Darden Restaurants (DRI) 10-K risk factor changes: FY2020 vs FY2019

The failure of these systems to operate effectively, problems with transitioning to upgraded or replacement systems, a material network breach in the security of these systems as a result of a cyber attack, [added: phishing attack] or any other failure to maintain a continuous and secure cyber network could result in substantial harm or inconvenience to [removed: our company,] [added: the Company,] our [removed: employees] [added: team members] or [removed: our] guests.

In addition, regardless of the source or cause, any report of food-borne illnesses such as E. coli, hepatitis A, norovirus or salmonella, and other [added: food safety issues including food tampering or contamination, at one of our restaurants could adversely affect the reputation of our brands and have a negative impact on our sales.]

The inability to hire, train, reward and retain restaurant team members [removed: or an inability to adequately monitor] and [removed: proactively respond to employee dissatisfaction] [added: determine and maintain adequate staffing] may impact our ability to achieve our operating, growth and financial objectives.

Our [removed: future] [added: long-term] growth depends substantially on our ability to recruit and retain high-quality team members to work in and manage our restaurants.

Adequate staffing [added: and retention] of qualified restaurant team members is a critical factor impacting our guests’ experience in our restaurants.

Maintaining adequate staffing in our existing restaurants and hiring and training staff for our new restaurants requires precise workforce [removed: planning.][added: planning which has been complicated by the impacts of the COVID-19 pandemic on our business and on consumer preferences.]

These actions and proceedings may involve allegations of illegal, unfair or inconsistent employment practices, including wage and hour violations and employment discrimination; guest discrimination; food safety issues including poor food quality, food-borne illness, food tampering, food contamination, and adverse health effects from consumption of various food products or high-calorie foods (including obesity); other personal [removed: injury;] [added: injury, including claims related to COVID-19;] violation of “dram shop” laws (providing an injured party with recourse against an establishment that serves alcoholic beverages to an intoxicated party who then causes injury to himself or a third party); trademark infringement; violation of the federal securities laws; or other concerns.

Negative publicity also may result from health concerns including food safety and flu [added: or virus] outbreaks, publication of government or industry findings concerning food products, environmental disasters, crime incidents, data [removed: privacy] [added: security] breaches, scandals involving our employees, or operational problems at our restaurants, all of which could make our brands and menu offerings less appealing to our guests and negatively impact our guest counts and sales.

As of May [removed: 26, 2019, 1,715] [added: 31, 2020, 1,730] of our [removed: 1,785] [added: 1,804] restaurants operating in the United States and Canada operate in leased locations.

Our inability or failure to execute on a comprehensive business continuity plan following a major natural disaster such as a hurricane or manmade disaster, [removed: including terrorism,] at our corporate facility could have a materially adverse impact on our business.

We have disaster recovery procedures and business continuity plans in place to address most events of a crisis nature, including hurricanes and other natural [added: or manmade] disasters, and back up and off-site locations for recovery of electronic and other forms of data and information.

Health concerns arising from food-related pandemics, outbreaks of [removed: flu] [added: flu,] viruses or other diseases may have an adverse effect on our business.

[removed: The] [added: In addition to the novel coronavirus that causes COVID-19, the] United States and other countries have experienced, or may experience in the future, outbreaks of [added: other] viruses, such as norovirus, avian flu or “SARS,” [added: “MERS,”] H1N1 or “swine flu,” or other diseases.

If a virus is transmitted by human [removed: contact,] [added: contact or respiratory transmission,] our employees or guests could become infected, or could choose, or be advised, to avoid gathering in public places, any of which could adversely affect our restaurant guest traffic and our ability to adequately staff our restaurants, receive deliveries on a timely basis or perform functions at the corporate level.

We also could be adversely affected if the World Health Organization and/or the [removed: Centers for Disease Control] [added: CDC] were to restrict travel to affected geographic areas where we source our products, thus possibly impacting the continuity of supply.

Even if such measures are not implemented and a virus or other disease does not spread significantly, the perceived risk of infection or significant health risk may [added: cause guests to choose other alternatives to dining out in our restaurants which may] adversely affect our business.

We face intense competition, and if we have an insufficient focus on competition and the consumer landscape, our business, financial condition and results of operations [removed: would] [added: could] be adversely affected.

If we are unable to continue to compete effectively, our business, financial condition and results of operations [removed: would] [added: could] be adversely affected.

If we fail to anticipate changing trends or other consumer preferences, our business, financial condition and results of operations [removed: would] [added: could] be adversely affected.

Our failure to drive both short-term and long-term profitable sales growth through brand relevance, operating excellence, opening new restaurants of existing brands, and acquiring new [removed: dining] [added: restaurant] brands could result in poor financial performance.

In addition, we may not be able to support sustained new unit growth or open all of our planned new restaurants, and the new restaurants that we open may not be profitable [added: or as profitable as our existing restaurants.]

The introduction of or changes to tariffs on imported food products, such as produce and seafood, [added: could increase our costs and possibly impact the supply of those products.]

[removed: Recessionary] [added: The current] economic [removed: cycles,] [added: recession,] a protracted economic slowdown, a worsening economy, increased unemployment, increased energy prices, rising interest rates, a downgrade of the U.S. government’s long-term credit rating, imposition of retaliatory tariffs on important U.S. imports and exports or other industry-wide cost pressures [removed: could] [added: have affected and can continue to] affect consumer behavior and spending for restaurant dining occasions and [removed: lead to a decline in sales and earnings.]

Job losses, foreclosures, bankruptcies and falling home prices [removed: could] [added: have caused and may continue to] cause guests to make fewer discretionary purchases, and any significant decrease in our guest traffic or average profit per transaction will negatively impact our financial performance.

Disruptions in the financial and credit markets may adversely impact consumer spending [removed: patterns,] [added: patterns and] affect the availability and cost of [removed: credit and increase pension plan expenses.][added: credit.]

[removed: However,] we are aware of names and marks identical or similar to our service marks being used from time to time by other persons.

We compute the amount of impairment by comparing the [removed: implied] fair value of [added: the] reporting unit [removed: goodwill] with the carrying amount of that [removed: goodwill.][added: reporting unit.]

We cannot accurately predict the amount and timing of any [removed: impairment] [added: further impairments] of these [added: or other] assets.

Our effective income tax rate and other taxes in the future could be adversely affected by a number of factors, including changes in the mix of earnings in countries with different statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in tax laws or other legislative changes, [removed: including the Tax Cuts and Jobs Act (Tax Act),] certain international tax treaties and the outcome of income tax audits.

Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting for [added: external purposes in accordance with accounting principles generally accepted in the United States.]

[removed: A significant financial reporting failure or material weakness in] internal control over financial reporting could cause a loss of investor confidence and decline in the market price of our common stock, increase our costs, lead to litigation or result in negative publicity that could damage our reputation.

The COVID-19 pandemic has disrupted and is expected to continue to disrupt our business, which has affected and could continue to materially affect our operations, financial condition and results of operations for an extended period of time.

The COVID-19 pandemic, federal, state and local government responses to COVID-19 and our Company’s responses to the outbreak have all disrupted and will continue to disrupt our business.

In the United States, individuals are being encouraged to practice social distancing, restricted from gathering in groups and for portions of the fourth quarter of fiscal 2020, placed on complete restriction from non-essential movements outside of their homes in some areas.

In response to the COVID-19 pandemic and these changing conditions, during the fourth quarter of fiscal 2020, we closed the dining rooms in all of our restaurants for some portion of the quarter and operated in a To Go or To Go plus delivery format only.

As of the date of this report, we have 89.0% of our dining rooms open in at least a limited capacity.

We have closed certain restaurants, modified work hours for our team members and identified and implemented cost savings measures throughout our operations.

As the COVID-19 pandemic continues to spike in certain areas of the country, there could be additional federal, state or local responses that restrict in-person dining and/or movement of guests or otherwise impact our business.

The COVID-19 pandemic and these responses have affected and will continue to adversely affect our guest traffic, sales and operating costs and we cannot predict how long the outbreak will last or what other government responses may impact us.

The COVID-19 pandemic has also adversely affected our ability to open new restaurants.

Due to the uncertainty in the economy and to preserve liquidity, we paused nearly all construction of new restaurants and certain remodeling projects at existing restaurants during the fourth quarter of fiscal 2020.

While we resumed most of these construction projects as of the date of this report, these pauses may materially adversely affect our ability to grow our business.

In order to reinforce our liquidity position, we entered into a new, $270.0 million 364-day Term Loan Credit Agreement in April 2020.

A material increase in our level of debt or material impairments of our assets could cause our debt to total capitalization ratio to exceed the maximum level permitted under the covenants in our Revolving Credit Agreement and Term Loan Credit Agreement.

We also raised $505.1 million in a public offering of the Company’s common stock that closed in April 2020.

If the business interruptions caused by COVID-19 last longer than we expect, we may continue to seek other sources of liquidity.

There can be no guarantee that additional liquidity will be readily available or available on favorable terms, especially the longer the COVID-19 outbreak lasts.

Our restaurant operations could be further disrupted if large numbers of our employees are diagnosed with COVID-19.

If a significant percentage of our workforce is unable to work, whether because of illness, quarantine, limitations on travel or other government restrictions in connection with COVID-19, our operations may be negatively impacted, potentially materially adversely affecting our liquidity, financial condition or results of operations.

Our suppliers could be adversely impacted by the COVID-19 outbreak.

If our suppliers’ employees are unable to work, whether because of illness, quarantine, limitations on travel or other government restrictions in connection with COVID-19, we could face shortages of food items or other supplies at our restaurants and our operations and sales could be adversely impacted by such supply interruptions.

We provide PPE to our team members and have added additional supplies of sanitization products to our restaurants for team member and guest use.

A shortage of supply of PPE or sanitization products could adversely impact our restaurant operations.

Additional government regulations or legislation as a result of COVID-19 in addition to decisions we have made and may make in the future relating to the compensation of and benefit offerings for our restaurant team members could also have an adverse effect on our business.

We cannot predict the types of additional government regulations or legislation that may be passed relating to employee compensation as a result of the COVID-19 outbreak.

We have implemented paid sick leave, emergency pay policies and taken other compensation and benefit actions to support our restaurant team members during the COVID-19 business interruption, but those actions may not be sufficient to compensate our team members for the entire duration of the business interruption resulting from COVID-19.

Those team members might seek and find other employment during that interruption, which could materially adversely affect our ability to properly staff and reopen our restaurants with experienced team members when the business interruptions caused by COVID-19 abate or end.

The market for the most qualified talent continues to be competitive and we must provide competitive wages, benefits and workplace conditions to maintain our most qualified team members.

Depending on the length of restaurant team member furloughs, team members may seek other employment and decline to return when we recall them to work in our restaurants.

Personal or public health concerns related to COVID-19 might make some existing team members or potential candidates reluctant to work in enclosed restaurant environments.

In response to the COVID-19 pandemic, many consumers have preferred to order food To Go or for delivery rather than dining in at full-service restaurants, and if these preferences continue and consumers continue to avoid gathering in public places in large groups, we may need to further adapt our offerings to accommodate these changes.

Volatility in the United States equity markets affects our ability to efficiently hedge exposures to our market risk related to equity-based compensation awards.

The equity markets in the United States have been extremely volatile due to the COVID-19 pandemic and the recessionary cycle affecting the United States economy and the Company’s stock price has fluctuated significantly.

