DARDEN RESTAURANTS INC

Previous wording

This discussion and analysis below for Darden Restaurants, Inc. (Darden, the Company, we, us or our) should be read in conjunction with our consolidated financial statements and related financial statement notes included in Part II of this report under the caption “Item 8 - Financial Statements and Supplementary Data.” We operate on a 52/53-week fiscal year, which ends on the last Sunday in May. Fiscal 2024, which ended May 26, 2024, and fiscal 2023, which ended May 28, 2023, each consisted of 52 weeks.

Current wording

This discussion and analysis below for Darden Restaurants, Inc. (Darden, the Company, we, us or our) should be read in conjunction with our consolidated financial statements and related financial statement notes included in Part II of this report under the caption “Item 8 - Financial Statements and Supplementary Data.” We operate on a 52/53-week fiscal year, which ends on the last Sunday in May. Fiscal 2025, which ended May 25, 2025, and fiscal 2024, which ended May 26, 2024, each consisted of 52 weeks. Fiscal 2026, which ends on May 31, 2026, will consist of 53 weeks.

Previous wording

Our business operates in the full-service dining segment of the restaurant industry. At May 26, 2024, we owned and operated 2,031 restaurants through subsidiaries in the United States and Canada under the Olive Garden®, LongHorn Steakhouse®, Cheddar’s Scratch Kitchen®, Yard House®, Ruth’s Chris Steak House®(Ruth’s Chris), The Capital Grille®, Seasons 52®, Bahama Breeze®, Eddie V’s Prime Seafood® (Eddie V’s) and The Capital Burger®trademarks. We own and operate all of our restaurants in the United States and Canada, except for 2 joint venture restaurants managed by us, 4 restaurants managed by us under contractual agreements and 85 franchised restaurants. We also have 61 franchised restaurants in operation located in Canada, Latin America, the Caribbean, Asia and the Middle East. All intercompany balances and transactions have been eliminated in consolidation.

Current wording

Our business operates in the full-service dining segment of the restaurant industry. At May 25, 2025, we owned and operated 2,159 restaurants through subsidiaries in the United States and Canada under the Olive Garden®, LongHorn Steakhouse®, Cheddar’s Scratch Kitchen®, Chuy’s®, Yard House®, Ruth’s Chris Steak House®(Ruth’s Chris), The Capital Grille®, Seasons 52®, Eddie V’s Prime Seafood® (Eddie V’s), Bahama Breeze® and The Capital Burger®trademarks. We own and operate all of our restaurants in the United States and Canada, except for 5 restaurants we manage through joint venture or other contractual agreements and 85 franchised restaurants. We also have 69 franchised restaurants in operation located in Canada, Latin America, the Caribbean, Asia and the Middle East. All intercompany balances and transactions have been eliminated in consolidation.

Previous wording

On June 14, 2023, we acquired 100 percent of the equity interest of Ruth’s Chris for $724.6 million in total consideration. As a result of the acquisition and related integration efforts, we incurred expenses of $51.8 million ($42.1 million, net of tax) during the twelve months ended May 26, 2024. As of May 26, 2024, all Ruth’s Chris operations have been fully integrated into Darden’s operations.

Current wording

On October 11, 2024, we acquired 100 percent of the equity interest of Chuy’s Holdings Inc. (Chuy’s) in an all-cash transaction of $649.1 million in total consideration, $613.7 million in net cash consideration, inclusive of $35.4 million of cash on Chuy’s balance sheet at closing. As a result of the acquisition and related integration efforts, we incurred expenses of $44.6 million ($36.7 million, net of tax) during the twelve months ended May 25, 2025.

Previous wording

•Total sales increased 8.6 percent to $11.39 billion in fiscal 2024 from $10.49 billion in fiscal 2023 driven by a blended same-restaurant sales increase of 1.6 percent and sales from the addition of 80 net company-owned Ruth's Chris restaurants and 37 other net new restaurants.

