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Item 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion and analysis below for Darden Restaurants, Inc. (Darden, the Company, we, us or our) should be read in conjunction with our consolidated financial statements and related financial statement notes included in Part II of this report under the caption “Item 8 - Financial Statements and Supplementary Data.” We operate on a 52/53-week fiscal year, which ends on the last Sunday in May. Fiscal 2023, which ended May 28, 2023, and fiscal 2022, which ended May 29, 2022, each consisted of 52 weeks.

OVERVIEW OF OPERATIONS

Our business operates in the full-service dining segment of the restaurant industry. At May 28, 2023, we operated 1,914 restaurants through subsidiaries in the United States and Canada under the Olive Garden®, LongHorn Steakhouse®, Cheddar’s Scratch Kitchen®, Yard House®, The Capital Grille®, Seasons 52®, Bahama Breeze®, Eddie V’s Prime Seafood®, and The Capital Burger® trademarks. We own and operate all of our restaurants in the United States and Canada, except for 2 joint venture restaurants managed by us and 34 franchised restaurants. We also have 35 franchised restaurants in operation located in Latin America, Asia, the Middle East and the Caribbean. All intercompany balances and transactions have been eliminated in consolidation.

COVID-19 Pandemic and Other Impacts to our Operating Environment

During fiscal 2022, increases in the number of cases of COVID-19 throughout the United States including the Omicron variant which significantly impacted our restaurants in the third quarter, subjected some of our restaurants to COVID-19-related restrictions such as mask and/or vaccine requirements for team members, guests or both. 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 efforts to recover from the effects of the COVID-19 pandemic and its variants, along with other geopolitical and macroeconomic events, could impact our restaurants through 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.

Fiscal 2023 Financial Highlights

•Total sales increased 8.9 percent to $10.49 billion in fiscal 2023 from $9.63 billion in fiscal 2022 driven by a blended same-restaurant sales increase of 6.8 percent and sales from 47 net new restaurants.

•Reported diluted net earnings per share from continuing operations increased to $8.00 in fiscal 2023 from $7.40 in fiscal 2022, a 8.1 percent increase.

•Net earnings from continuing operations increased to $983.5 million in fiscal 2023 from $954.7 million in fiscal 2022, a 3.0 percent increase.

•Net loss from discontinued operations decreased to $1.6 million ($0.01 per diluted share) in fiscal 2023, from $1.9 million ($0.01 per diluted share) in fiscal 2022. When combined with results from continuing operations, our diluted net earnings per share was $7.99 for fiscal 2023 and $7.39 for fiscal 2022.

Outlook

On June 14, 2023, we completed our acquisition of Ruth’s, a Delaware corporation, for $21.50 per share in cash. Ruth’s is the owner, operator and franchisor of Ruth’s Chris Steak House restaurants.

We expect fiscal 2024 sales from continuing operations to increase between 9.5 percent and 10.5 percent, driven by the addition of the Ruth’s Chris Steak House restaurants to our portfolio, Darden same-restaurant sales growth of 2.5 percent to 3.5 percent, and sales from approximately 50 new restaurant openings. In fiscal 2024, we expect our annual effective tax rate to be 12 percent to 12.5 percent and we expect capital expenditures incurred to build new restaurants, remodel and maintain existing restaurants and technology initiatives to be between $550 million and $600 million.

RESULTS OF OPERATIONS FOR FISCAL 2023 AND 2022

To facilitate review of our results of operations, the following table sets forth our financial results for the periods indicated. All information is derived from the consolidated statements of earnings for the fiscal years ended May 28, 2023 and May 29, 2022:

Fiscal Year Ended Percent Change

Costs and expenses:

General and administrative expenses 386.1 373.2 3.5%

Impairments and disposal of assets, net (10.6) (2.0) NM

Earnings from continuing operations $ 983.5 $ 954.7 3.0%

Losses from discontinued operations, net of tax (1.6) (1.9) (15.8)%

(1) Effective tax rate 12.2 % 12.7 %

NM- Percentage change not considered meaningful.

The following table details the number of company-owned restaurants currently reported in continuing operations, compared with the number open at the end of fiscal 2022:

Cheddar’s Scratch Kitchen 180 172

The Capital Grille 62 62

The Capital Burger 4 3

SALES

The following table presents our company-owned restaurant sales, U.S. same-restaurant sales (SRS) and average annual sales per restaurant by segment for the periods indicated:

Sales Average Annual Sales per Restaurant (2)

Fiscal Year Ended Percent Change Fiscal Year Ended

(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.

(2)Average annual sales are calculated as sales divided by total restaurant operating weeks multiplied by 52 weeks; excludes franchise locations.

Olive Garden’s sales increase for fiscal 2023 was primarily driven by a U.S. same-restaurant sales increase combined with revenue from new restaurants. The increase in U.S. same-restaurant sales in fiscal 2023 resulted from an 8.4 percent increase in average check, partially offset by a 1.6 percent decrease in same-restaurant guest counts.

LongHorn Steakhouse’s sales increase for fiscal 2023 was driven by a same-restaurant sales increase combined with revenue from new restaurants. The increase in same-restaurant sales in fiscal 2023 resulted from a 1.2 percent increase in same-restaurant guest counts combined with a 6.1 percent increase in average check.

Fine Dining’s sales increase for fiscal 2023 was driven by a same-restaurant sales increase combined with revenue from new restaurants. The increase in same-restaurant sales in fiscal 2023 resulted from a 0.5 percent increase in same-restaurant guest counts combined with a 5.1 percent increase in average check.

Other Business’s sales increase for fiscal 2023 was driven by a same-restaurant sales increase combined with revenue from new restaurants. The increase in same-restaurant sales in fiscal 2023 resulted from a 0.6 percent increase in same-restaurant guest counts combined with a 6.4 percent increase in average check.

COSTS AND EXPENSES

The following table sets forth selected operating data as a percent of sales from continuing operations for the periods indicated. This information is derived from the consolidated statements of earnings for the fiscal years ended May 28, 2023 and May 29, 2022.

Fiscal Year Ended

Costs and expenses:

Marketing expenses 1.1 1.0

General and administrative expenses 3.7 3.9

Depreciation and amortization 3.7 3.8

Impairments and disposal of assets, net (0.1) —

Total operating costs and expenses 88.5 % 87.9 %

Interest, net 0.8 0.7

Earnings before income taxes 10.7 % 11.4 %

Income tax expense (benefit) 1.3 1.4

Earnings from continuing operations 9.4 % 9.9 %

Total operating costs and expenses from continuing operations were $9.29 billion in fiscal 2023 and $8.47 billion in fiscal 2022.

Fiscal 2023 Compared to Fiscal 2022:

•Food and beverage costs increased as a percent of sales primarily due to a 3.0% impact from inflation and a 0.8% impact from menu mix, partially offset by a 2.3% impact from pricing and other changes.

•Restaurant labor costs decreased as a percent of sales primarily due to a 1.5% impact from sales leverage and a 1.2% impact from increased productivity, partially offset by a 2.3% impact from inflation.

•Restaurant expenses decreased as a percent of sales primarily due to a 1.0% impact from pricing leverage, partially offset by a 0.3% impact from utility cost inflation, 0.2% impact from repairs and maintenance inflation, and 0.3% of inflation on other restaurant expenses.

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

•General and administrative expenses decreased as a percent of sales primarily due to a 0.3% impact from sales leverage.

•Depreciation and amortization expenses decreased as a percent of sales primarily due to sales leverage.

•Impairments and disposal of assets, net decreased as a percent of sales primarily due to gains recognized on the sale of five properties.

INCOME TAXES

The effective income tax rates for fiscal 2023 and 2022 for continuing operations were 12.2 percent and 12.7 percent, respectively. During fiscal 2023, we had income tax expense of $137.0 million on earnings before income tax of $1.12 billion compared to income tax expense of $138.8 million on earnings before income taxes of $1.09 billion in fiscal 2022. This change was primarily driven by the impact of federal tax credits.

The Inflation Reduction Act (IRA) was enacted on August 16, 2022. The IRA includes provisions imposing a 1 percent excise tax on share repurchases that occur after December 31, 2022 and introduces a 15 percent corporate alternative minimum tax (CAMT) on adjusted financial statement income. The IRA excise tax and the CAMT are immaterial to our financial statements.

