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Operating Successfullyin a New Era
DARDEN SECURITY ANALYSTS MEETING | FEBRUARY 2013
Agenda
Monday, February 252:00 p.m. Matthew Stroud
VP, Investor Relations, Darden Restaurants
2:05 p.m. Clarence Otis, Jr.Chairman & CEO, Darden Restaurants
2:35 p.m. Drew MadsenPresident & COO, Darden Restaurants
3:35 p.m. Break4:00 p.m. Chris Chang
SVP, Technology Strategy, Darden Restaurants
Agenda
Monday, February 254:20 p.m. Brad Richmond
CFO, Darden Restaurants
5:05 p.m. Q&A
5:50 p.m. Adjourn
6:15 p.m. Buses Depart for dinner at Red Lobster – Lake Buena Vista
8:15 p.m. Buses return to Hotel
Forward-Looking StatementDuring the course of this presentation, Darden Restaurants’ officers and employees may make forward-looking statements concerning the Company’s expectations, goals or objectives. Forward-looking statements regarding our expected earnings per share and U.S. same-restaurant sales for the fiscal year, new restaurant growth and all other statements that are not historical facts, including without limitation statements concerning our future economic performance, plans or objectives, are made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. 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 to reflect events or circumstances arising after such date. We wish to caution investors not to place undue reliance on any such forward-looking statements. By their nature, forward-looking statements involve risks and uncertainties that could cause actual results to materially differ from those anticipated in the statements. The most significant of these uncertainties are described in Darden's Form 10-K, Form 10-Q and Form 8-K reports (including all amendments to those reports). These risks and uncertainties include food safety and food-borne illness concerns, litigation, unfavorable publicity, risks relating to public policy changes and federal, state and local regulation of our business including health care reform, labor and insurance costs, technology failures, failure to execute a business continuity plan following a disaster, health concerns including virus outbreaks, intense competition, failure to drive sales growth, failure to successfully integrate the Yard House business and the additional indebtedness incurred to finance the Yard House acquisition, our plans to expand our newer brands like Bahama Breeze, Seasons 52 and Eddie V’s, a lack of suitable new restaurant locations, higher-than-anticipated costs to open, close or remodel restaurants, a failure to execute innovative marketing tactics and increased advertising and marketing costs, a failure to develop and recruit effective leaders, a failure to address cost pressures, shortages or interruptions in the delivery of food and other products, adverse weather conditions and natural disasters, volatility in the market value of derivatives, economic factors specific to the restaurant industry and general macroeconomic factors including unemployment and interest rates, disruptions in the financial markets, risks of doing business with franchisees and vendors in foreign markets, failure to protect our service marks or other intellectual property, a possible impairment in the carrying value of our goodwill or other intangible assets, a failure of our internal controls over financial reporting, or changes in accounting standards, and other factors and uncertainties discussed from time to time in reports filed by Darden with the Securities and Exchange Commission.
Reconciliation of Non-GAAP Financial Measures
In addition to disclosing financial results calculated in accordance withU.S. generally accepted accounting principles ("GAAP"), this presentation contains non-GAAP financial measures. The non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, however, they are provided as management believes they are helpful in evaluating the state of the business. The non-GAAP financial measures may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. Other financial and statistical information in this presentation, including any information required by Regulation G, is available under the heading “Investor Relations” on our website at www.darden.com.
Operating Successfullyin a New Era
Clarence OtisChairman & CEO
DARDEN SECURITY ANALYSTS MEETING | FEBRUARY 2013
Our Strategic Direction
7
INDUSTRYLEADERSHIP
IMPORTANTCHANGES FOR
A NEW ERA
CompetitivelySuperior ValueGoing Forward
Our Strategic History:HARD EARNED INDUSTRY LEADERSHIP
8
Pioneered National Casual Dining
• Grounded in talented and engaged restaurant and …eventually … multi-restaurant leaders …
• Increasingly robust people managementsystems and techniques …
• And increasingly effective guest countforecasting and cost management tools
9
Strong Restaurant-Level Operations
Pioneered National Casual Dining
• Rooted in a commitment from the startto rigorous consumer insight …
• Which drove consistently in-synch evolutionof key consumer touch points …
• Including menus, advertising, servicestyle and restaurant look and feel …
• And combining that with effectiveuse of promotions and in-restaurantmerchandising
10
Strong Brand Management
Pioneered National Casual Dining
• Reflects a commitment from the start to ongoing investmentin creating a robust Supply Chain …
• A highly functional Information Technology infrastructure …
• And strong financial management and reporting systems
11
Effective and Efficient Support
Pioneered Multi-Brand Casual Dining
• Well beyond what was possible with a single brand … since there are relatively few units before a full service dining brand reaches full national penetration
• A critical success factor was establishing appropriate leadership structures and teams … at the enterprise level andat each brand …
• Which allowed us to manage the added scale and scope of being multi-brand … and maintain strong restaurant operations and brand management
12
Enabled Significant Value Creating Growth
Pioneered Multi-Brand Casual Dining
• With two national brands and a growing portfolio …
• Achieved new levels of financial and operating scale compared to single brand operators …
• Which has been an important driver of competitively superior long-term shareholder value creation
13
Enabled Significant Value Creating Growth
Track Record of Decisive Action
• In the 1970’s and 1980’s … helped pioneer shrimp and fish aquaculture … preserving Red Lobster’s ability to offer everyday price accessibility over the long-term
• In the 1980’s … disposed of several brands to focus on Olive Garden’s compelling expansion and value creation potential
14
A Key to Sustained Long-Term Momentum
1970’s 1980’s 1990’s
Track Record of Decisive Action
• In the 1990’s … aggressively closed restaurants to address overbuilding at Red Lobster and in the industry
• In 2007 … disposed of Smokey Bones and acquired LongHorn Steakhouse and Capital Grille … to create a brand portfolio with a much stronger overall growth profile
• In 2011 and 2012 … enhanced our sales and earnings growth potential by acquiring Eddie V’s and Yard House
15
A Key to Sustained Long-Term Momentum
2000’s 2010’s
Consistently Willing and Able to Invest for the Future
• General Mills funded ourinvestment for the futureinitially … but for decades nowwe have relied on our ownconsiderable cash flow
• We’ve invested through capitalspending and … when necessary …operating expense and margin choices
• Beyond financial resources … our most important investment for the future has long been organizational capacity
16
Foundation for All Other Leadership Attributes
Our Strategic Direction:BLENDING CONTINUITY AND CHANGE
TO MAINTAIN LEADERSHIP
17
Committed to a Multi-Brand Future
• Our current portfolio supports continued market share growth for the next decade … without additional brands …
• As well as competitively superior returns …
• Provided we make the changes that are needed to manage the new scale and scope of our business …
• And that are needed to craft and deliver the guest experiences required to take advantage of the New Era
18
Our Path for Sustained Long-Term Value Creation
The New Era
• Many guests are more financially stretched than ever …and more focused than ever on affordability
• Many other guests remain financially comfortable …and are demanding better quality offerings
• The financially comfortable are affecting the tastes and preferences of the financially stretched … so financially stretched guests want more for less
19
Key Consumer and Competitive Dynamics
The New Era
• There are more millennial and multicultural guests than ever … and they are having a significant affect on the tastes and preferences of all guests
• Competition within Full-Service has increased … as eroding traffic fuels a more intense market share battle
• Competition within Full-Service has also increased because some brands are replicating promotional and operational approaches that have been successful at Darden
20
Key Consumer and Competitive Dynamics
The New Era
• Competition with other restaurant segments has also increased … driven by innovation within traditional quick service …
• As well as the continued emergence of segments like quick service retail and fast casual
21
Key Consumer and Competitive Dynamics
Operating Successfully in the New Era
• Our Specialty Restaurant Group brands provide Darden witha broader overall guest and occasion base
• To more effectively support our three large brands, we have established separate, dedicated teams that each focus more singularly on:– Winning more consistently in the marketplace today … or …– Redefining our guest experiences for tomorrow
22
We’re Making Needed Changes
Operating Successfully in the New Era
• To more consistently win in the marketplace today… new, dedicated teams are focused on …
• More competitive promotional affordability …
• Better in-restaurant delivery of our current guest experiences …
• And richer, more targeted and more agile day-to-day guest communication
23
We’re Making Needed Changes
Operating Successfully in the New Era
• To redefine the guest experiences we offer … new, dedicated teams are focused on …
• Big multi-year efforts that strengthen … in step change ways … the loyalty and visit frequency of current guests … or add new guests…
• By meaningfully reshaping our core menus … in-restaurant experiences … and how we engage guests and employees who are living increasingly digital lifestyles
24
We’re Making Needed Changes
Operating Successfully in the New Era
• We are tempering check average growth noticeably going forward … to support traffic growth
• We are significantly reducing new restaurant expansionat Olive Garden …– So the brand can better focus on regaining same-restaurant momentum …– And the guest experience changes needed to sustain success
25
We’re Making Needed Changes
Operating Successfully in the New Era
• We are also investing in …– A select few multi-year initiatives to ensure sustained success …– Transitioning to the new healthcare landscape in a way that maintains
strong employee engagement …– Lobster aquaculture … which will preserve Red Lobster’s ability to offer
everyday price accessibility over the long-term
• While our strategic choices will result in lower near-term sales and earnings growth targets …
• They are the appropriate choices for the business … and we have the resources to pursue them
26
We’re Making Needed Changes
Strong Collective Experience and Expertise
A Cost-Effective Support Platform
We Are Well-Resourced for the Needed Changes
27
Significant and Durable Operating Cash Generation
SustainedIndustry Leadership &
Superior Value Creation
As We Make the Needed Changes … Darden’s Winning Culture Will Not Change
28
The best, now and for generations…and a placewhere people can achieve their dreams
Nourish and Delight Everyone We Serve
Integrity & Fairness | Respect & Caring | Diversity | TeamworkAlways Learning, Always Teaching | Being “of Service” | Excellence
Grounded in Shared Purpose Identity and Values
Important Confirmation thatOurs is a Winning Culture
29
In service industries, employees’ “actions with consumers transforma company’s brand aspirations…intoa customer-experienced brand.”