Current wording

•Total sales increased 6.0 percent to $12.08 billion in fiscal 2025 from $11.39 billion in fiscal 2024 driven by a blended same-restaurant sales increase of 2.0 percent and sales from the addition of 103 net company-owned Chuy’s restaurants and 25 other net new restaurants.

Previous wording

•Reported diluted net earnings per share from continuing operations increased to $8.53 in fiscal 2024 from $8.00 in fiscal 2023, a 6.6 percent increase.

Current wording

•Diluted net earnings per share from continuing operations increased to $8.88 in fiscal 2025 from $8.53 in fiscal 2024, a 4.1 percent increase.

Previous wording

•Net loss from discontinued operations increased to $2.9 million ($0.02 per diluted share) in fiscal 2024, from $1.6 million ($0.01 per diluted share) in fiscal 2023. When combined with results from continuing operations, our diluted net earnings per share was $8.51 for fiscal 2024 and $7.99 for fiscal 2023.

Current wording

•Net loss from discontinued operations decreased to $1.4 million ($0.02 per diluted share) in fiscal 2025, from $2.9 million ($0.02 per diluted share) in fiscal 2024. When combined with results from continuing operations, our diluted net earnings per share was $8.86 for fiscal 2025 and $8.51 for fiscal 2024.

Previous wording

We expect fiscal 2025 sales from continuing operations to increase between 3.5 percent and 4.5 percent, driven by same-restaurant sales growth (1) of 1.0 percent to 2.0 percent, and sales from 45 to 50 new restaurant openings. In fiscal 2025, we expect our annual effective tax rate to be 13 percent and we expect capital expenditures incurred to build new restaurants, remodel and maintain existing restaurants and technology initiatives to be between $550 million and $600 million.

Current wording

We expect fiscal 2026 sales from continuing operations to increase between 7.0 to 8.0 percent, driven by growth of 2.0 percent related to the fifty-third week in fiscal 2026, same-restaurant sales growth (1) of 2.0 to 3.5 percent, and sales from 60 to 65 new restaurant openings. In fiscal 2026, we expect our annual effective tax rate to be 13 percent, and we expect capital expenditures incurred to build new restaurants, remodel and maintain existing restaurants and technology initiatives to be between $700 million and $750 million.

Previous wording

(1) Excludes Ruth’s Chris as they will not be owned and operated by Darden for a 16-month period at the

Current wording

(1) Annual same-restaurant sales is a 52-week metric and excludes the impact of Chuy’s, which will not have been owned and operated by Darden for a 16-month period prior to the beginning of fiscal 2026, as well as any additional locations not expected to be operated by Darden for the entirety of the fiscal year.

Previous wording

The following table details the number of company-owned restaurants currently reported in continuing operations, compared with the number open at the end of fiscal 2023:

Current wording

The following table details the number of company-owned restaurants reported in continuing operations at the end of fiscal 2025, compared with the number open at the end of fiscal 2024:

Previous wording

Olive Garden’s sales increase for fiscal 2024 was primarily driven by a U.S. same-restaurant sales increase combined with revenue from new restaurants. The increase in U.S. same-restaurant sales in fiscal 2024 resulted from a 3.3 percent increase in average check, partially offset by a 1.7 percent decrease in same-restaurant guest counts.

Current wording

Olive Garden’s sales increase for fiscal 2025 was primarily driven by a U.S. same-restaurant sales increase combined with revenue from new restaurants. The increase in U.S. same-restaurant sales in fiscal 2025 resulted from a 4.1 percent increase in average check, which includes a 0.7 increase in off-premise catering sales, partially offset by a 2.3 percent decrease in same-restaurant guest counts.

Previous wording

LongHorn Steakhouse’s sales increase for fiscal 2024 was primarily driven by a same-restaurant sales increase combined with revenue from new restaurants. The increase in same-restaurant sales in fiscal 2024 resulted from a 5.2 percent increase in average check, partially offset by a 0.4 percent decrease in same-restaurant guest counts.

Current wording

LongHorn Steakhouse’s sales increase for fiscal 2025 was primarily driven by a same-restaurant sales increase combined with revenue from new restaurants. The increase in same-restaurant sales in fiscal 2025 resulted from a 3.1 percent increase in average check and a 1.9 percent increase in same-restaurant guest counts.

