Letter To Shareholders During fi scal 2008, we took signifi cant steps that leave Darden well positioned to achieve 2008 ANNUAL REPORT and sustain strong profi table sales growth. And we did so while successfully navigating a particularly challenging consumer and cost environment – delivering results on key measures of sales, earnings and profi tability that were competitively superior. OUR GOALS AND STRATEGY Management and Restaurant Operations leaders who During calendar 2008, we continued to execute against are great brand builders. Beyond great brand builders, our ultimate goal. Our passion is to create a great company, strong and durable brands also require great brand which we defi ne as one that is: support. For us, that means competitively superior Darden Restaurants, Inc. 2008 Annual Report • A winning organization fi nancially – translating sales expertise, systems, processes and practices in important and earnings growth which is competitively superior areas like Human Resources, Supply Chain, Information within our industry into top quartile total shareholder Technolog y and Finance, among others. return within the S&P 500. During the leadership transition that took place at Darden in calendar 2004, we concluded that, to better • A special place – one that everyone wants to be part of execute each element of our strategy, we needed to trans- because they have an opportunity to fulfi ll their profes- form the Company. It was clear that our brand portfolio sional and personal dreams. had to be stronger. It was equally clear that we had to More specifi cally, our aim fi nancially is to sustain be better brand builders, provide better brand support long-term annual sales growth of 7 percent to 9 percent and – to sustain excellence in these areas – enhance our and diluted net earnings per share growth of 10 percent culture. What was most apparent, however, is that success Darden Restaurants, Inc. • 5900 Lake Ellenor Drive, Orlando, FL 32809 • (407) 245-4000 • www.darden.com to 15 percent, which are what we believe the full-service on any of these fronts meant making some fundamental restaurant industry offers effective multi-unit operators changes in how we work. longer term. Culturally, we want to create an organization Based on these conclusions, we started down the path that understands, values and helps realize the dreams and of transformation in calendar 2004, and our progress accel- aspirations of our employees, who are essential to achieving erated in fi scal 2008. Among other things, this year we: our fi nancial targets. • Acquired RARE Hospitality International, Inc. (RARE) We recognize that there will be years when consumer and its two brands, LongHorn Steakhouse and The and cost dynamics will not permit us to achieve our long- Capital Grille, and completed the disposition of Smokey term fi nancial targets, and fi scal 2008 was certainly one of Bones Barbeque & Grill, resulting in a more proven those. Our goal, however, is to deliver competitively superior portfolio of brands that has much stronger collective results, even during such periods as we did in fi scal 2008. sales and earnings growth potential. Our strategy for creating a great company has been consistent for some time now as well. We seek to build a • Developed and began implementing integration plans multi-brand growth company – bound together by a unify- for LongHorn Steakhouse and The Capital Grille that ing culture, shared expertise and a common approach to the further leverage our brand support, putting us on track What We business – that operates existing brands at a consistently to capture meaningful cost synergies that are beyond high level and successfully adds new brands. those estimated in our initial acquisition analysis. • Continued to both add to and optimize the use of our FISCAL 2008 HIGHLIGHTS brand-building resources by working in an ever more integrated manner across brands in the two critical brand- EXECUTING OUR STRATEGY building areas – Brand Management and Restaurant Bring To Put most simply, executing our strategy involves building Operations – to ensure that each brand benefi ts from great brands. And that starts with having differenti- our collective expertise, whether grounded in talent, pro- ated and relevant brands and entrusting each to Brand cesses or practices. Letter To Shareholders IFC | Our Restaurants At-A-Glance 2 | What Else We Bring To The Table 11 The Table Social Responsibility 20 | Board of Directors 22 | Executive and Operating Teams 23 | 2008 Financial Review 25 DDarden_CVR_rev.indd.CGLAR1arden_CVR_rev.indd.CGLAR1 1 77/23/08/23/08 4:19:184:19:18 PPMM Letter To Shareholders During fiscal 2008, we took significant steps that leave Darden well positioned to achieve 2 0 0 8 A N N U al R eport and sustain strong profitable sales growth. And we did so while successfully navigating a particularly challenging consumer and cost environment – delivering results on key measures of sales, earnings and profitability that were competitively superior. OUR Goals AND StrategY