E A R N I N G S C A L L F ISCAL 2017: Q4 R ESULTS J UNE 27, 2017
D ISCLAIMER /N ON -G AAP I NFORMATION IMPORTANT NOTICE The following slides are part of a presentation by Darden Restaurants, Inc. (the "Company") and are intended to be viewed as part of that presentation (the "Presentation"). No representation is made that the Presentation is complete. Forward-looking statements in this communication regarding our expected earnings performance and all other statements that are not historical facts, including without limitation statements concerning our future economic performance and expenses, 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 first 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. These risks and uncertainties include our ability to successfully integrate Cheddar’s Scratch Kitchen operations into our business, technology failures including failure to maintain a secure cyber network, 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, labor and insurance costs, failure to execute a business continuity plan following a disaster, health concerns including food-related pandemics or virus outbreaks, intense competition, failure to drive profitable sales growth, our plans to expand our smaller brands Bahama Breeze, Seasons 52 and Eddie V's, a lack of availability of suitable locations for new restaurants, higher-than-anticipated costs to open, close, relocate or remodel restaurants, a failure to execute innovative marketing tactics, 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 and services, 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 interest rates, disruptions in the financial markets, risks of doing business with franchisees and vendors in foreign markets, failure to protect our intellectual property, impairment in the carrying value of our goodwill or other intangible assets, failure of our internal controls over financial reporting, an inability or failure to manage the accelerated impact of social media and other factors and uncertainties discussed from time to time in reports filed by Darden with the Securities and Exchange Commission. The information in this communication includes financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (“GAAP”), such as adjusted net earnings per diluted share from continuing operations. The Company’s management uses these non- GAAP measures in its analysis of the Company’s performance. The Company believes that the presentation of certain non-GAAP measures provides useful supplemental information that is essential to a proper understanding of the operating results of the Company’s businesses. These non -GAAP disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Reconciliations of these non-GAAP measures to the most comparable GAAP measures are include under “Additional Information” in this presentation. 1 2
F ISCAL F OURTH Q UARTER H IGHLIGHTS D ARDEN S ALES ($ BN ) S AME -R ESTAURANT S ALES G ROWTH 1 3.3% 1.7% $1.93 $1.88 $1.85 $1.79 $1.69 $1.71 $1.64 $1.61 1.3% 0.9% FY16 FY17 FY16 FY17 FY16 FY17 FY16 FY17 Q1 Q2 Q3 Q4 Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 D ARDEN A DJUSTED EPS 2 $1.32 $1.21 $1.18 $1.10 $0.88 $0.68 $0.64 $0.54 FY16 FY17 FY16 FY17 FY16 FY17 FY16 FY17 Q2 Q1 Q3 Q4 1 Excludes Cheddar’s Scratch Kitchen 2 2 EPS values, except FY17 Q1, Q2 & Q3, are adjusted for special items. A reconciliation of reported to adjusted numbers can be found in the additional information section of this presentation. 3
F ISCAL F OURTH Q UARTER H IGHLIGHTS 4.4 % 3.5 % A CQUISITION C OMPLETED S AME -R ESTAURANT S ALES S AME -R ESTAURANT S ALES G ROWTH A PRIL 24, 2017 GROWTH + 590 BPS + 500 BPS 1.3 % S AME -R ESTAURANT S ALES S AME -R ESTAURANT S ALES S AME -R ESTAURANT S ALES I NDUSTRY O UTPERFORMANCE 1 I NDUSTRY O UTPERFORMANCE 1 G ROWTH 2 1 Industry excluding Darden brands. 2 Five weeks ending May 28, 2017. 3 4
F I N A N C I A L D I S C U S S I O N