Professor Leonard L. Berry
2011 | 2012 | 2013
Operating Successfullyin a New Era
Drew MadsenPresident & COO
DARDEN SECURITY ANALYSTS MEETING | FEBRUARY 2013
The New Era
Key Dynamics– Industry, Consumer, Competitive
Implications for Darden– Compete more effectively within the current Casual Dining market share contest today– While also working aggressively to ensure our brands win the contest for relevance
tomorrow that goes beyond Casual Dining
Our Response– Further strengthened brand portfolio– Further strengthening organization capabilities– Making near term changes to regain momentum in our large brands– Advancing a focused set of high potential growth initiatives
2
3
Key Dynamics
Total Restaurant Industry Traffic Declining
4
Source: NPD CREST
QSR Less Retail & Fast Casual
62.3 Billion Visits 60.5 Billion Visits2008 2012
QSR RetailFast CasualMidscaleCasual DiningFine Dining / Upscale Hotel
38.0
7.8 2.0 7.17.0
0.4
37.1
8.0 2.4 6.26.4
0.4
Shifts from Full Service to Fast Casual and QSR Retail
Casual Dining Traffic Still Contracting
6.26.2
6.4 6.4
6.66.7
6.9 6.9
7.0
6.9
6.7
6.6
6.4
5.6
5.8
6.0
6.2
6.4
6.6
6.8
7.0
7.2
FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12
Bill
ions
5
+1.1%
-2.1%
Avg Growth = +1.6% Avg Growth = -2.1%
+2.3%
+0.5%+2.9%
+1.5%
+2.5%
+0.4%
+1.9%
-2.8%
-1.6%-2.0%
Source: NPD CREST; Total System Traffic; Restated History on PCYA Basis
Total Casual Dining Traffic
RISING TIDES SHARE BATTLE
Casual Dining Penetration and Frequency are Both Opportunities
77%
75%73%
69%66%
FY08 FY09 FY10 FY11 FY12
9.2
8.7 8.78.2
7.5
FY08 FY09 FY10 FY11 FY12
Source: Darden i-Tracker
Casual Dining Visit Frequency(Last Four Weeks)
Casual Dining Penetration(Last Four Weeks)
6
Casual Dining Less Affordable for Many
7
Source: NPD CREST & US Census Bureau, Population DivisionNote: 12 Months ending Sep’07 and Sep’12
Share of Traffic by Income
< $60,000 $60,000-$100,000 >$100,0002007 2012 2007 2012 2007 2012
U.S. Population 55% 58% 23% 22% 22% 20%
C.D. Total 38% 33% 29% 28% 32% 39%
The Reduction in Segment Affordability has Affected Our Brands More Because of Their Broader Reach
8
Source: NPD CREST & US Census Bureau, Population DivisionNote: 12 Months ending Sep’07 and Sep’12
Share of Traffic by Income
< $60,000 $60,000-$100,000 >$100,000
2007 2012 2007 2012 2007 2012
U.S. Population 55% 58% 23% 22% 22% 20%
C.D. Total 38% 33% 29% 28% 33% 39%
CD Major Chains 38% 38% 30% 29% 32% 33%
51% 43% 26% 29% 23% 28%46% 40% 30% 32% 24% 28%
35% 32% 30% 33% 35% 35%
Though Broader Reach is a Key Driver of Superior Revenues Per Restaurant
Casual Dining Not Capturing Millennial Opportunity
9
Source: NPD CREST & US Census Bureau, Population DivisionNote: 12 Months ending Sep’07 and Sep’12
Share of Traffic by Age
Millennials Gen X Boomers Matures
2007 2012 2007 2012 2007 2012 2007 2012
U.S. Population 31% 33% 22% 23% 30% 30% 17% 14%
C.D. Total 25% 24% 24% 24% 31% 35% 20% 17%
Casual Dining Not Fully CapturingHispanic Opportunity
10
Source: NPD CREST & US Census Bureau, Population DivisionNote: 12 Months ending May’07 and May’12 considered
Share of Traffic by Ethnicity
Caucasians African American Hispanics Others
2007 2012 2007 2012 2007 2012 2007 2012
U.S. Population 67% 65% 12% 12% 15% 17% 6% 6%
C.D. Total 75% 75% 8% 7% 12% 13% 5% 5%
However… Major Casual Dining Chains are Growing…
11
1.9%
-2.1%-2.8%
-1.6% -2.0%
FY08 FY09 FY10 FY11 FY12
Total Casual Dining
Source: NPD CREST
4.0%
-2.4% -2.7%
0.3%1.4%
FY08 FY09 FY10 FY11 FY12
Major Chains
Total Traffic% + / - LY
… And Taking Market Share
12
Share of Total Traffic
Source: NPD CREST
52%
15%33%
2008
51%
14%35%
2012
Independents (<3 units)
Small Chains (3-200 units)
Major Chains (200+ units)
Source: NPD Crest
Cum
. Per
cent
Cha
nge
vs. Y
ear A
go
Our Large Brands Have Been Growing FasterThan Major Chains
13
5.6%
10.1%
4.0%
0.6%
-2%
0%
2%
4%
6%
8%
10%
12%
FY08 FY09 FY10 FY11 FY12
Darden Blended Major Chains
Cumulative Total Traffic% + / -
Darden Blended Average (RL, OG, LH)
We Also Have Higher Average Unit Volumes…
14
$4.7
$3.8
$3.0
$3.9
$3.2
$3.0
$3.0
$2.8
$2.4
$1.8
Source: Competitors: Form 10-K Filings, 2012 Nation’s Restaurant News Top 100 Report
AUV$Millions
Darden: Fiscal 2012
(Dinner Only)Primary MajorChain Competitors(Sales of $1Billion plus 250 units)
Higher Restaurant Level Returns…
15
18.5%
17.9%
17.6%
15.5%
10.3%
NA
Source: Competitors: Form 10-K Filings; Darden: Fiscal 2012
Restaurant-LevelReturns (%)*
* Restaurant-Level Returns (%) = (EBIT + G&A + Depreciation & Amortization) / Total Revenue, as reportedDine Equity not included - not comparable due to high level franchising activity.
