Darden Restaurants 10-Q 2024-08-25

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended August 25, 2024

or

For the transition period from to

1-13666

Commission File Number

DARDEN RESTAURANTS, INC.

(Exact name of registrant as specified in its charter)

407-245-4000

(Registrant’s telephone number, including area code)

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

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

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

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

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

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

Number of shares of common stock outstanding as of September 16, 2024: 117,500,476.

TABLE OF CONTENTS

Cautionary Statement Regarding Forward-Looking Statements

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

PART I

FINANCIAL INFORMATION

DARDEN RESTAURANTS, INC.

CONSOLIDATED STATEMENTS OF EARNINGS

(In millions, except per share data)

(Unaudited)

See accompanying notes to our unaudited consolidated financial statements.

DARDEN RESTAURANTS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)

See accompanying notes to our unaudited consolidated financial statements.

DARDEN RESTAURANTS, INC.

CONSOLIDATED BALANCE SHEETS

(In millions)

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The discussion and analysis below for the Company, which contains forward-looking statements, should be read in conjunction with the unaudited consolidated financial statements and the notes to such financial statements included elsewhere in this quarterly report on Form 10-Q (Form 10-Q) and the audited consolidated financial statements and the notes thereto included in our Form 10-K for the fiscal year ended May 26, 2024 (Form 10-K). In addition to historical consolidated financial information, this discussion contains forward-looking statements that reflect our plans, estimates, and beliefs and involve numerous risks and uncertainties, including but not limited to those described in the “Item 1A. Risk Factors” section of the Form 10-K. Actual results may differ materially from those contained in any forward-looking statements. You should carefully read “Forward-Looking Statements” included below in this Form 10-Q.

To facilitate review of our discussion and analysis, the following table sets forth our financial results for the periods indicated. All information is derived from the unaudited consolidated statements of earnings for the three months ended August 25, 2024 and August 27, 2023.

The following table details the number of company-owned restaurants currently reported in continuing operations that were open at the end of the first quarter of fiscal 2025, compared with the number open at the end of fiscal 2024 and the end of the first quarter of fiscal 2024.

OVERVIEW OF OPERATIONS

Financial Highlights - Consolidated

• Total sales increased 1.0 percent to $2.76 billion for the first quarter of fiscal 2025 compared to $2.73 billion for the first quarter of fiscal 2024 driven by sales from 42 net new restaurants, partially offset by a blended same-restaurant sales decrease of (1.1) percent1.

• Our net earnings from continuing operations were $207.6 million for the first quarter of fiscal 2025 compared to $194.8 million for the first quarter of fiscal 2024.

• Reported diluted net earnings per share from continuing operations were $1.74 for the first quarter of fiscal 2025 compared to $1.60 for the first quarter of fiscal 2024.

Outlook

On July 17, 2024, we entered into an agreement to acquire all of the outstanding shares of Chuy’s Holdings, Inc. (Chuy’s Holdings), a Delaware corporation, for $37.50 per share in an all-cash transaction with an enterprise value of approximately $605 million. The transaction has been approved by our Board of Directors and is subject to the satisfaction of customary conditions, including, among others, the approval of Chuy’s Holdings shareholders. The acquisition is expected to be completed in the second quarter of fiscal 2025 and expected to be funded through the issuance of debt. The impacts of the planned acquisition of Chuy’s Holdings have not been included in our fiscal 2025 outlook below.

During the second quarter of fiscal 2025, we entered into an exclusive multi-year delivery arrangement with Uber Technologies, Inc. (Uber). The agreement will enable our guests to order on-demand delivery via Darden restaurant channels, with delivery handled by Uber Direct, through Uber’s national delivery network. An initial pilot of first-party delivery from a limited number of Olive Garden locations will begin in the second quarter of fiscal 2025.

We expect sales for fiscal 2025 to be between $11.8 and $11.9 billion, driven by same-restaurant sales growth of 1.0 to 2.0 percent1 and approximately 45 to 50 new restaurant openings. Additionally, we expect capital expenditures incurred to build new restaurants, remodel and maintain existing restaurants and for technology initiatives to be $550 to $600 million.