F ISCAL F OURTH Q UARTER H IGHLIGHTS 3.3 % $ 1.18 8.1 % S AME -R ESTAURANT S ALES A DJUSTED D ILUTED EPS FROM T OTAL S ALES G ROWTH G ROWTH 1 C ONTINUING O PERATIONS 2 7.3 % ~$ 70 M ILLION ~$ 15 M ILLION A DJUSTED D ILUTED EPS G ROWTH D IVIDENDS P AID S HARE R EPURCHASES VS L AST Y EAR 1 1 Excludes Cheddar’s Scratch Kitchen 2 EPS values adjusted for special items. A reconciliation of reported to adjusted numbers can be found in the additional information section of this presentation. 5 6
M ARGIN A NALYSIS As Reported As Adjusted Q4 2017 Q4 2017 vs. Q4 2016 (bps) Q4 2017 ($ millions) ($ millions) Favorable/(Unfavorable) % of Sales Sales $1,934.6 $1,934.6 Food & Beverage $557.5 $557.5 28.8% 10 Restaurant Labor $603.1 $603.1 31.2% (10) Restaurant Expenses $335.8 $335.8 17.4% (20) Marketing $64.3 $64.3 3.3% 20 Restaurant-Level EBITDA $373.9 $373.9 19.3% 10 G&A $133.3 $97.9 5.1% (10) Depreciation & Amortization $70.4 $70.4 3.6% 10 Impairments - - 0.0 % 10 EBIT $170.2 $205.6 10.6% 10 Interest Expense $11.5 $11.5 0.6% (10) EBT $158.7 $194.1 10.0% 10 Income Tax Expense $33.3 $45.3 2.3% (30) 21.0% Note: Effective Tax Rate 23.3% EAT $125.4 $148.8 7.7% (20) Note: Continuing operations, values may not foot due to rounding. A reconciliation of reported to adjusted numbers can be found in the additional information section of this presentation. 6 7
FY17 Q4 S EGMENT P ERFORMANCE Segment Sales ($ millions) Fine Dining Other $1,027 $332 $982 $437 $264 $413 $139 $132 FY16 Q4 FY17 Q4 FY16 Q4 FY17 Q4 FY16 Q4 FY17 Q4 FY16 Q4 FY17 Q4 Segment Profit Margin 1 Fine Dining Other 20.4% 20.1% 19.9% 19.3% 19.1% 19.0% 18.9% 17.4% FY16 Q4 FY17 Q4 FY16 Q4 FY17 Q4 FY16 Q4 FY17 Q4 FY16 Q4 FY17 Q4 1 Segment profit margin calculated as (sales less costs of food & beverage, restaurant labor, restaurant expenses and marketing expenses) / sales. 7 8
F ISCAL 2017 A NNUAL H IGHLIGHTS 1.8 % $ 4.02 3.4 % S AME -R ESTAURANT S ALES A DJUSTED D ILUTED EPS FROM T OTAL S ALES G ROWTH G ROWTH 1 C ONTINUING O PERATIONS 2 13.9 % ~$ 230 MILLION ~$ 280 MILLION A DJUSTED D ILUTED EPS G ROWTH S HARE R EPURCHASES D IVIDENDS P AID VS L AST Y EAR 2 1 Excludes Cheddar’s Scratch Kitchen 2 EPS values adjusted for special items. A reconciliation of reported to adjusted numbers can be found in the additional information section of this presentation. 8 9
O UTPERFORMS C ASUAL D INING ON M OST M EASURES Food & Beverage Rank: 1 st Gap: +7 Intent to Return Rank: 1 st Gap: +9 Service Value Rank: 5 th Rank: 1 st Gap: +2 Gap: +9 Intent to Recommend Rank: 1 st Atmosphere Gap: +11 Rank: 1 st Gap: +6 Source: Technomic; Gap is Cheddar’s Scratch Kitchen – Casual Dining Average Cheddar’s Scratch Kitchen Rank is among Casual Dining brands (Y.E. Mar’17 ) 9
T RAILING T WELVE M ONTHS 0.3 % ~ 300 BPS $624 MILLION S AME -R ESTAURANT S AME -R ESTAURANT S ALES T OTAL R EVENUE S ALES G ROWTH I NDUSTRY O UTPERFORMANCE 2 $4.5 M ILLION ~ 17 % $72 MILLION A VERAGE R ESTAURANT V OLUME R ESTAURANT -L EVEL EBITDA¹ A DJUSTED EBITDA¹ 1 Trailing twelve months ended May 2017. 2 Industry excluding Darden brands. 10 11
S IGNIFICANT R OOM F OR G ROWTH Restaurant Footprint 1 Investment Profile 2 Capital Investment Range $3.0 - $4.0MM Square Feet 8,000 Dining Seats 280 1 Cheddar’s Scratch Kitchen as of March 2017 2 Represents the range of calendar 2016 openings. Capital Investment includes cash investments for building, equipment, furniture and other construction costs; excludes internal capitalized overhead, pre-opening expenses, tenant allowance and future lease obligations. Square feet includes all space under the roof, including the coolers and freezers and dining seats includes bar dining seats and patio seating, but excludes bar stools. 11 12
F ISCAL 2018 A NNUAL O UTLOOK M ARGIN S ALES Total Sales Growth Total Inflation: ~2.0% 11.5% to 13.0% Commodities: 0% to 1% Labor: 3% to 4% Same-Restaurant Sales Effective Tax Rate Growth Approximately 26% 1.0% to 2.0% Restaurant Openings 35 to 40 (Includes 4 to 5 Cheddar’s) Capital Spending $400 to $450 million Adjusted Earnings per Diluted Share 1 $4.38 to $4.50 (~127 million Weighted Average Diluted Shares Outstanding) 1 EPS values adjusted for special items. A reconciliation of reported to adjusted numbers can be found in the additional information section of this presentation. 12 13
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