Primary MajorChain Competitors(Sales of $1Billion plus 250 units)
(Partly Franchised)
(Partly Franchised)
And Darden Has Higher Operating Profit Margins…
16
9.2%
8.5%
8.4%
4.5%
0.4%
NA
Source: Competitors: Form 10-K Filings; Darden: Fiscal 2012
EnterpriseEBIT (%)*
* Enterprise EBIT (%) = (Net Income + Interest Expense + Income Taxes) / Total Revenue, as reported
Primary MajorChain Competitors(Sales of $1Billion plus 250 units)
(Partly Franchised)
(Partly Franchised)
Which Reflects Significant Productivity Gains
17
Cumulative SavingsFY09-FY13($ millions)
Supply Chain Automation $41 - $44
Facilities Centralization $9 - $10
Sustainable Operating Practices $24 - $26
Labor Optimization $46 - $50
Total $120 - $130
But... Same-Restaurant Traffic Has Been a Challenge
18
‐20%
0%
20%
FY08 FY09 FY10 FY11 FY12
Cumulative Same-Restaurant Traffic% +/-
Darden Blended
Major Chains
Darden Blended Average (RL, OG, LH)
-7.7%
-18.2%
And We Have Lagged the Industry Recently
-4.5%
-2.6%
-4.5%
-2.2%
-0.8%-1.4%
Q4 FY12 Q1 FY13 Q2 FY13
Quarterly Same-Restaurant Traffic% +/- Prior Year
Darden Blended Average (RL, OG, LH) Knapp Track (Ex. DRI)
19
20
Implications for Darden
Winning the Market Share Contest Today
Winning Today– Address the more intense market share contest within Casual Dining …
• Further strengthen in-restaurant delivery of our guest experiences• And respond more aggressively to the elevated guest need for affordability• While being careful not to cheapen the guest experiences we offer
Winning Tomorrow– Address larger contest for relevance beyond Casual Dining …
• Innovate and redefine our guest experiences• To take advantage of changing guest preferences• And effectively address increased competition … within Casual Dining and
Limited Service segments as well
21
Requires tempering near-term check average growth and making other important investments
While Redefining Our Guest Experiences for Tomorrow
Major Chain Share Gain Within Casual DiningReflects Aggressive Increase in Price Incentives
22
829.5 801.5 806.2 815.6 852.5 780.0 731.40%
5%
10%
15%
20%
25%
30%
0
100
200
300
400
500
600
700
800
900
YESep'06
YESep'07
YESep'08
YESep'09
YESep'10
YESep'11
YESep'12
277.4 307.4 360.1 469.1 500.9 567.5 566.80%
5%
10%
15%
20%
25%
30%
0
100
200
300
400
500
600
700
800
900
YESep'06
YESep'07
YESep'08
YESep'09
YESep'10
YESep'11
YESep'12
13%
25%
18% 18%
Traffic (000) on deal % of dealing
Source: NPD CREST
Major CD Chains Small and IndependentCD Chains
But Casual Dining Guest Experience is Not Improving Fast Enough
23
% Excellent – Overall Experience
2526
28 29 30 30 30 30 3132 33 33
3132
36 3638 37 38
3638
3941 40
39 3841 41 41 41 41 40 40 41 42 41
45 45 45 45 4644 43 43 43
45 45 45
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Average Eater Check
Total Occasions
$27.41
$13.22$ 7.02
$ 5.13
+11 PT
+2 PT
+8 PT
Source: NPD CREST, YE May 2012
QSRQSR
Fast CasualFast Casual
Casual DiningCasual Dining
Fine DiningFine Dining
Making Price Premium to Other Segments… Even AfterDiscounting… Tougher to Justify
ServiceServiceAtmosphereAtmosphere
FoodFood
AdvertisingAdvertisingExecutionExecution
ValueValue
Guest Experience Levers to Sustain Great Brands
24
Business Performance
Attentive ServiceCleanlinessUp-to-date
Atmosphere I Like
Menu VarietyTaste of Food
Brand AwarenessAd Awareness
Consistently Good Experience
Value for the MoneyAffordability
Overall Brand Strength
Future Visit Intent
Our View
Sustaining Great Brands
Overall Brand Strength Rating (Future Visit Intent)– Red Lobster, LongHorn and Olive Garden have all moved up
Individual Attribute Ratings– Red Lobster is generally up in competitive ranking– LongHorn is generally flat or up– Olive Garden is generally flat but down slightly on a few attributes
Value for Money– The one exception where all three of our brands have moved down in ranking– Apparently driven more by “What You Pay” versus “What You Get”
25
Shifts in Guest Perception and Competitive Brand RankFY08-FY12
Taste of Food
26
B & G 4
B & G 3
B & G 2
B & G 1
CD Destination 3
CD Destination 1
CD Destination 2
CD Polished 1
FY08
B & G 4
B & G 3
B & G 2
B & G 1
CD Destination 3
CD Destination 1
CD Destination 2
CD Polished 1
FY12
Source: Darden i-Tracker – Top Box % Ranking
FY12 vs. FY08
One
Competitive Ranking
One
(“BIG DISCOUNTS”)
(“BIG DISCOUNTS”)
Distinctive Menu Items
27
B & G 4
B & G 2
B & G 3
B & G 1
CD Destination 1
CD Destination 3
CD Destination 2
CD Polished 1
FY08
B & G 4
B & G 2
B & G 1
B & G 3
CD Destination 3
CD Destination 1
CD Destination 2
CD Polished 1
FY12
One
One
One
One
One
One
FY12 vs. FY08Competitive Ranking
Source: Darden i-Tracker – Top Box % Ranking
(“BIG DISCOUNTS”)
(“BIG DISCOUNTS”)
Consistently Good Experience
B & G 4
B & G 3
B & G 2
B & G 1
CD Destination 3
CD Destination 1
CD Destination 2
CD Polished 1
FY08
28
B & G 4
B & G 3
B & G 2
B & G 1
CD Destination 3
CD Destination 1
CD Destination 2
CD Polished 1
FY12
One
One
One
One
FY12 vs. FY08Competitive Ranking
(“BIG DISCOUNTS”)
(“BIG DISCOUNTS”)
Source: Darden i-Tracker – Top Box % Ranking
Attentive Service
B & G 4
B & G 3
B & G 1
B & G 2
CD Destination 3
CD Destination 1
CD Destination 2
CD Polished 1
FY08
29
B & G 1
B & G 3
B & G 4
B & G 2
CD Destination 3
CD Destination 1
CD Destination 2
CD Polished 1
FY12
Two
One
One
Two
Two
Two
FY12 vs. FY08Competitive Ranking
Source: Darden i-Tracker – Top Box % Ranking
(“BIG DISCOUNTS”)
(“BIG DISCOUNTS”)
Atmosphere I Like
B & G 4
B & G 2
B & G 3
B & G 1
CD Destination 3
CD Destination 1
CD Destination 2
CD Polished 1
FY08
30
B & G 4
B & G 2
B & G 1
B & G 3
CD Destination 3
CD Destination 1
CD Destination 2
CD Polished 1
FY12
Two
One
Two
One
FY12 vs. FY08Competitive Ranking
(“BIG DISCOUNTS”)
(“BIG DISCOUNTS”)
Source: Darden i-Tracker – Top Box % Ranking
Value for Money
31
B & G 4
B & G 3
B & G 2
B & G 1
CD Destination 3
CD Polished 1
CD Destination 2
CD Destination 1
FY08
B & G 4
CD Destination 3
CD Polished 1
B & G 3
B & G 1
B & G 2
CD Destination 2
CD Destination1
FY12
One
Two
Four
Four
Five
One
Three
Four
Three
One
FY12 vs. FY08Competitive Ranking
Source: Darden i-Tracker – Top Box % Ranking
(“BIG DISCOUNTS”)
(“BIG DISCOUNTS”)
Future Visit Intent
32
B & G 4
B & G 3
B & G 1
B & G 2
CD Destination 3
CD Destination 1
CD Destination 2
CD Polished 1
FY08
B & G 4
B & G 3
B & G 2
B & G 1
CD Destination 3
CD Destination 1
CD Destination 2
CD Polished 1
FY12
Two
Two
Three
One
Three
Three
One
One
FY12 vs. FY08Competitive Ranking
Source: Darden i-Tracker – Top Box % Ranking
(“BIG DISCOUNTS”) (“BIG DISCOUNTS”)
Sustaining Great Brands
We have made significant progress strengthening overall brand perception over the last several years at all three large brands– Although we have seen some erosion from a high level on a few individual
attributes at Olive Garden
However… our most financially constrained guests do not feel we are “in the game” from an affordability perspective … which keeps them from coming as much as they’d like– Negatively impacting our Value perception and near term sales momentum at
all three large brands
And… we still have opportunity to improve the guest experiences we offer for more financially secure guests, Millennials and Multiculturals
33
Guest Experience Levers
34
Our Response
Further Strengthened Our Brand Portfolio