Previous wording

Other Business’s sales increase for fiscal 2024 was driven by revenue from new restaurants offset by same-restaurant sales decreases. The decrease in same-restaurant sales in fiscal 2024 resulted from a 3.3 percent decrease in same-restaurant guest counts offset by a 2.6 percent increase in average check.

Current wording

Fine Dining’s sales increase for fiscal 2025 was driven by revenue from new restaurants offset by same-restaurant sales decreases. The decrease in same-restaurant sales in fiscal 2025 resulted from a 5.2 percent decrease in same-restaurant guest counts offset by a 2.3 percent increase in average check.

Previous wording

Total operating costs and expenses from continuing operations were $10.08 billion in fiscal 2024 and $9.29 billion in fiscal 2023.

Current wording

Total operating costs and expenses from continuing operations were $10.71 billion in fiscal 2025 and $10.08 billion in fiscal 2024.

Previous wording

•Food and beverage costs decreased as a percent of sales primarily due to a 1.3% impact from pricing leverage and a 0.2% impact from mix and other, partially offset by a 0.4% impact from inflation.

Current wording

•Food and beverage costs decreased as a percent of sales primarily due to a 0.9 percent impact from pricing leverage and a 0.2 percent impact from cost savings, partially offset by a 0.3 percent impact from mix and other and a 0.2 percent impact from inflation.

Previous wording

•Restaurant labor costs decreased as a percent of sales primarily due to a 1.0% impact from sales leverage, a 0.4% impact from productivity improvement and a 0.2% impact from brand mix, including Ruth’s Chris, partially offset by a 1.5% impact from inflation.

Current wording

•Restaurant labor costs decreased as a percent of sales primarily due to a 0.8 percent impact from sales leverage, a 0.2 percent impact from productivity improvement and a 0.2 percent impact from lower benefits expense, partially offset by a 1.1 percent impact from inflation.

Previous wording

•Restaurant expenses decreased as a percent of sales primarily due to a 0.4% impact from sales leverage, and a 0.3% impact from other, partially offset by a 0.4% impact from inflation and a 0.2% impact from brand mix, including Ruth’s Chris.

Current wording

•Restaurant expenses increased as a percent of sales primarily due to a 0.5 percent impact from inflation, a 0.2 percent impact from brand mix, including Chuy’s and a 0.1 percent impact from Uber Direct fees, partially offset by a 0.4 percent impact from sales leverage and a 0.2 percent impact from other expenses.

Previous wording

•General and administrative expenses increased as a percent of sales primarily due to a 0.4% impact from Ruth’s Chris acquisition and integration costs and 0.1% impacts from inflation, partially offset by a 0.1% impact from sales leverage.

Current wording

•General and administrative expenses increased as a percent of sales primarily due to a 0.4 percent impact from Chuy’s acquisition and integration costs, 0.1 percent impact from inflation, a 0.1 percent impact from mark to market adjustments and a 0.1 percent impact from restaurant closures, partially offset by a 0.4 percent impact from reduced Ruth’s Chris acquisition and integration costs and by a 0.2 percent impact from sales leverage.

Previous wording

•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.

Current wording

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

Previous wording

The effective income tax rates for fiscal 2024 and 2023 for continuing operations were 12.3 percent and 12.2 percent, respectively. During fiscal 2024, we had income tax expense of $145.0 million on earnings before income tax of $1.18 billion compared to income tax expense of $137.0 million on earnings before income taxes of $1.12 billion in fiscal 2023. This change was primarily driven by the impact of state tax expense.

Current wording

The effective income tax rates for fiscal 2025 and 2024 for continuing operations were 11.5 percent and 12.3 percent, respectively. During fiscal 2025, we had income tax expense of $136.2 million on earnings before income tax of $1.19 billion compared to income tax expense of $145.0 million on earnings before income taxes of $1.18 billion in fiscal 2024. This change was primarily driven by federal tax credits.

