UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~February 23,~~November 29, 2020



☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

1-13666

Commission File Number

DARDEN RESTAURANTS, INC.

(Exact name of registrant as specified in its charter)


Florida			59-3305930
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

~~Florida~~		~~59-3305930~~
~~(State or other jurisdiction of~~ ~~incorporation or organization)~~	~~(I.R.S. Employer~~ ~~Identification No.)~~

1000 Darden Center Drive
Orlando,	Florida		32837
(Address of principal executive offices)			(Zip Code)

~~407~~-~~245-4000~~407-245-4000

(Registrant’s telephone number, including area code)

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



Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, without par value	DRI	New York Stock Exchange

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

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

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

Number of shares of common stock outstanding as of December 15, 2020: 130,328,167.

~~March 16, 2020: 120,823,455.~~

Table of Contents

TABLE OF CONTENTS



			Page
Part I -	Financial Information
	Item 1.	Financial Statements (Unaudited)	4
		Consolidated Statements of Earnings	4
		Consolidated Statements of Comprehensive Income	5
		Consolidated Balance Sheets	6
		Consolidated Statements of Changes in Stockholders’ Equity	7
		Consolidated Statements of Cash Flows	8
		Notes to Consolidated Financial Statements	10
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2523
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3432
	Item 4.	Controls and Procedures	3432

Part II -	Other Information
	Item 1.	Legal Proceedings	3533
	Item 1A.	Risk Factors	3533
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3634
	Item 5.	Other Information	3634
	Item 6.	Exhibits	3735

Signature			3836

Table of Contents

Cautionary Statement Regarding Forward-Looking Statements

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

Table of Contents

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

DARDEN RESTAURANTS, INC.

CONSOLIDATED STATEMENTS OF EARNINGS

(In millions, except per share data)

(Unaudited)


	Three Months Ended				Six Months Ended
	November 29, 2020		November 24, 2019		November 29, 2020		November 24, 2019
Sales	$	1,656.5	$	2,056.4	$	3,183.9	$	4,190.3
Costs and expenses:
Food and beverage	475.1		583.0		909.6		1,186.3
Restaurant labor	535.5		692.3		1,036.2		1,396.1
Restaurant expenses	330.5		375.6		621.4		748.0
Marketing expenses	18.8		66.3		47.6		135.0
General and administrative expenses	89.9		91.4		218.2		189.4
Depreciation and amortization	86.0		87.6		173.6		173.8

Total operating costs and expenses	$	1,535.8	$	1,896.2	$	3,006.6	$	3,828.6
Operating income	120.7		160.2		177.3		361.7
Interest, net	14.6		13.1		31.2		24.2
Other (income) expense, net	0.4		153.3		7.9		153.3
Earnings (loss) before income taxes	105.7		(6.2)		138.2		184.2
Income tax expense (benefit)	8.8		(31.6)		4.0		(13.0)
Earnings from continuing operations	$	96.9	$	25.4	$	134.2	$	197.2
Losses from discontinued operations, net of tax benefit of $0.7, $0.7, $1.6 and $0.9, respectively	(0.9)		(0.7)		(2.1)		(1.9)
Net earnings	$	96.0	$	24.7	$	132.1	$	195.3
Basic net earnings per share:
Earnings from continuing operations	$	0.74	$	0.21	$	1.03	$	1.61
Losses from discontinued operations	0		(0.01)		(0.01)		(0.02)
Net earnings	$	0.74	$	0.20	$	1.02	$	1.59
Diluted net earnings per share:
Earnings from continuing operations	$	0.74	$	0.21	$	1.02	$	1.59
Losses from discontinued operations	(0.01)		(0.01)		(0.01)		(0.02)
Net earnings	$	0.73	$	0.20	$	1.01	$	1.57
Average number of common shares outstanding:
Basic	130.3		122.2		130.1		122.5
Diluted	131.5		123.7		131.2		124.1

Three Months Ended Nine Months Ended
February 23,
2020 February 24,
2019 February 23,
2020 February 24,
2019
Sales $ 2,346.5
$ 2,246.5
$ 6,536.8
$ 6,281.3
Costs and expenses:
Food and beverage 658.0
638.0
1,844.3
1,784.6
Restaurant labor 753.8
711.4
2,149.9
2,053.1
Restaurant expenses 396.7
379.5
1,144.7
1,098.4
Marketing expenses 71.6
62.4
206.6
186.9
General and administrative expenses 100.3
102.8
289.6
302.4
Depreciation and amortization 87.7
85.3
261.5
248.8
Impairments and disposal of assets, net 0.1
1.6
0.2
4.4
Total operating costs and expenses $ 2,068.2
$ 1,981.0
$ 5,896.8
$ 5,678.6
Operating income 278.3
265.5
640.0
602.7
Interest, net 13.2
12.4
37.4
38.3
Other (income) expense, net —
—
153.3
—
Earnings (loss) before income taxes 265.1
253.1
449.3
564.4
Income tax expense 31.8
28.0
18.8
54.5
Earnings from continuing operations $ 233.3
$ 225.1
$ 430.5
$ 509.9
Losses from discontinued operations, net of tax benefit of $0.7, $0.8, $1.6 and $1.3, respectively (1.0 ) (1.5 ) (2.9 ) (4.5 )
Net earnings $ 232.3
$ 223.6
$ 427.6
$ 505.4
Basic net earnings per share:
Earnings from continuing operations $ 1.92
$ 1.83
$ 3.53
$ 4.12
Losses from discontinued operations —
(0.02 ) (0.03 ) (0.03 )
Net earnings $ 1.92
$ 1.81
$ 3.50
$ 4.09
Diluted net earnings per share:
Earnings from continuing operations $ 1.90
$ 1.80
$ 3.48
$ 4.06
Losses from discontinued operations (0.01 ) (0.01 ) (0.02 ) (0.04 )
Net earnings $ 1.89
$ 1.79
$ 3.46
$ 4.02
Average number of common shares outstanding:
Basic 121.3
123.3
122.1
123.7
Diluted 122.8
125.0
123.7
125.6

See accompanying notes to our unaudited consolidated financial statements.

Table of Contents

DARDEN RESTAURANTS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)


	Three Months Ended						Nine Months Ended							Three Months Ended				Six Months Ended
	February 23, 2020			February 24, 2019			February 23, 2020			February 24, 2019				November 29, 2020		November 24, 2019		November 29, 2020		November 24, 2019
Net earnings	$	232.3		$	223.6		$	427.6		$	505.4		Net earnings	$	96.0	$	24.7	$	132.1	$	195.3
Other comprehensive income (loss):													Other comprehensive income (loss):
Foreign currency adjustment	—			(0.3		)	5.5			0.3			Foreign currency adjustment	0		5.5		0.2		5.5
Change in fair value of derivatives and amortization of unrecognized gains and losses on derivatives, net of taxes of $0.0, $(0.1), $(0.1) and $(0.1), respectively	0.7			(1.9		)	(4.9		)	4.4
Net unamortized gain (loss) arising during the period, including amortization of unrecognized net actuarial (loss) gain, net of taxes of $(0.1), $0.0, $32.3 and $0.0, respectively, related to pension and other post-employment benefits	(0.6		)	(0.1		)	97.2			(0.5		)
Change in fair value of derivatives and amortization of unrecognized gains and losses on derivatives, net of taxes of $(0.1), $0.1, $0.3 and $(0.1), respectively													Change in fair value of derivatives and amortization of unrecognized gains and losses on derivatives, net of taxes of $(0.1), $0.1, $0.3 and $(0.1), respectively	5.0		(2.7)		9.5		(5.6)
Net unamortized gain (loss) arising during the period, including amortization of unrecognized net actuarial gain (loss), net of taxes of $0.2 $32.5, $0.3 and $32.5, respectively, related to pension and other post-employment benefits													Net unamortized gain (loss) arising during the period, including amortization of unrecognized net actuarial gain (loss), net of taxes of $0.2 $32.5, $0.3 and $32.5, respectively, related to pension and other post-employment benefits	0.4		97.7		0.8		97.8
Other comprehensive income (loss)	$	0.1		$	(2.3	)	$	97.8		$	4.2		Other comprehensive income (loss)	$	5.4	$	100.5	$	10.5	$	97.7
Total comprehensive income	$	232.4		$	221.3		$	525.4		$	509.6		Total comprehensive income	$	101.4	$	125.2	$	142.6	$	293.0

See accompanying notes to our unaudited consolidated financial statements.