Broaden exposure to financially secure guests plus Millennial andGen X guests
Add important capabilities related to music, on-trend food development and running a great bar
Contemporize overall portfolio
35
Specialty Restaurant Group
Projected sales of $1.0 Billion in FY13
Growing 17% to 19% annually
Funding its own growth
36
Now an Even Stronger Growth Profile
Further Strengthening Our Organization
Winning Today– New structure … and new teams … to ensure we maintain a strong foundation at
each brand … execute with excellence against our current strategies and standards … and make important changes in our go-to-market approach
Winning Tomorrow– New structure … and new teams … to ensure we redefine the guest experiences
we offer in a coordinated fashion across the enterprise– Leading to multi-year growth initiatives to strengthen visit frequency of current
guests and capture new guests for new occasions
37
Key Objectives
Further Strengthen Our Organization
38
Large Brand Leadership Structure (RL, OG, LH)
President
EVPOperations
SVP Finance
SVPHR
VP Development
EVPMarketing
Further Strengthen Our Organization
39
EVP Operations(RL & OG – 7 SVPs)
(LH – 4 SVPs)
Old Structure
SVP Operations (Up to 13 Directors)
New Structure
Director of Operations (Up to 8 GMs)
General Manager (Leads Restaurant)
EVP Operations(RL & OG – 4 SVPs)
(LH – 2 SVPs)
SVP Operations (Winning Today and Tomorrow)
(3 to 5 MDs)
Managing Director(Winning Today)
(5 to 8 DOs)
Director of Operations (Winning Today)(Up to 8 GMs)
General Manager (Leads Restaurant)
Field Operations Organization (RL, OG, LH)
Further Strengthen Our Organization
40
General Manager
Old Structure
Culinary Manager
Service Manager
Sales/Hospitality Manager
General Manager
New Structure
Culinary Manager
Service Manager
Staffing/Training Manager
(Winning Today)
Full Time Hourly Shift Leaders(Winning Today)
In-Restaurant Operations Organization (RL, OG, LH)
Further Strengthen Our Organization
41
EVP Marketing
Old Structure
VP Consumer Insights
SVP Brand Marketing
SVP Culinary Beverage
EVP Marketing
New Structure
VP Consumer Insights
SVP Brand Foundation
(Winning Today)
SVP Brand Development
(Winning Tomorrow)
CorporateExecutive Chef(Culinary Innovation
for Today and Tomorrow)
Marketing Organization (RL, OG, LH)
Further Strengthen Our Organization
42
EVP’sBrand
Marketing
New Structure
SVP BusinessInsights
SVP Brand
Innovation
VP InteractiveEcosystem
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
_ _
_ _
Enterprise Marketing Organization (All Brands)
CMO
Adding Capability for the New Era
43
Brian FoyePresident,
Seasons 52
Harald HerrmannPresident,
Yard House
Craig CarlyleEVP Operations,
Yard House
Carlito JocsonExecutive Chef,
Yard House
Jim NuetziCorporate Exec. Chef
Olive Garden
Will SetliffChief Marketing Officer
Jose DuenasSVP, Brand Foundation
Olive Garden
John ConnellySVP Brand Foundation
LongHorn
Gopal KrishnanSVP, Brand Innovation
Jim TaylorSVP, Brand Dev.
Olive Garden
Sam MancusoSVP Brand Foundation
Red Lobster
Mike ChurchVP, Interactive Ecosystems
Chris ChangSVP, Technology
Strategy
Adding Capability for the New Era
20 years of Marketing experiencewith a retail focus
Joined Darden as EVP, Marketingfor Specialty Restaurant Group
Previously SVP Marketing, Target– Brand, Category and Storewide Marketing– Enterprise Strategy and Insights– Enterprise Innovation and Digital Marketing
44
Will SetliffChief Marketing Officer
Adding Capability for the New Era
26 years of restaurant industry experience
Previously CEO, Yard House before joining Darden
Worked in various capacities in a range of dining venues prior to helping launch the flagship Yard House inLong Beach, CA in 1996
45
Harald HerrmannPresident, Yard House
Adding Capability for the New Era
19 Years of IT & Strategy experience
Joined Darden as SVP, Technology Strategy and Innovation
Previously VP, Innovation & IT Strategy for Caesars Entertainment– Founded and led the innovation team
focused on developing new technologies across 50 casino properties worldwide
46
Chris ChangSVP, Technology Strategyand Innovation
Making Near Term Changes to Regain Momentum
47
Further Strengthen Guest Experience
Making Near Term Changes to Regain Momentum
48
Three Course Italian Dinner - $12.95
Elevate Emphasis on Affordability in Promotions
Making Near Term Changes to Regain Momentum
49
More Effective Advertising
Making Near Term Changes to Regain Momentum
50
Red LobsterBlack Friday Event
Olive GardenLighter Fare
Bahama BreezeLate Night Happy Hour Launch
More Aggressive Use of Digital and Social Media
More Fundamentally Evolve Our Guest Experiences
Identify and more quickly take advantage of key culinary trends as appropriate by brand
Prioritize culinary development against “platforms” that support multiple dishes and have the potential to drive step-change improvement in the breadth of our appeal
More consistently leverage our culinary expertise and resources across all the brands in the Darden portfolio
51
Redefine Our Food and Beverage Experience
Culinary Trends*
52
EMERGING PEAK DECLINE
Fresh Ingredients
Regional SourcingOrganic/Sustainable
Transparent PreparationCraft Anything
Healthful Kids’ Meals
New Cuts of Meat
Gluten-free cuisine
Half/Smaller Portions
High/LowRight PriceCustomizable
Share-ability / Tasting
Vegetable Main Dishes
Convenient for the Occasion
Allergen Sensitive
Value
Handheld Foods
To Go
Asian Inspiration
Latin Inspiration
Upscale Comfort Food
All You Can EatFood Trucks
SushiCupcakes
Panini
Barbecue
Soba Noodles
Buffet
Traditional French
*Culinary trends tend to fade and resurface in response to macro trends
Negronis
Chef-driven Cocktails
Low Alc Cocktails
Brandy
Beer Cocktails
Ice Clarity Southern Inspired Cocktails
Mezcal
Cosmos
Wellness
Culinary Trends*
53
Fresh Ingredients
Regional SourcingOrganic/Sustainable
Transparent PreparationCraft Anything
Healthful Kids’ Meals
New Cuts of Meat
Gluten-free cuisine
Half/Smaller Portions
High/LowRight PriceCustomizable
Share-ability / Tasting
Vegetable Main Dishes
Convenient for the Occasion
Allergen Sensitive
Value
Handheld Foods
To Go
Asian Inspiration
Latin Inspiration
Upscale Comfort Food
All You Can EatFood Trucks
SushiCupcakes
Panini
Barbecue
Soba Noodles
Buffet
Traditional French
*Culinary trends tend to fade and resurface in response to macro trends
Negronis
Chef-driven Cocktails
Low Alc Cocktails
Brandy
Beer Cocktails
Ice Clarity Southern Inspired Cocktails
Mezcal
Cosmos
Wellness
EMERGING PEAK DECLINE
Longhorn Steakhouse – Price/Value
Seasons 52 – Latin/Fresh/Handheld
Olive Garden – WellnessRed Lobster – Fresh
The Capital Grille – Customization /Value
Bahama Breeze – Latin/Shareable/Value
Trend-Inspired Culinary Innovation
54
Leveraging Scale and Expertise Across the Portfolio
Grilled Pork Veneto at Olive Gardenwas developed in a cross-conceptculinary “charette”
When one chef has an applicable concept,they share their learning to inspire others– Tacos began in Seasons 52 and Bahama Breeze,
then moved to Red Lobster
Improved bread recipes have moved from The Capital Grille and Seasons 52 to our larger concepts
55
More Fundamentally Evolve Our Guest Experiences
56
Act More Like Restaurateurs– Less about systems and processes– More about passionate guest engagement– Leading to increased guest loyalty