Previous wording

Net earnings from continuing operations for fiscal 2024 were $1.03 billion ($8.53 per diluted share) compared with net earnings from continuing operations for fiscal 2023 of $983.5 million ($8.00 per diluted share).

Current wording

Net earnings from continuing operations for fiscal 2025 were $1.05 billion ($8.88 per diluted share) compared with net earnings from continuing operations for fiscal 2024 of $1.03 billion ($8.53 per diluted share).

Previous wording

Net earnings from continuing operations for fiscal 2024 increased 4.8 percent and diluted net earnings per share from continuing operations increased 6.6 percent compared with fiscal 2023.

Current wording

Net earnings from continuing operations for fiscal 2025 increased 2.0 percent and diluted net earnings per share from continuing operations increased 4.1 percent compared with fiscal 2024.

Previous wording

On an after-tax basis, results from discontinued operations for fiscal 2024 were a net loss of $2.9 million ($0.02 per diluted share) compared with a net loss for fiscal 2023 of $1.6 million ($0.01 per diluted share).

Current wording

On an after-tax basis, results from discontinued operations for fiscal 2025 were a net loss of $1.4 million ($0.02 per diluted share) compared with a net loss for fiscal 2024 of $2.9 million ($0.02 per diluted share).

Previous wording

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 the U.S. and Canada as operating segments. We aggregate our operating segments into reportable segments based on a combination of the size, economic characteristics and sub-segment of full-service dining within which each brand operates. Our four reportable segments are: (1) Olive Garden, (2) LongHorn Steakhouse, (3) Fine Dining and (4) Other Business. See Note 6 of the Notes to Consolidated Financial Statements (Part II, Item 8 of this report) for further details.

Current wording

We manage our restaurant brands, Olive Garden, LongHorn Steakhouse, Cheddar’s Scratch Kitchen, Chuy’s, Yard House, Ruth’s Chris, The Capital Grille, Seasons 52, Eddie V’s, Bahama Breeze and The Capital Burger in the U.S. and Canada as operating segments. We aggregate our operating segments into reportable segments based on a combination of the size, economic characteristics and sub-segment of full-service dining within which each brand operates. Our four reportable segments are: (1) Olive Garden, (2) LongHorn Steakhouse, (3) Fine Dining and (4) Other Business. See Note 6 of the Notes to Consolidated Financial Statements (Part II, Item 8 of this report) for further details.

Previous wording

The increase in the Olive Garden segment profit margin for fiscal 2024 was driven primarily by positive same-restaurant sales and lower food and beverage costs and restaurant expenses, partially offset by higher marketing costs. The increase in the LongHorn Steakhouse segment profit margin for fiscal 2024 was driven primarily by positive same-restaurant sales, as well as lower food and beverage costs, restaurant labor and restaurant expenses. The decrease in the Fine Dining segment profit margin for fiscal 2024 was driven primarily by negative same-restaurant sales and higher restaurant labor, restaurant expenses and marketing costs, partially offset by lower food and beverage costs. The increase in the Other Business segment profit margin for fiscal 2024 was driven primarily by increased franchise revenue with the addition of Ruth’s Chris and lower food and beverage costs, partially offset by negative same-restaurant sales and increased restaurant labor costs and marketing costs.

Current wording

The increases in the Olive Garden and LongHorn Steakhouse segment profit margins for fiscal 2025 were both driven primarily by positive same-restaurant sales and lower food and beverage costs, partially offset by higher restaurant expenses and marketing costs. The decrease in the Fine Dining segment profit margin for fiscal 2025 was driven primarily by negative same-restaurant sales and higher restaurant labor and restaurant expenses, partially offset by lower food and beverage costs. The increase in the Other Business segment profit margin for fiscal 2025 was driven primarily by positive same-restaurant sales and lower food and beverage costs, partially offset by increased restaurant expenses and marketing costs.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

Unearned revenues primarily represent our liability for gift cards that have been sold but not yet redeemed. The estimated value of gift cards expected to remain unused is recognized over the expected period of redemption as the remaining gift card values are redeemed, generally over a period of 12 years. Utilizing this method, we estimate both the amount of breakage and the time period of redemption. If actual redemption patterns vary from our estimates, actual gift card breakage income may differ from the amounts recorded. We update our estimates of our redemption period and our breakage rate periodically and apply that rate to gift card redemptions on a prospective basis. Changing our breakage-rate estimates by 50 basis points would have resulted in an adjustment in our breakage income of approximately $3.6 million for fiscal 2024.