We have equity hedges in place to protect the Company from exposure to market risk related to future payout of equity-based compensation awards.

However, because these hedges also net settle on a cash basis quarterly, we have been and may in the future be required to make cash payments at those quarterly settlement dates and the amounts of those payments are difficult to predict due to the recent extreme volatility of the equity markets.

These cash payments may ultimately be offset by payments to us from the hedge counterparties or reductions in expected payouts to employees when those equity hedges finally fully settle and the related equity awards pay out.

General economic conditions, including economic downturns related to the COVID-19 pandemic, have also adversely affected our results of operations and may continue to do so.

lead to a decline in sales and earnings.

However,

Subsequent to our fiscal 2020 annual analysis, we identified an indication of impairment related to the impacts of the COVID-19 pandemic requiring us to assess our goodwill and trademarks for impairment as of May 31, 2020.

As a result of these analyses, we recorded impairments of our Cheddar’s Scratch Kitchen® trademark and the related goodwill from acquiring that brand.

food safety issues including food tampering or contamination, at one of our restaurants could adversely affect the reputation of our brands and have a negative impact on our sales.

The low level of unemployment in the United States is resulting in aggressive competition for talent, wage inflation and pressure to improve benefits and workplace conditions to remain competitive.

or as profitable as our existing restaurants.

could increase our costs and possibly impact the supply of those products.

General economic conditions may also adversely affect our results of operations.

Changes in the capital markets could also have significant effects on our pension plan.

Our pension income or expense is affected by factors including the market performance of the assets in the master pension trust maintained for the pension plan for some of our employees, the weighted average asset allocation and long-term rate of return of our pension plan assets and the discount rate used to determine the interest cost component of our net periodic pension cost.

Additional tax regulations and interpretations of the Tax Act are expected to be issued, and no assurance can be made that future guidance will not adversely affect our financial condition and results of operations.

external purposes in accordance with accounting principles generally accepted in the United States.

Fiscal [removed: 2019,] [added: 2020,] which ended May [removed: 26, 2019,] [added: 31, 2020,] consisted of [removed: 52] [added: 53] weeks and fiscal [removed: 2018,] [added: 2019,] which ended May [removed: 27, 2018,] [added: 26, 2019,] consisted of 52 weeks.

At May [removed: 26, 2019,] [added: 31, 2020,] we operated [removed: 1,785] [added: 1,804] 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® and Eddie V’s Prime Seafood® trademarks.

We own and operate all of our restaurants in the United States and Canada, except for 3 joint venture restaurants managed by us and [removed: 37] [added: 30] franchised restaurants.

We also have [removed: 33] [added: 32] franchised restaurants in operation located in Latin America and the Middle East.

Fiscal [removed: 2019] [added: 2020] Financial Highlights

Our sales from continuing operations were [removed: $8.51] [added: $7.81] billion in fiscal [removed: 2019] [added: 2020] compared to [removed: $8.08] [added: $8.51] billion in fiscal [removed: 2018.][added: 2019.]

The [removed: 5.3] [added: 8.3] percent [removed: increase] [added: decrease] in sales from continuing operations was primarily driven by [added: negative combined Darden same-restaurant sales of 11.0 percent partially offset by] revenue from the addition of [removed: 39] [added: 19] net new company-owned [removed: restaurants and a combined Darden same-restaurant sales increase of 2.5 percent.][added: restaurants.]

Net [removed: earnings] [added: loss] from continuing operations for fiscal [removed: 2019 were $718.6] [added: 2020 was $49.2] million [removed: ($5.73] [added: ($0.40] per diluted share) compared with net earnings from continuing operations for fiscal [removed: 2018] [added: 2019] of [removed: $603.8] [added: $718.6] million [removed: ($4.79] [added: ($5.73] per diluted share).

Net [removed: earnings] [added: loss] from continuing operations for fiscal [removed: 2019 increased 19.0 percent and] [added: 2020 was $49.2 million ($0.40 per] diluted [added: share) compared with] net earnings [removed: per share] from continuing operations [removed: increased 19.6 percent compared with] [added: for] fiscal [removed: 2018.][added: 2019 of $718.6 million ($5.73 per diluted share).]

Our net loss from discontinued operations was [removed: $5.2] [added: $3.2] million [removed: ($0.04] [added: ($0.03] per diluted share) for fiscal [removed: 2019,] [added: 2020,] compared with a net loss from discontinued operations of [removed: $7.8] [added: $5.2] million [removed: ($0.06] [added: ($0.04] per diluted share) for fiscal [removed: 2018.][added: 2019.]

[removed: When combined with results from] continuing operations, our diluted net [added: loss per share was $0.43 for fiscal 2020 and diluted net] earnings per share [removed: were] [added: was] $5.69 [removed: and $4.73] for fiscal [removed: 2019 and 2018, respectively.][added: 2019.]

In fiscal [removed: 2020,] [added: 2021,] we expect [removed: our annual effective tax rate] to [removed: be between 10.0 percent and 11.0 percent] [added: open 35-40 net new restaurants] and we expect capital expenditures incurred to build new restaurants, remodel and maintain existing restaurants and technology initiatives to be between [removed: $450.0] [added: $250.0] million and [removed: $500.0] [added: $300.0] million.

RESULTS OF OPERATIONS FOR FISCAL [removed: 2019] [added: 2020] AND [removed: 2018][added: 2019]

All information is derived from the consolidated statements of earnings for the fiscal years ended May [removed: 26, 2019] [added: 31, 2020] and May [removed: 27, 2018:][added: 26, 2019:]

| (in millions) | May [removed: 26, 2019] [added: 31, 2020] | | | | May [removed: 27, 2018] [added: 26, 2019] | | | | [removed: 2019] [added: 2020] vs [removed: 2018] [added: 2019] | |

| Food and beverage | [removed: 2,412.5] [added: 2,240.8] | | | | [removed: 2,303.1] [added: 2,412.5] | | | | [removed: 4.8] [added: (7.1] | [removed: %] [added: )%] |

| Restaurant labor | [removed: 2,771.1] [added: 2,682.6] | | | | [removed: 2,614.5] [added: 2,771.1] | | | | [removed: 6.0] [added: (3.2] | [removed: %] [added: )%] |

| Restaurant expenses | [removed: 1,477.8] [added: 1,475.1] | | | | [removed: 1,417.1] [added: 1,477.8] | | | | [removed: 4.3] [added: (0.2] | [removed: %] [added: )%] |

| Marketing expenses | [removed: 255.3] [added: 238.0] | | | | [removed: 252.3] [added: 255.3] | | | | [removed: 1.2] [added: (6.8] | [removed: %] [added: )%] |

| General and administrative expenses | [removed: 405.5] [added: 376.4] | | | | [removed: 409.8] [added: 405.5] | | | | [removed: (1.0] [added: (7.2] | )% |

| Depreciation and amortization | [removed: 336.7] [added: 355.9] | | | | [removed: 313.1] [added: 336.7] | | | | [removed: 7.5] [added: 5.7] | % |

| Impairments and disposal of assets, net | [removed: 19.0] [added: 221.0] | | | | [removed: 3.4] [added: 19.0] | | | | NM | |

| Total operating costs and expenses | $ | [removed: 7,677.9] [added: 7,759.0] | | | $ | [removed: 7,313.3] [added: 7,677.9] | | | [removed: 5.0] [added: 1.1] | % |

| Operating income | [removed: 832.5] [added: 47.9] | | | | [removed: 766.8] [added: 832.5] | | | | [removed: 8.6] [added: (94.2] | [removed: %] [added: )%] |

| Interest, net | [removed: 50.2] [added: 57.3] | | | | [removed: 161.1] [added: 50.2] | | | | [removed: (68.8] [added: 14.1] | [removed: )%] [added: %] |

| Earnings [added: (loss)] before income taxes | [removed: 782.3] [added: (161.0] | | [added: )] | | [removed: 605.7] [added: 782.3] | | | | [removed: 29.2] [added: NM] | [removed: %] |

| Income tax expense [added: (benefit)] (1) | [removed: 63.7] [added: (111.8] | | [added: )] | | [removed: 1.9] [added: 63.7] | | | | NM | |

| Earnings [added: (loss)] from continuing operations | $ | [removed: 718.6] [added: (49.2] | [added: )] | | $ | [removed: 603.8] [added: 718.6] | | | [removed: 19.0] [added: NM] | [removed: %] |

| Losses from discontinued operations, net of tax | [removed: (5.2] [added: (3.2] | | ) | | [removed: (7.8] [added: (5.2] | | ) | | NM | |

| Net earnings [added: (loss)] | $ | [removed: 713.4] [added: (52.4] | [added: )] | | $ | [removed: 596.0] [added: 713.4] | | | [removed: 19.7] [added: NM] | [removed: %] |

| (1) Effective tax rate | [removed: 8.1] [added: 69.4] | | % | | [removed: 0.3] [added: 8.1] | | % | | | |

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 [removed: 2018:][added: 2019:]

| | | May [removed: 26, 2019] [added: 31, 2020] | | | May [removed: 27, 2018] [added: 26, 2019] | |

| Olive Garden [removed: (1)] | | [removed: 866] [added: 868] | | | [removed: 856] [added: 866] | |

| LongHorn Steakhouse | | [removed: 514] [added: 522] | | | [removed: 504] [added: 514] | |

| Cheddar’s Scratch Kitchen [removed: (2)] [added: (1)] | | [removed: 161] [added: 165] | | | [removed: 156] [added: 161] | |

| Yard House | | [removed: 79] [added: 81] | | | [removed: 72] [added: 79] | |

| The Capital Grille [removed: (3)] [added: (2)] | | [removed: 58] [added: 60] | | | 58 | |

| Seasons 52 | | 44 | | | [removed: 42] [added: 44] | |

| Bahama Breeze | | [removed: 42] [added: 41] | | | [removed: 39] [added: 42] | |

COVID-19 Pandemic

In March 2020, the COVID-19 outbreak was declared a national public health emergency resulting in a significant reduction in guest traffic at our restaurants due to changes in consumer behavior as public health officials encouraged social distancing and state and local governments mandated restrictions including suspension of dine-in operations, reduced restaurant seating capacity, table spacing requirements, bar closures and additional physical barriers.

Through the first three quarters of fiscal 2020, our financial results were strong as sales from continuing operations for the first nine months of fiscal 2020 were $6.54 billion, an increase of 4.1 percent over the prior year period.

The COVID-19 pandemic negatively impacted this strong performance, and for most of the fourth quarter of fiscal 2020, we operated with all of our dining rooms closed and served our guests in a To Go only or To Go and delivery format.

Our sales for the fourth quarter of fiscal 2020 declined 43.0 percent from the fourth quarter of fiscal 2019.