Redefine Our Service Experience
More Fundamentally Evolve Our Guest Experiences
57
Tableside Ordering and Settlement
Web Ahead Seating Targeting Marketing
Digital Guest Engagement
More Fundamentally Evolve Our Guest Experiences
58
Guest Convenience Guest Segmentation
More Fundamentally Evolve Our Guest Experiences
59
Remodels
More Fundamental Steps to Support Our Guest Experiences
60
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000
10,000,000
0
50
100
150
200
250
300
350
400
450
500
2000
2001
2002
2003
2004
2005
2006
2007
2008
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2015
2016
2017
2018
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2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Popu
latio
n
Live
Wei
ght (
Mill
ions
of L
bs)
Historic World Supply Projected World Supply World Popluation
Global Demand for Lobster Projected to Exceed Supply
More Fundamental Steps to Support Our Guest Experiences
61
Lobster Aquaculture
Create the world’s first integrated lobster aquaculture park
Working in close partnership with the Malaysian government
Preserve the ability of Red Lobster to offer everyday price accessibility on a brand-defining product
We Are Investing in Needed Change
62
Direct P&L InvestmentsIT Platform, Organization Structure, Growth Initiatives, Lobster Aquaculture
0
10
20
30
40
50
60
70
80
90
100
FY10 FY11 FY12 FY13Direct Investment Tempered Check Growth
$15-20$8-12
$30-35
$70-75$
in M
illio
ns
Will be another $25-30 million of direct P&L investment in FY14 … as well as another $25-30 million of investment via tempered check growth
Making the Changes Required to Win in a New Era
Taking decisive action to regain momentum and position Dardento deliver competitively superior value creation going forward
Focused on important changes in several key areas including:– Organization capability– Guest experience affordability– Guest experience redefinition for the New Era
Making the investments required to implement these changes, protect the broad appeal of our brands and sustainably growsame-restaurant traffic
63
Darden’s Technology StrategyOur Technology Journey
Chris ChangSVP | Technology Strategy
DARDEN SECURITY ANALYSTS MEETING | FEBRUARY 2013
Discussion Topics
• A Rapidly Changing Technology Environment
• Our Response and Vision
• Current Status of Our Technology Strategy Program
• Our Roadmap
2
A Rapidly Changing Technology Environment
3
Technology is rapidly changing & evolving…
3 YEARS AGO, NONE OF THESE EXISTED
A Rapidly Changing Technology Environment
4
…the vendor landscape is becoming increasingly complicated(and below is just the social media space)…
SOURC
E: Lum
aPa
rtne
rs
A Rapidly Changing Technology Environment
5
…and consumers are becoming more & more digitally reliant.
FEBRUARY 2010 FEBRUARY 2013
Facebook Users350,000,000 1,000,000,000
Tweets Per Day50,000,000 500,000,000+
US Text Messages Per Day5.1 billion 6.0 billion
Apps in App Store120,000 750,000
Yelp Monthly Visitors25,000,000 90,000,000+
Videos Viewed Per Month30 billion 181 billion
Emails Sent Per Day250 billion 325 billion
A Rapidly Changing Technology Environment
6
As consumers & technologies evolve, we have both an obligation and an enormous opportunity to change how consumers interact with our brands:
SMS Wait List
Tableside Ordering
Websites Vary Prices, DealsBased on Users' Information December 24, 2012
It was the same Swingline stapler, on thesame staples.com website. But forKim Wamble,
Targeted eCommerce
MobilePayments
Guest of the Future
Source: Henriksent
Technology Vision & Strategy
• Connecting guests and employeesto Darden in their digital world
• Deliver new brand relevant servicesand employee services anytime,anywhere on any device
• Manage guest relationships withinand across Darden brands
• Establish a trusted andextensible platform
7
Our vision is focused on building relationships & engaging with consumers & employees digitally…
Build relationships and loyalty by digitally engaging with guests and employees ontheir terms and leveraging insights to drive business performance
MARKET SHARE
Sales Building
Agile in Thought
and Action
Robust, Flexible & Scalable
People
Our Response to a Rapidly ChangingTechnology Environment
8
Given that it is impossible to predict how technology will evolve…
Source: SteamFan
…To This
Our Response to a Rapidly ChangingTechnology Environment
9
…our strategy is to build a robust platform that allows usto respond to changes now & in the future
Next App Here
Websites To Go Web Ahead
Digital Menus Loyalty
From This…
Our Response to a Rapidly ChangingTechnology Environment
10
We’ve made a few key strategic choices that inform our approach:
Guest DataWe will own & manage guest data as a strategic asset
Scalable PlatformWe will build a scalable platform that can support & scale across our portfolio of brands
IntegrationWe will integrate our platform within & across our restaurants to enable a seamless, cross-channel experience
Building On a Strong Foundation & Unique Strengths• Owned Restaurants • Strong IT Platform • Centralized Team• Multi-Brands
Current Status of Technology Strategy Program
11
This journey that we’re on is similar to that of building a house
Get Some Help
Find experts that can help you bring your vision to life
Define Wants
Write down on paper what you want your house to contain
Create Blueprint
Draft & architect the house blueprint & compliant design
Cost it Out
Get estimates for what house will cost to build & phasing for construction
Build the House
Begin constructing the house…starting with the foundation!
Inspect the House
Once it’s built, hire inspectors to make sure it’s A-OK
Define the Vision
Write down your dream house wish list & rough priorities
Move into the House
Move into the dream house…and over time enhance / renovate
Current Status of Technology Strategy Program
12
We our moving into the design phase of our program
Define Wants
REQUIREMENTS PHASE
Create Blueprint
DESIGN PHASEFY13
Cost it Out
IMPL PLANNINGFY13
Build the House
DEVELOPMENTFY13-FY14
Inspect the House
TESTING & QAFY14
Move into the House
GO LIVEFY14
Define the Vision
STRATEGY & VISION
Get Some Help
FIND PARTNERS
Technology Strategy Program: 3 Phases
13
Below are our phases of our program
PHASE 1Building Our
Foundation & Getting in the Game
PHASE 2Selectively
Innovating & Leading
PHASE 3Creating Sustainable
Competitive Advantage
Technology Strategy Program Journey
14
We will evolve in key areas such as the ones below:
AnalyticsSuperior Guest Data &
Analytics Insight
Insight into guest behavior on avisit-by-visit,
check-by-check basis
Enhanced & enriched views of guest activity in
our restaurants
Cross-brand insight into guests
across entire portfolio
Digital PlatformRobust Guest-Facing Technology Platform
Upgrading our guests’ digital experience on our
brand sites
Adding new applications on our sites that deliver guest value
Delivering cross-brand digital
experiences to our guests
Guest Relationships
Technology-Enabled Guest Relationship Management
Capturing guest opt-ins across all channels
Learning from our guests and getting smarter about their
preferences
Enabling cross-brand guest relationship
management
FROM TO
What Does Success Look Like?