NET EARNINGS AND NET EARNINGS PER SHARE FROM CONTINUING OPERATIONS

Net earnings from continuing operations for fiscal 2023 were $983.5 million ($8.00 per diluted share) compared with net earnings from continuing operations for fiscal 2022 of $954.7 million ($7.40 per diluted share).

Net earnings from continuing operations for fiscal 2023 increased 3.0 percent and diluted net earnings per share from continuing operations increased 8.1 percent compared with fiscal 2022.

LOSS FROM DISCONTINUED OPERATIONS

On an after-tax basis, results from discontinued operations for fiscal 2023 were a net loss of $1.6 million ($0.01 per diluted share) compared with a net loss for fiscal 2022 of $1.9 million ($0.01 per diluted share).

SEGMENT RESULTS

We manage our restaurant brands, Olive Garden, LongHorn Steakhouse, Cheddar’s Scratch Kitchen, Yard House, The Capital Grille, Seasons 52, Bahama Breeze, Eddie V’s and The Capital Burger in the U.S. and Canada 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 5 of the Notes to Consolidated Financial Statements (Part II, Item 8 of this report) for further details.

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

Fiscal Year Ended Change

The decrease in the Olive Garden segment profit margin for fiscal 2023 was driven primarily by higher food and beverage and marketing costs, offset by lower restaurant expenses, restaurant labor, and positive same-restaurant sales. The decrease in the LongHorn Steakhouse segment profit margin for fiscal 2023 was driven primarily by higher food and beverage costs, partially offset by lower restaurant labor and positive same-restaurant sales. The decrease in the Fine Dining segment profit margin for fiscal 2023 was driven primarily by higher food and beverage costs, restaurant labor, and restaurant expenses, partially offset by positive same-restaurant sales. The decrease in the Other Business segment profit margin for fiscal 2023 was driven primarily by higher food and beverage costs and restaurant labor, partially offset by positive same-restaurant sales.

RESULTS OF OPERATIONS FOR FISCAL 2022 COMPARED TO FISCAL 2021

For a comparison of our results of operations for the fiscal years ended May 29, 2022 and May 30, 2021, see “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our annual report on Form 10-K for the fiscal year ended May 29, 2022, filed with the SEC on July 22, 2022.

SEASONALITY

Our sales volumes have historically fluctuated 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 and similar conditions may impact sales volumes seasonally in some operating regions. Because of the historical seasonality of our business and these other factors, results for any fiscal quarter are not necessarily indicative of the results that may be achieved for the full fiscal year.

IMPACT OF INFLATION

We attempt to minimize the annual effects of inflation through appropriate planning, operating practices and menu price increases. We are currently operating in a period of higher than usual inflation, led by food and beverage cost and labor inflation. Food and beverage inflation is principally due to increased costs incurred by our vendors related to higher labor, transportation, packaging, and raw materials costs. Some of the impacts of the inflation have been offset by menu price increases and other adjustments made during the year. Whether we are able and/or choose to continue to offset the effects of inflation will determine to what extent, if any, inflation affects our restaurant profitability in future periods.

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 and expenses during the reporting period. Actual results could differ from those estimates.

Our significant accounting policies are more fully described in Note 1 of the Notes to Consolidated Financial Statements (Part II, Item 8 of this report). Judgments and uncertainties affecting the application of those policies may result in materially different amounts being reported under different conditions or using different assumptions. We consider the following estimates to be most critical in understanding the judgments that are involved in preparing our consolidated financial statements.

Leases

We evaluate our leases at their inception to estimate their expected term, which commences on the date when we have the right to control the use of the leased property and includes the non-cancelable base term plus all option periods we are reasonably certain to exercise. Our judgment in determining the appropriate expected term and discount rate for each lease affects our evaluation of:

•The classification and accounting for leases as operating versus finance;

•The rent holidays and escalation in payments that are included in the calculation of the lease liability and related right-of-use asset; and

•The term over which leasehold improvements for each restaurant facility are amortized.

These judgments may produce materially different amounts of lease liabilities and right-of-use assets recognized on our consolidated balance sheets, as well as depreciation, amortization, interest and rent expense recognized in our consolidated statements of earnings if different discount rates and expected lease terms were used.

Valuation of Long-Lived Assets

Land, buildings and equipment, operating lease right-of-use assets and certain other assets, including definite-lived intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include, among others: a significant decline in our expected future cash flows; changes in expected useful life; unanticipated competition; slower growth rates, ongoing maintenance and improvements of the assets, or changes in the usage or operating performance. Any adverse change in these factors could have a significant impact on the recoverability of these assets and could have a material impact on our consolidated financial statements. Based on a review of operating results for each of our restaurants, given the current operating environment, the amount of net book value associated with lower performing restaurants that would be deemed at risk for impairment is not material to our consolidated financial statements.

Valuation and Recoverability of Goodwill and Trademarks

We have nine reporting units, six of which have goodwill and seven of which have trademarks. Goodwill and trademarks are not subject to amortization and goodwill has been assigned to reporting units for purposes of impairment testing. The reporting units are our restaurant brands. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include, among others: a significant decline in our expected future cash flows; a sustained, significant decline in our stock price and market capitalization; a significant adverse change in legal factors or in the business climate; unanticipated competition; the testing for recoverability of a significant asset group within a reporting unit; and slower growth rates. Any adverse change in these factors could have a significant impact on the recoverability of these assets and could have a material impact on our consolidated financial statements. We review our goodwill and trademarks for impairment annually, as of the first day of our fourth fiscal quarter, or more frequently if indicators of impairment exist.

We estimate the fair value of each reporting unit using the best information available, including market information (also referred to as the market approach) and discounted cash flow projections (also referred to as the income approach). A market approach estimates fair value by applying sales or cash flow multiples to the reporting unit’s operating performance. The multiples are derived from observable market data of comparable publicly traded companies with similar operating and investment characteristics of the reporting units. The income approach uses a reporting unit’s projection of estimated operating cash flows which are based on a combination of historical and current trends, organic growth expectations, and residual growth rate assumptions. These cash flows are discounted using a weighted-average cost of capital (WACC) that reflects current market conditions. We recognize a goodwill impairment loss when the fair value of the reporting unit is less than its carrying value.

if we did not own the trademarks; and a discount rate based on an adjusted estimated WACC for each business unit. We recognize an impairment loss when the estimated fair value of the trademark is less than its carrying value.

We performed our annual impairment test of our goodwill and trademarks as of February 27, 2023 which was the first day of our fiscal 2023 fourth quarter. As of February 27, 2023, no impairment of goodwill or trademarks was indicated based on our testing.

If our assessment resulted in an impairment of our assets, including goodwill or trademarks, our financial position and results of operations would be adversely affected and our leverage ratio for purposes of our revolving credit agreement (Revolving Credit Agreement) would increase. A leverage ratio exceeding the maximum permitted under our Revolving Credit Agreement would be a default under our Revolving Credit Agreement. At May 28, 2023, additional write-downs of goodwill, other indefinite-lived intangible assets, or any other assets in excess of approximately $1.01 billion 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.

Unearned Revenues

Unearned revenues primarily represent our liability for gift cards that have been sold but not yet redeemed. The estimated value of gift cards expected to remain unused is recognized over the expected period of redemption as the remaining gift card values are redeemed, generally over a period of 12 years. Utilizing this method, we estimate both the amount of breakage and the time period of redemption. If actual redemption patterns vary from our estimates, actual gift card breakage income may differ from the amounts recorded. We update our estimates of our redemption period and our breakage rate periodically and apply that rate to gift card redemptions on a prospective basis. Changing our breakage-rate estimates by 50 basis points would have resulted in an adjustment in our breakage income of approximately $3.3 million for fiscal 2023.

Income Taxes

We estimate certain components of our provision for income taxes. These estimates include, among other items, depreciation and amortization expense allowable for tax purposes, allowable tax credits for items such as taxes paid on reported employee tip income, effective rates for state and local income taxes and the tax deductibility of certain other items. We adjust our annual effective income tax rate as additional information on outcomes or events becomes available.