Current wording

Unearned revenues primarily represent our liability for gift cards that have been sold but not yet redeemed. The estimated value of gift cards expected to remain unused is recognized over the expected period of redemption as the remaining gift card values are redeemed, generally over a period of 12 years. Utilizing this method, we estimate both the amount of breakage and the time period of redemption. If actual redemption patterns vary from our estimates, actual gift card breakage income may differ from the amounts recorded. We update our estimates of our redemption period and our breakage rate periodically and apply that rate to gift card redemptions on a prospective basis. Changing our breakage-rate estimates by 50 basis points would have resulted in an adjustment in our breakage income of approximately $3.5 million for fiscal 2025.

Previous wording

Assessment of uncertain tax positions requires judgments relating to the amounts, timing and likelihood of resolution. As described in Note 13 of the Notes to Consolidated Financial Statements (Part II, Item 8 of this report), the $22.7 million balance of unrecognized tax benefits at May 26, 2024, includes $6.1 million related to tax positions for which it is reasonably possible that the total amounts could change during the next 12 months based on the outcome of examinations. Of the $6.1 million, $3.9 million relates to items that would impact our effective income tax rate.

Current wording

Assessment of uncertain tax positions requires judgments relating to the amounts, timing and likelihood of resolution. As described in Note 13 of the Notes to Consolidated Financial Statements (Part II, Item 8 of this report), the $21.4 million balance of unrecognized tax benefits at May 25, 2025, includes $1.3 million related to tax positions for which it is reasonably possible that the total amounts could change during the next 12 months based on the outcome of examinations. All of such $1.3 million relates to items that would impact our effective income tax rate.

Previous wording

On October 23, 2023, we entered into a $1.25 billion Revolving Credit Agreement (Revolving Credit Agreement) with Bank of America, N.A. (BOA), as administrative agent, and the lenders and other agents party thereto. The Revolving Credit Agreement 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 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, and consistent with our Prior Revolving Credit Agreement. As of May 26, 2024, we had no outstanding balances and were in compliance with all covenants under the Revolving Credit Agreement. As of May 26, 2024, $86.8 million of commercial paper was outstanding in addition to $0.6 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 May 26, 2024, we had $1.16 billion of credit available under the Revolving Credit Agreement.

Current wording

On October 23, 2023, we entered into a $1.25 billion Revolving Credit Agreement (Revolving Credit Agreement) with Bank of America, N.A. (BOA), as administrative agent, and the lenders and other agents party thereto. The Revolving Credit Agreement is a senior unsecured credit commitment to the Company and contains customary representations and affirmative and negative covenants (including limitations on liens and subsidiary debt and a maximum consolidated lease adjusted total debt to total capitalization ratio of 0.75 to 1.00) and events of default usual for credit facilities of this type. As of May 25, 2025, we had no outstanding balances and were in compliance with all covenants under the Revolving Credit Agreement. As of May 25, 2025, $0.2 million of letters of credit were outstanding, which was backed by this facility. After consideration of letters of credit backed by the Revolving Credit Agreement, as of May 25, 2025, we had $1.25 billion of credit available under the Revolving Credit Agreement.

Previous wording

On May 31, 2023, the Company also entered into a senior unsecured $600 million 3-year Term Loan Credit Agreement (Term Loan) with Bank of America, N.A., as administrative agent, the lenders and other agents party thereto, the material terms of which are consistent with the Revolving Credit Agreement, as amended. We borrowed $600 million under the Term Loan to fund a portion of the consideration paid in connection with the acquisition of Ruth’s Chris. The $600 million outstanding under the Term Loan was subsequently paid in full on October 10, 2023 with the $500 million proceeds from our 2033 Notes (as defined and discussed below) along with $100 million from cash on hand. The Term Loan was terminated on October 10, 2023 in connection with its payment in full and no amounts remain outstanding.