As we continue to navigate through the pandemic, we have taken significant steps to adapt our business to allow us to continue to serve guests, support our team members and secure our liquidity position to provide financial flexibility, including:

| • | Modifying our business operations in order to continue serving guests at our restaurants as safely and effectively as possible, including, initially transitioning all restaurant locations to a To Go only or To Go and delivery model; |

| • | Reducing or eliminating fixed costs in our restaurants and restaurant support center as well as eliminating or delaying most nonessential capital spending; |

| • | Furloughing a substantial number of hourly restaurant employees as a result of the closure of our dining rooms and reduction in sales; |

| • | Protecting our team members’ safety and wellbeing, including sourcing additional sanitation supplies and personal protective equipment, implementing paid sick leave for all hourly restaurant team members, providing a $75.0 million emergency pay program and covering $4.1 million of health and welfare insurance premiums for furloughed team members; |

| • | Suspending the quarterly cash dividend, with the intention of reviewing our dividend policy as developments warrant; |

| • | Fully drawing on our $750.0 million Revolving Credit Agreement, which was subsequently repaid in May 2020; |

| • | Securing a $270.0 million term loan; |

| • | Raising $505.1 million in net proceeds from a follow-on equity offering; |

| • | Suspending our share repurchase activity; and |

| • | Implementing a careful, phased reopening of our dining rooms where permitted by local regulations. |

The impact on our operating results as well as the operational and financial measures we have implemented in response to the COVID-19 pandemic have been included throughout this document.

As a result of the economic impact of the COVID-19 pandemic, during the fourth quarter of fiscal 2020, we recorded non-cash impairment charges of $390.0 million related to a portion of our goodwill, other indefinite-lived intangible assets, and other assets.

See Note 1 and Note 3 of the Notes to Consolidated Financial Statements (Part II, Item 8 of this report) for additional information.

Additionally, on March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (CARES Act) was signed into law in the United States.

The provisions of the CARES Act provide for, among other items, refundable employee retention tax credits for which we intend to claim $39.2 million related to our emergency pay program mentioned above.

See Note 12 of the Notes to Consolidated Financial Statements (Part II, Item 8 of this report) for additional information.

In late April 2020, state and local governments began to allow us to open dining rooms at limited capacities, along with other operating restrictions, and as of the date of filing this report, 89.0 percent of our restaurants were able to open their dining

rooms to some extent.

While increasing our in-restaurant dining capacity is subject to the ordinances in the jurisdictions we operate, we are focused on increasing capacity where possible, continuing to provide a safe environment for our team members and guests, and maintaining many of the efficiencies established over these past few months.

For most of the fourth quarter of fiscal 2020, our cash flows from operations were negative, but by the end of the quarter, with the increasing dining room capacity, we were back to near break-even cash flow levels.

Although we expect our restaurants’ dining room capacity to increase as public health conditions improve and restrictions are eased, it is possible additional outbreaks could require us to reduce our capacity or further suspend our in-restaurant dining operations.

Although the fourth quarter of fiscal 2020 required us to focus on adapting our business to account for the impacts of COVID-19, our long-term operating philosophy remains focused on strengthening the core operational fundamentals of the business by providing an outstanding guest experience rooted in culinary innovation, attentive service, engaging atmosphere, and integrated marketing.

The decrease in sales was driven by the impact of COVID-19 on our fourth quarter results in fiscal 2020 which declined 43.0 percent from the fourth quarter of fiscal 2019.

Our results from continuing operations for fiscal 2020 decreased compared to fiscal 2019 primarily due to the economic impacts of COVID-19 which had a material adverse effect on the fourth quarter of fiscal 2020.

When combined with results from

While it is our normal practice to provide an annual financial outlook, given the level of volatility and uncertainty surrounding the future impact of the COVID-19 outbreak, measures taken to control its spread, the broader U.S. economy and any specific impact on our financial results, we are providing only a limited outlook for fiscal 2021.

| Sales | $ | 7,806.9 | | | $ | 8,510.4 | | | (8.3 | )% |

| Goodwill impairment | 169.2 | | | | — | | | | NM | |

| Other (income) expense, net | 151.6 | | | | — | | | | NM | |

| NM- Percentage change not considered meaningful. | | | | | | | | | | |

| (1) | Includes seven franchised locations acquired in fiscal 2020. |

| Olive Garden | $ | 4,013.8 | | | $ | 4,287.3 | | | (6.4 | )% | | (8.6 | )% | | $ | 4.5 | | | $ | 5.0 | |

| LongHorn Steakhouse | $ | 1,701.1 | | | $ | 1,810.6 | | | (6.0 | )% | | (8.8 | )% | | $ | 3.2 | | | $ | 3.6 | |

| Cheddar’s Scratch Kitchen | $ | 584.2 | | | $ | 664.0 | | | (12.0 | )% | | (17.1 | )% | | $ | 3.5 | | | $ | 4.2 | |

With a focus on growing same-restaurant sales, we’ve implemented a “Back-to-Basics” approach rooted in strong operating fundamentals.

We’re focused on improving culinary innovation and execution inside each of our brands, delivering attentive service to each and every one of our guests, and creating an inviting and engaging atmosphere inside our restaurants.

We support these priorities with smart and relevant integrated marketing programs that resonate with our guests.

By delivering on these operational and brand-building imperatives, we expect to increase our market share through new restaurant and same-restaurant sales growth and deliver best-in-class profitability.

We expect fiscal 2020 sales from continuing operations to increase between 5.3 percent and 6.3 percent, driven by the impact of the 53rd week in fiscal 2020, combined Darden same-restaurant sales growth of 1.0 percent to 2.0 percent and approximately 50 new restaurants.

In June 2019, we announced a quarterly dividend of $0.88 per share, payable on August 1, 2019.

Based on the $0.88 quarterly dividend declaration, our expected annual dividend is $3.52 per share, which reflects an increase of 17.3 percent compared to our fiscal 2019 annual dividend.

Dividends are subject to the approval of our Board of Directors and, accordingly, the timing and amount of our dividends are subject to change.

| Sales | $ | 8,510.4 | | | $ | 8,080.1 | | | 5.3 | % |

| NM- Not meaningful. Percentage increases and decreases over 100 percent were not considered meaningful. | | | | | | | | | | |

| (1) | Includes six locations in Canada. |

| (2) | Includes the 11 franchised restaurants acquired on August 28, 2017. |

| Olive Garden | $ | 4,287.3 | | | $ | 4,082.5 | | | 5.0 | % | | 3.9 | % | | $ | 5.0 | | | $ | 4.8 | |

| LongHorn Steakhouse | $ | 1,810.6 | | | $ | 1,703.2 | | | 6.3 | % | | 3.3 | % | | $ | 3.6 | | | $ | 3.4 | |

| Cheddar’s Scratch Kitchen | $ | 664.0 | | | $ | 652.7 | | | 1.7 | % | | (3.4 | )% | | $ | 4.2 | | | $ | 4.3 | |

| The Capital Grille | $ | 461.4 | | | $ | 440.7 | | | 4.7 | % | | 3.7 | % | | $ | 8.0 | | | $ | 7.7 | |

| Seasons 52 | $ | 253.2 | | | $ | 249.6 | | | 1.4 | % | | (1.5 | )% | | $ | 5.9 | | | $ | 6.1 | |

| Bahama Breeze | $ | 246.5 | | | $ | 236.8 | | | 4.1 | % | | (1.0 | )% | | $ | 6.0 | | | $ | 6.2 | |

| Eddie V’s | $ | 144.5 | | | $ | 133.7 | | | 8.1 | % | | 2.8 | % | | $ | 7.4 | | | $ | 7.1 | |

| Earnings (loss) from discontinued operations, net of taxes | (0.1 | ) | | (0.1 | ) |

| Net earnings | 8.4 | % | | 7.4 | % |

| • | General and administrative expenses decreased as a percent of sales primarily driven by a 0.2% impact due to expenses incurred in fiscal 2018 related to the integration of Cheddar’s Scratch Kitchen and a 0.3% impact related to sales leverage. |

| • | Impairments and disposal of assets, net increased as a percent of sales due to fiscal 2019 restaurant impairments in excess of fiscal 2018 restaurant impairments. |

INTEREST EXPENSE

Net interest expense decreased as a percent of sales in fiscal 2019 primarily due to debt retirement costs of $102.2 million incurred in fiscal 2018 associated with the retirement of $310.9 million aggregate principal amount of long-term debt.

The increase in the effective income tax rate for fiscal 2019 was primarily due to the favorable impact in fiscal 2018 of the Tax Cuts and Jobs Act (Tax Act), which included a $79.3 million one-time adjustment of our net deferred tax liabilities and a corresponding income tax benefit reflected in our consolidated statements of earnings.

The impact of the deferred tax adjustment was partially offset by a benefit in fiscal 2019 due to the lower federal corporate tax rate of 21.0 percent compared with the 29.4 percent blended federal corporate tax rate in effect for fiscal 2018.

Our diluted per share results from continuing operations were positively impacted by the Tax Act by approximately $0.52 in fiscal 2019 due to the lower federal corporate tax rate of 21.0 percent as compared with the 29.4 percent blended federal corporate tax rate in effect for fiscal 2018.

Our diluted per share results from continuing operations for fiscal 2018 were positively impacted by the Tax Act by approximately $0.62 due to a net benefit from deferred tax revaluation.

Our diluted per share results from continuing operations for fiscal 2018 were adversely impacted by approximately $0.54 related to debt retirement costs and approximately $0.10 related to costs associated with the integration of Cheddar’s Scratch Kitchen.

| Olive Garden | | 20.6% | | 20.1% | | 50 | | BP |

| LongHorn Steakhouse | | 17.9% | | 17.7% | | 20 | | BP |

| Fine Dining | | 21.1% | | 20.4% | | 70 | | BP |

| Other Business | | 14.3% | | 14.8% | | (50 | ) | BP |

The decrease in Other Business’ segment profit margin for fiscal 2019 was driven primarily by margin impact from negative same-restaurant sales and workforce investments.

Other Business’ segment profit margin was also negatively impacted by the adoption of new revenue recognition guidance which requires franchisee purchases of our inventory through our distribution network to be recognized as revenue with a corresponding increase to food and beverage expense.

The judgments we make related to the expected useful lives of long-lived assets, definitions of lease terms and our ability to realize undiscounted cash flows in excess of the carrying amounts of these assets are affected by factors such as the ongoing maintenance and improvements of the assets, changes in economic conditions, changes in usage or operating performance, desirability of the restaurant sites and other factors, such as our ability to sell our assets held for sale.

As we assess the ongoing expected cash flows and carrying amounts of our long-lived assets, significant adverse changes in these factors could cause us to realize an impairment loss.

Based on a review of operating results for each of our restaurants, 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.

The

See Notes 1 and [removed: 8] [added: 7] of the Notes to Consolidated Financial Statements (Part II, Item 8 of this report).

At May [removed: 26, 2019,] [added: 31, 2020,] our potential losses in future net earnings resulting from changes in equity forwards, commodity instruments and floating rate debt interest rate exposures were approximately [removed: $42.2] [added: $23.9] 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 [removed: $93.3] [added: $89.7] million.

The fair value of our long-term fixed-rate debt outstanding as of May [removed: 26, 2019,] [added: 31, 2020,] averaged [removed: $917.8][added: $1.02 billion, with a high of $1.20 billion and a low of $828.7 million during fiscal 2020.]

million, with a high of $955.7 million and a low of $887.9 million during fiscal 2019.

Darden Restaurants, Inc. is a full-service restaurant company, and as of May [removed: 26, 2019,] [added: 31, 2020,] we owned and operated [removed: 1,785] [added: 1,804] 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® and Eddie V’s Prime Seafood® trademarks.

We served [removed: nearly 395] [added: over 355] million meals in fiscal [removed: 2019.][added: 2020.]

As of May [removed: 26, 2019,] [added: 31, 2020,] we also had [removed: 70] [added: 62] restaurants operated by independent third parties pursuant to area development and franchise agreements.