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

SALES

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

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

Olive Garden’s sales decrease for the first quarter of fiscal 2025 was primarily driven by same-restaurant sales decreases, offset by revenue from new restaurants. The decrease in U.S. same-restaurant sales for the first quarter of fiscal 2025 resulted from a 5.6 percent decrease in same-restaurant guest count, partially offset by a 2.9 percent increase in average check.

LongHorn Steakhouse’s sales increase for the first quarter of fiscal 2025 was primarily driven by same-restaurant sales increases combined with revenue from new restaurants. The increase in same-restaurant sales for the first quarter of fiscal 2025 resulted from a 3.0 percent increase in average check combined with a 0.7 percent increase in same-restaurant guest counts.

Fine Dining’s sales increase for the first quarter of fiscal 2025 was primarily driven by the acquisition of Ruth’s Chris and revenue from new restaurants, offset by same restaurant sales decreases. The decrease in same-restaurant sales for the first quarter of fiscal 2025 resulted from a 9.3 percent decrease in same-restaurant guest counts offset by a 3.7 percent increase in average check.

Other Business’ sales decrease for the first quarter of fiscal 2025 was primarily driven by same-restaurant sales decreases, offset by revenue from new restaurants. The decrease in same-restaurant sales for the first quarter of fiscal 2025 resulted from a 3.9 percent decrease in same-restaurant guest counts, offset by a 2.2 percent increase in average check.

COSTS AND EXPENSES

The following table sets forth selected operating data as a percent of sales for the periods indicated. All information is derived from the unaudited consolidated statements of earnings for the quarters ended August 25, 2024 and August 27, 2023.

Quarter Ended August 25, 2024 Compared to Quarter Ended August 27, 2023

• Food and beverage costs decreased as a percent of sales primarily due to a 0.8% impact from pricing leverage and a 0.2% impact from cost savings, partially offset by a 0.6% impact from mix and other.

• Restaurant labor costs increased as a percent of sales primarily due to a 1.2% impact from inflation, partially offset by a 0.3% impact from sales leverage, a 0.6% impact from salary and benefits, and a 0.2% productivity improvement.

• Restaurant expenses increased as a percent of sales primarily due a 0.3% impact from inflation, partially offset by a 0.1% impact related to other.

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

• General and administrative expenses decreased as a percent of sales primarily due to a 0.9% impact from Ruth’s Chris transaction and integration costs incurred in fiscal 2024 but not in fiscal 2025, a 0.4% impact from incentive pay and a 0.1% impact from sales leverage, partially offset by a 0.2% impact from inflation and a 0.1% impact related to mark to market adjustments.

• Depreciation and amortization expenses increased as a percent of sales primarily due to the acquisition of Ruth’s Chris as well as depreciation on brand assets.

• Impairment and disposal of assets, net decreased as a percent of sales primarily due to a decrease in unplanned closures or early lease terminations as compared to prior year.

INTEREST EXPENSE

Net interest expense increased as a percent of sales for the first quarter of fiscal 2025 primarily due to financing related to the Ruth’s Chris acquisition.

INCOME TAXES

The effective income tax rate for continuing operations for the quarter ended August 25, 2024 was 10.6 percent compared to an effective income tax rate for the quarter ended August 27, 2023 of 12.7 percent. The decrease in the tax rate is primarily driven by the release of federal tax reserves and the favorable impact of mark to market hedges.

LOSSES FROM DISCONTINUED OPERATIONS

On an after-tax basis, losses from discontinued operations for the first quarter of fiscal 2025 were $0.4 million ($0.00 per diluted share) compared with losses from discontinued operations for the first quarter of fiscal 2024 of $0.3 million ($0.01 per diluted share).

SEGMENT RESULTS

We manage our restaurant brands, Olive Garden, LongHorn Steakhouse, Cheddar’s Scratch Kitchen, Yard House, Ruth’s Chris, The Capital Grille, Seasons 52, Bahama Breeze, Eddie V’s and The Capital Burger in North America as operating segments. We aggregate our operating segments into reportable segments based on a combination of the size, economic characteristics and sub-segment of full-service dining within which each brand operates. Our four reportable segments are: (1) Olive Garden, (2) LongHorn Steakhouse, (3) Fine Dining and (4) Other Business (see Note 6 to our unaudited consolidated financial statements in Part I, Item 1 of Form 10-Q).