Assessment of uncertain tax positions requires judgments relating to the amounts, timing and likelihood of resolution. As described in Note 12 of the Notes to Consolidated Financial Statements (Part II, Item 8 of this report), the $23.0 million balance of unrecognized tax benefits at May 28, 2023, includes $7.8 million related to tax positions for which it is reasonably possible that the total amounts could change during the next 12 months based on the outcome of examinations. Of the $7.8 million, $5.7 million relates to items that would impact our effective income tax rate.

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 report 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. The Revolving Credit Agreement replaced our prior $750.0 million revolving credit agreement, dated as of October 27, 2017 and amended as of March 25, 2020.As of May 28, 2023, we had no outstanding balances and we were in compliance with all covenants 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.During fiscal 2023, loans under the Revolving Credit Agreement bore interest at a rate of LIBOR plus a margin determined by reference to a ratings-based pricing grid (Applicable Margin), or 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 plus 1.00 percent) plus the Applicable Margin. Assuming a “BBB” equivalent credit rating level, the Applicable Margin under the Revolving Credit Agreement would have been 1.000 percent for LIBOR loans and 0.000 percent for base rate loans.

Effective May 31, 2023, we entered into an amendment to the Revolving Credit Agreement (the “Amendment”.) Pursuant to the terms of the Amendment, the Company, the administrative agent and the lenders have agreed to replace the LIBOR-based interest rate applicable to borrowings under the Credit Agreement with a Term SOFR-based interest rate in advance of the cessation of LIBOR, and make certain other conforming changes. All other material terms and conditions of the Credit Agreement were unchanged. Effective May 31, 2023, loans under the Revolving Credit Agreement bear 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 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 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 1.00 percent for Term SOFR loans and 0.00 percent for base rate loans.

Also on May 31, 2023, the Company 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 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.

On June 14, 2023, we completed the acquisition of Ruth’s. We borrowed $600 million under the Term Loan Agreement to fund a portion of the approximately $715 million in consideration paid in connection with our acquisition of Ruth’s.

As of May 28, 2023, our outstanding long-term debt consisted principally of:

•$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 6.800 percent senior notes due 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 May 28, 2023, no such adjustments are made to this rate.

Through 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 outstanding debt in privately negotiated 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 to manage interest rate risk inherent in our operations. See Note 7 of the Notes to Consolidated Financial Statements (Part II, Item 8 of this report).

A summary of our contractual obligations and commercial commitments at May 28, 2023, is as follows:

(in millions) Payments Due by Period

Unrecognized income tax benefits (5) 25.6 9.6 3.6 12.4 —

(in millions) Amount of Commitment Expiration per Period

Standby letters of credit (6) $ 100.6 $ 100.6 $ — $ — $ —

(1)Includes interest payments associated with existing long-term debt. Excludes discount and issuance costs of $8.8 million.

(2)Includes non-cancelable future operating lease and finance lease commitments.

(3)Includes commitments for food and beverage items and supplies, capital projects, information technology and other miscellaneous items.

(4)Includes expected contributions associated with our supplemental defined benefit pension plan and payments associated with our postretirement benefit plan and our non-qualified deferred compensation plan through fiscal 2033.

(5)Includes interest on unrecognized income tax benefits of $2.7 million, $1.8 million of which relates to contingencies expected to be resolved within one year.

(6)Includes letters of credit for $85.3 million of workers’ compensation and general liabilities accrued in our consolidated financial statements and letters of credit for $15.2 million of surety bonds related to other payments.

(7)Consists solely of guarantees associated with leased properties that have been assigned to third parties and are primarily related to the disposition of Red Lobster in fiscal 2015.

Our adjusted debt to adjusted total capital ratio was 62 percent and 61 percent as of May 28, 2023 and May 29, 2022, respectively. Based on these ratios, we believe our financial condition is strong. We include the lease-debt equivalent and contractual lease guarantees in our adjusted debt to adjusted total capital ratio reported to shareholders, as we believe its inclusion better represents the optimal capital structure that we target from period to period and because it is consistent with the calculation of the covenant under our Revolving Credit Agreement. For fiscal 2023 and fiscal 2022, the lease-debt equivalent includes 6.00 times the total annual minimum rent for consolidated lease obligations of $424.3 million and $409.8 million, respectively. The composition of our capital structure is shown in the following table:

CAPITAL STRUCTURE

CALCULATION OF ADJUSTED CAPITAL

CAPITAL STRUCTURE RATIOS

Debt to total capital ratio 30 % 30 %

Adjusted debt to adjusted total capital ratio 62 % 61 %

Net cash flows provided by operating activities from continuing operations were $1.55 billion and $1.26 billion in fiscal 2023 and 2022, respectively. Net cash flows provided by operating activities include net earnings from continuing operations of $983.5 million in fiscal 2023 and $954.7 million in fiscal 2022. Net cash flows provided by operating activities from continuing operations increased in fiscal 2023 primarily due to changes in working capital and higher net earnings from continuing operations.

Net cash flows used in investing activities from continuing operations were $568.4 million and $389.0 million in fiscal 2023 and 2022, respectively. Capital expenditures incurred principally for building new restaurants, remodeling existing restaurants, replacing equipment, and technology initiatives were $564.9 million in fiscal 2023, compared to $376.9 million in fiscal 2022.

Net cash flows used in financing activities from continuing operations were $1.03 billion and $1.61 billion in fiscal 2023 and 2022, respectively. Net cash flows used in financing activities in fiscal 2023 included dividend payments of $589.8 million and share repurchases of $458.7 million, partially offset by proceeds from the exercise of employee stock options. Net cash flows used in financing activities in fiscal 2022 included dividend payments of $563.0 million and share repurchases of $1.07 billion, partially offset by proceeds from the exercise of employee stock options.

Our defined benefit and other postretirement benefit costs and liabilities are determined using various actuarial assumptions and methodologies prescribed under Financial Accounting Standards Board Accounting Standards Codification Topic 715, Compensation - Retirement Benefits and Topic 712, Compensation - Nonretirement Postemployment Benefits. We expect to contribute approximately $0.4 million to our supplemental defined benefit pension plan and approximately $1.6 million to our postretirement benefit plan during fiscal 2024.

We are not aware of any trends or events that would materially affect our capital requirements or liquidity. We believe that our internal cash-generating capabilities, the potential issuance of equity or unsecured debt securities under our shelf registration statement and short-term commercial paper or drawings under our Revolving Credit Agreement should be sufficient to finance our capital expenditures, debt maturities and other operating activities through fiscal 2024.

OFF-BALANCE SHEET ARRANGEMENTS

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 or expenses, results of operations, liquidity, capital expenditures or capital resources.

FINANCIAL CONDITION

Our total current assets were $997.7 million at May 28, 2023, compared with $1.18 billion at May 29, 2022. The decrease was primarily due to decreases in prepaid income taxes and cash and cash equivalents.

Our total current liabilities were $1.94 billion at May 28, 2023 and $1.85 billion at May 29, 2022. The increase was primarily due to increases in accounts payable and other current liabilities.

APPLICATION OF NEW ACCOUNTING STANDARDS

See Note 1 of the Notes to Consolidated Financial Statements (Part II, Item 8 of this report) for a discussion of recently issued accounting standards.

Item 7A. 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 instruments, equity forward and commodity derivative instruments for other than trading purposes. See Notes 1 and 7 of the Notes to Consolidated Financial Statements (Part II, Item 8 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. At May 28, 2023, our potential losses in future net earnings resulting from changes in equity forwards, commodity instruments and floating rate debt interest rate exposures were approximately $75.0 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 $79.7 million. The fair value of our long-term fixed-rate debt outstanding as of May 28, 2023, averaged $857.3 million, with a high of $893.7 million and a low of $798.0 million during fiscal 2023. 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 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

Report of Management Responsibilities 39

Management’s Report on Internal Control over Financial Reporting 39

Notes to Consolidated Financial Statements 49

REPORT OF MANAGEMENT’S RESPONSIBILITIES

The management of Darden Restaurants, Inc. is responsible for the fairness and accuracy of the consolidated financial statements. The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles, using management’s best estimates and judgments where appropriate. The financial information throughout this report is consistent with our consolidated financial statements.