The following table details the number of company-owned and operated restaurants, as well as those operated under franchise agreements, as of May [removed: 26, 2019:][added: 31, 2020:]

| Number of restaurants | | Olive Garden | | LongHorn Steakhouse | | Cheddar’s Scratch [removed: Kitchen] [added: Kitchen (2)] | | Yard House | | The Capital Grille [removed: (2)] [added: (3)] | | [removed: Seasons 52] [added: Seasons 52] | | [removed: Bahama Breeze] [added: Bahama Breeze] | | Eddie V’s | | Total |

| Canada | | [removed: 6] [added: 7] | | — | | — | | — | | — | | — | | — | | — | | [removed: 6] [added: 7] |

| United States [removed: (3)] [added: (4)] | | [removed: 6] [added: 7] | | 16 | | [removed: 14] [added: 6] | | — | | — | | — | | 1 | | — | | [removed: 37] [added: 30] |

| Middle East | | [removed: 4] [added: 3] | | [removed: 1] [added: —] | | — | | — | | — | | — | | — | | — | | [removed: 5] [added: 3] |

| Latin America | | [removed: 25] [added: 26] | | 1 | | — | | — | | 2 | | — | | — | | — | | [removed: 28] [added: 29] |

| Total | | [removed: 35] [added: 36] | | [removed: 18] [added: 17] | | [removed: 14] [added: 6] | | — | | 2 | | — | | 1 | | — | | [removed: 70] [added: 62] |

| [removed: (2)] [added: (3)] | Includes [removed: one] [added: two] company-owned The Capital Burger [removed: restaurant.] [added: restaurants.] |

| [removed: (3)] [added: (4)] | Includes Puerto Rico and Guam. |

Our fiscal year [removed: 2019] [added: 2020] ended May [removed: 26, 2019] [added: 31, 2020] and consisted of [removed: 52] [added: 53] weeks, fiscal [removed: 2018] [added: 2019] ended May [removed: 27, 2018] [added: 26, 2019] and consisted of 52 weeks, and fiscal [removed: 2017] [added: 2018] ended May [removed: 28, 2017] [added: 27, 2018] and consisted of 52 weeks.

We have four reportable segments: 1) Olive Garden, 2) LongHorn Steakhouse, 3) Fine Dining (which includes The Capital Grille and Eddie V’s) and 4) Other Business (which includes Cheddar’s Scratch Kitchen, Yard House, [removed: Seasons 52,] Bahama [removed: Breeze] [added: Breeze, Seasons 52] 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 [added: the customers and long-lived assets of our reportable segments are predominantly in the U.S. There were no material transactions among reportable segments.]

Most dinner menu entrée prices range from $9.00 to [removed: $19.00,] [added: $19.50,] and most lunch menu entrée prices range from [removed: $7.00] [added: $8.00] to [removed: $12.50.][added: $10.00.]

During fiscal [removed: 2019,] [added: 2020,] the average check per person (defined as total sales divided by number of entrées sold) was approximately [removed: $19.00,] [added: $19.50,] with alcoholic beverages accounting for [removed: 6.6] [added: 5.9] percent of Olive Garden’s sales.

Most dinner menu entrée prices range from $12.00 to [removed: $29.00,] [added: $30.00,] and most lunch menu entrée prices range from $8.00 to [removed: $16.00.][added: $16.50.]

During fiscal [removed: 2019,] [added: 2020,] the average check per person was approximately [removed: $22.00,] [added: $22.50,] with alcoholic beverages accounting for [removed: 9.5] [added: 8.9] percent of LongHorn Steakhouse’s sales.

Most lunch and dinner menu entrée prices range from [removed: $6.29] [added: $6.50] to [removed: $17.79.][added: $18.50.]

During fiscal [removed: 2019,] [added: 2020,] the average check per person was approximately [removed: $14.00,] [added: $15.00,] with alcoholic beverages accounting for [removed: 9.0] [added: 8.6] percent of Cheddar’s Scratch Kitchen’s sales.

During fiscal [removed: 2019,] [added: 2020,] the average check per person was approximately $32.00, with alcoholic beverages accounting for [removed: 36.1] [added: 35.4] percent of Yard House’s sales.

Nationally acclaimed for dry aging steaks on the premises, the restaurants feature an award-winning [added: wine list offering over 350 selections, personalized service, a comfortable club-like atmosphere, and premiere private dining rooms.]

Most dinner menu entrée prices range from $31.00 to $95.00 and most lunch menu entrée prices range from [removed: $16.00] [added: $18.00] to $48.00.

During fiscal [removed: 2019,] [added: 2020,] the average check per person was approximately [removed: $83.00,] [added: $84.00,] with alcoholic beverages accounting for [removed: 29.2] [added: 29.0] percent of The Capital Grille’s sales.

Most dinner menu entrée prices range from $15.00 to [removed: $33.00,] [added: $41.50,] and most lunch entrée prices range from [removed: $10.50] [added: $11.50] to [removed: $33.00.][added: $41.50.]

During fiscal [removed: 2019,] [added: 2020,] the average check per person was approximately [removed: $44.50,] [added: $103.00,] with alcoholic beverages accounting for [removed: 24.8] [added: 31.7] percent of [removed: Seasons 52’s] [added: Eddie V’s] sales.

Most lunch and dinner menu entrée prices range from [removed: $8.00] [added: $7.50] to [removed: $24.50.][added: $26.00.]

During fiscal [removed: 2019,] [added: 2020,] the average check per person was approximately [removed: $30.50,] [added: $31.00,] with alcoholic beverages accounting for [removed: 23.9] [added: 23.5] percent of Bahama Breeze’s sales.

Most dinner menu entrée prices range from $27.00 to [removed: $97.00.][added: $100.00.]

During fiscal [removed: 2019,] [added: 2020,] the average check per person was approximately [removed: $101.00,] [added: $46.50,] with alcoholic beverages accounting for [removed: 32.2] [added: 25.1] percent [removed: of Eddie V’s sales.]

| Fiscal Year | | Olive Garden | | LongHorn Steakhouse | | Cheddar’s Scratch Kitchen | | Yard House | | The Capital Grille (3) | | [removed: Seasons 52] [added: Seasons 52] | | Bahama Breeze | | Eddie V’s | | Total Restaurants (1)(2) | | Total Sales (in millions) |

[removed: During] [added: Although the fourth quarter of] fiscal [removed: 2019,] [added: 2020 required us to focus on adapting] our [added: business to account for the impacts of the COVID-19 pandemic, our] operating philosophy [removed: remained] [added: remains] focused on strengthening the core operational fundamentals of the business by providing an outstanding guest experience rooted in culinary innovation, attentive service, engaging atmosphere, and integrated marketing.

Additionally, [added: our] brands can capitalize on data insights to deliver customized one-to-one customer relationship marketing.

During fiscal [removed: 2019,] [added: 2020,] we added [removed: 39] [added: 19] net new company-owned restaurants in the United States.

Our fiscal [removed: 2019] [added: 2020] actual restaurant openings and closings, fiscal [removed: 2020] [added: 2021] projected openings, and approximate capital investment, square footage and dining capacity, by brand, are shown below:

| | Actual - Fiscal [removed: 2019] [added: 2020] | | | | [added: | |] Projected - Fiscal [removed: 2020] [added: 2021] | | Pro-Forma New Restaurants | | | | | | |

| | Restaurant Openings | | [added: Acquired (1) | |] Restaurant Closings [added: (2)] | | New Restaurant Openings | | Capital Investment Range [removed: (2)] [added: (3)] (in millions) | | | | Square Feet [removed: (3)] [added: (4)] | | Dining Seats [removed: (4)] [added: (5)] |

| Olive Garden | [removed: 14] [added: 13] | | [removed: 4] [added: —] | | [removed: 15 - 18] [added: 11] | | [added: 8 -10 | |] $3.5 | \- | $4.5 | | 7,700 | | 250 |

| LongHorn Steakhouse | [removed: 13] [added: 12] | | [removed: 3] [added: —] | | [removed: 13] [added: 4 | | 12] - 15 | | $2.6 | \- | $3.6 | | 5,660 | | [removed: 190] [added: 184] |

| United States (1) | | 861 | | 522 | | 165 | | 81 | | 60 | | 44 | | 41 | | 23 | | 1,797 |

| Total | | 868 | | 522 | | 165 | | 81 | | 60 | | 44 | | 41 | | 23 | | 1,804 |

| (2) | Includes seven franchised locations acquired in fiscal 2020. |

COVID-19 Pandemic

In March 2020, the COVID-19 outbreak was declared a national public health emergency resulting in a significant reduction in guest traffic at our restaurants due to changes in consumer behavior as public health officials encouraged social distancing and state and local governments mandated restrictions including suspension of dine-in operations, reduced restaurant seating capacity, table spacing requirements, bar closures and additional physical barriers.

Through the first three quarters of fiscal 2020, our financial results were strong as sales from continuing operations for the first nine months of fiscal 2020 were $6.54 billion, an

increase of 4.1 percent over the prior year period.

The COVID-19 pandemic negatively impacted this strong performance, and for most of the fourth quarter of fiscal 2020, we operated with all of our dining rooms closed and served our guests in a To Go only or To Go and delivery format.

Our sales for the fourth quarter of fiscal 2020 declined 43.0 percent from the fourth quarter of fiscal 2019.

As we continue to navigate through the pandemic, we have taken significant steps to adapt our business to allow us to continue to serve guests, support our team members and secure our liquidity position to provide financial flexibility, including:

| • | Modifying our business operations in order to continue serving guests at our restaurants as safely and effectively as possible, including, initially transitioning all restaurant locations to a To Go only or To Go and delivery model; |

| • | Reducing or eliminating fixed costs in our restaurants and restaurant support center as well as eliminating or delaying most nonessential capital spending; |

| • | Furloughing a substantial number of hourly restaurant employees as a result of the closure of our dining rooms and reduction in sales; |

| • | Protecting our team members’ safety and wellbeing, including sourcing additional sanitation supplies and personal protective equipment, implementing paid sick leave for all hourly restaurant team members, providing a $75.0 million emergency pay program and covering $4.1 million of health and welfare insurance premiums for furloughed team members; |

| • | Suspending the quarterly cash dividend, with the intention of reviewing our dividend policy as developments warrant; |

| • | Fully drawing on our $750.0 million Revolving Credit Agreement, which was subsequently repaid in May 2020; |

| • | Securing a $270.0 million term loan; |

| • | Raising $505.1 million in net proceeds from a follow-on equity offering; |

| • | Suspending our share repurchase activity; and |

| • | Implementing a careful, phased reopening of our dining rooms where permitted by local regulations. |

The impact on our operating results as well as the operational and financial measures we have implemented in response to the COVID-19 pandemic have been included throughout this document.

In late April 2020, state and local governments began to allow us to open dining rooms at limited capacities, along with other operating restrictions, and as of the date of filing this report, 89.0 percent of our restaurants were able to open their dining rooms to some extent.

While increasing our in-restaurant dining capacity is subject to the ordinances in the jurisdictions where we operate, we are focused on increasing capacity where possible, continuing to provide a safe environment for our team members and guests, and maintaining many of the efficiencies established over these past few months.

For most of the fourth quarter of fiscal 2020, our cash flows from operations were negative, but by the end of the quarter, with the increasing dining room capacity, we were back to near break-even cash flow levels.