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

The decrease in Olive Garden’s segment profit margin for the first quarter of fiscal 2025 was driven primarily by negative same-restaurant sales as well as increased restaurant labor costs and restaurant expenses, partially offset by lower food and beverage costs. The increase in Longhorn Steakhouse’s segment profit margin for the first quarter of fiscal 2025 was driven

primarily by positive same-restaurant sales as well as decreased food and beverage costs, partially offset by higher restaurant labor and restaurant expenses. The decrease in Fine Dining’s segment profit margin for the first quarter of fiscal 2025 was driven primarily by negative same-restaurant sales, higher restaurant labor costs and restaurant expenses, partially offset by lower food and beverages costs. Other Business’ segment profit margin for the first quarter of fiscal 2025 remained flat compared to fiscal 2024, primarily due to lower food and beverage costs, offset by negative same-restaurant sales.

SEASONALITY

Our sales volumes fluctuate seasonally. Typically, our average sales per restaurant are highest in the winter and spring, followed by the summer, and lowest in the fall. Holidays, changes in the economy, severe weather, effects of other conditions may impact sales volumes seasonally in some operating regions. Because of the seasonality of our business, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year.

LIQUIDITY AND CAPITAL RESOURCES

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

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

• Moody’s Investors Service “Baa2”;

• Standard & Poor’s “BBB”; and

• Fitch “BBB”.

Our commercial paper has ratings of:

• Moody’s Investors Service “P-2”;

• Standard & Poor’s “A-2”; and

• Fitch “F-2”.

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

On October 23, 2023, we entered into a $1.25 billion Revolving Credit Agreement (as amended, Revolving Credit Agreement) with Bank of America, N.A. (BOA), as administrative agent, and the lenders and other agents party thereto. The Revolving Credit Agreement replaced our prior $1.0 billion Revolving Credit Agreement (Prior Revolving Credit Agreement), dated as of September 10, 2021, and the Prior Revolving Credit Agreement was terminated concurrently with our entry into the Revolving Credit Agreement. The Revolving Credit Agreement is a senior unsecured credit commitment to the Company and contains customary representations and affirmative and negative covenants (including limitations on liens and subsidiary debt and, prior to the Amendment (as defined below) a maximum consolidated lease adjusted total debt to total capitalization ratio of 0.75 to 1.00) and events of default usual for credit facilities of this type. As of August 25, 2024, we had no outstanding balances and were in compliance with all covenants under the Revolving Credit Agreement. As of August 25, 2024, $293.9 million of commercial paper was outstanding in addition to $0.5 million of letters of credit outstanding, which were both backed by this facility. After consideration of commercial paper and letters of credit backed by the Revolving Credit Agreement, as of August 25, 2024, we had $955.6 million of credit available under the Revolving Credit Agreement.

Loans under the Revolving Credit Agreement bear interest at a rate of (a) Term SOFR (which is defined, for the applicable interest period, as the Term SOFR Screen Rate two U.S. Government Securities Business Days prior to the commencement of such interest period with a term equivalent to such interest period) plus a Term SOFR adjustment of 0.10 percent plus the relevant margin determined by reference to a ratings-based pricing grid (Applicable Margin), or (b) the base rate (which is defined as the highest of the BOA prime rate, the Federal Funds rate plus 0.500 percent, and the Term SOFR plus 1.00 percent) plus the relevant Applicable Margin. Assuming a “BBB” equivalent credit rating level, the Applicable Margin under the Revolving Credit Agreement is 1.000 percent for Term SOFR loans and 0.000 percent for base rate loans.

The Revolving Credit Agreement matures on October 23, 2028, and the proceeds may be used for working capital and capital expenditures, the refinancing of certain indebtedness, certain acquisitions and general corporate purposes.

On September 16, 2024, we entered into Amendment No. 1 (Amendment) to the Revolving Credit Agreement, which replaced the prior financial covenant (which provided for a maximum consolidated total debt to total capitalization ratio) with a new financial covenant requiring us to maintain, measured as of the end of each fiscal quarter, a maximum consolidated leverage ratio of 3.50 to 1.00 (which may be temporarily increased to 4.00 to 1.00 upon our the election as a result of a covered acquisition, subject to customary limitations set forth in the Revolving Credit Agreement). All other material terms and conditions of the Revolving Credit Agreement were unchanged.