Management has established a system of internal controls over financial reporting that provides reasonable assurance that assets are adequately safeguarded and transactions are recorded accurately, in all material respects, in accordance with management’s authorization. Our internal controls provide for appropriate segregation of duties and responsibilities and there are documented policies regarding utilization of our assets and proper financial reporting. These formally stated and regularly communicated policies set high standards of ethical conduct for all employees. We also maintain a strong audit program that independently evaluates the adequacy of the design and operating effectiveness of these internal controls.

The Audit Committee of the Board of Directors meets at least quarterly to determine that management, internal auditors and the independent registered public accounting firm are properly discharging their duties regarding internal control and financial reporting. Management, internal auditors and the independent registered public accounting firm have full and free access to the Audit Committee at any time.

KPMG LLP, an independent registered public accounting firm, is retained to audit our consolidated financial statements and the effectiveness of our internal control over financial reporting. Their reports follow.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). The Company’s internal control over financial reporting is designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of published financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of May 28, 2023. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework (2013). Management has concluded that, as of May 28, 2023, the Company’s internal control over financial reporting was effective based on these criteria.

The Company’s independent registered public accounting firm KPMG LLP, has issued an audit report on the effectiveness of our internal control over financial reporting, which follows.

/s/ Ricardo Cardenas

Ricardo Cardenas

President and Chief Executive Officer

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Darden Restaurants, Inc.:

Opinion on Internal Control Over Financial Reporting

We have audited Darden Restaurants, Inc. and subsidiaries' (the Company) internal control over financial reporting as of May 28, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of May 28, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of May 28, 2023 and May 29, 2022, the related consolidated statements of earnings, comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended May 28, 2023, and the related notes (collectively, the consolidated financial statements), and our report dated July 21, 2023 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

/s/ KPMG LLP

Orlando, Florida

July 21, 2023

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Darden Restaurants, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Darden Restaurants, Inc. and subsidiaries (the Company) as of May 28, 2023 and May 29, 2022, the related consolidated statements of earnings, comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended May 28, 2023, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of May 28, 2023 and May 29, 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended May 28, 2023, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of May 28, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated July 21, 2023 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of long-lived assets for impairment

As discussed in Notes 1, 4, and 10 to the consolidated financial statements, land, buildings and equipment, net and operating lease right-of-use assets were $7.1 billion as of May 28, 2023. The Company tests for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Such indicators may include, among others: a significant decline in expected future cash flows and changes in the expected useful life which relates to the Company’s intent and ability to hold its asset groups for a period that recovers their carrying value.

We identified the evaluation of indicators of potential long-lived assets impairment as a critical audit matter. Subjective auditor judgment was required to evaluate certain assumptions in the Company’s analysis, including expected future cash flows and the expected useful life. Adverse changes in these assumptions could have a significant impact on whether an indicator has been identified and could have a material impact on the Company’s consolidated financial statements.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s long-lived asset impairment process, including controls over the identification of indicators of impairment and the assumptions listed above. For certain asset groups, we compared the expected future cash flows used by the Company in its evaluation of indicators of potential long-lived asset impairment to historical results. We evaluated the expected useful life for certain asset groups by inspecting underlying documents, such as real estate meeting minutes and other documents to assess the Company’s plans to dispose or close asset groups. We corroborated the Company’s plans with others in the organization who are responsible for, and have authority over, disposition and closure activities.

/s/ KPMG LLP

We have served as the Company’s auditor since 1996.

Orlando, Florida

July 21, 2023

DARDEN RESTAURANTS, INC.

CONSOLIDATED STATEMENTS OF EARNINGS

(In millions, except per share data)

Fiscal Year Ended

Costs and expenses:

Impairments and disposal of assets, net (10.6) (2.0) 6.6

Other (income) expense, net — — 8.7

Basic net earnings per share:

Earnings from continuing operations $ 8.07 $ 7.47 $ 4.85

Losses from discontinued operations (0.01) (0.01) (0.02)

Diluted net earnings per share:

Earnings from continuing operations $ 8.00 $ 7.40 $ 4.80

Losses from discontinued operations (0.01) (0.01) (0.03)

Average number of common shares outstanding:

See accompanying notes to consolidated financial statements.

DARDEN RESTAURANTS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

Fiscal Year Ended

Foreign currency adjustment (0.3) (0.4) 0.7

Other comprehensive income (loss) $ 5.1 $ (6.1) $ 21.8

See accompanying notes to consolidated financial statements.

DARDEN RESTAURANTS, INC.

CONSOLIDATED BALANCE SHEETS

(In millions)

ASSETS

Current assets:

Cash and cash equivalents $ 367.8 $ 420.6

Prepaid expenses and other current assets 154.5 141.4

Operating lease right-of-use assets 3,373.9 3,465.1

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accrued income taxes 7.8 32.1

Operating lease liabilities - non-current 3,667.6 3,755.8

Stockholders’ equity:

Retained earnings (deficit) (32.5) (25.9)

Accumulated other comprehensive income (loss) 3.2 (1.9)

Total liabilities and stockholders’ equity $ 10,241.5 $ 10,135.8

See accompanying notes to consolidated financial statements.

DARDEN RESTAURANTS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In millions, except per share data)

Common Stock And Surplus

Other comprehensive income — — — 21.8 21.8

Dividends declared ($1.55 per share) — — (203.9) — (203.9)

Stock-based compensation — 39.8 — — 39.8

Repurchases of common stock (0.4) (6.3) (39.1) — (45.4)

Other comprehensive income — — — (6.1) (6.1)

Dividends declared ($4.40 per share) — — (565.4) — (565.4)

Stock-based compensation — 33.6 — — 33.6

Other comprehensive income — — — 5.1 5.1

Dividends declared ($4.84 per share) — — (594.1) — (594.1)

Stock-based compensation — 32.7 — — 32.7

See accompanying notes to consolidated financial statements.

DARDEN RESTAURANTS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

Fiscal Year Ended

Cash flows - operating activities

Losses from discontinued operations, net of tax 1.6 1.9 3.1

Impairments and disposal of assets, net (10.6) (2.0) 6.6

Stock-based compensation expense 67.5 60.5 72.4

Change in current assets and liabilities 175.7 (96.7) (25.9)

Contributions to pension and postretirement plans (2.1) (2.2) (1.8)

Change in other assets and liabilities 9.0 (7.4) 23.0

Cash flows - investing activities

Purchases of land, buildings and equipment (564.9) (376.9) (254.9)

Proceeds from disposal of land, buildings and equipment 25.4 10.1 5.4

Purchases of capitalized software and other assets (29.4) (25.6) (15.4)

Cash flows - financing activities

Net proceeds from issuance of common stock 35.4 40.2 46.2

Repayments of short-term debt (427.0) — (270.0)

Proceeds from issuance of short-term debt 427.0 — —

Principal payments on finance leases (19.8) (12.9) (7.1)

Other, net (0.2) (2.7) —

Cash flows - discontinued operations

Net cash provided by (used in) discontinued operations $ (7.2) $ (8.5) $ 0.5

(Decrease) increase in cash and cash equivalents (55.9) (742.6) 451.4

Restricted cash included in prepaid and other current assets 48.4 51.5 —

DARDEN RESTAURANTS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(In millions)

Fiscal Year Ended

Cash flows from changes in current assets and liabilities

Receivables, net $ (8.2) $ (3.9) $ (18.4)

Prepaid expenses and other current assets (24.5) (22.6) 3.1

Change in current assets and liabilities $ 175.7 $ (96.7) $ (25.9)

See accompanying notes to consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements include the operations of Darden Restaurants, Inc. and its wholly owned subsidiaries (Darden, the Company, we, us or our). We own and operate the Olive Garden®, LongHorn Steakhouse®, Cheddar’s Scratch Kitchen®, Yard House®, The Capital Grille®, Seasons 52®, Bahama Breeze®, Eddie V’s Prime Seafood® and The Capital Burger® restaurant brands located in the United States and Canada. 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 and 34 franchised restaurants. We also have 35 franchised restaurants in operation located in Latin America, the Caribbean, Asia, and the Middle East. All significant intercompany balances and transactions have been eliminated in consolidation.