Management and Restaurant Operations leaders who During calendar 2008, we continued to execute against are great brand builders. Beyond great brand builders, our ultimate goal. Our passion is to create a great company, strong and durable brands also require great brand which we define as one that is: support. For us, that means competitively superior Darden Restaurants, Inc. • A winning organization financially – translating sales expertise, systems, processes and practices in important and earnings growth which is competitively superior areas like Human Resources, Supply Chain, Information within our industry into top quartile total shareholder Technology and Finance, among others. return within the S&P 500. During the leadership transition that took place at Darden in calendar 2004, we concluded that, to better • A special place – one that everyone wants to be part of execute each element of our strategy, we needed to trans- because they have an opportunity to fulfill their profes- form the Company. It was clear that our brand portfolio sional and personal dreams. had to be stronger. It was equally clear that we had to More specifically, our aim financially is to sustain be better brand builders, provide better brand support long-term annual sales growth of 7 percent to 9 percent and – to sustain excellence in these areas – enhance our and diluted net earnings per share growth of 10 percent culture. What was most apparent, however, is that success Darden Restaurants, Inc. • 5900 Lake Ellenor Drive, Orlando, FL 32809 • (407) 245-4000 • www.darden.com 2008 Annual Report to 15 percent, which are what we believe the full-service on any of these fronts meant making some fundamental restaurant industry offers effective multi-unit operators changes in how we work. longer term. Culturally, we want to create an organization Based on these conclusions, we started down the path that understands, values and helps realize the dreams and of transformation in calendar 2004, and our progress accel- aspirations of our employees, who are essential to achieving erated in fiscal 2008. Among other things, this year we: our financial targets. • Acquired RARE Hospitality International, Inc. (RARE) We recognize that there will be years when consumer and its two brands, LongHorn Steakhouse and The and cost dynamics will not permit us to achieve our long- Capital Grille, and completed the disposition of Smokey term financial targets, and fiscal 2008 was certainly one of Bones Barbeque & Grill, resulting in a more proven those. Our goal, however, is to deliver competitively superior portfolio of brands that has much stronger collective results, even during such periods as we did in fiscal 2008. sales and earnings growth potential. Our strategy for creating a great company has been consistent for some time now as well. We seek to build a • Developed and began implementing integration plans multi-brand growth company – bound together by a unify- for LongHorn Steakhouse and The Capital Grille that ing culture, shared expertise and a common approach to the further leverage our brand support, putting us on track What We business – that operates existing brands at a consistently to capture meaningful cost synergies that are beyond high level and successfully adds new brands. those estimated in our initial acquisition analysis. • Continued to both add to and optimize the use of our Fiscal 2008 Highlights brand-building resources by working in an ever more integrated manner across brands in the two critical brand- EXECUTING OUR STRATEGY building areas – Brand Management and Restaurant Bring To Put most simply, executing our strategy involves building Operations – to ensure that each brand benefits from great brands. And that starts with having differenti- our collective expertise, whether grounded in talent, pro- ated and relevant brands and entrusting each to Brand cesses or practices. Letter To Shareholders IFC | Our Restaurants At-A-Glance 2 | What Else We Bring To The Table 11 The Table Social Responsibility 20 | Board of Directors 22 | Executive and Operating Teams 23 | 2008 Financial Review 25 LETTER TO SHAREHOLDERS continued 2008 FINANCIAL HIGHLIGHTS Shareholder Information purchase accounting adjustments related to the acquisition of RARE; Fiscal Year Ended these were approximately $44.8 million before income taxes, or (In Millions, Except Per Share Amounts) May 25, 2008 May 27, 2007 May 28, 2006 19 cents per share. Sales $ 6,626.5 $ 5,567.1 $ 5,353.6 • Excluding acquisition and integration costs and purchase account- Earnings from Continuing Operations $ 369.5 $ 377.1 $ 351.8 ing adjustments related to the RARE acquisition, diluted net earnings Earnings (Loss) from Discontinued Operations $ 7.7 $ (175.7) $ (13.6) per share from continuing operations were $2.74 in fi scal 2008, an Net Earnings $ 377.2 $ 201.4 $ 338.2 COMPANY ADDRESS SHAREHOLDER REPORTS/INVESTOR INQUIRIES increase of 8 percent compared to diluted net earnings per share Earnings per Share from Continuing Operations: Darden Restaurants, Inc.