Current wording

On September 16, 2024, we entered into a senior unsecured $600 million 2-year Term Loan Credit Agreement (Term Loan Agreement) with BOA, as administrative agent, the lenders and other agents party thereto, the material terms of which were consistent with the Revolving Credit Agreement. The intended use of the proceeds was to finance our acquisition of Chuy’s and we subsequently terminated the Term Loan Agreement on October 3, 2024, in connection with the closing of our senior notes issuance discussed below. We did not draw any funds, and there were never any outstanding borrowings under the Term Loan Agreement.

Previous wording

On October 10, 2023, the Company issued $500 million aggregate principal amount of our 6.300 percent Senior Notes due 2033 (the 2033 Notes) pursuant to the provisions of the Underwriting Agreement, dated October 4, 2023 (Underwriting Agreement), among the Company and BofA Securities, Inc., Truist Securities, Inc., U.S. Bancorp Investments, Inc. and Wells Fargo Securities, LLC, as representatives of the several underwriters named therein. The 2033 Notes were issued under the Company’s Indenture, dated as of January 1, 1996 (Base Indenture), between the Company and Computershare Trust Company, National Association (as successor to Wells Fargo Bank, National Association, successor to Wells Fargo Bank Minnesota, National Association, formerly known as Norwest Bank Minnesota, National Association), as trustee (Base Trustee), as amended and supplemented by the Second Supplemental Indenture, dated as of October 4, 2023 (Second Supplemental Indenture), among the Company, the Base Trustee and U.S. Bank Trust Company, National Association, as successor trustee with respect to the 2033 Notes. The 2033 Notes will mature on October 10, 2033. Interest on the 2033 Notes will be paid semiannually in arrears on April 10 and October 10 of each year, commencing on April 10, 2024, to holders of record on the preceding March 26 or September 25, as the case may be.

Current wording

On October 3, 2024, we issued and sold $400.0 million aggregate principal amount of 4.350 percent Senior Notes due 2027 (2027 Notes) and $350.0 million aggregate principal amount of 4.550 percent Senior Notes due 2029 (2029 Notes and, together with the 2027 Notes, the Notes), pursuant to the provisions of the Underwriting Agreement, dated September 30, 2024, among the Company and BofA Securities, Inc., Truist Securities, Inc., U.S. Bancorp Investments, Inc. and Wells Fargo Securities, LLC, as representatives of the several underwriters named therein. The Notes were issued under the Company’s Indenture, dated as of January 1, 1996, between the Company and Computershare Trust Company, National Association (as successor to Wells Fargo Bank, National Association, successor to Wells Fargo Bank Minnesota, National Association, formerly known as Norwest Bank Minnesota, National Association), as trustee (Base Trustee), as amended and supplemented by the Second Supplemental Indenture, dated as of October 4, 2023, among the Company, the Base Trustee and U.S. Bank Trust Company, National Association, as a successor trustee with respect to the Notes. We used the proceeds from our issuance of the Notes to finance our acquisition of Chuy’s and for general corporate purposes.

Previous wording

The interest rate on our $42.8 million 6.800 percent senior notes due October 2037 is subject to adjustment from time to time if the debt rating assigned to such series of notes is downgraded below a certain rating level (or subsequently upgraded). The maximum adjustment is 2.000 percent above the initial interest rate and the interest rate cannot be reduced below the initial interest rate. As of May 26, 2024, no such adjustments are made to this rate.

Current wording

The interest rate on our $42.8 million 6.800 percent senior notes due October 2037 is subject to adjustment from time to time if the debt rating assigned to such series of notes is downgraded below a certain rating level (or subsequently upgraded). The maximum adjustment is 2.000 percent above the initial interest rate and the interest rate cannot be reduced below the initial interest rate. As of May 25, 2025, no such adjustments have been made to this rate.

