares of our common stock~~respectively, during the quarter ended August ~~29, 2021.~~28, 2022.

We are not a party to any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, changes in financial condition, sales, costs or expenses, results of operations, liquidity, capital expenditures or capital resources.

Impairment of our assets, including goodwill or trademarks, adversely affects our financial position and results of operations, and our leverage ratio for purposes of our Revolving Credit Agreement. A leverage ratio exceeding the maximum permitted under our Revolving Credit Agreement would be a default under our Revolving Credit Agreement. At August ~~28, 2022,~~27, 2023, write-downs of goodwill, other indefinite-lived intangible assets, or any other assets in excess of approximately ~~$893.2~~$707.8 million would have been required to cause our leverage ratio to exceed the permitted maximum. As our leverage ratio is determined on a quarterly basis, and due to the seasonal nature of our business, a lesser amount of impairment in future quarters could cause our leverage ratio to exceed the permitted maximum.

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FINANCIAL CONDITION

Our current assets totaled ~~$941.0~~$835.7 million as of August ~~28, 2022,~~27, 2023, compared to ~~$1.18 billion~~$997.7 million as of May ~~29, 2022.~~28, 2023. The decrease was primarily due to a decrease in ~~prepaid income taxes.~~cash and cash equivalents.

Our current liabilities totaled ~~$1.83~~$2.09 billion as of August ~~28, 2022,~~27, 2023, compared to ~~$1.85~~$1.94 billion as of May ~~29, 2022.~~28, 2023. The ~~decrease~~increase was primarily driven by ~~a decrease~~an increase in ~~accrued payroll~~short-term debt as well as an increase in other current liabilities and unearned revenues associated with ~~gift card redemptions in excess~~the acquisition of ~~gift card sales, partially offset by an increase in accounts payable.~~Ruth’s Chris.

CRITICAL ACCOUNTING ESTIMATES

We prepare our consolidated financial statements in conformity with U.S. generally accepted accounting principles. 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, costs and expenses during the reporting period. Actual results could differ from those estimates. We have discussed the development, selection and disclosure of those estimates with the Audit Committee. Our critical accounting estimates have not changed materially from those previously reported in our Annual Report on Form 10-K for the fiscal year ended May ~~29, 2022.~~

28,

2023.

APPLICATION OF NEW ACCOUNTING STANDARDS

Information regarding application of new accounting standards is incorporated by reference from Note 1 to our unaudited consolidated financial statements in Part I, Item 1 of this report.

FORWARD-LOOKING STATEMENTS

Statements set forth in or incorporated into this report regarding the expected increase in the number of our restaurants and capital expenditures in fiscal ~~2023,~~2024, projections for sales and all other statements that are not historical facts, including without limitation statements with respect to the financial condition, results of operations, plans, objectives, future performance and business of Darden Restaurants, Inc. and its subsidiaries that are preceded by, followed by or that include words such as “may,” “will,” “expect,” “intend,” “anticipate,” “continue,” “estimate,” “project,” “believe,” “plan,” “outlook” or similar expressions, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are included, along with this statement, for purposes of complying with the safe harbor provisions of that Act. Any forward-looking statements speak only as of the date on which such statements are made, and we undertake no obligation to update such statements for any reason to reflect events or circumstances arising after such date. By their nature, forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by such forward-looking statements. In addition to the risks and uncertainties of ordinary business obligations, and those described in information incorporated into this report, the forward-looking statements contained in this report are subject to the risks and uncertainties described in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended May ~~29, 2022~~28, 2023 and in our Forms 10-Q (including this report), which are summarized as follows:

•~~The disruption of our business and the global economy caused by the novel coronavirus (COVID-19) pandemic;~~

•A failure to address cost pressures, including rising costs for commodities, labor, health care and utilities used by our restaurants, and a failure to effectively deliver cost management activities and achieve economies of scale in purchasing;

•Economic and business factors and their impacts on the restaurant industry and general macroeconomic factors including unemployment, energy prices and interest rates;

•The inability to hire, train, reward and retain restaurant team members and determine and maintain adequate staffing;