Although we expect our restaurants’ dining room capacity to increase as public health conditions improve and restrictions are eased, it is possible additional outbreaks could require us to reduce our capacity or further suspend our in-restaurant dining operations.

of Seasons 52’s sales.

| 2020 | | 868 | | 522 | | 165 | | 81 | | 60 | | 44 | | 41 | | 23 | | 1,804 | | $7,806.9 |

| (3) | Includes The Capital Burger restaurants as follows: one in fiscal 2018, one in fiscal 2019 and two in fiscal 2020. |

| | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | |

| The Capital Grille (6) | 3 | | — | | 1 | | 1 - 2 | | $7.5 | \- | $8.5 | | 10,000 | | 320 |

| Bahama Breeze | — | | — | | 1 | | 0 - 1 | | $4.5 | \- | $5.5 | | 9,000 | | 350 |

| | |

| --- | --- |

| (1) | Includes seven Cheddar's Scratch Kitchen restaurants acquired from existing franchisees during fiscal 2020. |

| | |

| --- | --- |

| (2) | Includes 11 underperforming restaurants that were permanently closed related to the economic impact of COVID-19 during the fourth quarter of fiscal 2020. The remaining 13 closures were primarily related to lease expirations or relocations. |

| | |

| United States (1) | | 860 | | 514 | | 161 | | 79 | | 58 | | 44 | | 42 | | 21 | | 1,779 |

| Total | | 866 | | 514 | | 161 | | 79 | | 58 | | 44 | | 42 | | 21 | | 1,785 |

the customers and long-lived assets of our reportable segments are predominantly in the U.S. There were no material transactions among reportable segments.

wine list offering over 350 selections, personalized service, a comfortable club-like atmosphere, and premiere private dining rooms.

| 2000 | | 469 | | | | | | | | | | | | 11 | | | | 480 | | $1,615.7 |

| (3) | Includes one The Capital Burger restaurant beginning in fiscal 2018. |

| | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| The Capital Grille (1) | — | | — | | 3 - 4 | | $6.0 | \- | $7.0 | | 9,500 | | 250 |

| Bahama Breeze | 3 | | — | | 0 - 1 | | $5.0 | \- | $6.0 | | 9,000 | | 360 |

Each Cheddar’s Scratch Kitchen restaurant is led by a managing partner.

In addition, each restaurant typically employs between 75 to 175 hourly team members, most of whom work part-time.

Each director of operations reports to a Senior Vice President of Operations who is responsible for approximately 80 restaurants.

Each also has two to eight managers.

The general manager or managing partner of each restaurant reports directly to a director of operations, who has operational responsibility for approximately three to ten restaurants.

During fiscal 2019, we received additional recognition for our employment practices, including: being included on Forbes’ 2019 List of the Best Employers for Diversity and LongHorn Steakhouse receiving the People Report’s 2019 Best Practices Award in recognition of having the best workplace culture in casual dining.

| • | Spain. |

We

We continue to monitor the status of the health care reform law enacted by Congress in March of 2010 (Affordable Care Act) and related rules and regulations.

It is an element that separates us from our competitors and a contributor to our business success.

In 2009, we set energy and water conservation goals for our restaurants to reduce the use of each by 15 percent by 2015.

When we retired those goals in 2015, we had significantly exceeded both, with a 22 percent reduction in water use per restaurant and a 17 percent reduction in energy.

Darden has also established an aspirational goal to send zero waste to landfill over time.

We have more than doubled our diversion rate over the past ten years to reach our current 32 percent diversion rate from landfills.

We have accomplished this by first minimizing food loss, standardizing our food donation program across all of our restaurants, and maximizing cost-effective recycling options.

(These historical restaurant sustainability metrics exclude Cheddar’s Scratch Kitchen due to our lack of sustainability data about that business prior to our acquisition of Cheddar’s Scratch Kitchen in April 2017.)

| Average Per Restaurant (1) (2) | | 511 | | | 520 | | | 519 | |

| Total - Scope 1 and 2 (2) | | 804,682 | | | 802,492 | | | 792,893 | |

| (2) | Excludes Cheddar's Scratch Kitchen |

We also focus on sustainability in today’s evolving food culture.

This was the result of a year-long effort that included extensive benchmarking and input from a variety of stakeholders, including animal welfare experts, industry partners and suppliers.

Our approach, which is aligned with Darden’s business priorities and practical to leverage with our supply chain partners, will help to clearly prioritize areas and promote improved animal welfare outcomes in line with the best available science and production practices.

Conservation is a competitive advantage – it continues to lower our operating costs over time, insulate our supply chain, and help us attract and retain the most qualified employees – all increasing the success of our business.

curriculum on topics ranging from culinary techniques to management skills.

See the discussion of legal proceedings contained in the third paragraph of Note [removed: 16] [added: 15] of the Notes to Consolidated Financial Statements (Part II, Item 8 of this report).

For the fiscal year ended May [removed: 26, 2019][added: 31, 2020]

The aggregate market value of Common Stock held by non-affiliates of the Registrant based on the closing price of [removed: $111.57] [added: $114.67] per share as reported on the New York Stock Exchange on November [removed: 23, 2018,] [added: 22, 2019,] was approximately: [removed: $13,781,073,000.][added: $13,915,679,000.]

Number of shares of Common Stock outstanding as of May [removed: 26, 2019: 123,080,471.][added: 31, 2020: 129,893,801.]

Portions of the Registrant’s Proxy Statement for its Annual Meeting of Shareholders on September [removed: 18, 2019,] [added: 23, 2020,] to be filed with the Securities and Exchange Commission no later than 120 days after May [removed: 26, 2019,] [added: 31, 2020,] are incorporated by reference into Part III of this Report.

FISCAL YEAR ENDED MAY [removed: 26, 2019][added: 31, 2020]

| Item 1. | [removed: [Business](#sC08E511CA7DE5811828D7BD91DEA5C57)] [added: [Business](#s7263EE1750FE5CCA837B860069285AEC)] | [removed: [1](#sC08E511CA7DE5811828D7BD91DEA5C57)] [added: [1](#s7263EE1750FE5CCA837B860069285AEC)] |

| Item 1A. | [Risk [removed: Factors](#s74DBBC512BF15232A8FA9CB82066064D)] [added: Factors](#sD295F4FAD7B157068F17DD498700339D)] | [removed: [13](#s74DBBC512BF15232A8FA9CB82066064D)] [added: [16](#sD295F4FAD7B157068F17DD498700339D)] |

| Item 1B. | [Unresolved Staff [removed: Comments](#s3069F5C2227155008EF83C00372F9F01)] [added: Comments](#s381110439C105476BBE5AA0992F8BFBA)] | [removed: [22](#s3069F5C2227155008EF83C00372F9F01)] [added: [26](#s381110439C105476BBE5AA0992F8BFBA)] |

| Item 2. | [removed: [Properties](#sCA17316B62885283AC36365E7A13387E)] [added: [Properties](#s3DA52585EE8D52C78D138A325BD911AD)] | [removed: [23](#sCA17316B62885283AC36365E7A13387E)] [added: [26](#s3DA52585EE8D52C78D138A325BD911AD)] |

| Item 3. | [Legal [removed: Proceedings](#s8D459CED22A354758CBE28281EFCC69E)] [added: Proceedings](#s0D1CE8EC7D385741BD20305F3D3ACBE3)] | [removed: [23](#s8D459CED22A354758CBE28281EFCC69E)] [added: [26](#s0D1CE8EC7D385741BD20305F3D3ACBE3)] |

| Item 4. | [Mine Safety [removed: Disclosures](#sB29CF21BCE3653D7B3C8717D191BE3DB)] [added: Disclosures](#sAF6E1C15CFBF5E82940D2566CC459B0A)] | [removed: [23](#sB29CF21BCE3653D7B3C8717D191BE3DB)] [added: [26](#sAF6E1C15CFBF5E82940D2566CC459B0A)] |

| Item 5. | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#sC72519736C305924BE0D50220CEBA83B)] [added: Securities](#sDB23A220650E582280BE5AB18656F1F6)] | [removed: [24](#sC72519736C305924BE0D50220CEBA83B)] [added: [27](#sDB23A220650E582280BE5AB18656F1F6)] |

| Item 6. | [Selected Financial [removed: Data](#s43F79328E0D55701B05307DD23DEEF0C)] [added: Data](#s5E71EA2E928C5B448B0E5DCD37C686E3)] | [removed: [26](#s43F79328E0D55701B05307DD23DEEF0C)] [added: [29](#s5E71EA2E928C5B448B0E5DCD37C686E3)] |

| Item 7. | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#s128DF6F9BE55514C9E4E84F8A8B8185F)] [added: Operations](#s3C5A2273035E5C6283ACD44B34DAED8F)] | [removed: [28](#s128DF6F9BE55514C9E4E84F8A8B8185F)] [added: [31](#s3C5A2273035E5C6283ACD44B34DAED8F)] |

| Item 7A. | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#sA0BDDC1D1F7E50AAA44D8AE70C783AD5)] [added: Risk](#s6AF1666BE9935D138105C90AD6B1EB14)] | [removed: [39](#sA0BDDC1D1F7E50AAA44D8AE70C783AD5)] [added: [43](#s6AF1666BE9935D138105C90AD6B1EB14)] |

| Item 8. | [Financial Statements and Supplementary [removed: Data](#s9ABEAAD601C959A79BE808BC071C9AE7)] [added: Data](#s6CE1697CF1935380BA45B152A82E55E1)] | [removed: [41](#s9ABEAAD601C959A79BE808BC071C9AE7)] [added: [45](#s6CE1697CF1935380BA45B152A82E55E1)] |

| Item 9. | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#sFFE207D1F0F95AF4A4417B44E531CB72)] [added: Disclosure](#s0E569DAE0AF6571496CABD1837D7D135)] | [removed: [81](#sFFE207D1F0F95AF4A4417B44E531CB72)] [added: [89](#s0E569DAE0AF6571496CABD1837D7D135)] |

| Item 9A. | [Controls and [removed: Procedures](#s813638B2ADFF5E95A10565CE36AF4B5D)] [added: Procedures](#sDEBABA28A7625332AA9A592A23F95D0D)] | [removed: [81](#s813638B2ADFF5E95A10565CE36AF4B5D)] [added: [89](#sDEBABA28A7625332AA9A592A23F95D0D)] |

| Item 9B. | [Other [removed: Information](#s53B640B8042050E8A7C2A88B7768B7D2)] [added: Information](#s48451E6A28C05D7794C37B3EB64E4B29)] | [removed: [81](#s53B640B8042050E8A7C2A88B7768B7D2)] [added: [89](#s48451E6A28C05D7794C37B3EB64E4B29)] |

| Item 10. | [Directors, Executive Officers and Corporate [removed: Governance](#s2F9684A0EA8F52F0BEBDE7D9DE503948)] [added: Governance](#sBAE71E2DD303528F961B6B1CCFDBAA96)] | [removed: [81](#s2F9684A0EA8F52F0BEBDE7D9DE503948)] [added: [89](#sBAE71E2DD303528F961B6B1CCFDBAA96)] |

| Item 11. | [Executive [removed: Compensation](#s9DB5ED54090857E4B56C448DF269E829)] [added: Compensation](#s8B9CBF8863935440A9D02BA6897221B6)] | [removed: [81](#s9DB5ED54090857E4B56C448DF269E829)] [added: [89](#s8B9CBF8863935440A9D02BA6897221B6)] |

| Item 12. | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#s2A8D2EFD14775F8B8454FB8A1AD3B501)] [added: Matters](#s6DF85413D22951199336A2B6380BF97C)] | [removed: [82](#s2A8D2EFD14775F8B8454FB8A1AD3B501)] [added: [90](#s6DF85413D22951199336A2B6380BF97C)] |

| Item 13. | [Certain Relationships and Related Transactions, and Director [removed: Independence](#s07C87848F9645DB99AC0EB415704299C)] [added: Independence](#s47BD4C8E1E025BA9A66E6B123C74E893)] | [removed: [82](#s07C87848F9645DB99AC0EB415704299C)] [added: [90](#s47BD4C8E1E025BA9A66E6B123C74E893)] |

| Item 14. | [Principal Accountant Fees and [removed: Services](#sE5A0667747C05F4C95F36BAE27B1D3F3)] [added: Services](#sFF10C2CC82595F1C88AAF06F9B9EB5ED)] | [removed: [82](#sE5A0667747C05F4C95F36BAE27B1D3F3)] [added: [90](#sFF10C2CC82595F1C88AAF06F9B9EB5ED)] |

| Item 15. | [Exhibits and Financial Statement [removed: Schedules](#s58C27899BCDE52FD9C012195D2A8C394)] [added: Schedules](#s79F3B9E512125667805E4C850FFEAADE)] | [removed: [82](#s58C27899BCDE52FD9C012195D2A8C394)] [added: [90](#s79F3B9E512125667805E4C850FFEAADE)] |