	Common Stock And Surplus		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Unearned Compensation		Total Stockholders’ Equity
Balance at August 30, 2020	$	2,220.9	$	166.6	$	(12.5)	$	0	$	2,375.0
Net earnings	—		96.0		—		—		96.0
Other comprehensive income (loss)	—		—		5.4		—		5.4
Dividends declared ($0.30 per share)	—		(39.5)		—		—		(39.5)
Stock option exercises (0.1 shares)	3.9		—		—		—		3.9
Stock-based compensation	11.9		—		—		—		11.9
Repurchases of common stock (0.0 shares)	(0.1)		(0.1)		—		—		(0.2)
Issuance of stock under Employee Stock Purchase Plan and other plans (0.0 shares)	2.3		—		—		—		2.3
Other	0.1		0.2		—		—		0.3
Balance at November 29, 2020	$	2,239.0	$	223.2	$	(7.1)	$	0	$	2,455.1

Balance at May 31, 2020	$	2,205.3	$	143.5	$	(17.6)	$	0	$	2,331.2
Net earnings	—		132.1		—		—		132.1
Other comprehensive income (loss)	—		—		10.5		—		10.5
Dividends declared ($0.30 per share)	—		(39.5)		—		—		(39.5)
Stock option exercises (0.1 shares)	5.6		—		—		—		5.6
Stock-based compensation	23.0		—		—		—		23.0
Repurchases of common stock (0.1 shares)	(1.5)		(5.3)		—		—		(6.8)
Issuance of stock under Employee Stock Purchase Plan and other plans (0.1 shares)	4.8		—		—		—		4.8
Other	1.8		(7.6)		—		—		(5.8)
Balance at November 29, 2020	$	2,239.0	$	223.2	$	(7.1)	$	0	$	2,455.1

Common
Stock
And
Surplus Retained
Earnings Treasury
Stock Accumulated
Other
Comprehensive
Income (Loss) Unearned
Compensation Total
Stockholders’
Equity
Balance at November 24, 2019 $ 1,690.0
$ 584.5
$ —
$ (0.5 ) $ (0.3 ) $ 2,273.7
Net earnings —
232.3
—
—
—
232.3
Other comprehensive income (loss) —
—
—
0.1
—
0.1
Dividends declared ($0.88 per share) —
(107.4 ) —
—
—
(107.4 )
Stock option exercises (0.1 shares) 0.7
—
—
—
—
0.7
Stock-based compensation 8.7
—
—
—
—
8.7
Repurchases of common stock (0.6 shares) (8.6 ) (60.8 ) —
—
—
(69.4 )
Issuance of stock under Employee Stock Purchase Plan and other plans (0.0 shares) 2.2
—
—
—
—
2.2
Other —
—
—
—
0.3
0.3
Balance at February 23, 2020 $ 1,693.0
$ 648.6
$ —
$ (0.4 ) $ —
$ 2,341.2

Balance at May 26, 2019 $ 1,685.0
$ 806.6
$ —
$ (98.2 ) $ (0.8 ) $ 2,392.6
Net earnings —
427.6
—
—
—
427.6
Other comprehensive income (loss) —
—
—
97.8
—
97.8
Dividends declared ($2.64 per share) —
(324.9 ) —
—
—
(324.9 )
Stock option exercises (0.3 shares) 11.5
—
—
—
—
11.5
Stock-based compensation 24.3
—
—
—
—
24.3
Repurchases of common stock (2.6 shares) (35.8 ) (264.5 ) —
—
—
(300.3 )
Issuance of stock under Employee Stock Purchase Plan and other plans (0.1 shares) 6.2
—
—
—
—
6.2
Other 1.8
3.8
—
—
0.8
6.4
Balance at February 23, 2020 $ 1,693.0
$ 648.6
$ —
$ (0.4 ) $ —
$ 2,341.2

See accompanying notes to our unaudited consolidated financial statements.

DARDEN RESTAURANTS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended
February 23,
2020 February 24,
2019
Cash flows—operating activities
Net earnings $ 427.6
$ 505.4
Losses from discontinued operations, net of tax 2.9
4.5
Adjustments to reconcile net earnings from continuing operations to cash flows:
Depreciation and amortization 261.5
248.8
Impairments and disposal of assets, net 0.2
4.4
Stock-based compensation expense 42.6
45.3
Change in current assets and liabilities 50.2
59.3
Contributions to pension and postretirement plans (14.0 ) (1.3 )
Deferred income taxes (1.9 ) 15.9
Change in deferred rent —
26.5
Change in other assets and liabilities 14.7
5.7
Pension settlement charge 147.1
—
Other, net (8.5 ) 5.5
Net cash provided by operating activities of continuing operations $ 922.4
$ 920.0
Cash flows—investing activities
Purchases of land, buildings and equipment (374.5 ) (346.9 )
Proceeds from disposal of land, buildings and equipment 4.3
12.7
Cash used in business acquisitions, net of cash acquired (50.1 ) —
Purchases of capitalized software and other assets (16.9 ) (17.4 )
Other, net (10.2 ) 1.9
Net cash used in investing activities of continuing operations $ (447.4 ) $ (349.7 )
Cash flows—financing activities
Proceeds from issuance of common stock 17.7
45.4
Dividends paid (322.3 ) (278.4 )
Repurchases of common stock (300.3 ) (166.0 )
Proceeds from issuance of short-term debt —
137.5
Repayments of short-term debt —
(137.5 )
Principal payments on capital and financing leases (3.8 ) (4.9 )
Other, net 0.6
0.1
Net cash used in financing activities of continuing operations $ (608.1 ) $ (403.8 )
Cash flows—discontinued operations
Net cash used in operating activities of discontinued operations (2.5 ) (10.5 )
Net cash used in discontinued operations $ (2.5 ) $ (10.5 )

Increase (decrease) in cash and cash equivalents (135.6 ) 156.0
Cash and cash equivalents - beginning of period 457.3
146.9
Cash and cash equivalents - end of period $ 321.7
$ 302.9

Table of Contents

DARDEN RESTAURANTS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(In millions)

(Unaudited)


	Six Months Ended
	November 29, 2020		November 24, 2019
Cash flows from changes in current assets and liabilities
Receivables, net	3.6		7.3
Inventories	3.9		(4.8)
Prepaid expenses and other current assets	1.3		(5.0)
Accounts payable	(24.8)		(5.2)
Accrued payroll	(20.1)		(38.2)
Prepaid/accrued income taxes	(3.5)		(1.9)
Other accrued taxes	4.2		6.4
Unearned revenues	(28.1)		(38.2)
Other current liabilities	56.6		(7.2)
Change in current assets and liabilities	$	(6.9)	$	(86.8)

Nine Months Ended
February 23,
2020 February 24,
2019
Cash flows from changes in current assets and liabilities
Receivables, net 12.8
16.5
Inventories (22.1 ) (4.2 )
Prepaid expenses and other current assets (2.1 ) (5.8 )
Accounts payable 20.7
26.3
Accrued payroll (20.1 ) (14.2 )
Prepaid/accrued income taxes 15.7
17.9
Other accrued taxes (2.1 ) (6.1 )
Unearned revenues 47.1
54.6
Other current liabilities 0.3
(25.7 )
Change in current assets and liabilities $ 50.2
$ 59.3

See accompanying notes to our unaudited consolidated financial statements.