•A failure to recruit, develop and retain effective leaders or the loss or shortage of personnel with key capacities and skills;

•Increases in labor and insurance costs;

•Health concerns arising from food-related pandemics, outbreaks of flu, viruses or other diseases;

•Failures to maintain food safety throughout the supply chain and food-borne illness concerns;

•Insufficient guest or employee facing technology or a failure to maintain a continuous or secure cyber network

•Increased costs related to compliance with privacy and data protection laws and government enforcement, litigation or adverse publicity relating to potential failures thereof;

•A failure to successfully integrate Ruth’s Chris Steak House operations into our business.

•Insufficient or ineffective response to legislation or government regulation may impact our cost structure, operational efficiencies and talent availability;

•Intense competition, or an insufficient focus on competition and the consumer landscape;

•Changes in consumer preferences that may adversely affect demand for food at our restaurants;

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•An inability or failure to recognize, respond to and effectively manage the accelerated impact of social media;

•A failure to identify and execute innovative marketing and guest relationship tactics and ineffective or improper use of other marketing initiatives and increased advertising and marketing costs;

•Impacts of climate change, adverse weather conditions and natural disasters;

•The inability to cancel long-term, non-cancelable leases that we may want to cancel or the inability to renew the leases that we may want to extend at the end of their terms;

•Our inability or failure to execute a comprehensive business continuity plan following a major natural disaster such as a hurricane or manmade disaster, including terrorism;

•The impact of shortages, delay or interruptions in the delivery of food and other products from third-party vendors and suppliers;

•Our failure to drive both short-term and long-term profitable sales growth through brand relevance, operating excellence, opening new restaurants of existing brands and developing or acquiring new dining brands;

•A lack of suitable new restaurant locations or a decline in the quality of the locations of our current restaurants;

•Higher-than-anticipated costs or delays to open, close, relocate or remodel restaurants;

•Risks associated with doing business with franchisees and licensees;

•Risks associated with doing business with business partners and vendors in foreign markets;

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•Volatility in the market value of derivatives we may use to hedge commodity and broader market prices;

•Volatility in the United States equity markets that may affect our ability to efficiently hedge exposures to our market risk related to equity-based compensation awards;

•Failure to protect our service marks or other intellectual property;

•Litigation, including allegations of illegal, unfair or inconsistent employment practices;

•Unfavorable publicity, or a failure to respond effectively to adverse publicity;

•Disruptions in the financial markets that may impact consumer spending patterns, affect the availability and cost of credit;

•Impairment of the carrying value of our goodwill or other intangible assets;

•Changes in tax laws or treaties and unanticipated tax liabilities; and

•A failure of our internal controls over financial reporting and future changes in accounting standards.

Any of the risks described above or elsewhere in this report or our other filings with the SEC could have a material impact on our business, financial condition or results of operations. It is not possible to predict or identify all risk factors. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also impair our business operations. Therefore, the above is not intended to be a complete discussion of all potential risks or uncertainties.

Item 3.Quantitative and Qualitative Disclosures About Market Risk

We are exposed to a variety of market risks, including fluctuations in interest rates, foreign currency exchange rates, compensation and commodity prices. To manage this exposure, we periodically enter into interest rate, foreign currency exchange rate, equity forward and commodity derivative instruments for other than trading purposes (see Note 1011 to our unaudited consolidated financial statements in Part I, Item 1 of this report).

We use the variance/covariance method to measure value at risk, over time horizons ranging from one week to one year, at the 95 percent confidence level. As of August ~~28, 2022,~~27, 2023, our potential losses in future net earnings resulting from changes in equity forwards, commodity instruments, floating rate and ~~floating~~fixed rate debt interest rate exposures were approximately ~~$68.4~~$91.4 million over a period of one year. The value at risk from an increase in the fair value of all of our long-term fixed-rate debt, over a period of one year, was approximately ~~$81.8~~$79.4 million. The fair value of our long-term fixed-rate debt outstanding as of August ~~28, 2022,~~27, 2023, averaged ~~$876.9 million,~~$1.37 billion, with a high of ~~$893.7 million~~$1.47 billion and a low of ~~$858.3~~$858.8 million during the ~~first~~ three months of fiscal ~~2023.~~2024. Our interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flows by targeting an appropriate mix of variable and fixed-rate debt.