Statements set forth in or incorporated into this report regarding the expected increase in the number of our [removed: restaurants, U.S. same-restaurant sales, total sales growth, our effective tax rate] [added: restaurants] and capital expenditures in fiscal [removed: 2020,] [added: 2021,] and all other statements that are not historical facts, including without limitation statements with respect to the financial condition, results of operations, plans, objectives, future performance and business of Darden Restaurants, Inc. and its subsidiaries that are preceded by, followed by or that include words such as “may,” “will,” “expect,” “intend,” “anticipate,” “continue,” “estimate,” “project,” “believe,” “plan,” “outlook” or similar expressions, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are included, along with this statement, for purposes of complying with the safe harbor provisions of that Act.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

| | [Signatures](#s12A82B07E3625C8CBF600F6FAD7A2B47) | [91](#s12A82B07E3625C8CBF600F6FAD7A2B47) |

| | [Signatures](#s1161F4E119165BD8A936730573D2B765) | [83](#s1161F4E119165BD8A936730573D2B765) |

As of May [removed: 26, 2019,] [added: 31, 2020,] we operated [removed: 1,785] [added: 1,804] restaurants, consisting of [removed: 866] [added: 868] Olive Garden, [removed: 514] [added: 522] LongHorn Steakhouse, [removed: 161] [added: 165] Cheddar’s Scratch Kitchen, [removed: 79] [added: 81] Yard House, [removed: 58] [added: 60] The Capital Grille, 44 Seasons 52, [removed: 42] [added: 41] Bahama [removed: Breeze,] [added: Breeze] and [removed: 21] [added: 23] Eddie V’s locations.

Of these [removed: 1,785] [added: 1,804] company-owned restaurants, [removed: 70] [added: 74] were located on owned sites and [removed: 1,715] [added: 1,730] were located on leased sites.

| Land-Only Leases (we own buildings and equipment) | [removed: 844] [added: 864] | |

| Ground and Building Leases | [removed: 662] [added: 658] | |

| Space/In-Line/Other Leases | [removed: 209] [added: 208] | |

| Total | 1,730 | |

| Total | 1,715 | |

As of June 30, [removed: 2019,] [added: 2020,] there were approximately [removed: 9,888] [added: 9,350] holders of record of our common shares.

Since commencing our common share repurchase program in December 1995, we have repurchased a total of [removed: 193.4] [added: 196.2] million shares through May [removed: 26, 2019] [added: 31, 2020] under authorizations from our Board of Directors.

The table below provides information concerning our repurchase of shares of our common stock during the quarter ended May [removed: 26, 2019:][added: 31, 2020:]

| (1) | All of the shares purchased during the quarter ended May [removed: 26, 2019] [added: 31, 2020] were purchased as part of our repurchase [removed: program. On June] [added: program on or before March] 20, [removed: 2018,] [added: 2020. On September 18, 2019,] our Board of Directors authorized a share repurchase program under which the Company may repurchase up to $500.0 million of its outstanding common stock. This repurchase program, which was announced publicly in a press release issued on [removed: June 21, 2018,] [added: September 19, 2019,] does not have an expiration and replaced the previously existing share repurchase authorization. |

| Company/Index | | May [removed: 2014 | | | | May] 2015 | | | | May 2016 | | | | May 2017 | | | | May 2018 | | | | May 2019 | | | [added: | May 2020 | | |]

[removed: ][added: ]

The annual changes for the five-year period shown in the graph on this page are based on the assumption that $100 had been invested in Darden Restaurants, Inc. common stock, the S&P 500 Stock Index and the S&P Composite 1500 Restaurant Sub-Index on May [removed: 25, 2014,] [added: 29, 2015,] and that all dividends were reinvested.

On November 9, [removed: 2015] [added: 2015,] we completed the spin-off of Four Corners Property Trust, Inc. (Four Corners) with the pro rata distribution of one share of Four Corners common stock for every three shares of Darden common stock to Darden shareholders.

| February 24, 2020 through March 29, 2020 | 297,553 | $ | 100.89 | | 297,553 | $ | 290.6 | |

| March 30, 2020 through April 26, 2020 | — | $ | — | | — | $ | 290.6 | |

| April 27, 2020 through May 31, 2020 | — | $ | — | | — | $ | 290.6 | |

| Total | 297,553 | $ | 100.89 | | 297,553 | $ | 290.6 | |

| Darden Restaurants, Inc. | | $ | 100.00 | | | $ | 118.68 | | | $ | 159.79 | | | $ | 164.27 | | | $ | 230.74 | | | $ | 151.00 | |

| S&P 500 Stock Index | | $ | 100.00 | | | $ | 101.81 | | | $ | 119.65 | | | $ | 137.42 | | | $ | 145.60 | | | $ | 160.05 | |

| S&P Composite 1500 Restaurant Sub-Index | | $ | 100.00 | | | $ | 110.10 | | | $ | 135.76 | | | $ | 141.75 | | | $ | 178.95 | | | $ | 178.74 | |

| February 25, 2019 through March 31, 2019 | 170,473 | $ | 111.29 | | 170,473 | $ | 326.7 | |

| April 1, 2019 through April 28, 2019 | 132,076 | $ | 116.92 | | 132,076 | $ | 311.3 | |

| April 29, 2019 through May 26, 2019 | 58,900 | $ | 120.42 | | 58,900 | $ | 304.2 | |

| Total | 361,449 | $ | 114.84 | | 361,449 | $ | 304.2 | |

| Darden Restaurants, Inc. | | $ | 100.00 | | | $ | 137.70 | | | $ | 163.41 | | | $ | 220.03 | | | $ | 226.20 | | | $ | 317.72 | |

| S&P 500 Stock Index | | $ | 100.00 | | | $ | 110.88 | | | $ | 110.45 | | | $ | 127.11 | | | $ | 143.19 | | | $ | 148.70 | |

| S&P Composite 1500 Restaurant Sub-Index | | $ | 100.00 | | | $ | 115.96 | | | $ | 125.39 | | | $ | 151.37 | | | $ | 154.76 | | | $ | 191.20 | |

| (Dollars in millions, except per share data) | May [added: 31, 2020 (2) | | | | May] 26, 2019 | | | | May 27, 2018 | | | | May 28, 2017 | | | | May 29, 2016 | | | [removed: | May 31, 2015 (2) | | |]

| Operating Results (1) Sales | $ | [removed: 8,510.4] [added: 7,806.9] | | | $ | [removed: 8,080.1] [added: 8,510.4] | | | $ | [removed: 7,170.2] [added: 8,080.1] | | | $ | [removed: 6,933.5] [added: 7,170.2] | | | $ | [removed: 6,764.0] [added: 6,933.5] | |

| Food and beverage | [removed: 2,412.5] [added: 2,240.8] | | | | [removed: 2,303.1] [added: 2,412.5] | | | | [removed: 2,070.3] [added: 2,303.1] | | | | [removed: 2,039.7] [added: 2,070.3] | | | | [removed: 2,085.1] [added: 2,039.7] | | |

| Restaurant labor | [removed: 2,771.1] [added: 2,682.6] | | | | [removed: 2,614.5] [added: 2,771.1] | | | | [removed: 2,265.3] [added: 2,614.5] | | | | [removed: 2,189.2] [added: 2,265.3] | | | | [removed: 2,135.6] [added: 2,189.2] | | |

| Restaurant expenses | [removed: 1,477.8] [added: 1,475.1] | | | | [removed: 1,417.1] [added: 1,477.8] | | | | [removed: 1,265.2] [added: 1,417.1] | | | | [removed: 1,163.5] [added: 1,265.2] | | | | [removed: 1,120.8] [added: 1,163.5] | | |

| Marketing expenses | [removed: 255.3] [added: 238.0] | | | | [removed: 252.3] [added: 255.3] | | | | [removed: 239.7] [added: 252.3] | | | | [removed: 238.0] [added: 239.7] | | | | [removed: 243.3] [added: 238.0] | | |

| General and administrative | [removed: 405.5] [added: 376.4] | | | | [removed: 409.8] [added: 405.5] | | | | [removed: 387.7] [added: 409.8] | | | | [removed: 384.9] [added: 387.7] | | | | [removed: 430.2] [added: 384.9] | | |

| Depreciation and amortization | [removed: 336.7] [added: 355.9] | | | | [removed: 313.1] [added: 336.7] | | | | [removed: 272.9] [added: 313.1] | | | | [removed: 290.2] [added: 272.9] | | | | [removed: 319.3] [added: 290.2] | | |

| Impairments and disposal of assets, net | [added: 221.0 | | | |] 19.0 | | | | 3.4 | | | | (8.4 | | ) | | 5.8 | | | [removed: | 62.1 | | |]

| Total operating costs and expenses | $ | [removed: 7,677.9] [added: 7,759.0] | | | $ | [removed: 7,313.3] [added: 7,677.9] | | | $ | [removed: 6,492.7] [added: 7,313.3] | | | $ | [removed: 6,311.3] [added: 6,492.7] | | | $ | [removed: 6,396.4] [added: 6,311.3] | |

| Operating income | [removed: 832.5] [added: 47.9] | | | | [removed: 766.8] [added: 832.5] | | | | [removed: 677.5] [added: 766.8] | | | | [removed: 622.2] [added: 677.5] | | | | [removed: 367.6] [added: 622.2] | | |

| Interest, net | [removed: 50.2] [added: 57.3] | | | | [removed: 161.1] [added: 50.2] | | | | [removed: 40.2] [added: 161.1] | | | | [removed: 172.5] [added: 40.2] | | | | [removed: 192.3] [added: 172.5] | | |

| Earnings [added: (loss)] before income taxes | [removed: 782.3] [added: (161.0] | | [added: )] | | [removed: 605.7] [added: 782.3] | | | | [removed: 637.3] [added: 605.7] | | | | [removed: 449.7] [added: 637.3] | | | | [removed: 175.3] [added: 449.7] | | |