On September 16, 2024, the Company entered into a senior unsecured $600 million 2-year Term Loan Credit Agreement (the Term Loan Agreement) with BOA, as administrative agent, the lenders and other agents party thereto, the material terms of which are consistent with the Revolving Credit Agreement, as amended by the Amendment. The Term Loan Agreement provides for a single borrowing on any business day until February 17, 2025 (the Funding Date) and matures on the second anniversary of the Funding Date. The Company has not drawn on the Term Loan as of the date of this filing. The proceeds may be used to finance our anticipated acquisition of Chuy’s Holdings.

As of August 25, 2024, our outstanding long-term debt consisted principally of:

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

• $500.0 million of unsecured 6.300 senior notes due in October 2033;

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

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

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

The interest rate on our $42.8 million senior notes due in October 2037 is subject to adjustment from time to time if the debt rating assigned to such series of notes is downgraded below a certain rating level (or subsequently upgraded). The maximum adjustment is 2.000 percent above the initial interest rate and the interest rate cannot be reduced below the initial interest rate. As of August 25, 2024, no such adjustments are made to this rate.

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

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

From time to time we enter into interest rate derivative instruments. See Note 10 to our unaudited consolidated financial statements in Part I, Item 1 of this report, which is incorporated by reference.

Net cash flows provided by operating activities from continuing operations increased to $273.2 million for the first three months of fiscal 2025, from $269.1 million for the three months of fiscal 2024. Net cash flows provided by operating activities include net earnings from continuing operations of $207.6 million and $194.8 million in the first three months of fiscal 2025 and 2024, respectively. Net cash flows provided by operating activities increased in fiscal 2025 primarily due to higher net earnings in fiscal 2025.

Net cash flows used in investing activities from continuing operations were $149.7 million for the first three months of fiscal 2025, compared to $854.2 million for the first three months of fiscal 2024. Net cash used in the acquisition of Ruth’s Chris was $701.1 million during fiscal 2024. Capital expenditures decreased to $145.2 million for the first three months of fiscal 2025 from $150.9 million for the first three months of fiscal 2024 reflecting a decrease in new restaurant construction and remodel spend during fiscal 2025.

Net cash flows used in financing activities from continuing operations were $126.7 million for the first three months of fiscal 2025, compared to net cash provided by financing activities of $409.4 million for the first three months of fiscal 2024. Net cash flows used in financing activities for the first three months of fiscal 2025 included net proceeds from issuance of short term debt of $207.1 million, dividends paid of $166.0 million and share repurchases of $172.4 million. Net cash flows provided by financing activities for the first three months of fiscal 2024 included net proceeds from issuance of short term debt of $95.4 million and proceeds from the Term Loan Agreement of $600.0 million, dividends paid of $158.5 million and share repurchases of $142.9 million. Dividends declared by our Board of Directors totaled $1.40 and $1.31 per share for the first three months of fiscal 2025 and 2024, respectively.

Other than the planned acquisition of Chuy’s Holdings, which we intend to fund through one or more long-term debt issuances, we are not aware of any trends or events that would materially affect our capital requirements or liquidity. We believe that our internal cash-generating capabilities, the potential issuance of equity or unsecured debt securities under our shelf registration statement and short-term commercial paper or drawings under our Revolving Credit Agreement should be sufficient to finance our capital expenditures, debt maturities and other operating activities through fiscal 2025.

On March 20, 2024 our Board of Directors authorized a new share repurchase program under which we may repurchase up to $1 billion of our outstanding common stock. This repurchase program does not have an expiration and replaced the prior share repurchase authorization. During the quarter ended August 25, 2024, we repurchased 1.2 million shares of our common stock compared to 0.9 million shares of our common stock during the quarter ended August 27, 2023.

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

FINANCIAL CONDITION

Our current assets totaled $819.6 million as of August 25, 2024, compared to $822.8 million as of May 26, 2024. The decrease was primarily due to a decrease in receivables and prepaid income tax, partially offset by increase in prepaid expenses and other current assets.