Item 4.Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of August ~~28, 2022,~~ 27, 2023,

the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of August ~~28, 2022.~~27, 2023.

During the fiscal quarter ended August ~~28, 2022,~~27, 2023, there was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION

Item 1.Legal Proceedings

See the discussion of legal proceedings contained in the third paragraph of Note 1112 to our unaudited consolidated financial statements in Part I, Item 1 of this report, which is incorporated herein by reference.

Item 1A.Risk Factors

There have been no material changes to the risk factors contained in Item 1A of our Annual Report on Form 10-K for the year ended May ~~29, 2022.~~28, 2023.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

The table below provides information concerning our repurchase of shares of our common stock during the quarter ended August ~~28, 2022.~~27, 2023.

(Dollars in millions, except per share data) Total Number of
Shares Purchased (1) (2) Average
Price Paid
per Share Total Number of
Shares Purchased as
Part of Publicly
Announced Plans
or Programs Maximum Dollar Value of
Shares that May Yet
be Purchased
Under the Plans or
Programs (3)
May 30, 2022 through July 3, 2022 1,110,380 $ 118.43 1,110,380 $ 979.2
July 4, 2022 through July 31, 2022 435,260 $ 118.84 435,260 $ 927.4
August 1, 2022 through August 28, 2022 123,212 $ 127.42 123,212 $ 911.7
Quarter-to-Date 1,668,852 $ 119.20 1,668,852 $ 911.7


(Dollars in millions, except per share data)	Total Number of Shares Purchased (1) (2)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (3)
May 29, 2023 through July 2, 2023	107,745	$	163.29	107,745	$	634.3
July 3, 2023 through July 30, 2023	353,672	$	167.92	353,672	$	574.9
July 31, 2023 through August 27, 2023	404,624	$	163.00	404,624	$	509.0
Quarter-to-Date	866,041	$	165.05	866,041	$	509.0

(1)All of the shares purchased during the quarter ended August ~~28, 2022~~27, 2023 were purchased as part of our repurchase program. On June 22, 2022, our Board of Directors authorized a new share repurchase program under which we may repurchase up to $1 billion of our outstanding common stock. This repurchase program, which was announced publicly in a press release issued on June 23, 2022, does not have an expiration ~~and replaces the existing share repurchase authorization.~~date.

(2)The number of shares purchased includes shares withheld for taxes on vesting of restricted stock, shares delivered or deemed to be delivered to us on tender of stock in payment for the exercise price of options, and shares reacquired pursuant to tax withholding on option exercises. These shares are included as part of our repurchase program and deplete the repurchase authority granted by our Board. The number of shares repurchased excludes shares we reacquired pursuant to forfeiture of restricted stock.

(3)Repurchases are subject to prevailing market prices, may be made in open market or private transactions, ~~and~~ may occur or be discontinued at any ~~time.~~time and remain subject to the discretion of our Board of Directors. There can be no assurance that we will repurchase any shares.

Item 5.OtherInformation

During the quarter ended August 27, 2023, no director or officer adopted, modified, or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as such terms are defined in Item 408(a) of Regulation S-K.

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Item 6.Exhibits



Exhibit No.						Exhibit Title
31(a)						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31(b)						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32(a)						Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32(b)						Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS						XBRL Instance Document
101.SCH						XBRL Schema Document
101.CAL						XBRL Calculation Linkbase Document
101.DEF						XBRL Definition Linkbase Document
101.LAB						XBRL Label Linkbase Document
101.PRE						XBRL Presentation Linkbase Document
104						Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		DARDEN RESTAURANTS, INC.

Dated:	~~October 4, 2022~~September 29, 2023	By:	/s/ Rajesh Vennam
			Rajesh Vennam
			Senior Vice President, Chief Financial Officer ~~and Treasurer~~
			(Principal financial officer)