| Income tax expense (benefit) | [removed: 63.7] [added: (111.8] | | [added: )] | | [removed: 1.9] [added: 63.7] | | | | [removed: 154.8] [added: 1.9] | | | | [removed: 90.0] [added: 154.8] | | | | [removed: (21.1] [added: 90.0] | | [removed: )] |

| Earnings [added: (loss)] from continuing operations | $ | [removed: 718.6] [added: (49.2] | [added: )] | | $ | [removed: 603.8] [added: 718.6] | | | $ | [removed: 482.5] [added: 603.8] | | | $ | [removed: 359.7] [added: 482.5] | | | $ | [removed: 196.4] [added: 359.7] | |

| Earnings (loss) from discontinued operations, net of tax expense (benefit) of [added: $(0.9),] $(1.8), $(4.8), [removed: $(4.2), $3.4] [added: $(4.2)] and [removed: $344.8] [added: $3.4] | [removed: (5.2] [added: (3.2] | | ) | | [removed: (7.8] [added: (5.2] | | ) | | [removed: (3.4] [added: (7.8] | | ) | | [removed: 15.3] [added: (3.4] | | [added: )] | | [removed: 513.1] [added: 15.3] | | |

| Net earnings [added: (loss)] | $ | [removed: 713.4] [added: (52.4] | [added: )] | | $ | [removed: 596.0] [added: 713.4] | | | $ | [removed: 479.1] [added: 596.0] | | | $ | [removed: 375.0] [added: 479.1] | | | $ | [removed: 709.5] [added: 375.0] | |

| Earnings [added: (loss)] from continuing operations | $ | [removed: 5.82] [added: (0.40] | [added: )] | | $ | [removed: 4.87] [added: 5.82] | | | $ | [removed: 3.88] [added: 4.87] | | | $ | [removed: 2.82] [added: 3.88] | | | $ | [removed: 1.54] [added: 2.82] | |

| Earnings (loss) from discontinued operations | $ | [removed: (0.04] [added: (0.03] | ) | | $ | [removed: (0.06] [added: (0.04] | ) | | $ | [removed: (0.03] [added: (0.06] | ) | | $ | [removed: 0.12] [added: (0.03] | [added: )] | | $ | [removed: 4.02] [added: 0.12] | |

| Net earnings [added: (loss)] | $ | [removed: 5.78] [added: (0.43] | [added: )] | | $ | [removed: 4.81] [added: 5.78] | | | $ | [removed: 3.85] [added: 4.81] | | | $ | [removed: 2.94] [added: 3.85] | | | $ | [removed: 5.56] [added: 2.94] | |

| Earnings [added: (loss)] from continuing operations | $ | [removed: 5.73] [added: (0.40] | [added: )] | | $ | [removed: 4.79] [added: 5.73] | | | $ | [removed: 3.83] [added: 4.79] | | | $ | [removed: 2.78] [added: 3.83] | | | $ | [removed: 1.51] [added: 2.78] | |

| Earnings (loss) from discontinued operations | $ | [removed: (0.04] [added: (0.03] | ) | | $ | [removed: (0.06] [added: (0.04] | ) | | $ | [removed: (0.03] [added: (0.06] | ) | | $ | [removed: 0.12] [added: (0.03] | [added: )] | | $ | [removed: 3.96] [added: 0.12] | |

| Net earnings [added: (loss)] | $ | [removed: 5.69] [added: (0.43] | [added: )] | | $ | [removed: 4.73] [added: 5.69] | | | $ | [removed: 3.80] [added: 4.73] | | | $ | [removed: 2.90] [added: 3.80] | | | $ | [removed: 5.47] [added: 2.90] | |

| Basic | [removed: 123.5] [added: 122.7] | | | | [removed: 124.0] [added: 123.5] | | | | [removed: 124.3] [added: 124.0] | | | | [removed: 127.4] [added: 124.3] | | | | [removed: 127.7] [added: 127.4] | | |

| Diluted | [removed: 125.4] [added: 122.7] | | | | [removed: 126.0] [added: 125.4] | | | | 126.0 | | | | [removed: 129.3] [added: 126.0] | | | | [removed: 129.7] [added: 129.3] | | |

| Total assets | $ | [removed: 5,892.8] [added: 9,946.1] | | | $ | [removed: 5,469.6] [added: 5,892.8] | | | $ | [removed: 5,292.3] [added: 5,469.6] | | | $ | [removed: 4,419.4] [added: 5,292.3] | | | $ | [removed: 5,837.3] [added: 4,419.4] | |

| Land, buildings and equipment, net | $ | [removed: 2,552.6] [added: 2,756.9] | | | $ | [removed: 2,429.8] [added: 2,552.6] | | | $ | [removed: 2,272.3] [added: 2,429.8] | | | $ | [removed: 2,041.6] [added: 2,272.3] | | | $ | [removed: 3,215.8] [added: 2,041.6] | |

| Working capital (deficit) | $ | [removed: (581.5] [added: (691.4] | ) | | $ | [removed: (830.9] [added: (581.5] | ) | | $ | [removed: (701.3] [added: (830.9] | ) | | $ | [removed: (530.0] [added: (701.3] | ) | | $ | [removed: (297.7] [added: (530.0] | ) |

| Long-term debt, less current portion | $ | [removed: 927.7] [added: 928.8] | | | $ | [removed: 926.5] [added: 927.7] | | | $ | [removed: 936.6] [added: 926.5] | | | $ | [removed: 440.0] [added: 936.6] | | | $ | [removed: 1,452.3] [added: 440.0] | |

| Stockholders’ equity | $ | [removed: 2,392.6] [added: 2,331.2] | | | $ | [removed: 2,194.8] [added: 2,392.6] | | | $ | [removed: 2,101.7] [added: 2,194.8] | | | $ | [removed: 1,952.0] [added: 2,101.7] | | | $ | [removed: 2,333.5] [added: 1,952.0] | |

| Stockholders’ equity per outstanding share | $ | [removed: 19.44] [added: 17.95] | | | $ | [removed: 17.77] [added: 19.44] | | | $ | [removed: 16.76] [added: 17.77] | | | $ | [removed: 15.47] [added: 16.76] | | | $ | [removed: 18.42] [added: 15.47] | |

| Cash flows from operations (1) | $ | [removed: 1,267.6] [added: 717.4] | | | $ | [removed: 1,019.8] [added: 1,267.6] | | | $ | [removed: 916.3] [added: 1,019.8] | | | $ | [removed: 820.4] [added: 916.3] | | | $ | [removed: 874.3] [added: 820.4] | |

| Capital expenditures (1) | $ | [removed: 452.0] [added: 459.9] | | | $ | [removed: 396.0] [added: 452.0] | | | $ | [removed: 293.0] [added: 396.0] | | | $ | [removed: 228.3] [added: 293.0] | | | $ | [removed: 296.5] [added: 228.3] | |

| Dividends paid | $ | [removed: 370.8] [added: 322.3] | | | $ | [removed: 313.5] [added: 370.8] | | | $ | [removed: 279.1] [added: 313.5] | | | $ | [removed: 268.2] [added: 279.1] | | | $ | [removed: 278.9] [added: 268.2] | |

| Dividends paid per share | $ | [removed: 3.00] [added: 2.64] | | | $ | [removed: 2.52] [added: 3.00] | | | $ | [removed: 2.24] [added: 2.52] | | | $ | [removed: 2.10] [added: 2.24] | | | $ | [removed: 2.20] [added: 2.10] | |

| Number of employees [added: (3)] | [removed: 184,514] [added: 177,895] | | | | [removed: 180,656] [added: 184,514] | | | | [removed: 178,729] [added: 180,656] | | | | [removed: 150,942] [added: 178,729] | | | | [removed: 148,892] [added: 150,942] | | |

| Number of restaurants (1) | [removed: 1,785] [added: 1,804] | | | | [removed: 1,746] [added: 1,785] | | | | [removed: 1,695] [added: 1,746] | | | | [removed: 1,536] [added: 1,695] | | | | [removed: 1,534] [added: 1,536] | | |

| (2) | Fiscal year [removed: 2015] [added: 2020] consisted of 53 weeks, while all other fiscal years consisted of 52 weeks. |

| Goodwill impairment | 169.2 | | | | — | | | | — | | | | — | | | | — | | |

| Other (income) expense, net | 151.6 | | | | — | | | | — | | | | — | | | | — | | |

| (Dollars in millions, except per share data) | May 31, 2020 (2) | | | | May 26, 2019 | | | | May 27, 2018 | | | | May 28, 2017 | | | | May 29, 2016 | | |

| (3) | Fiscal year 2020 includes approximately 95,000 employees on furlough due to the COVID-19 pandemic. |

| | |

| --- | --- |

| [Report of Management [removed: Responsibilities](#s297DCBD34E325230B87D2833AC381220)] [added: Responsibilities](#s7580170D9FCF508EB07F0E2DE39CB49E)] | [removed: [42](#s297DCBD34E325230B87D2833AC381220)] [added: [46](#s7580170D9FCF508EB07F0E2DE39CB49E)] |

| [Management’s Report on Internal Control over Financial [removed: Reporting](#s6A705D673B775A5CB21BD3252416A26B)] [added: Reporting](#s323A0DED99245450ADF57E72C243AD1C)] | [removed: [42](#s6A705D673B775A5CB21BD3252416A26B)] [added: [46](#s323A0DED99245450ADF57E72C243AD1C)] |

| [Report of Independent Registered Public Accounting Firm on Internal Control over Financial [removed: Reporting](#s91843AFB52FD5899871F28B0B1FA028B)] [added: Reporting](#s2C5B2CEA0DC2541D9BDF045BC1D63C5C)] | [removed: [43](#s91843AFB52FD5899871F28B0B1FA028B)] [added: [47](#s2C5B2CEA0DC2541D9BDF045BC1D63C5C)] |

| [Report of Independent Registered Public Accounting [removed: Firm](#s544031F88C8D52E6817E95A055404F20)] [added: Firm](#s0416D7ADAF665EF493700C1BA50E9125)] | [removed: [44](#s544031F88C8D52E6817E95A055404F20)] [added: [48](#s0416D7ADAF665EF493700C1BA50E9125)] |

| [Consolidated Statements of Earnings for the fiscal years ended May [removed: 26, 2019,] [added: 31, 2020,] May [removed: 27, 2018] [added: 26, 2019] and May [removed: 28, 2017](#sCCC5113DDE7E5FCEA5893A973A2FFC23)] [added: 27, 2018](#s46D60C3C7BAE5E95BF6283481B3B0893)] | [removed: [45](#sCCC5113DDE7E5FCEA5893A973A2FFC23)] [added: [51](#s46D60C3C7BAE5E95BF6283481B3B0893)] |

| [Consolidated Statements of Comprehensive Income for the fiscal years ended May [removed: 26, 2019,] [added: 31, 2020,] May [removed: 27, 2018] [added: 26, 2019] and May [removed: 28, 2017](#sEE504E24BF1652CDA77E6A2B9152ACD3)] [added: 27, 2018](#s8D9E630D85075E5BA5F40D73F466EE8D)] | [removed: [46](#sEE504E24BF1652CDA77E6A2B9152ACD3)] [added: [52](#s8D9E630D85075E5BA5F40D73F466EE8D)] |