Our current liabilities totaled $2.32 billion as of August 25, 2024, compared to $2.19 billion as of May 26, 2024. The increase was primarily driven by an increase in short-term debt .

CRITICAL ACCOUNTING ESTIMATES

We prepare our consolidated financial statements in conformity with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales, costs and expenses during the reporting period. Actual results could differ from those estimates. We have discussed the development, selection and disclosure of those estimates with the Audit Committee. Our critical accounting estimates have not changed materially from those previously reported in our Annual Report on Form 10-K for the fiscal year ended May 26, 2024.

APPLICATION OF NEW ACCOUNTING STANDARDS

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

FORWARD-LOOKING STATEMENTS

Statements set forth in or incorporated into this report regarding the expected increase in the number of our restaurants and capital expenditures in fiscal 2025, projections for sales and all other statements that are not historical facts, including without limitation statements with respect to the financial condition, results of operations, plans, objectives, future performance and business of Darden Restaurants, Inc. and its subsidiaries that are preceded by, followed by or that include words such as “may,” “will,” “expect,” “intend,” “anticipate,” “continue,” “estimate,” “project,” “believe,” “plan,” “outlook” or similar expressions, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are included, along with this statement, for purposes of complying with the safe harbor provisions of that Act. Any forward-looking statements speak only as of the date on which such statements are made, and we undertake no obligation to update such statements for any reason to reflect events or circumstances arising after such date. By their nature, forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by such forward-looking statements. In addition to the risks and uncertainties of ordinary business obligations, and those described in information incorporated into this report, the forward-looking statements contained in this report are subject to the risks and uncertainties described in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended May 26, 2024 and in our Forms 10-Q (including this report), which are summarized as follows:

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

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

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

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

• Increases in labor and insurance costs;

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

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

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

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

• A failure to successfully complete our acquisition and integration of Chuy’s Holdings operations into our business.

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

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

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

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

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

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

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

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

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

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

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

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

• Risks associated with doing business with franchisees and licensees;

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

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

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

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

• Environmental, social and governance risk, including disclosure expectations and the impact of third party ratings,

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

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

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

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

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

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

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

We are exposed to a variety of market risks, including fluctuations in interest rates, foreign currency exchange rates, compensation and commodity prices. To manage this exposure, we periodically enter into interest rate, foreign currency exchange rate, equity forward and commodity derivative instruments for other than trading purposes (see Note 10 to our unaudited consolidated financial statements in Part I, Item 1 of this report).

We use the variance/covariance method to measure value at risk, over time horizons ranging from one week to one year, at the 95 percent confidence level. As of August 25, 2024, our potential losses in future net earnings resulting from changes in equity forwards, commodity instruments, floating rate and fixed rate debt interest rate exposures were approximately $86.9 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 $92.8 million. The fair value of our long-term fixed-rate debt outstanding as of August 25, 2024, averaged $1.39 billion, with a high of $1.43 billion and a low of $1.37 billion during the three months of fiscal 2025. Our interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flows by targeting an appropriate mix of variable and fixed-rate debt.

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of August 25, 2024, the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of August 25, 2024.

During the fiscal quarter ended August 25, 2024, there was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

**Item 1.**Legal Proceedings

See the discussion of legal proceedings contained in the third paragraph of Note 12 to our unaudited consolidated financial statements in Part I, Item 1 of this report, which is incorporated herein by reference.

There have been no material changes to the risk factors contained in Item 1A of our Annual Report on Form 10-K for the year ended May 26, 2024.

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

The table below provides information concerning our repurchase of shares of our common stock during the quarter ended August 25, 2024.

(1)All of the shares purchased during the quarter ended August 25, 2024 were purchased as part of our repurchase program. On March 20, 2024 our Board of Directors authorized a new share repurchase program under which we may repurchase up to $1 billion of our outstanding common stock. This repurchase program, which was announced publicly in a press release issued on March 21, 2024, does not have an expiration and replaced the prior share repurchase authorization.

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

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

During the quarter ended August 25, 2024, no director or officer adopted, modified, or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as such terms are defined in Item 408(a) of Regulation S-K.

SIGNATURE

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