15
We believe this journey will allow us to achieve the following:
• Rich digital experiences anytime, anywhere, on any device
• Access to new experiences & opportunities with our brands
For OurGuests
• Tools, data, and insight we need to better anticipate guest needs across our portfolio of brands
• Both new & more loyal guests who visit our brands more frequently
ForDarden
Financial Implicationsof Our Strategic Choices
Brad RichmondCFO
DARDEN SECURITY ANALYSTS MEETING | FEBRUARY 2013
Agenda
1
FY13• Where Our Business is Today
Horizon• Our Near-Term Business Model
FY14• Preliminary Fiscal 2014 Variances
to the Near-Term Model
Agenda
2
FY13• Where Our Business is Today
Horizon• Our Near-Term Business Model
FY14• Preliminary Fiscal 2014 Variances
to the Near-Term Model
What Fiscal 2013 Looks Like...
Total Annual Sales ≈ $8.5 billion
Operating Cash Flow ≈ $950 million
EBIT Margin ≈ 7.8%*
Fully Diluted EPS $3.06 to $3.22*
3* Including Yard House acquisition costs and purchase accounting adjustments
FY13
Yard House Acquisition Cost and Purchase Accounting Impacts:• Reduce EBIT Margin by approximately (30) bps• Reduce EPS by approximately ($0.09)
Unit Growth is Driving Sales Growth
4
Large Brands 85 4.5%
Specialty Restaurant Group* 15 13.6%
Total* 100 5.0%
* Excludes Yard House
FY13
New UnitsProjected
% GrowthProjected
While Same-Restaurant Results are Soft... Two Year Results are Solid Except at Olive Garden
5
Same-Restaurant SalesProjected
Current YearTwo-Year
Cumulative
Olive Garden -2% to -3% -3% to -4%
Red Lobster -2% to -3% +1.5% to +2.5%
LongHorn ≈ +1% ≈ +6%
Blended Large Brands -1.5% to -2.5% Flat
Specialty Restaurant Group* +1.5% to +2.5% ≈ +6.5%
* Excludes Yard House and Eddie V’s
FY13
Total Sales Growth is Also Supportedby the Eddie V’s and Yard House Acquisitions
6
Same-Restaurant Sales
Darden Blended -1.4% ≈ -4.5%* -0.5% to +1.5% -1.5% to -2.5%
Olive Garden -1.4% ≈ -4.0%
Red Lobster -2.6% ≈ -7.0%
LongHorn +1.5% ≈ -1.5%
Unit/Operating Weeks Growth +4.9% +5.2% +5.3% +5.0%
Yard House & EV’s Acquisitions +2.8% +4.1% +4.7% +3.6%
Other -0.4% +0.1% 0.0% -0.2%
Total Sales Growth +5.9% ≈ +4.5% +9.5% to +11.5% +6% to +7%
1st Half Q3 Full YearActual ProjectedProjected
Q4
* Year over Year 3rd Quarter Weather Impact estimated at -0.9%
FY13
We Have a Strong, Balanced Portfolio
7
Total Sales($B) Projected
% GrowthProjected
Olive Garden $3.7 2%
Red Lobster 2.6 -2%
LongHorn 1.2 10%
Specialty Restaurant Group 1.0 60%*
Darden $8.5 6% to 7%*
* Includes Yard House; excluding the Yard House acquisition, projected growth is 18% for the Specialty Restaurant Group and 3% to 4% for Darden overall.
FY13
Olive Garden 17+% $4.6Red Lobster 14 - 17% $3.8LongHorn 14 - 17% $3.0
The Capital Grille 17+% $6.8Seasons 52 17+% $6.3Yard House** 17+% $8.4Bahama Breeze 14 - 17% $5.6Eddie V’s 14 - 17% $6.2
BrandRestaurant Return
on Sales %*
AverageSales per Unit
($ Millions)
Despite Recent Challenges... Sales and ReturnLevels of Our Brands Remain Industry Leading...
8
* Includes marketing and depreciation expense and a credit that represents the implied interest in rent payment for leased units. Excludes rent averaging expense and direct new unit opening costs.
** Yard House presented on a Pro Forma basis
Trailing Four Quarters Ending Q2 FY13
FY13
Darden EBIT 8.8%
General & Administrative Expenses* 5.5%
Implied Lease Interest & Rent Averaging 1.7%
New Unit Direct Opening Expense 0.4%
Restaurant Earnings 16.4%
*Selling Expenses (Included as an expense in Restaurant Earnings) 4.6%
Roadmap From Earnings Before Interestand Taxes (EBIT) to Restaurant Earnings
9
Trailing Four Quarters Ending Q2 FY13
FY13
Our Portfolio Generates Substantialand Growing Operating Cash Flow
10
$0.00
$0.25
$0.50
$0.75
$1.00
03 04 05 06 07 08 09 10 11 12 13 Proj
$ Billion
Continuing Operations
Equates to Pre-Tax Cash Flow of ≈$535,000 per restaurant
FY13
Our Portfolio Generates Substantialand Growing Operating Cash Flow
11
$0.00
$0.25
$0.50
$0.75
$1.00
03 04 05 06 07 08 09 10 11 12 13 Proj
Adjusting for Significant Variances
Fiscal 2011 through Fiscal 2013 Operating Cash Flows reduced by Working Capital Usage related to Supply Chain Transformation and Debt Hedge Settlements ($22MM, $104MM, and $55MM, respectively)
FY13
Continuing Operations
$ Billion
Composition and Use of Operating Cash Flow
FY11 FY12 FY13Projected
Earnings $479 $477 $402 to $425Depreciation and Amortization 317 349 400Working Capital 12 (191) 90Other Cash Items 87 128 50
Operating Cash Flow $895 $762 $945 to $965
Capital Expenditures (548) (639) ($700 to $725)
Add-Back Acquisition Cost Impact - 1 10
Available for Dividends & Share Repurchase $347 $124 $230 to $275
12
($ in Millions)
Continuing Operations
FY13
We Deploy Our Capital to Protect AND GrowOperating Cash Flow...