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DARDEN RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1.Basis of Presentation

Darden Restaurants, Inc. (we, our, Darden or the Company) owns and operates full-service dining restaurants in the United States and Canada under the trade names Olive Garden^®, LongHorn Steakhouse^®, Cheddar’s Scratch Kitchen^®, Yard House^®, The Capital Grille^®, Seasons 52^®, Bahama Breeze^®, and Eddie V’s Prime Seafood^®. As of ~~February 23,~~November 29, 2020, through subsidiaries, we own and operate all of our restaurants in the United States and Canada, except for 3 joint venture restaurants managed by us and 3132 franchised restaurants. We also have 3227 franchised restaurants in operation located in Latin ~~America and the Middle East.~~America.

We have prepared these consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally presented in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal recurring nature. We operate on a 52/53-week fiscal year which ends on the last Sunday in May. Our fiscal year ending May ~~31, 2020~~30, 2021 will contain 5352 weeks of ~~operation, with the 53rd week occurring in our fiscal fourth quarter.~~operation. Operating results for interim periods presented are not necessarily indicative of results that may be expected for the full fiscal year.

These statements should be read in conjunction with the consolidated financial statements and related notes to consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended May ~~26, 2019~~.31, 2020. We prepare our consolidated financial statements in conformity with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of sales and costs and expenses during the reporting period. Actual results could differ from those estimates.

We have reclassified certain amounts in prior-period financial statements to conform to the current period’s presentation.

~~On July 29, 2019,~~COVID-19 Pandemic

The COVID-19 pandemic has resulted in a significant reduction in guest traffic at our restaurants due to changes in consumer behavior as public health officials encouraged social distancing and state and local governments mandated restrictions including suspension of dine-in operations, reduced restaurant seating capacity, table spacing requirements, bar closures and additional physical barriers. Beginning in late March 2020, we ~~completed~~operated with all of our dining rooms closed and served our guests in a To Go only or To Go and delivery format. In late April 2020, state and local governments began to allow us to open dining rooms at limited capacities, along with other operating restrictions. While increasing our in-restaurant dining capacity is subject to the ~~acquisition~~ordinances in the jurisdictions we operate, we are focused on increasing capacity where possible, while continuing to provide a safe environment for our team members and guests, and maintaining many of ~~5 Cheddar's Scratch Kitchen restaurants (4~~the operating efficiencies established during this time. As we navigate through the pandemic, we have taken significant steps to adapt our business to allow us to continue to serve guests, support our team members and ~~1 closed) and~~secure our liquidity position to provide financial flexibility. As we progressed into November, rising case rates have resulted in certain ~~assets and liabilities from an existing franchisee. The acquisition was funded with cash on hand~~jurisdictions implementing restrictions that reduce dining room capacity or mandate the closure of dining rooms. We anticipate continued uncertainty surrounding dining room operations for ~~$37.8 million in total consideration,~~the near term. As of ~~which approximately $19.0 million was allocated to land, buildings and equipment. The results of operations of these restaurants are included in our consolidated financial statements from~~ the date of ~~acquisition.~~

~~On December 2, 2019,~~this filing, 84.0 percent of our restaurants were able to open their dining rooms to some extent. With approved vaccines beginning to be distributed, we ~~completed the acquisition of 2 Cheddar's Scratch Kitchen restaurants~~expect our restaurants’ dining room capacity to increase as public health conditions improve and ~~certain assets and liabilities from two existing franchisees. The acquisition was funded with cash on hand for $14.0 million in total consideration, of which approximately $7.0 million was allocated~~restrictions are eased. However, it is possible additional outbreaks could require us to ~~land, buildings and equipment. The results of operations of these restaurants are included in~~reduce our ~~consolidated financial statements from the date of acquisition.~~

Pro-forma financial information of the combined entities for periods prior to the acquisitions is not presented due to the immaterial impact, both individually and in the aggregate, of the financial results of the acquired restaurants oncapacity or further suspend our ~~consolidated financial statements.~~in-restaurant dining operations.

Recently Adopted Accounting Standards

As of ~~May 27, 2019,~~June 1, 2020, we adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) ~~2016-02, Leases~~2016-13 Financial Instruments - Credit Losses (Topic ~~842) (ASC 842) which replaced existing lease~~326). The amendments in this update require entities to estimate an expected lifetime credit loss on financial assets ranging from short-term trade accounts receivable to long-term financings. This guidance impacts, among other items, how a company determines liabilities associated with ~~comprehensive lease measurement and recognition guidance and expanded disclosure requirements. This new guidance requires lessees~~financial guarantees related to ~~recognize on the balance sheet a liability based on the present value of minimum~~assigned leases. We remain contingently liable for lease payments ~~and a corresponding right-of-use asset.~~under certain restaurant leases related to dispositions. We adopted this guidance using the modified retrospective transition ~~method which means~~method. Upon adoption, we ~~did not adjust the balance sheet for comparative periods but~~ recorded a ~~$3.8~~$7.5 million (net of tax of $2.5 million) cumulative-effect adjustment to the beginning balance of retained earnings asrelated to an expected credit loss liability for the contingent aspect of ~~May 27, 2019. We elected the package of practical expedients which allowed us to not reassess previous accounting conclusions regarding~~our lease identification, lease classification and initial direct costs. We elected the land easement practical expedient which allowed us to not evaluate our existing land easements for lease accounting treatment. We elected the short-term lease recognition exemption which provided the option to not recognize right-of-use assets and related liabilities that arise from certain leases with terms of 12 months or less. We also elected the accounting policy election to not separate lease and non-lease components for real estate leases entered into after adoption.guarantees. See Note ~~14.~~11 for information regarding contingent lease guarantees.

~~As of May 27,~~

In December 2019, ~~we adopted~~the FASB issued ASU ~~2017-12, Derivatives and Hedging~~2019-12, Income Taxes (Topic ~~815)~~740). The amendments in this update ~~better align an entity’s risk management activities~~are intended to simplify the accounting for income taxes by removing certain exceptions in the existing guidance and ~~financial reporting for hedging relationships through changes to~~simplify areas

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DARDEN RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~both~~such as franchise taxes, recognizing deferred taxes for tax goodwill, separate entity financial statements and interim recognition of enactment of tax laws or tax rate changes. This update is effective for us in the ~~designation and measurement~~first quarter of fiscal 2022, however we elected to early adopt this guidance ~~for qualifying hedging relationships and~~during the ~~presentation of hedge results.~~quarter ended August 30, 2020. The adoption of this guidance did not have a material impact on our consolidated financial statements.

Note 2.Revenue Recognition

Deferred revenue liabilities from contracts with customers included on our accompanying consolidated balance sheets is comprised of the following:

The following table presents a rollforward of deferred gift card revenue.