On June 14, 2023, we completed our acquisition of Ruth’s Hospitality Group, Inc., a Delaware corporation (Ruth’s), for $21.50 per share in cash. Ruth’s is the owner, operator and franchisor of Ruth’s Chris Steak House restaurants. As the acquisition was subsequent to our fiscal year ended on May 28, 2023, there was no impact to our financial statements or operations for fiscal year 2023. The accompanying consolidated financial statements do not include any results of Ruth’s Chris Steak House.

For fiscal 2023, 2022 and 2021, all gains and losses on disposition, impairment charges and disposal costs, along with the sales, costs and expenses and income taxes attributable to discontinued locations, have been aggregated in a single caption entitled “Losses from discontinued operations, net of tax benefit” in our consolidated statements of earnings for all periods presented.

COVID-19 Pandemic and Other Impacts to our Operating Environment

Unless otherwise noted, amounts and disclosures throughout these notes to consolidated financial statements relate to our continuing operations. We have reclassified certain amounts in prior-period financial statements to conform to the current period’s presentation.

Fiscal Year

We operate on a 52/53-week fiscal year, which ends on the last Sunday in May. Fiscal 2023, which ended May 28, 2023, consisted of 52 weeks. Fiscal 2022, which ended May 29, 2022, consisted of 52 weeks and fiscal 2021, which ended May 30, 2021, consisted of 52 weeks.

Use of Estimates

We prepare our consolidated financial statements in conformity with U.S. generally accepted accounting principles (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 expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash equivalents include highly liquid investments such as bank deposits and money market funds that have an original maturity of three months or less. Amounts receivable from credit card companies are also considered cash equivalents because they are both short term and highly liquid in nature and are typically converted to cash within three days of the sales transaction.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The components of cash and cash equivalents are as follows:

Total cash and cash equivalents $ 367.8 $ 420.6

As of May 28, 2023, and May 29, 2022, we had cash and cash equivalent accounts in excess of insured limits. We manage the credit risk of our positions through utilizing multiple financial institutions and monitoring the credit quality of those financial institutions that hold our cash and cash equivalents. We had restricted cash of $48.4 million and $51.5 million as of May 28, 2023 and May 29, 2022, respectively, which represents cash held as security for a standby letter of credit. Restricted cash is included in Prepaid Expenses and Other Current Assets on the balance sheet. See Note 15, Commitments and Contingencies.

Receivables, Net

Receivables, net of the allowance for doubtful accounts, represent their estimated net realizable value. Provisions for doubtful accounts are recorded based on historical collection experience and the age of the receivables. Receivables are written off when they are deemed uncollectible. See Note 11 for additional information.

Inventories

Inventories consist of food and beverages and are valued at the lower of weighted-average cost or net realizable value.

Land, Buildings and Equipment, Net

Land, buildings and equipment are recorded at cost less accumulated depreciation. Building components are depreciated over estimated useful lives ranging from 3 to 30 years using the straight-line method. Leasehold improvements, which are reflected on our consolidated balance sheets as a component of buildings in land, buildings and equipment, net, are amortized over the lesser of the expected lease term or the estimated useful lives of the related assets using the straight-line method. Equipment is depreciated over estimated useful lives ranging from 2 to 20 years also using the straight-line method. See Note 4 for additional information. Gains and losses on the disposal of land, buildings and equipment are included in impairments and disposal of assets, net, while the write-off of net book value associated with the replacement of equipment in the normal course of business is recorded as a component of restaurant expenses in our accompanying consolidated statements of earnings.Depreciation and amortization expense from continuing operations associated with buildings and equipment and losses on replacement of equipment were as follows:

Fiscal Year Ended

Depreciation and amortization on buildings and equipment $ 367.4 $ 346.7 $ 323.5

Losses on replacement of equipment 2.2 2.1 2.6

Capitalized Software Costs and Other Definite-Lived Intangibles

Capitalized software, which is a component of other assets, is recorded at cost less accumulated amortization. Capitalized software is amortized using the straight-line method over estimated useful lives ranging from 1 to 10 years. The cost of capitalized software and related accumulated amortization was as follows:

Capitalized software, net of accumulated amortization $ 67.0 $ 59.5

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

We have other definite-lived intangible assets, including assets related to the value of reacquired franchise rights resulting from our acquisitions that are included as a component of other assets and definite-lived intangible liabilities related to the value of below-market agreements resulting from our acquisitions that are included in other liabilities on our consolidated balance sheets. Definite-lived intangibles are amortized on a straight-line basis over estimated useful lives of 1 to 20 years.The cost and related accumulated amortization was as follows:

Definite-lived intangible assets $ 23.8 $ 23.8

Accumulated amortization (12.5) (10.5)

Definite-lived intangible assets, net of accumulated amortization $ 11.3 $ 13.3

Definite-lived intangible liabilities $ (3.0) $ (3.0)

Accumulated amortization 1.8 1.5

Amortization expense from continuing operations associated with capitalized software and other definite-lived intangibles included in depreciation and amortization in our accompanying consolidated statements of earnings was as follows:

Fiscal Year Ended

Amortization expense - capitalized software $ 18.6 $ 19.7 $ 25.4

Amortization expense - other definite-lived intangibles 1.8 2.0 2.0

Based on the net book values of our definite-lived intangible assets and liabilities at May 28, 2023, we expect amortization of capitalized software and other definite-lived intangible assets will be approximately $22.9 million annually for fiscal 2024 through 2028.

Trust-Owned Life Insurance

We have a trust that purchased life insurance policies covering certain of our officers and other key employees (trust-owned life insurance or TOLI). The trust is the owner and sole beneficiary of the TOLI policies. The policies were purchased to offset a portion of our obligations under our non-qualified deferred compensation plan. The cash surrender value for each policy is included in other assets, while changes in cash surrender values are included in general and administrative expenses.

Liquor Licenses

The costs of obtaining non-transferable liquor licenses that are directly issued by local government agencies for nominal fees are expensed as incurred. The costs of purchasing transferable liquor licenses through open markets in jurisdictions with a limited number of authorized liquor licenses are capitalized as indefinite-lived intangible assets and included in other assets. Liquor licenses are reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying amount may not be recoverable. Annual liquor license renewal fees are expensed over the renewal term.

Goodwill and Intangible Assets

Our goodwill and trademark balances are allocated as follows:

Goodwill Trademarks

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

We estimate the fair value of trademarks using the relief-from-royalty method, which requires assumptions related to projected sales from the reporting unit’s projection of estimated operating cash flows; assumed royalty rates that could be payable if we did not own the trademarks; and a discount rate based on an adjusted estimated WACC for each business unit. We recognize an impairment loss when the estimated fair value of the trademark is less than its carrying value.

Impairment or Disposal of Long-Lived Assets

Land, buildings and equipment, operating lease right-of-use assets and certain other assets, including definite-lived intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to the future undiscounted net cash flows expected to be generated by the assets. Identifiable cash flows are measured at the lowest level for which they are largely independent of the cash flows of other groups of assets and liabilities, generally at the restaurant level. If such assets are determined to be impaired, the recognized impairment is measured by the amount by which the carrying amount of the assets exceeds their fair value. Fair value is generally determined based on appraisals, sales prices of comparable assets or discounted future net cash flows expected to be generated by the assets. Restaurant sites and certain other assets to be disposed of are reported at the lower of their carrying amount or fair value, less estimated costs to sell, and are included in assets held for sale on our consolidated balance sheets when certain criteria are met. These criteria include, among other factors, the requirement that the likelihood of disposing of these assets within one year is probable. Assets not meeting the “held for sale” criteria remain in land, buildings and equipment until their disposal is probable within one year.

We account for exit or disposal activities, including restaurant closures, in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 420, Exit or Disposal Cost Obligations. Such costs include the cost of disposing of the assets as well as other facility-related expenses from previously closed restaurants. These costs are generally expensed as incurred. See Note 3 for additional information. For restaurants operated under non-cancellable leases, on the date we commit to a plan to either abandon the related right-of-use (ROU) asset or sublease the underlying asset, we evaluate the ROU asset for potential impairment and determine the go-forward accounting based on the requirements in FASB ASC Topic 842, Leases.