13
Capital Expenditures $548 $639 $700 to $725New Restaurants 274 341 395
Maintenance Capital 135 146 148Remodeling 97 94 120 Relocations / Rebuilds 14 20 15
Technology 13 11 20All Other 15 27 17
FY12FY11 FY13Projected
($ in Millions)
FY13
Recession RecoveryRARE Acquisition
Pre-Acquisition$’s in Millions
YH Acquisition
$0
$250
$500
$750
$1,000
FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13
Dividends Share Repurchase Operating Cash Flow
Dividendsper Share $0.08 $0.08 $0.08 $0.40 $0.46 $0.72 $0.80 $1.00 $1.28 $1.72 $2.00
Share RepurchaseDollars perOutstanding Share
$1.25 $1.44 $1.99 $2.90 $2.59 $1.13 $1.05 $0.61 $2.82 $2.88 $0.40
Proj
Acquisition Debt Reduction
... And Are Clearly Committed to Returning Capital to Shareholders
14
Recession RecoveryRARE Acquisition
Pre-Acquisition$’s in Millions
YH Acquisition
$0
$250
$500
$750
$1,000
FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13
Dividends Share Repurchase Operating Cash Flow
Dividendsper Share $0.08 $0.08 $0.08 $0.40 $0.46 $0.72 $0.80 $1.00 $1.28 $1.72 $2.00
Share RepurchaseDollars perOutstanding Share
$1.25 $1.44 $1.99 $2.90 $2.59 $1.13 $1.05 $0.61 $2.82 $2.88 $0.40
Proj
Acquisition Debt Reduction
... And Are Clearly Committed to Returning Capital to Shareholders
15
$3.9 Billion Returned to Shareholders over 10 years
Even With Current Sales Challenges...New Unit Growth Remains Value Creating
16
Olive Garden
LongHorn
Seasons 52
Capital Grille
Bahama Breeze
Red Lobster(Relocations & Rebuilds)
140%
110%
145%
115%
135%
100%
Average NewUnit Sales
$4.2
$3.1
$6.3
$6.8
$5.5
$4.0
79
66
12
7
5
7
# New Units
150%+
150%
150%+
100%
100%
115%
Earnings as % of HurdlePrior Year Current Year
Fiscal 2011, 2012 and 2013 openings; cumulative performance through November Fiscal 2013
FY13
Experiencing Some EBIT Margin Contraction...Due to Sales De-Leveraging and Acquisition Costs
17
FY12 EBIT (Q1/Q2) 7.1%Sales De-Leveraging -50 bpsYard House Acquisition Costs & Lower % Margins -40 bpsChange in Fair Value of Benefit Programs -30 bps
(Fully offset in lower income tax rate for the year)
Incremental Selling Expenses -30 bpsOperating Productivity & Transformational Cost Initiatives +70 bps
FY13 EBIT (Q1/Q2) 6.3%
FY13
Current Fiscal 2013 Earnings Outlook
18
Earnings After Tax $145 $132 to $135 $125 to $144 $402 to $425+/- Last Year -10% -20% to -18% -17% to -5% -16% to -11%
EPS (Diluted net) $1.11 $1.00 to $1.02 $0.95 to $1.09 $3.06 to $3.22+/- Last Year -7% -20% to -18% -17% to -5% -15% to -10%
EPS (Excl Acq Costs) $1.17 $1.02 to $1.04 $0.96 to $1.10 $3.15 to $3.31+/- Last Year -2% -18% to -17% -16% to -4% -12% to -8%
Diluted Shares 131.4 131.5 131.6 131.5Effective Tax Rate 23.6% ≈ 23.0% ≈ 22.5% ≈ 23.0%Share Repurchase $52 $0 $0 $52
1st Half Q3 Q4 Full YearActual ProjectedProjected
($ and Shares in Millions, Except EPS)FY13
Total Adjusted Capital ($ Billions)
Funded Debt ($ Billions)
Lease Debt ($ Billions)
Adjusted Debt to Adj Capital*
Adjusted Debt to EBITDAR**
FY11
$4.38
$1.65
$0.79
56%
2.1x
Target 55% to 65%
Target 2.0x to 2.5x
FY12
$4.83
$2.13
$0.85
62%
2.4x
FY13Projected
$5.87
$2.80
$1.03
≈65%
≈ 3.1x
Current Performance is Affecting Key Debt Metrics
19*Operating lease expense capitalized at 6.25x annual rents **From Continuing Operations
FY13
Given where debt metrics are and the need for focus at Olive Garden...we will reduce Capital Spending going forward
Capital Deployment Priorities
Ensure Base Business Vitality– Ongoing facilities maintenance– Remodeling– Other initiatives to drive same-restaurant traffic growth
Protect Our Financial Flexibility– Maintain an investment grade credit profile to ensure efficient access to capital
Maintain Solid Dividend Growth– Consistently grow dividends annually and maintain a 50% payout ratio
on a forward looking basis over the long-term
Invest in Value Creating New Unit Growth– To capture the significant opportunity within our current portfolio
Return Excess Capital to Shareholders through Share Repurchase
20
FY13
Agenda
21
FY13• Where Our Business is Today
Horizon• Our Near-Term Business Model
FY14• Preliminary Fiscal 2014 Variances
to the Near-Term Model
Near-Term Large Brand Sales Growth ReflectsCurrent Trends and Our Strategic Choices
Same Restaurant Sales +1% to +2% annually– +1% Check growth as modest pricing partially offsets downward
pressure from menu mix due to core menu, merchandising and promotional choices
– Traffic growth between 0% and +1%
Unit Growth +2.5% to +3.0% annually (50 to 60 units)– LongHorn 35-40– Olive Garden ≈15– Red Lobster 0-3
Annual Total Sales Growth of +3.5% to +4.5%... or $275 million to $350 million
22
Olive Garden, Red Lobster, LongHorn
Horizon
Near-Term Specialty Restaurant Group SalesGrowth is More Robust
Same Restaurant Sales +2% to +4% annually
Unit Growth +15% annually (25 to 30 units)– Seasons 52 7-10– Yard House 7-10– Capital Grille 3-6– Bahama Breeze & Eddie V’s 5-8
Annual Total Sales Growth of +17% to +19%... or $175 million to $225 million
23
Capital Grille, Yard House, Seasons 52, Bahama Breeze, Eddie V’s
Horizon
High volume, high margin businesses that currentlyhave significant growth opportunities
Near-Term Overall Sales Growth is Expectedto be 5% to 6%
24
Large Brands +3.5% to +4.5% (60% to 65% of Total Growth)
SRG Brands +17% to +19% (35% to 40% of Total Growth)
Combined Growth +5% to +6%
Horizon
Specialty Restaurant Group’s Contribution to Darden’s Overall Sales Growth is Increasingly Significant
In two years, SRG brands will deliver 40% of total Dardensales growth and represent ≈ 15% of total Darden sales
Two years ago, SRG brands delivered 21% of total Dardensales growth and represented 7% of total Darden sales
25
7%12% 15%
0%
10%
20%
30%
40%
50%
FY11 FY13 FY15 Projection
SRG % of Total Darden Sales
21%
35% 40%
0%
10%
20%
30%
40%
50%
FY11 FY13 FY15 Projection
SRG % of Total Darden Sales Growth
Horizon
Yard House Integration is On Track
Tracking to annual run rate cost synergies of $12 to $15 million... which is 3% to 4% of sales on 40 restaurants
– Expect to achieve 60% to 70% of run rate cost synergiesby end of Fiscal 2014
– Supply Chain & Support Services account for more than 60% of savings
Pipeline of openings on schedule– 4 post acquisition openings in Fiscal 2013– 8 identified locations for Fiscal 2014
Adding 3% to Darden sales growth in Fiscal 2013 and $0.04 to $0.05to earnings per share... before acquisition related impacts of $0.09
Significant, highly value creating growth potential
26
Horizon
Near-Term Capital Spending is Expectedto be Appreciably Lower
27
Capital Expenditures $700 to $725 $600 to $650New Restaurants 395 340 to 360
Maintenance Capital 148 140 to 150Remodeling 120 90 to 95Relocation / Rebuild 15 15 to 20
Technology 20 15 to 25All Other 17 10 to 20
FY14Outlook
FY13 Projected
($ in Millions)
Horizon
Near-Term Continues to Include SomeTransformational Cost Savings
28
FY11 FY12 FY13 Ultimate RunRate
$51
$170 to $195
$113 $120 to $130
Total Annual Savings
($ in Millions)
Horizon
Near-Term Annual Outlook is for ≈ $20 million of additional savings each year
Supply Chain Automation $21 $36 $41 to $44 $60 to $65Facilities Centralization $4 $8 $9 to $10 $15 to $20Sustainable Operating Practices $18 $22 $24 to $26 $25 to $30Labor Optimization $8 $46 $46 to $50 $70 to $80 Revised
Near-Term Includes ExpandingInternational Franchising
Started in Middle East and Latin America based on the success of other American full-service brands in those regions
Four agreements with...– Americana Group to develop 60 restaurants in the Middle East
• 5 units open, 3 more to open by end of Fiscal 2013– CMR to develop 37 restaurants in Mexico
• 2 units open, 1 more to open by end of Fiscal 2013– Restaurant Operators Inc. to develop 14 additional restaurants in
Puerto Rico– International Meal Company to develop 57 restaurants in Brazil,
Colombia, Panama and the Dominican Republic
29
Horizon
Near-Term Includes ExpandingConsumer Products Business
Five products at Sam’s Clubs: – Olive Garden: Italian Salad Dressing, Seasoned Croutons,
Extra-Virgin Olive Oil, Four Italian Cheese Blend– Red Lobster: Cheddar Bay Biscuit Mix
Annualized gross retail sales are above $40 millionand exceeding expectations
Best-sellers are Salad Dressingand Cheddar Bay Biscuit Mix
Salad Dressing will expandto 3,200+ Walmart stores in March
30
Horizon
Near-Term Includes Synergy Restaurants
Synergy Restaurants have separate Olive Garden andRed Lobster dining rooms but shared kitchens,restrooms and management teams
Five open, with another planned for the 4th quarter
Exceeding sales hurdle and achieving earnings hurdle
Decision whether to further expand will be made in Fiscal 2015
31
Horizon
More Modest EBIT Margin Expansion Near-TermGiven Our Strategic Choices
32
EBIT Margin expands +10 to +30 bps a year, driven by...New Unit Growth Leverage +15 to +20 bps
Effect of Same-Restaurant Sales Growththat Reflects Traffic Growthbut Tempered Check Growth -20 to -30 bps
Transformational Cost Savings +25 to +30 bps
Additional Investments for Future Success -10 to -15 bps
International Franchising & Consumer Products +5 to +10 bps
Horizon
Combination of 5% to 6% Sales Growthand Modest EBIT Margin Expansion SupportsStrong Operating Cash Flow
33
Annual Operating Cash Flow expands +$40 to +$60 milliona year, driven by...