	Three Months Ended				Six Months Ended
(in millions)	November 29, 2020		November 24, 2019		November 29, 2020		November 24, 2019
Beginning balance	$	475.6	$	410.2	$	494.6	$	453.6
Activations	94.7		127.4		170.4		243.8
Redemptions and breakage	(101.0)		(125.2)		(195.7)		(285.0)
Ending balance	$	469.3	$	412.4	$	469.3	$	412.4

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DARDEN RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 3.Additional Financial Information

Supplemental Balance Sheet Information

The components of lease assets and liabilities on the consolidated balance sheet are as follows:


(in millions)	Balance Sheet Classification	November 29, 2020		May 31, 2020
Operating lease right-of-use assets	Operating lease right-of-use assets	$	3,909.8	$	3,969.2
Finance lease right-of-use assets	Land, buildings and equipment, net	292.0		235.2
Total lease assets, net		$	4,201.8	$	4,204.4

Operating lease liabilities - current	Other current liabilities	$	178.1	$	160.6
Finance lease liabilities - current	Other current liabilities	5.8		5.7
Operating lease liabilities - non-current	Operating lease liabilities - non-current	4,222.8		4,276.3
Finance lease liabilities - non-current	Other liabilities	432.3		368.4
Total lease liabilities		$	4,839.0	$	4,811.0

Supplemental Cash Flow Information

Cash paid for interest and income taxes are as follows: Nine Months Ended
(in millions) February 23, 2020 February 24, 2019
Interest, net of amounts capitalized $ 40.2
$ 37.1
Income taxes, net of refunds 1.1
15.0


Cash paid for interest and income taxes are as follows:	Six Months Ended
(in millions)	November 29, 2020		November 24, 2019
Interest, net of amounts capitalized	$	31.4	$	26.8
Income taxes, net of refunds	12.6		(4.7)

Non-cash investing activities are as follows: Nine Months Ended
(in millions) February 23, 2020 February 24, 2019
Increase in land, buildings and equipment through accrued purchases $ 44.7
$ 37.5


Non-cash investing and financing activities are as follows:	Six Months Ended
(in millions)	November 29, 2020		November 24, 2019
Increase in land, buildings and equipment through accrued purchases	$	33.9	$	50.9
Right-of-use assets obtained in exchange for new operating lease liabilities	42.7		106.6
Right-of-use assets obtained in exchange for new finance lease liabilities	67.1		139.3

The effective income tax rate for continuing operations for the quarter ended ~~February 23,~~November 29, 2020 was ~~12.0~~8.3 percent, reflecting income tax expense of $8.8 million, compared to an effective income tax rate ~~of 11.1 percent~~ for the quarter ended ~~February~~November 24, ~~2019.~~2019 of (509.7) percent, reflecting an income tax benefit of $31.6 million. The effective income tax rate for continuing operations for the ~~nine~~six months ended ~~February 23,~~November 29, 2020 was ~~4.2~~2.9 percent, reflecting income tax expense of $4.0 million compared to an effective income tax rate of ~~9.7~~(7.1) percent for the ~~nine~~six months ended ~~February~~November 24, ~~2019. The effective~~2019, reflecting an income tax ~~rate increase for~~benefit of $13.0 million. The change was driven by lower net earnings from continuing operations in the quarter ended ~~February 23,~~November 24, 2019 compared to the quarter ended November 29, 2020, ~~was~~ primarily due to ~~higher earnings before income taxes. The effective income~~a pension settlement charge recorded during the quarter ended November 24, 2019 and the impact of certain tax ~~rate decrease for the~~

~~Table of Contents~~

~~DARDEN RESTAURANTS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~nine months ended February 23, 2020 was primarily due to~~credits on our lower earnings before income ~~taxes for fiscal 2020 driven primarily by a pension settlement charge.~~taxes.

Included in our remaining balance of unrecognized tax benefits is ~~$5.4~~$6.1 million related to tax positions for which it is reasonably possible that the total amounts could change within the next twelve months based on the outcome of examinations or as a result of the expiration of the statute of limitations for specific jurisdictions.

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DARDEN RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 5.Net Earnings per Share

Outstanding stock options, restricted stock and equity-settled performance stock units granted by us represent the only dilutive effect reflected in diluted weighted average shares outstanding, none of which impact the numerator of the diluted net earnings per share computation. Stock options, restricted stock and equity-settled performance stock units excluded from the calculation of diluted net earnings per share because the effect would have been anti-dilutive, are as follows:

Three Months Ended

Six Months Ended

(in millions)

November 29,
2020

November 24,
2019

November 29,
2020

November 24,
2019

Anti-dilutive stock-based compensation awards

0.7

1.1

0.5

Note 6.Segment Information

We manage our restaurant brands, Olive Garden, LongHorn Steakhouse, Cheddar’s Scratch Kitchen, Yard House, The Capital Grille, Seasons 52, Bahama Breeze and Eddie V’s, in North America as operating segments. The brands operate principally in the U.S. within full-service dining. 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. We have 4 reportable segments: (1) Olive Garden, (2) LongHorn Steakhouse, (3) Fine Dining and (4) Other Business.

The Olive Garden segment includes the results of our company-owned Olive Garden restaurants in the U.S. and Canada. The LongHorn Steakhouse segment includes the results of our company-owned LongHorn Steakhouse restaurants in the U.S. The Fine Dining segment aggregates our premium brands that operate within the fine-dining sub-segment of full-service dining and includes the results of our company-owned The Capital Grille and Eddie V’s restaurants in the U.S. The Other Business segment aggregates our remaining brands and includes the results of our company-owned Cheddar’s Scratch Kitchen, Yard House, Seasons 52 and Bahama Breeze restaurants in the U.S and results from our franchise operations.

External sales are derived principally from food and beverage sales. We do not rely on any major customers as a source of sales, and the customers and long-lived assets of our reportable segments are predominantly in the U.S. There were no material transactions among reportable segments.

Our management uses segment profit as the measure for assessing performance of our segments. Segment profit includes revenues and expenses directly attributable to restaurant-level results of operations (sometimes referred to as restaurant-level earnings). These expenses include food and beverage costs, restaurant labor costs, restaurant expenses and marketing expenses (collectively “restaurant and marketing expenses”). InNon-cash lease-related expenses included in restaurant expenses (which is a component of segment profit) and lease-related depreciation and amortization are reported at the ~~first quarter of fiscal 2020, we changed our internal management reporting related to non-cash lease-related expenses,~~corporate level as these are expenses for which our operating segments are ~~no longer~~not being evaluated. This change reallocates non-cash lease-related expenses from our operating segments to the corporate level for restaurant expenses (which is a component of segment profit) and depreciation and amortization. Additionally, our lease-related right-of-use assets are not managed or evaluated at the operating segment level, but rather at the corporate level. ~~Fiscal 2019 segment profit and depreciation and amortization have been restated for comparability.~~

Table of Contents

DARDEN RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following tables reconcile our segment results to our consolidated results reported in accordance with GAAP.