| [Consolidated Balance Sheets at May [removed: 26, 2019] [added: 31, 2020] and May [removed: 27, 2018](#s9CCAE3EA51F05DC7914198A9D969CE13)] [added: 26, 2019](#s66D5769FE99F5E8BACEA3D7A5B61D47F)] | [removed: [47](#s9CCAE3EA51F05DC7914198A9D969CE13)] [added: [53](#s66D5769FE99F5E8BACEA3D7A5B61D47F)] |

| [Consolidated Statements of Changes in Stockholders’ Equity for the fiscal years ended May [removed: 26, 2019,] [added: 31, 2020,] May [removed: 27, 2018] [added: 26, 2019] and May [removed: 28, 2017](#s5F75D0A439D1550693AA12039BEF4CDF)] [added: 27, 2018](#s2364DD0DEC5D5BD9B78A4BEFDE87EE7C)] | [removed: [48](#s5F75D0A439D1550693AA12039BEF4CDF)] [added: [54](#s2364DD0DEC5D5BD9B78A4BEFDE87EE7C)] |

| [Consolidated Statements of Cash Flows for the fiscal years ended May [removed: 26, 2019,] [added: 31, 2020,] May [removed: 27, 2018] [added: 26, 2019] and May [removed: 28, 2017](#s061A254B37E656C088BCC8E7E146B325)] [added: 27, 2018](#s0E77B48FCE8E51EB9B60326618155112)] | [removed: [49](#s061A254B37E656C088BCC8E7E146B325)] [added: [55](#s0E77B48FCE8E51EB9B60326618155112)] |

| [Notes to Consolidated Financial [removed: Statements](#s71169F4B9D0A5188AE1ABB2289AB7B21)] [added: Statements](#s5A08C81F83335E1CB3BF7A611045F970)] | [removed: [51](#s71169F4B9D0A5188AE1ABB2289AB7B21)] [added: [57](#s5A08C81F83335E1CB3BF7A611045F970)] |

Management assessed the effectiveness of the Company’s internal control over financial reporting as of May [removed: 26, 2019.][added: 31, 2020.]

Management has concluded that, as of May [removed: 26, 2019,] [added: 31, 2020,] the Company’s internal control over financial reporting was effective based on these criteria.

We have audited Darden Restaurants, Inc. and subsidiaries’ (the Company) internal control over financial reporting as of May [removed: 26, 2019,] [added: 31, 2020,] based on criteria established in *Internal Control [removed: –] [added: -] 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 [removed: 26, 2019,] [added: 31, 2020,] based on criteria established in *Internal Control [removed: –] [added: -] 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 [removed: 26, 2019] [added: 31, 2020] and May [removed: 27, 2018,] [added: 26, 2019,] 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 [removed: 26, 2019,] [added: 31, 2020,] and the related notes (collectively, the consolidated financial statements), and our report dated July [removed: 19, 2019] [added: 24, 2020] expressed an unqualified opinion on those consolidated financial statements.

We have audited the accompanying consolidated balance sheets of Darden Restaurants, Inc. and subsidiaries (the Company) as of May [removed: 26, 2019] [added: 31, 2020] and May [removed: 27, 2018,] [added: 26, 2019,] the related consolidated statements of earnings, comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the [removed: three‑year] [added: three-year] period ended May [removed: 26, 2019,] [added: 31, 2020] 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 [removed: 26, 2019] [added: 31, 2020] and May [removed: 27, 2018,] [added: 26, 2019,] and the results of its operations and its cash flows for each of the years in the [removed: three‑year] [added: three-year] period ended May [removed: 26, 2019,] [added: 31, 2020,] 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 [removed: 26, 2019,] [added: 31, 2020,] based on criteria established in *Internal Control [removed: –] [added: -] Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated July [removed: 19, 2019] [added: 24, 2020] expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

| | [added: |] Fiscal Year Ended | | | | | | | | | | | [added: | Fiscal Year Ended | | | | | | | | | | |]

| | May [removed: 26, 2019] [added: 31, 2020] | | | | May [removed: 27, 2018] [added: 26, 2019] | | | | May [removed: 28, 2017] [added: 27, 2018] | | |

| Sales | $ | [removed: 8,510.4] [added: 7,806.9] | | | $ | [removed: 8,080.1] [added: 8,510.4] | | | $ | [removed: 7,170.2] [added: 8,080.1] | |

| [removed: Costs] [added: Food] and [removed: expenses:] [added: beverage costs and restaurant expenses] | | [added: $] | [added: 0.3] | | | [added: $] | [added: —] | | | [added: $] | [added: —] | [added: |]

| Food and beverage | [removed: 2,412.5] [added: 2,240.8] | | | | [removed: 2,303.1] [added: 2,412.5] | | | | [removed: 2,070.3] [added: 2,303.1] | | |

| Restaurant labor | [removed: 2,771.1] [added: 2,682.6] | | | | [removed: 2,614.5] [added: 2,771.1] | | | | [removed: 2,265.3] [added: 2,614.5] | | |

| Restaurant expenses | [removed: 1,477.8] [added: 1,475.1] | | | | [removed: 1,417.1] [added: 1,477.8] | | | | [removed: 1,265.2] [added: 1,417.1] | | |

| Marketing expenses | [removed: 255.3] [added: 238.0] | | | | [removed: 252.3] [added: 255.3] | | | | [removed: 239.7] [added: 252.3] | | |

| General and administrative expenses | [removed: 405.5] [added: 376.4] | | | | [removed: 409.8] [added: 405.5] | | | | [removed: 387.7] [added: 409.8] | | |

| Depreciation and amortization | [removed: 336.7] [added: 355.9] | | | | [removed: 313.1] [added: 336.7] | | | | [removed: 272.9] [added: 313.1] | | |

| Impairments and disposal of assets, net | [removed: 19.0] [added: 221.0] | | | | [removed: 3.4] [added: 19.0] | | | | [removed: (8.4] [added: 3.4] | | [removed: )] |

| Total operating costs and expenses | $ | [removed: 7,677.9] [added: 7,759.0] | | | $ | [removed: 7,313.3] [added: 7,677.9] | | | $ | [removed: 6,492.7] [added: 7,313.3] | |

| Operating income | [removed: 832.5] [added: 47.9] | | | | [removed: 766.8] [added: 832.5] | | | | [removed: 677.5] [added: 766.8] | | |

| Interest, net | [removed: 50.2] [added: 57.3] | | | | [removed: 161.1] [added: 50.2] | | | | [removed: 40.2] [added: 161.1] | | |

| Earnings [added: (loss)] before income taxes | [removed: 782.3] [added: (161.0] | | [added: )] | | [removed: 605.7] [added: 782.3] | | | | [removed: 637.3] [added: 605.7] | | |

| Income tax expense [added: (benefit)] | [removed: 63.7] [added: (111.8] | | [added: )] | | [removed: 1.9] [added: 63.7] | | | | [removed: 154.8] [added: 1.9] | | |

| Earnings [added: (loss)] from continuing operations | $ | [removed: 718.6] [added: (49.2] | [added: )] | | $ | [removed: 603.8] [added: 718.6] | | | $ | [removed: 482.5] [added: 603.8] | |

| Losses from discontinued operations, net of tax benefit of [removed: $1.8, $4.8] [added: $0.9, $1.8] and [removed: $4.2,] [added: $4.8,] respectively | [removed: (5.2] [added: (3.2] | | ) | | [removed: (7.8] [added: (5.2] | | ) | | [removed: (3.4] [added: (7.8] | | ) |

| Net earnings | $ | [removed: 713.4] [added: (52.4] | [added: )] | | $ | [removed: 596.0] [added: 713.4] | | | $ | [removed: 479.1] [added: 596.0] | |

| Earnings [added: (loss)] from continuing operations | $ | [removed: 5.82] [added: (0.40] | [added: )] | | $ | [removed: 4.87] [added: 5.82] | | | $ | [removed: 3.88] [added: 4.87] | |

| Losses from discontinued operations | [removed: (0.04] [added: (0.03] | | ) | | [removed: (0.06] [added: (0.04] | | ) | | [removed: (0.03] [added: (0.06] | | ) |

| Net earnings [added: (loss)] | $ | [removed: 5.78] [added: (0.43] | [added: )] | | $ | [removed: 4.81] [added: 5.78] | | | $ | [removed: 3.85] [added: 4.81] | |

July 24, 2020

*Change in Accounting Principle*

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for leases as of May 27, 2019, due to the adoption of Financial Accounting Standards Board’s Accounting Standards Codification (ASC) 842, Leases.

*Critical Audit Matters*

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate 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 critical audit matters 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 matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

*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 right-of-use assets were $6.7 billion as of May 31, 2020.

The Company tests for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable.

If the carrying amount of an asset group exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount

of the asset group exceeds the fair value of the asset group.

Based upon the analyses performed primarily resulting from several coronavirus disease 2019 (COVID-19) pandemic factors, including significant reduction in guest traffic at the restaurants, state and local government mandated restrictions including suspension of dine-in operations, and resulting changes in consumer behavior, the Company recognized pre-tax impairment charges for long-lived assets of $51.2 million in fiscal 2020.

We identified the evaluation of long-lived assets for impairment as a critical audit matter.

Subjective auditor judgment was required to evaluate the effects of expected useful lives of the long-lived assets and the forecasted cash flows to be generated by the asset groups, specifically forecasted sales and forecasted expenses, including the effects of the COVID-19 pandemic and resulting duration of the economic downturn.

Furthermore, in determining the fair value of certain long-lived assets, involvement of valuation professionals with specialized skills and knowledge was required to assess the market rental rates, rental growth rates and discount rates in certain right-of-use assets.

Involvement of valuation professionals with specialized skills and knowledge was also required to evaluate certain discount rates used in the impairment models.

The primary procedures we performed to address this critical audit matter included the following.

We tested certain internal controls over the Company’s long-lived assets impairment process, including controls related to the assumptions listed above.

To test the Company’s impairment assessment, we evaluated the Company’s ability to accurately forecast future sales and expenses by comparing actual results to the Company’s historical forecasts.

We performed sensitivity analyses over future sales and expense assumptions and expected useful lives to evaluate the change in the impairment analysis of each asset group resulting from changes in these specific assumptions.

In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in:

| – | assessing the methodology used to determine the fair value of right-of-use assets; |

| – | evaluating market rental rates in certain right-of-use assets by comparing them against rate ranges that were independently developed using publicly available market data for comparable entities; |

| – | evaluating rental growth rates and discount rates in certain right-of-use assets by comparing them to publicly available market data for comparable entities and assessing the resulting rates; |

| – | assessing the estimate of certain right-of-use assets’ fair value considering the application of the Company’s rental rates, rental growth rates, and discount rates; and |

| – | evaluating the discount rates by comparing them to publicly available market data for comparable entities and assessing the resulting discount rates. |

*Evaluation of goodwill and trademarks for impairment*

As discussed in Note 1 to the consolidated financial statements, the Company performs goodwill and trademarks impairment testing on an annual basis as of the first day of the fiscal fourth quarter or when a triggering event occurs.

The Company identified a triggering event requiring an interim impairment assessment of goodwill and trademarks at the end of the fourth quarter of 2020 upon consideration of the current overall economic conditions resulting from several COVID-19 pandemic factors.

Such factors include significant reduction in guest traffic at the restaurants, state and local government mandated restrictions including suspension of dine-in operations, and resulting changes in consumer behavior impacting the Company.

The evaluation of goodwill and trademarks impairment requires considerable judgment and is sensitive to changes in underlying assumptions and factors.