New Unit Growth of 4% +$40 to +$50 million
Effect of Same-Restaurant Sales Growththat Reflects Traffic Growthbut Tempered Check Growth Flat to -$10 million
Transformational Cost Savings +$10 to +$20 million
Additional Investments for Future Success -$5 to -$10 million
International Franchising & Consumer Products +$5 to +$10 million
Horizon
Our Near-Term Model
Total sales growth of +5% to +6%... – +1% to +2% same-restaurant sales growth– +4% new unit sales growth– With increasing contribution from the Specialty Restaurant Group
Driving +10 to +30 bps of EBIT margin expansion...
And diluted net EPS growth of +5% to +10%...
As well as +$40 to +$60 million of incremental operating cash flow
Supporting a competitive total shareholder return– That also reflects consistent annual dividend growth
34
Horizon
In Fiscal 2014... However...There are Important Adverse Variances to Our Near-Term Model
Our Near-Term Model
Total sales growth of +5% to +6%... – +1% to +2% same-restaurant sales growth– +4% new unit sales growth– With increasing contribution from the Specialty Restaurant Group
Driving +10 to +30 bps of EBIT margin expansion...
And diluted net EPS growth of +5% to +10%...
As well as +$40 to +$60 million of incremental operating cash flow
Supporting a competitive total shareholder return– That also reflects consistent annual dividend growth
35
Horizon
Agenda
36
FY13• Where Our Business is Today
Horizon• Our Near-Term Business Model
FY14• Preliminary Fiscal 2014 Variances
to the Near-Term Model
Sales Growth is Somewhat Higher ThanOur Near-Term Model... Due Largely toYard House Acquisition
37
Same-Restaurant Sales +1.5% to +2.5%Blended Large Brands +1.0% to +2.0%
Blended SRG +2.5% to +3.5%
Unit/Operating Weeks Growth +3.5% to +4.0%
Total Sales Growth (Business Model) +5% to +6%
Yard House Acquisition +1.0%
Total Sales Growth (Fiscal 2014) +6% to +7%
Full YearProjected
FY14
Expect Normalized Cost Pressureand Modest Pricing / Check Growth
38
Overall Inflation ($4) 0.1% ($123) 1.9% ($243) 3.6% ($126) 1.8% 2.0% - 2.5%Food & Beverage $71 -3.3% ($42) 1.9% ($142) 6.1% ($15) 0.6% 1.5% - 2.5%
Utilities $17 -6.3% $0 0.0% $2 -1.0% $1 -0.8% 2.0% - 4.0%
All Other Costs ($92) 2.4% ($81) 2.0% ($103) 2.4% ($112) 2.6% 2.0% - 3.0%
Cost Savings Initiatives* $77 $43 $73 $28
Net Inflation $73 -1.2% ($80) 1.3% ($170) 2.5% ($98) 1.4% 1.5% - 2.0%
Pricing / Check Growth 1.6% 1.8% 1.2% 0.6% ≈1%
FY10 FY11 FY12FY13
Projected
$ $ $ $ %%%%
FY14Outlook
%
≈ 0.50%
($ in Millions)
* Excludes acquisition cost synergies
FY14
Investments for Future Success are at Levels Anticipated in Our Near-Term Model
39
FY10 FY11 FY12 FY13 FY14
P&L ExpenseOperations Organization Structure 4 Other Growth Initiatives 5 5 IT Platform 2 7 13 Lobster Aquaculture 2 3 3 9 10 Total $2 $3 $5 $25 $28
Other Cash OutflowsIT Platform 2 27 50 Lobster Aquaculture 37 2 Total $2 $64 $52
($ in Millions)FY14
EBIT Margin Dynamics for Fiscal 2014 Before Important Variances
40
EBIT
Mar
gin
Gro
wth
Same-Rest Guest Count
Growth
New Rest Growth
Cost Inflation Net of Pricing /
Check Growth
Cost Savings
Near-Term Model EBIT
MarginGrowth
GrowthInvestments for Future Success
+30 to +40 bps
+15 to +20 bps
-50 to -60 bps
+25 to +30 bps
-10 to -15 bps
0%Int’l
Franchising & Consumer
Products
+5 to +10 bps +10 bps
to+30 bps
FY14
Fiscal 2014 Variances to Our Near-TermBusiness Model
Resetting Incentives to Target ($0.30) to ($0.34)
Healthcare Transition Costs ($0.05) to ($0.06)(January through May)
Lower Yard House Acquisition Costs +$0.08($0.09 in FY13 vs $0.01 in FY14)
41
Effect onEarnings Per Share
FY14
EBIT Margin Dynamics Including the Variances for Fiscal 2014
42
Near-Term Model EBIT
Margin Growth
Lower Yard
House AcqCosts
Resetting Incentives to Target
Healthcare Transition
Costs
FY14 Expected
EBIT Margin
EBIT
Mar
gin
Gro
wth
0%
+15 to +25 bps
-75 to -85 bps
-5 to -15 bps
-40 bpsto
-60 bps
+10 bpsto
+30 bps
FY14
EPS Dynamics for Fiscal 2014Before the Variances
43
+5% to +6%
+6% to +7% -7% to -8%
+2% to +3% -1% to -2%
Earn
ings
Per
Sha
re G
row
th
0%
Same-Rest Guest Count
Growth
New Rest Growth
Cost Inflation Net of Pricing /
Check Growth
Cost Savings
Near-Term ModelEPS
Growth
GrowthInvestments for Future Success
Int’l Franchising & Consumer
Products
+1% to +1.5% +5%
to+10%
FY14
EPS Dynamics for Fiscal 2014Including the Variances
44
Near-Term ModelEPS
Growth
Lower Yard
House AcqCosts
Resetting Incentives to
Target
Healthcare Transition
Costs
FY14 Expected
EPS Growth
+2.5% -9.5% to -10.5%
-1% to -2%Earn
ings
Per
Sha
re G
row
th
0%+3%to
-3%
+5%to
+10%
FY14
In Summary...
While Sales Pressure Persists... Especially at Large Nationally Advertised Brands... Margins and Cash Flows Are Resilient
Tempering Average Check and New Unit Growth... And Investing Behind Other Strategic Choices... Still Leaves Us with a Solid Near-Term Business Model
Even with a Solid Near-Term Model and Lower Yard House Acquisition Costs... Incentive Resets and Healthcare Transition Costs Mean Lower EBIT Margins and Flat Earnings
45
Strategic Choices We Are Making to Strengthen How We Go to Market Today... and Our Guest Experiences for the Future... Are the Right Decisions for Our Business
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