(in millions)	Olive Garden		LongHorn Steakhouse		Fine Dining		Other Business		Corporate		Consolidated
For the three months ended November 29, 2020
Sales	$	829.5	$	407.4	$	108.1	$	311.5	$	0	$	1,656.5
Restaurant and marketing expenses	654.4		341.1		87.8		272.2		4.4		1,359.9
Segment profit	$	175.1	$	66.3	$	20.3	$	39.3	$	(4.4)	$	296.6

Depreciation and amortization	$	34.5	$	16.5	$	7.8	$	24.0	$	3.2	$	86.0



(in millions)	Olive Garden		LongHorn Steakhouse		Fine Dining		Other Business		Corporate		Consolidated
For the six months ended November 29, 2020
Sales	$	1,617.7	$	784.1	$	191.2	$	590.9	$	0	$	3,183.9
Restaurant and marketing expenses	1,268.8		660.8		161.0		515.9		8.3		2,614.8
Segment profit	$	348.9	$	123.3	$	30.2	$	75.0	$	(8.3)	$	569.1

Depreciation and amortization	$	70.4	$	33.4	$	15.5	$	48.1	$	6.2	$	173.6

Purchases of land, buildings and equipment	34.6		17.4		24.1		31.1		1.0		108.2

(in millions) Olive Garden LongHorn Steakhouse Fine Dining Other Business Corporate Consolidated
For the three months ended February 24, 2019
Sales $ 1,130.2
$ 483.2
$ 174.5
$ 458.6
$ —
$ 2,246.5
Restaurant and marketing expenses 884.6
385.9
131.1
389.4
0.3
1,791.3
Segment profit $ 245.6
$ 97.3
$ 43.4
$ 69.2
$ (0.3 ) $ 455.2

Depreciation and amortization $ 35.5
$ 17.2
$ 7.5
$ 23.8
$ 1.3
$ 85.3
Impairments and disposal of assets, net 2.2
—
—
—
(0.6 ) 1.6

(in millions) Olive Garden LongHorn Steakhouse Fine Dining Other Business Corporate Consolidated
For the nine months ended February 24, 2019
Sales $ 3,180.3
$ 1,326.2
$ 451.2
$ 1,323.6
$ —
$ 6,281.3
Restaurant and marketing expenses 2,534.2
1,090.2
358.7
1,135.5
4.4
5,123.0
Segment profit $ 646.1
$ 236.0
$ 92.5
$ 188.1
$ (4.4 ) $ 1,158.3

Depreciation and amortization $ 103.8
$ 50.6
$ 21.8
$ 68.3
$ 4.3
$ 248.8
Impairments and disposal of assets, net 4.6
0.3
—
—
(0.5 ) 4.4
Purchases of land, buildings and equipment 146.1
50.5
31.2
116.3
2.8
346.9

Table of Contents

DARDEN RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Reconciliation of segment profit to earnings from continuing operations before income taxes:


	Three Months Ended				Six Months Ended
(in millions)	November 29, 2020		November 24, 2019		November 29, 2020		November 24, 2019
Segment profit	$	296.6	$	339.2	$	569.1	$	724.9
Less general and administrative expenses	(89.9)		(91.4)		(218.2)		(189.4)
Less depreciation and amortization	(86.0)		(87.6)		(173.6)		(173.8)

Less interest, net	(14.6)		(13.1)		(31.2)		(24.2)
Less other (income) expense, net	(0.4)		(153.3)		(7.9)		(153.3)
Earnings (loss) before income taxes	$	105.7	$	(6.2)	$	138.2	$	184.2

Three Months Ended Nine Months Ended
(in millions) February 23, 2020 February 24, 2019 February 23, 2020 February 24, 2019
Segment profit $ 466.4
$ 455.2
$ 1,191.3
$ 1,158.3
Less general and administrative expenses (100.3 ) (102.8 ) (289.6 ) (302.4 )
Less depreciation and amortization (87.7 ) (85.3 ) (261.5 ) (248.8 )
Less impairments and disposal of assets, net (0.1 ) (1.6 ) (0.2 ) (4.4 )
Less interest, net (13.2 ) (12.4 ) (37.4 ) (38.3 )
Less other (income) expense, net —

—
(153.3 ) —
Earnings (loss) before income taxes $ 265.1
$ 253.1
$ 449.3
$ 564.4

~~Note 7.Impairments and Disposal of Assets, Net~~

~~Impairments and disposal of assets, net, in our accompanying consolidated statements of earnings are comprised of the following:~~

Restaurant impairments for the quarter and nine months ended February 23, 2020 and February 24, 2019 were primarily related to underperforming restaurants. Disposal gains for the nine months ended February 23, 2020 were related to a sale-leaseback, disposal of closed locations, and sale of liquor licenses. Disposal gains for the quarter and nine months ended February 24, 2019 were related to the sale of excess land parcels. Other for the quarter and nine months ended February 23, 2020 was related to lease revaluations.

Note 8.7.Stockholders’ Equity

The components of accumulated other comprehensive income (loss), net of tax, for the quarter and ~~nine~~six months ended ~~February 23,~~November 29, 2020 are as follows:


(in millions)	Foreign Currency Translation Adjustment		Unrealized Gains (Losses) on Derivatives		Benefit Plan Funding Position		Accumulated Other Comprehensive Income (Loss)
Balance at August 30, 2020	$	4.7	$	(4.1)	$	(13.1)	$	(12.5)
Gain (loss)	0		4.6		0		4.6
Reclassification realized in net earnings	0		0.4		0.4		0.8
Balance at November 29, 2020	$	4.7	$	0.9	$	(12.7)	$	(7.1)

Balance at May 31, 2020	$	4.5	$	(8.6)	$	(13.5)	$	(17.6)
Gain (loss)	0.2		9.0		0		9.2
Reclassification realized in net earnings	0		0.5		0.8		1.3
Balance at November 29, 2020	$	4.7	$	0.9	$	(12.7)	$	(7.1)

~~Table of Contents~~

~~DARDEN RESTAURANTS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

The components of accumulated other comprehensive income (loss), net of tax, for the quarter and ~~nine~~six months ended ~~February~~November 24, 2019 are as follows:


(in millions)	Foreign Currency Translation Adjustment		Unrealized Gains (Losses) on Derivatives		Benefit Plan Funding Position		Accumulated Other Comprehensive Income (Loss)
Balance at August 25, 2019	$	(1.0)	$	6.1	$	(106.1)	$	(101.0)
Gain (loss)	5.5		(3.0)		(12.7)		(10.2)
Reclassification realized in net earnings	0		0.3		110.4		110.7
Balance at November 24, 2019	$	4.5	$	3.4	$	(8.4)	$	(0.5)

Balance at May 26, 2019	$	(1.0)	$	9.0	$	(106.2)	$	(98.2)
Gain (loss)	5.5		(5.1)		(12.7)		(12.3)
Reclassification realized in net earnings	0		(0.5)		110.5		110.0
Balance at November 24, 2019	$	4.5	$	3.4	$	(8.4)	$	(0.5)

(in millions) Foreign Currency Translation Adjustment Unrealized Gains (Losses) on Derivatives Benefit Plan Funding Position Accumulated Other Comprehensive Income (Loss)
Balance at November 25, 2018 $ (1.0 ) $ 9.7
$ (87.4 ) $ (78.7 )
Gain (loss) (0.3 ) (1.5 ) —
(1.8 )
Reclassification realized in net earnings —
(0.4 ) (0.1 ) (0.5 )
Balance at February 24, 2019 $ (1.3 ) $ 7.8
$ (87.5 ) $ (81.0 )

Balances at May 27, 2018 $ (1.6 ) $ 3.4
$ (87.0 ) $ (85.2 )
Gain (loss) 0.3
9.9
—
10.2
Reclassification realized in net earnings —
(5.5 ) (0.5 ) (6.0 )
Balance at February 24, 2019 $ (1.3 ) $ 7.8
$ (87.5 ) $ (81.0 )

Table of Contents

DARDEN RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table presents the amounts and line items in our consolidated statements of earnings where adjustments reclassified from AOCI into net earnings were recorded.