Insurance Accruals

Through the use of insurance program deductibles and self-insurance, we retain a significant portion of expected losses under our workers’ compensation and general liability programs. Accrued liabilities have been recorded based on our estimates of the anticipated ultimate costs to settle all claims, both reported and not yet reported.

Revenue Recognition

Sales, as presented in our consolidated statements of earnings, represents food and beverage product sold and is presented net of discounts, coupons, employee meals and complimentary meals. Revenue from restaurant sales is recognized when food and

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

beverage products are sold. Revenue is presented net of sales tax. Sales taxes collected from customers are included in other accrued taxes on our consolidated balance sheets until the taxes are remitted to governmental authorities.

Franchise royalties, which are a percentage of net sales of franchised restaurants, are recognized in the period the related sales occur. Revenue from area development and franchise fees are recognized as the performance obligations are satisfied over the term of the franchise agreement, which is generally 10 years. Advertising contributions, which are a percentage of net sales of franchised restaurants, are recognized in the period the related sales occur. Additionally, franchisee purchases of our inventory through our distribution network are recognized as revenue in the period the purchases are made.

Revenue from the sale of consumer packaged goods includes ongoing royalty fees based on a percentage of licensed retail product sales and is recognized upon the sale of product by our licensed manufacturers to retail outlets.

Unearned Revenues

Unearned revenues primarily represent our liability for gift cards that have been sold but not yet redeemed. We recognize sales from our gift cards when the gift card is redeemed by the customer. Although there are no expiration dates or dormancy fees for our gift cards, based on our analysis of our historical gift card redemption patterns, we can reasonably estimate the amount of gift cards for which redemption is remote, which is referred to as “breakage.” We recognize breakage within sales for unused gift card amounts in proportion to actual gift card redemptions, which is also referred to as the “redemption recognition” method. The estimated value of gift cards expected to remain unused is recognized over the expected period of redemption as the remaining gift card values are redeemed, generally over a period of 12 years. Utilizing this method, we estimate both the amount of breakage and the time period of redemption. If actual redemption patterns vary from our estimates, actual gift card breakage income may differ from the amounts recorded. We update our estimates of our redemption period and our breakage rate periodically and apply that rate prospectively to gift card redemptions. Discounts for gift cards sold by third parties are recorded to unearned revenues and are recognized over a period that approximates redemption patterns.

Food and Beverage Costs

Food and beverage costs include inventory, warehousing, related purchasing and distribution costs, and gains and losses on certain commodity derivative contracts. Vendor allowances received in connection with the purchase of a vendor’s products are recognized as a reduction of the related food and beverage costs as earned. For certain contracts, advance payments are made by the vendors based on estimates of volume to be purchased from the vendors and the terms of the agreement. As we make purchases from the vendors each period, we recognize the pro rata portion of allowances earned as a reduction of food and beverage costs for that period. Differences between estimated and actual purchases are settled in accordance with the terms of the agreements. Vendor agreements are generally for a period of one year or more and payments received are initially recorded as long-term liabilities. Amounts expected to be earned within one year are recorded as current liabilities.

Income Taxes

We provide for federal and state income taxes currently payable as well as for those deferred because of temporary differences between reporting income and expenses for financial statement purposes versus tax purposes. Federal income tax credits are recorded as a reduction of income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period that includes the enactment date. Interest recognized on reserves for uncertain tax positions is included in income tax expense in our consolidated statements of earnings. A corresponding liability for accrued interest is included as a component of other current liabilities on our consolidated balance sheets. Penalties, when incurred, are recognized in general and administrative expenses.

FASB ASC Topic 740, Income Taxes, requires that a position taken or expected to be taken in a tax return be recognized (or derecognized) in the financial statements when it is more likely than not (i.e., a likelihood of more than 50 percent) that the position would be sustained upon examination by tax authorities. A recognized tax position is then measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. See Note 12 for additional information.

Derivative Instruments and Hedging Activities

We enter into derivative instruments for risk management purposes only, including derivatives designated as hedging instruments as required by FASB ASC Topic 815, Derivatives and Hedging, and those utilized as economic hedges. We use financial and commodities derivatives to manage interest rate, compensation and commodities pricing risks inherent in our business operations. Our use of derivative instruments is currently limited to interest rate hedges, equity forward contracts and commodity swaps. These instruments are generally structured as hedges of the variability of cash flows related to forecasted transactions (cash flow hedges). However, we do at times enter into instruments designated as fair value hedges to reduce our

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

exposure to changes in fair value of the related hedged item. We do not enter into derivative instruments for trading or speculative purposes, where changes in the cash flows or fair value of the derivative are not expected to offset changes in cash flows or fair value of the hedged item. However, we have entered into equity forwards to economically hedge changes in the fair value of employee investments in our non-qualified deferred compensation plan. All derivatives are recognized on the balance sheet at fair value. For those derivative instruments for which we intend to elect hedge accounting, on the date the derivative contract is entered into, we document all relationships between hedging instruments and hedged items, as well as our risk-management objective and strategy for undertaking the various hedge transactions. This process includes linking all derivatives designated as cash flow hedges to specific assets and liabilities on the consolidated balance sheet or to specific forecasted transactions. We also formally assess, both at the hedge’s inception and on an ongoing basis, whether the derivatives used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items.

To the extent our derivatives are effective in offsetting the variability of the hedged cash flows, and otherwise meet the cash flow hedge accounting criteria required by FASB ASC Topic 815, changes in the derivatives’ fair value are not included in current earnings but are included in accumulated other comprehensive income (loss), net of tax. These changes in fair value will be reclassified into earnings at the time of the forecasted transaction. Ineffectiveness measured in the hedging relationship is recorded currently in earnings in the period in which it occurs. To the extent our derivatives are effective in mitigating changes in fair value, and otherwise meet the fair value hedge accounting criteria required by FASB ASC Topic 815, gains and losses in the derivatives’ fair value are included in current earnings, as are the gains and losses of the related hedged item. To the extent the hedge accounting criteria are not met, the derivative contracts are utilized as economic hedges, and changes in the fair value of such contracts are recorded currently in earnings in the period in which they occur. Cash flows related to derivatives are included in operating activities. See Note 7 for additional information.

Leases

The majority of our restaurant locations, as well as our restaurant support center, are subject to a lease. We evaluate our leases at the commencement of the lease to determine the classification as an operating or finance lease. Upon adoption of FASB ASC Topic 842, we recognized operating and finance lease liabilities based on the present value of minimum lease payments over the remaining expected lease term and corresponding right-of-use assets. We recognize lease expense related to operating leases on a straight-line basis. Amortization expense and interest expense related to finance leases are included in depreciation and amortization and interest, net, respectively, in our consolidated statements of earnings. Sale-leasebacks are transactions through which we sell assets (such as restaurant properties) at fair value and subsequently lease them back. The resulting leases qualify and are accounted for as operating leases. Failed sale-leaseback transactions are generally classified as finance leases and result in retention of the “sold” assets within land, buildings and equipment with a finance lease liability equal to the amount of proceeds received recorded as a component of other liabilities on our consolidated balance sheets.

Within the provisions of certain of our leases, there are rent holidays and escalations in payments over the base lease term, as well as renewal periods. The effects of the holidays and escalations have been reflected in lease expense on a straight-line basis for operating leases over the expected lease term. The lease term commences on the date when we have the right to control the use of the leased property, which is typically before lease payments are due under the terms of the lease. Many of our leases have renewal periods totaling 5 to 20 years, exercisable at our option, and require payment of property taxes, insurance and maintenance costs in addition to the lease payments. At lease inception, we include option periods that we are reasonably certain to exercise as failure to renew the lease would impose an economic penalty either from the loss of our investment in leasehold improvements or future cash flows from operating the restaurant. The consolidated financial statements reflect the same lease term for amortizing leasehold improvements as we use to determine finance versus operating lease classifications. Variable lease expense is generally based on sales levels and is accrued at the point in time we determine that it is probable that such sales levels will be achieved. Landlord allowances are recorded as an adjustment to the right-of-use assets. Gains and losses on sale-leaseback transactions are recognized immediately. We elected the practical expedient to not separate lease and non-lease components for real estate leases entered into after adoption. See Note 10 for additional information.