Previous wording

(1)Includes interest payments associated with existing long-term debt. Excludes discount and issuance costs of $16.9 million.

Current wording

(1)Includes interest payments associated with existing long-term debt. Excludes discount and issuance costs of $20.2 million.

Previous wording

(4)Includes expected contributions associated with our supplemental defined benefit pension plan and payments associated with our postretirement benefit plan and our non-qualified deferred compensation plan through fiscal 2034.

Current wording

(4)Primarily represents our non-qualified deferred compensation plan through fiscal 2035.

Previous wording

(5)Includes interest on unrecognized income tax benefits of $3.2 million, $1.8 million of which relates to contingencies expected to be resolved within one year.

Current wording

(5)Includes interest on unrecognized income tax benefits of $2.3 million, $0.3 million of which relates to contingencies expected to be resolved within one year.

Previous wording

(6)Includes letters of credit for $79.5 million of workers’ compensation and general liabilities accrued in our consolidated financial statements and letters of credit for $16.8 million of surety bonds related to other payments.

Current wording

(6)Includes letters of credit for $80.0 million of workers’ compensation and general liabilities accrued in our consolidated financial statements and letters of credit for $16.7 million of surety bonds related to other payments.

Previous wording

Our adjusted debt to adjusted total capital ratio was 66 percent and 62 percent as of May 26, 2024 and May 28, 2023, respectively. Based on these ratios, we believe our financial condition is strong. We include the lease-debt equivalent and contractual lease guarantees in our adjusted debt to adjusted total capital ratio reported to shareholders, as we believe its inclusion better represents the optimal capital structure that we target from period to period and because it is consistent with the calculation of the covenant under our Revolving Credit Agreement. For fiscal 2024 and fiscal 2023, the lease-debt equivalent includes 6.00 times the total annual minimum rent for consolidated lease obligations of $464.4 million and $424.3 million, respectively. The composition of our capital structure is shown in the following table:

Current wording

Based on these ratios, we believe our financial condition is strong. We include the lease-debt equivalent and contractual lease guarantees in our ratios reported to shareholders, as we believe its inclusion better represents the optimal capital structure that we target from period to period and because it is consistent with the calculation of the covenant under our Revolving Credit Agreement.

Previous wording

Net cash flows provided by operating activities from continuing operations were $1.62 billion and $1.55 billion in fiscal 2024 and 2023, respectively. Net cash flows provided by operating activities include net earnings from continuing operations of $1.03 billion in fiscal 2024 and $983.5 million in fiscal 2023. Net cash flows provided by operating activities from continuing operations increased in fiscal 2024 primarily due to higher net earnings from continuing operations.

Current wording

Net cash flows provided by operating activities from continuing operations were $1.71 billion and $1.62 billion in fiscal 2025 and 2024, respectively. Net cash flows provided by operating activities include net earnings from continuing operations of $1.05 billion in fiscal 2025 and $1.03 billion in fiscal 2024. Net cash flows provided by operating activities from continuing operations increased in fiscal 2025 primarily due to higher net earnings from continuing operations.

Previous wording

Net cash flows used in investing activities from continuing operations were $1.3 billion and $568.4 million in fiscal 2024 and 2023, respectively. Capital expenditures incurred principally for building new restaurants, remodeling existing restaurants, replacing equipment, and technology initiatives were $601.2 million in fiscal 2024, compared to $564.9 million in fiscal 2023. Net cash used in the acquisition of Ruth’s Chris was $701.1 million during fiscal 2024.

Current wording

Net cash flows used in investing activities from continuing operations were $1.3 billion in fiscal 2025 and 2024. Capital expenditures incurred principally for building new restaurants, remodeling existing restaurants, replacing equipment, and technology initiatives were $644.6 million in fiscal 2025, compared to $601.2 million in fiscal 2024. Net cash used in the acquisition of Chuy’s was $613.7 million during fiscal 2025. Net cash used in the acquisition of Ruth’s Chris was $701.1 million during fiscal 2024.