		Amount Reclassified from AOCI into Net Earnings
		Three Months Ended				Six Months Ended
(in millions) AOCI Components	Location of Gain (Loss) Recognized in Earnings	November 29, 2020		November 24, 2019		November 29, 2020		November 24, 2019
Derivatives
Commodity contracts	(1)	$	(0.4)	$	(0.2)	$	(0.9)	$	(0.6)
Equity contracts	(2)	(0.1)		0		0.3		1.0
Interest rate contracts	(3)	(0.1)		(0.1)		(0.1)		(0.1)
Total before tax		$	(0.6)	(0.3)		$	(0.7)	$	0.3
Tax (expense) benefit		0.2		0		0.2		0.2
Net of tax		$	(0.4)	$	(0.3)	$	(0.5)	$	0.5

Benefit plan funding position
Recognized net actuarial loss - pension/postretirement plans	(4)	$	(0.1)	$	(147.9)	$	(0.1)	$	(148.8)
Recognized net actuarial gain (loss) - other plans	(5)	(0.5)		0.8		(1.0)		1.6
Total before tax		$	(0.6)	$	(147.1)	$	(1.1)	$	(147.2)
Tax (expense) benefit		0.2		36.7		0.3		36.7
Net of tax		$	(0.4)	$	(110.4)	$	(0.8)	$	(110.5)

Amount Reclassified from AOCI into Net Earnings
Three Months Ended Nine Months Ended
(in millions)
AOCI Components
Location of Gain (Loss) Recognized in Earnings February 23,
2020 February 24,
2019 February 23,
2020 February 24,
2019
Derivatives
Commodity contracts (1) $ (0.5 ) $ 0.5
$ (1.1 ) $ 0.9
Equity contracts (2) —
—
1.0
4.9
Interest rate contracts (3) —
—
(0.1 ) (0.1 )
Total before tax $ (0.5 ) $ 0.5
$ (0.2 ) $ 5.7
Tax (expense) benefit —
(0.1 ) 0.2
(0.2 )
Net of tax $ (0.5 ) $ 0.4
$ —
$ 5.5

Benefit plan funding position
Recognized net actuarial loss - pension/postretirement plans (4) $ (0.1 ) $ (0.6 ) $ (148.9 ) $ (1.9 )
Recognized net actuarial gain - other plans (5) 0.8
0.7
2.4
2.4
Total before tax $ 0.7
$ 0.1
$ (146.5 ) $ 0.5
Tax (expense) benefit (0.1 ) —
36.6
—
Net of tax $ 0.6
$ 0.1
$ (109.9 ) $ 0.5

(2)Included in general and administrative expenses. See Note 9 for additional details.

(3)Included in interest, net on our consolidated statements of earnings.

(4)Included in the computation of net periodic benefit costs - pension and postretirement plans, which is a component of restaurant labor expenses and general and administrative expenses and other (income) expense, net. See Note 9 for additional details.

~~Table of Contents~~

~~DARDEN RESTAURANTS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~Note 9.~~ ~~Retirement Plans~~

~~Components~~ of net periodic benefit ~~cost are as follows:~~

(5)Included in the computation of net periodic benefit costs - other plans, which is a component of restaurant labor, general and administrative expenses and other (income) expense, net.

In April 2018, our Benefit Plans Committee approved the termination of our primary non-contributory defined benefit pension plan (the Retirement Income Plan for Darden Restaurants, Inc.). Plan participants who had not yet begun receiving their benefit payments were provided the opportunity to receive their full accrued benefits from plan assets by either (i) electing immediate lump sum distributions or annuities or (ii) deferring commencement of their benefits to a later date. Deferred benefits have been transferred to a third-party annuity provider. During the second quarter of fiscal 2020, we made a funding contribution of approximately $12.2 million to fully fund the benefit obligation. In November of fiscal 2020 the benefit obligation to plan participants was settled, resulting in a pre-tax pension settlement charge of $147.1 million.

Note ~~10.~~8.Stock-Based Compensation

We grant stock options for a fixed number of shares to certain employees with an exercise price equal to the fair value of the shares at the date of grant. We also grant restricted stock, restricted stock units and performance stock units with a fair value generally determined based on our closing stock price on the date of grant. In addition, we grant cash settled stock units (Darden stock units) which are classified as liabilities and are marked to market as of the end of each period.

The weighted-average fair value of non-qualified stock options and the related assumptions used in the Black-Scholes option pricing model for options granted during the periods presented, were as ~~follows.~~follows:

Stock Options Granted
Nine Months Ended
February 23, 2020 February 24, 2019
Weighted-average fair value $ 19.94
$ 18.78
Dividend yield 3.0 % 3.2 %
Expected volatility of stock 22.5 % 22.6 %
Risk-free interest rate 1.9 % 2.9 %
Expected option life (in years) 6.3
6.4
Weighted-average exercise price per share $ 124.24
$ 107.05


	Six Months Ended
	November 29, 2020			November 24, 2019
Weighted-average fair value	$	20.07		$	19.94
Dividend yield	3.0		%	3.0		%
Expected volatility of stock	37.3		%	22.5		%
Risk-free interest rate	0.4		%	1.9		%
Expected option life (in years)	6.4			6.3
Weighted-average exercise price per share	$	78.84		$	124.24

Table of Contents

DARDEN RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The weighted-average grant date fair value of performance-based restricted stock units and the related assumptions used in the Monte Carlo simulation to record stock-based compensation ~~are~~for units granted during the periods presented, were as follows:


	Six Months Ended
	November 29, 2020			November 24, 2019
Dividend yield (1)	0.0		%	0.0		%
Expected volatility of stock	50.5		%	23.1		%
Risk-free interest rate	0.1		%	1.8		%
Expected life (in years)	2.8			2.9
Weighted-average grant date fair value per unit	$	83.46		$	124.41

Granted in Fiscal Year Ended
Nine Months Ended
February 23, 2020 February 24, 2019
Dividend yield (1) 0.0 % 0.0 %
Expected volatility of stock 23.1 % 23.4 %
Risk-free interest rate 1.8 % 2.7 %
Expected option life (in years) 2.9
2.9
Weighted-average grant date fair value per unit $ 124.41
$ 115.07
(1)Assumes a reinvestment of dividends.

The following table presents a summary of our stock-based compensation activity for the ~~nine~~six months ended ~~February 23, 2020~~.November 29, 2020.

(in millions)
Stock
Options

Restricted
Stock/
Restricted
Stock
Units
Equity-Settled
Performance
Stock Units
Cash-Settled Darden
Stock
Units
Outstanding beginning of period 2.60
0.28
0.60
1.20
Awards granted 0.31
0.07
0.18
0.19
Awards exercised/vested (0.26 ) (0.06 ) (0.22 ) (0.28 )
Awards forfeited (0.01 ) (0.01 ) (0.01 ) (0.06 )
Outstanding end of period 2.64
0.28
0.55
1.05


(in millions)	Stock Options	Restricted Stock/ Restricted Stock Units	Equity-Settled Performance Stock Units	Cash-Settled Darden Stock Units
Outstanding beginning of period	2.62	0.28	0.55	1.03
Awards granted	0.28	0.09	0.14	0.28
Awards exercised/vested	(0.12)	(0.07)	(0.19)	(0.29)
Awards forfeited	(0.01)	(0.01)	0	(0.05)
Outstanding end of period	2.77	0.29	0.50	0.97

We recognized expense from stock-based compensation as follows:


	Three Months Ended				Six Months Ended
(in millions)	November 29, 2020		November 24, 2019		November 29, 2020		November 24, 2019
Stock options	$	2.8	$	1.5	$	4.5	$	2.8
Restricted stock/restricted stock units	3.0		1.7		5.8		3.5
Equity-settled performance stock units	5.1		3.9		10.7		7.7
Cash-settled Darden stock units	10.4		5.8		18.4		12.4
Employee stock purchase plan	0.6		0.5		1.3		0.9
Director compensation program/other	0.3		0.4		0.7		0.7
Total stock-based compensation expense	$	22.2	$	13.8	$	41.4	$	28.0

Note ~~11.~~9. Derivative Instruments and Hedging Activities

We enter into derivative instruments for risk management purposes only, including derivatives designated as hedging instruments as provided by FASB ASC Topic 815, Derivatives and Hedging, and those utilized as economic hedges. We use financial derivatives to manage interest rate and compensation risks inherent in our business operations. To the extent our cash-flow hedging instruments are effective in offsetting the variability of the hedged cash flows, and otherwise meet the cash flow hedge accounting criteria required by Topic 815 of the FASB ASC, changes in the derivatives’ fair value are not included in current earnings, but are included in accumulated other comprehensive income (loss), net of tax. These changes in fair value will be reclassified into earnings at the time of the forecasted transaction. To the extent the cash flow hedge accounting criteria

Table of Contents

DARDEN RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

are not met, the derivative contracts are utilized as economic hedges and changes in the fair value of such contracts are recorded currently in earnings in the period in which they occur.

~~Table of Contents~~

~~DARDEN RESTAURANTS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

By using these instruments, we expose ourselves, from time to time, to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes us, which creates credit risk for us. We minimize this credit risk by entering into transactions with high quality counterparties. We currently do not have any provisions in our agreements with counterparties that would require either party to hold or post collateral in the event that the market value of the related derivative instrument exceeds a certain limit. As such, the maximum amount of loss due to counterparty credit risk we would incur at ~~February 23,~~November 29, 2020,, if counterparties to the derivative instruments failed completely to perform, would approximate the values of derivative instruments currently recognized as assets on our consolidated balance sheet. Market risk is the adverse effect on the value of a financial instrument that results from a change in interest rates, commodity prices, or the market price of our common stock. We minimize this market risk by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken.

We periodically enter into commodity futures, swaps and option contracts (collectively, commodity contracts) to reduce the risk of variability in cash flows associated with fluctuations in the price we pay for commodities, such as natural gas and diesel fuel. For certain of our commodity purchases, changes in the price we pay for these commodities are highly correlated with changes in the market price of these commodities. For these commodity purchases, we designate commodity contracts as cash flow hedging instruments. For the remaining commodity purchases, changes in the price we pay for these commodities are not highly correlated with changes in the market price, generally due to the timing of when changes in the market prices are reflected in the price we pay. For these commodity purchases, we utilize these commodity contracts as economic hedges. Our commodity contracts currently extend through ~~April~~May 2021.

We enter into equity forward contracts to hedge the risk of changes in future cash flows associated with the unvested, unrecognized Darden stock units. The equity forward contracts will be settled at the end of the vesting periods of their underlying Darden stock units, which range between three and five years and currently extend through July ~~2024.~~2025. The contracts were initially designated as cash flow hedges to the extent the Darden stock units are unvested and, therefore, unrecognized as a liability in our financial statements. The forward contracts have net cash settlement terms and net settle every three months. As the Darden stock units vest, we will de-designate that portion of the equity forward contract that no longer qualifies for hedge accounting, and changes in fair value associated with that portion of the equity forward contract will be recognized in current earnings. We periodically incur interest on the notional value of the contracts and receive dividend equivalents on the underlying shares. These amounts are recognized currently in earnings as they are incurred or received.

We entered into equity forward contracts to hedge the risk of changes in future cash flows associated with recognized, employee-directed investments in Darden stock within the non-qualified deferred compensation plan. We did not elect hedge accounting with the expectation that changes in the fair value of the equity forward contracts would offset changes in the fair value of Darden stock investments in the non-qualified deferred compensation plan within general and administrative expenses in our consolidated statements of earnings. These contracts currently extend through ~~September 2023.~~July 2024.

Table of Contents

DARDEN RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The notional and fair values of our derivative contracts are as follows:


					Fair Values													Fair Values
(in millions, except per share data)	Number of Shares Outstanding	Weighted-Average Per Share Forward Rates	Notional Values		Derivative Assets (1)				Derivative Liabilities (1)				(in millions, except per share data)	Number of Shares Outstanding	Weighted-Average Per Share Forward Rates	Notional Values		Derivative Assets (1)				Derivative Liabilities (1)
	February 23, 2020				February 23, 2020		May 26, 2019		February 23, 2020		May 26, 2019			November 29, 2020				November 29, 2020		May 31, 2020		November 29, 2020		May 31, 2020
Equity forwards:													Equity forwards:
Designated	0.3	$103.03	$	29.8	$	0.2	$	—	$	—	$	0.3	Designated	0.3	$104.56	$	31.2	$	0	$	1.8	$	0	$	0
Not designated	0.6	$83.61	$	47.4	0.3		—		—		0.5		Not designated	0.5	$103.26	$	52.9	0		4.4		0.1		0
Total equity forwards	Total equity forwards				$	0.5	$	—	$	—	$	0.8	Total equity forwards					$	0	$	6.2	$	0.1	$	0
Commodity contracts	N/A	N/A	$	15.6	$	—	$	0.1	$	0.7	$	0.1
Commodity contracts:													Commodity contracts:
Designated													Designated	N/A	N/A	$	9.3	$	0.5	$	0.3	$	0.6	$	1.8
Not designated													Not designated	N/A	N/A	$	0.5	0		0		0.1		0.3
Total commodity contracts													Total commodity contracts					$	0.5	$	0.3	$	0.7	$	2.1
Total derivative contracts	Total derivative contracts				$	0.5	$	0.1	$	0.7	$	0.9	Total derivative contracts					$	0.5	$	6.5	$	0.8	$	2.1

~~Table of Contents~~(1)

~~DARDEN RESTAURANTS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Derivative assets and liabilities are included in receivables, net and other current liabilities, as applicable, on our consolidated balance sheets.

The effects of derivative instruments accounted for as cash flow hedging instruments in the consolidated statements of earnings are as follows:


	Amount of Gain (Loss) Recognized in AOCI				Amount of Gain (Loss) Reclassified from AOCI to Earnings
	Three Months Ended				Three Months Ended
(in millions)	November 29, 2020		November 24, 2019		November 29, 2020		November 24, 2019
Equity (1)	$	5.0	$	(3.3)	$	(0.1)	$	0
Commodity (2)	(0.5)		0.4		(0.4)		(0.2)
Interest rate (3)	0		0		(0.1)		(0.1)
Total	$	4.5	$	(2.9)	$	(0.6)	$	(0.3)

	Amount of Gain (Loss) Recognized in AOCI				Amount of Gain (Loss) Reclassified from AOCI to Earnings
	Six Months Ended				Six Months Ended
(in millions)	November 29, 2020		November 24, 2019		November 29, 2020		November 24, 2019
Equity (1)	$	8.7	$	(4.3)	$	0.3	$	1.0
Commodity (2)	0.4		(1.0)		(0.9)		(0.6)
Interest rate (3)	0		0		(0.1)		(0.1)
Total	$	9.1	$	(5.3)	$	(0.7)	$	0.3

Amount of Gain (Loss) Recognized in AOCI Amount of Gain (Loss) Reclassified from AOCI to Earnings
Three Months Ended Three Months Ended
(in millions) February 23,
2020 February 24,
2019 February 23,
2020 February 24,
2019
Equity (1)(2) $ 0.8
$ (1.4 ) $ —
$ —
Commodity (3) (0.8 ) (0.1 ) (0.5 ) 0.5
Interest rate (4) —
—
—
—
Total $ —
$ (1.5 ) $ (0.5 ) $ 0.5

Amount of Gain (Loss) Recognized in AOCI Amount of Gain (Loss) Reclassified from AOCI to Earnings
Nine Months Ended Nine Months Ended
(in millions) February 23,
2020 February 24,
2019 February 23,
2020 February 24,
2019
Equity (1)(2) $ (3.5 ) $ 9.6
$ 1.0
$ 4.9
Commodity (3) (1.8 ) 0.4
(1.1 ) 0.9
Interest rate (4) —
—
(0.1 ) (0.1 )
Total $ (5.3 ) $ 10.0
$ (0.2 ) $ 5.7

(2)Location of the gain (loss) reclassified from AOCI to earnings is food and beverage costs and restaurant expenses.