Pre-Opening Expenses

Non-capital expenditures associated with opening new restaurants are expensed as incurred. These costs are reported as restaurant expenses in our consolidated statements of earnings.

Advertising

Production costs of commercials are expensed in the fiscal period the advertising is first aired while the costs of programming and other advertising, promotion and marketing programs are expensed as incurred. These costs are reported as marketing expenses in our consolidated statements of earnings.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Stock-Based Compensation

We recognize the cost of employee service received in exchange for awards of equity instruments based on the grant date fair value of those awards. We recognize compensation expense, net of estimated forfeitures, on a straight-line basis over the employee service period for awards granted. We utilize the Black-Scholes option pricing model to estimate the fair value of stock option awards. The dividend yield has been estimated based upon our historical results and expectations for changes in dividend rates. The expected volatility was determined using historical stock prices. The risk-free interest rate was the rate available on zero coupon U.S. government obligations with a term approximating the expected life of each grant. The expected life was estimated based on the exercise history of previous grants, taking into consideration the remaining contractual period for outstanding awards. We utilize a Monte Carlo simulation to estimate the fair value of our market-based equity-settled performance awards. The dividend yield assumes reinvestment of dividends. The expected volatility was determined using historical stock prices. The risk-free interest rate was the rate available on zero coupon U.S. government obligations with a term approximating the expected life of each grant. The expected life was estimated based on the performance measurement period for outstanding awards. See Note 14 for further information.

Net Earnings per Share

Basic net earnings per share are computed by dividing net earnings by the weighted-average number of common shares outstanding for the reporting period. Diluted net earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Outstanding stock options, restricted stock units and equity-settled performance stock units granted by us represent the only dilutive effect reflected in diluted weighted-average shares outstanding. These stock-based compensation instruments do not impact the numerator of the diluted net earnings per share computation.

The following table presents the computation of basic and diluted net earnings per common share:

Fiscal Year Ended

Losses from discontinued operations (1.6) (1.9) (3.1)

Weighted average common shares outstanding – Basic 121.9 127.8 130.4

Effect of dilutive stock-based compensation 1.0 1.2 1.4

Weighted average common shares outstanding – Diluted 122.9 129.0 131.8

Basic net earnings per share:

Earnings from continuing operations $ 8.07 $ 7.47 $ 4.85

Losses from discontinued operations (0.01) (0.01) (0.02)

Diluted net earnings per share:

Earnings from continuing operations $ 8.00 $ 7.40 $ 4.80

Losses from discontinued operations (0.01) (0.01) (0.03)

Stock options, restricted stock units 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 as follows:

Fiscal Year Ended

Anti-dilutive stock-based compensation awards 0.3 0.1 0.7

Foreign Currency

The Canadian dollar is the functional currency for our Canadian restaurant operations. Assets and liabilities denominated in foreign currencies are translated into U.S. dollars using the exchange rates in effect at the balance sheet date. Results of operations are translated using the average exchange rates prevailing throughout the period. Translation gains and losses are reported as a separate component of other comprehensive income (loss). Aggregate cumulative translation gains (losses) were $4.5 million and $4.8 million at May 28, 2023 and May 29, 2022, respectively. Net gains (losses) from foreign currency transactions recognized in

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

our consolidated statements of earnings were $0.0 million, $0.0 million and $0.6 million for fiscal 2023, 2022 and 2021, respectively.

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 sheet and income statement affected by these transactions including amounts applicable to each line; and (iii) significant terms and conditions of the transactions, including commitments and contingencies. The guidance is effective for annual periods beginning after December 15, 2021. The Company adopted this guidance in the first quarter of fiscal 2023. The adoption did not have a material impact on our financial statements.

NOTE 2 - REVENUE RECOGNITION

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

Unearned revenues

Deferred gift card revenue $ 537.0 $ 521.1

Deferred gift card discounts (25.5) (23.5)

Other liabilities

Deferred franchise fees - non-current $ 2.7 $ 2.8

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

Twelve Months Ended

NOTE 3 –IMPAIRMENTS AND DISPOSAL OF ASSETS, NET

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

Fiscal Year Ended

Restaurant impairments $ 2.4 $ 6.8 $ 5.3

Disposal (gains) losses (15.1) (4.8) (2.1)

Impairments and disposal of assets, net $ (10.6) $ (2.0) $ 6.6

Restaurant impairments for fiscal 2023 were primarily related to (i) one underperforming restaurant whose projected cash flows were not sufficient to cover its respective carrying values and (ii) four restaurant closures. Restaurant impairments for fiscal 2022 were primarily related to one underperforming restaurant whose projected cash flows were not sufficient to cover its respective carrying values and two underperforming restaurants that were permanently closed during 2022. Restaurant impairments for fiscal 2021 were primarily related to four underperforming restaurants.

Disposal gains for fiscal 2023, 2022 and 2021 are primarily related to sale of properties, sale-leasebacks, disposal of closed locations, and the sale of liquor licenses.

Other impacts for fiscal 2023 were primarily related to cancelled projects. Other impacts for fiscal 2022 were primarily related to the termination of lease liabilities in excess of the related right-of-use assets. Other impairment charges for fiscal 2021 were primarily related to software and lease right-of-use asset impairments.

Impairment charges were measured based on the amount by which the carrying amount of these assets exceeded their fair value. Fair value is generally determined based on appraisals or sales prices of comparable assets and estimates of discounted future cash flows (see Note 8). These amounts are included in impairments and disposal of assets, net as a component of earnings from continuing operations in the accompanying consolidated statements of earnings.

NOTE 4 - LAND, BUILDINGS AND EQUIPMENT, NET

The components of land, buildings and equipment, net, are as follows:

Total land, buildings and equipment $ 7,147.1 $ 6,496.9

Less accumulated depreciation and amortization (3,317.7) (3,070.5)

Less amortization associated with assets under finance leases (104.3) (70.4)

Land, buildings and equipment, net $ 3,725.1 $ 3,356.0

NOTE 5 - SEGMENT INFORMATION

We manage our restaurant brands, Olive Garden, LongHorn Steakhouse, Cheddar’s Scratch Kitchen, Yard House, 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 The Capital Grille and Eddie V’s restaurants in the U.S. The Other Business segment aggregates our remaining brands and includes the results of our company-owned Cheddar’s Scratch Kitchen, Yard House, Seasons 52, Bahama Breeze and The Capital Burger restaurants in the U.S and results from our franchise operations.

External sales are derived principally from food and beverage sales. We do not rely on any major customers as a source of sales, and the customers and long-lived assets of our reportable segments are predominantly in the U.S. There were no material transactions among reportable segments.

Our management uses segment profit as the measure for assessing performance of our segments. Segment profit includes revenues and expenses directly attributable to restaurant-level results of operations (sometimes referred to as restaurant-level earnings). These expenses include food and beverage costs, restaurant labor costs, restaurant expenses and marketing expenses (collectively, restaurant and marketing expenses). Non-cash lease-related expenses from our operating segments are allocated to the corporate level for restaurant expenses (which is a component of segment profit) and depreciation and amortization. Additionally, our lease-related right-of-use assets are not managed or evaluated at the operating segment level, but rather at the corporate level. For fiscal 2023, 2022, and 2021, restaurant and marketing expenses included approximately $0.2 million, $9.0 million, and $28.9 million, respectively, of costs net of retention credits associated with the CARES Act, related to special team member and manager bonuses as well as emergency and furlough pay for restaurant employees due to COVID-19, reflected at the corporate level as they are costs for which our operating segments are not being evaluated.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

In the first quarter of fiscal 2022, we changed our internal management reporting to include The Capital Burger in the Other Business segment. Previously, The Capital Burger was included in the Fine Dining segment due to its adjacency with The Capital Grille brand and overall immateriality. Fiscal 2021 figures have been restated for comparability.

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

At May 28, 2023 and for the year ended

Impairments and disposal of assets, net — (3.3) — — (7.3) (10.6)

At May 29, 2022 and for the year ended

Impairments and disposal of assets, net 4.9 0.1 — 1.6 (8.6) (2.0)

At May 30, 2021 and for the year ended

Impairments and disposal of assets, net 0.1 0.3 — 3.9 2.3 6.6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Reconciliation of segment profit to earnings from continuing operations before income taxes:

Fiscal Year Ended

Less general and administrative expenses (386.1) (373.2) (396.2)

Less impairments and disposal of assets, net 10.6 2.0 (6.6)

Less other (income) expense, net — — (8.7)

NOTE 6 - DEBT

The components of long-term debt are as follows:

Less unamortized discount and issuance costs (8.8) (10.1)

The aggregate contractual maturities of long-term debt for each of the five fiscal years subsequent to May 28, 2023, and thereafter are as follows:

(in millions)

Debt repayments $ — $ — $ — $ 500.0 $ — $ 439.1

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. During fiscal year 2023, loans under the Revolving Credit Agreement bore interest at a rate of LIBOR plus a margin determined by reference to a ratings-based pricing grid (Applicable Margin), or 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 plus 1.000 percent) plus the Applicable Margin. Assuming a “BBB” equivalent credit rating level, the Applicable Margin under the Revolving Credit Agreement would have been 1.000 percent for LIBOR loans and 0.000 percent for base rate loans.

Subsequent to the end of fiscal year 2023, effective May 31, 2023, we entered into an amendment to the Revolving Credit Agreement. Pursuant to the terms of the amendment, the Company, the administrative agent and the lenders have agreed to replace the LIBOR-based interest rate applicable to borrowings under the Credit Agreement with a Term SOFR-based interest rate in advance of the cessation of LIBOR, and make certain other conforming changes. All other material terms and conditions of the Credit Agreement were unchanged. Effective May 31, 2023, loans under the Revolving Credit Agreement bear 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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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 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 1.00 percent for Term SOFR loans and 0.000 percent for base rate loans.

Also subsequent to the end of fiscal year 2023, on May 31, 2023, the Company 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 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.

NOTE 7 – 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 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 interest rate swap agreements are designated as fair value hedges of the related debt.Further, we entered into equity forward contracts to hedge the risk of changes in future cash flows associated with recognized, employee-directed investments in our common stock within the non-qualified deferred compensation plan. We did not elect hedge accounting with the expectation that changes in the fair value of the equity forward contracts would offset changes in the fair value of our common stock investments in the non-qualified deferred compensation plan.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

Fair Values

Equity Forwards

Total equity forwards (2) $ 7.3 $ — $ — $ 0.3

Commodity contracts

Designated N/A N/A $ 27.0 $ 0.6 $ 5.6 $ —

Not designated N/A N/A $ — — — — —

Total commodity contracts (3) $ — $ 0.6 $ 5.6 $ —

Interest rate related

Not designated N/A N/A $ — $ — $ — $ —

Total interest rate related $ — $ — $ 45.4 $ 28.0

Total derivative contracts $ 7.3 $ 0.6 $ 51.0 $ 28.3

(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.

(3)Commodity contracts extend through June 2024.

The effects of derivative instruments in cash flow hedging relationships in the consolidated statements of earnings are as follows:

Fiscal Year Ended Fiscal Year Ended

Interest rate (3) — — — (0.1) (0.1) (0.1)

(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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The effects of derivative instruments in fair value hedging relationships in the consolidated statements of earnings are as follows:

Fiscal Year Ended Fiscal Year Ended

(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 as follows:

Amount of Gain (Loss) Recognized in Earnings

(in millions) Fiscal Year Ended

Food and beverage costs and restaurant expenses $ — $ — $ 0.1

General and administrative expenses 18.3 (3.6) 32.7

Based on the fair value of our derivative instruments designated as cash flow hedges as of May 28, 2023, we expect to reclassify $5.4 million of net losses on derivative instruments from accumulated other comprehensive income (loss) to earnings during the next 12 months based on the maturity of equity forward, commodity, and interest rate contracts. However, the amounts ultimately realized in earnings will be dependent on the fair value of the contracts on the settlement dates.

NOTE 8 – FAIR VALUE MEASUREMENTS

The fair values of cash equivalents, receivables, net, accounts payable and short-term debt approximate their carrying amounts due to their short duration.

The following tables summarize the fair values of financial instruments measured at fair value on a recurring basis at May 28, 2023 and May 29, 2022:

Items Measured at Fair Value at May 28, 2023

Derivatives:

Commodities futures, swaps & options (1) $ (5.6) $ — $ (5.6) $ —

Equity forwards (2) 7.3 — 7.3 —

Interest rate swaps (3) (45.4) — (45.4) —

Total $ (43.7) $ — $ (43.7) $ —

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Items Measured at Fair Value at May 29, 2022

Derivatives:

Commodities futures, swaps & options (1) $ 0.6 $ — $ 0.6 $ —

Equity forwards (2) (0.3) — (0.3) —

Interest rate swaps (3) (28.0) — (28.0) —

Total $ (27.7) $ — $ (27.7) $ —

(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 May 28, 2023, was $884.9 million and $857.0 million, respectively. The carrying value and fair value of long-term debt as of May 29, 2022, was $901.0 million and $896.9 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 generally determined based on third-party market appraisals which includes market data for similar assets. As of May 28, 2023 and May 29, 2022, 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 May 28, 2023, long-lived assets held and used with a carrying amount of $10.0 million, primarily related to one underperforming restaurant, were determined to have a fair value of $8.4 million resulting in an impairment charge of $1.6 million. As of May 29, 2022, long-lived assets held and used with a carrying amount of $4.9 million, primarily related to one underperforming restaurant, were determined to have a fair value of $0.9 million resulting in an impairment charge of $4.0 million.

NOTE 9 - STOCKHOLDERS’ EQUITY

Share Repurchase Program

All of the shares purchased during the fiscal year ended May 28, 2023 were purchased as part of our repurchase program authorized by our Board of Directors. On June 22, 2022, our Board of Directors authorized a share repurchase program under which we may repurchase up to $1.0 billion of our outstanding common stock. This repurchase program does not have an expiration and replaces the existing share repurchase authorization.

Share Retirements

As of May 28, 2023, of the 207.7 million cumulative shares repurchased under the current and previous authorizations, 196.4 million shares were retired and restored to authorized but unissued shares of common stock and there are no remaining treasury shares. We expect that all shares of common stock acquired in the future will also be retired and restored to authorized but unissued shares of common stock.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Accumulated Other Comprehensive Income (Loss)

The components of accumulated other comprehensive income (loss), net of tax, are as follows:

Reclassification realized in net earnings — (2.2) 0.2 (2.0)

Reclassification realized in net earnings — 3.2 0.4 3.6

The following table presents the amounts and line items in our consolidated statements of earnings where other adjustments reclassified from AOCI into net earnings were recorded:

Fiscal Year Ended

Derivatives

Commodity contracts (1) $ (3.1) $ 1.9

Equity contracts (2) (0.8) 0.8

Interest rate contracts (3) (0.1) (0.1)

Total before tax $ (4.0) $ 2.6

Tax benefit (expense) 0.8 (0.4)

Net of tax $ (3.2) $ 2.2

Fiscal Year Ended

Benefit plan funding position

Pension/postretirement plans- actuarial losses (4) $ (0.1) $ (0.5)

Recognized net actuarial gain - other plans (5) (0.7) (0.6)

Total before tax $ (0.8) $ (1.1)

Tax benefit (expense) 0.4 0.9

Net of tax $ (0.4) $ (0.2)

(1)Primarily included in food and beverage costs and restaurant expenses. See Note 7 for additional details.

(2)Included in general and administrative expenses. See Note 7 for additional details.

(3)Included in interest, net, on our consolidated statements of earnings.

(4)Included in the computation of net periodic benefit costs - pension and postretirement plans, which is a component of other (income) expense, net, restaurant labor expenses and general and administrative expenses. See Note 13 for additional details.

(5)Included in the computation of net periodic benefit costs - other plans, which is a component of restaurant labor, and general and administrative expenses.

DRI US Equity

DRI · 10-K · period ended 2023-05-28

Item 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Item 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

DRI US Equity☆

DRI · 10-K · period ended 2023-05-28

Item 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Item 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

DRI US Equity