(3)Location of the gain (loss) reclassified from AOCI to earnings is interest, net.

Table of Contents

DARDEN RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The effects of derivatives not designated as hedging instruments in the consolidated statements of earnings are as follows:

Amount of Gain (Loss) Recognized in Earnings
(in millions) Three Months Ended Nine Months Ended
Location of Gain (Loss) Recognized in Earnings on Derivatives February 23, 2020 February 24, 2019 February 23, 2020 February 24, 2019
Food and beverage costs and restaurant expenses $ —
$ —
$ 0.3
$ —
Restaurant labor expenses —
0.8
—
8.1
General and administrative expenses 2.4
0.7
1.8
10.9
Total $ 2.4
$ 1.5
$ 2.1
$ 19.0


	Amount of Gain (Loss) Recognized in Earnings
(in millions)	Three Months Ended				Six Months Ended
Location of Gain (Loss) Recognized in Earnings on Derivatives	November 29, 2020		November 24, 2019		November 29, 2020		November 24, 2019
Food and beverage costs and restaurant expenses	$	0	$	0	$	0.1	$	0.3
General and administrative expenses	10.6		(1.2)		15.1		(0.6)
Total	$	10.6	$	(1.2)	$	15.2	$	(0.3)

Based on the fair value of our derivative instruments designated as cash flow hedges as of ~~February 23,~~November 29, 2020,, we expect to reclassify ~~$0.2~~$0.4 million of net gains on derivative instruments from accumulated other comprehensive income (loss) to earnings during the next 12 months based on the maturity of our equity forward contracts. However, the amounts ultimately realized in earnings will be dependent on the fair value of the contracts on the settlement dates.

~~Table of Contents~~

~~DARDEN RESTAURANTS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Note ~~12.~~10. Fair Value Measurements

The fair values of cash equivalents, receivables, net, accounts payable and short-term debt approximate their carrying amounts due to their short duration.

The following tables summarize the fair values of financial instruments measured at fair value on a recurring basis as of ~~February 23,~~November 29, 2020 and May ~~26, 2019~~31, 2020.


Items Measured at Fair Value at May 31, 2020
(in millions)		Fair value of assets (liabilities)		Quoted prices in active market for identical assets (liabilities) (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Derivatives:
Commodities futures, swaps & options	(1)	$	(1.8)	$	0	$	(1.8)	$	0
Equity forwards	(2)	6.2		0		6.2		0
Total		$	4.4	$	0	$	4.4	$	0

Items Measured at Fair Value at May 26, 2019
(in millions)
Fair value
of assets
(liabilities)

Quoted prices
in active
market for
identical assets
(liabilities)
(Level 1)

Significant
other
observable
inputs
(Level 2)

Significant
unobservable
inputs
(Level 3)
Derivatives:
Equity forwards (2) $ (0.8 ) $ —
$ (0.8 ) $ —
Total $ (0.8 ) $ —
$ (0.8 ) $ —

(1)The fair value of our commodities futures, swaps and options is based on closing market prices of the contracts, inclusive of the risk of nonperformance.

(2)The fair value of equity forwards is based on the closing market value of Darden stock, inclusive of the risk of nonperformance.

The carrying value and fair value of long-term debt as of ~~February 23,~~November 29, 2020, was ~~$928.5~~$929.4 million and $1.04 billion, respectively. The carrying value and fair value of long-term debt as of May ~~26, 2019,~~31, 2020, was ~~$927.7~~$928.8 million and ~~$955.7 million,~~$1.20 billion, respectively. The fair value of long-term debt, which is classified as Level 2 in the fair value hierarchy, is determined based on

Table of Contents

DARDEN RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

market prices or, if market prices are not available, the present value of the underlying cash flows discounted at our incremental borrowing rates.

The fair value of non-financial assets measured at fair value on a non-recurring basis, ~~which~~classified as Level 2 in the fair value hierarchy, is determined based on third-party market appraisals. As of November 29, 2020, adjustments to the fair values of non-financial assets measured at fair value on a non-recurring basis, classified as Level 2, were not material. As of May 31, 2020, operating lease right-of-use assets with a carrying amount of $24.2 million, primarily related to 7 restaurants, were determined to have a fair value of $17.6 million resulting in an impairment of $6.6 million.

The fair value of non-financial assets measured at fair value on a non-recurring basis, classified as Level 3 in the fair value hierarchy, is determined based on appraisals, or sales prices of comparable assets, ~~and~~or estimates of discounted future cash flows. As of ~~February 23,~~November 29, 2020, adjustments to the fair values of non-financial assets, classified as Level 3, were not material. As of May 31, 2020, long-lived assets held and used with a carrying amount of ~~$3.7~~$35.1 million, primarily related to 413 underperforming restaurants as well as 2 restaurants damaged by natural disasters, were determined to have a fair value of ~~$0.1~~$0.2 million resulting in an impairment ~~charge~~ of ~~$3.6~~$34.9 million. AsAlso as of May ~~26, 2019, long-lived assets held~~31, 2020, goodwill and ~~used~~trademarks for our Cheddar’s Scratch Kitchen brand with a carrying ~~amount~~values of ~~$21.7~~$334.3 million ~~primarily related to 7 underperforming restaurants,~~and $375.1 million, respectively, were determined to have a fair ~~value~~values of ~~$2.5~~$165.1 million and $230.1 million, respectively, resulting in ana total impairment ~~charge~~ of ~~$19.2~~$314.2 million.

Note ~~13.~~11. Commitments and Contingencies

As collateral for performance on contracts and as credit guarantees to banks and insurers, we are contingently liable for guarantees of subsidiary obligations under standby letters of credit. As of ~~February 23,~~November 29, 2020 and May ~~26, 2019~~,31, 2020, we had ~~$67.4~~$70.5 million and ~~$75.9~~$65.2 million,, respectively, of standby letters of credit related to workers’ compensation and general liabilities accrued in our consolidated financial statements. As of ~~February 23,~~November 29, 2020 and May ~~26, 2019~~,31, 2020, we had ~~$24.8~~$28.5 million and ~~$21.6~~$44.0 million,, respectively, of surety bonds related to other payments. Most surety bonds are renewable annually.

~~Table of Contents~~

~~DARDEN RESTAURANTS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

As of ~~February 23,~~November 29, 2020 and May ~~26, 2019~~,31, 2020, we had ~~$133.0~~$125.6 million and ~~$151.6~~$151.5 million,, respectively, of guarantees associated with leased properties that have been assigned to third parties. These amounts represent the maximum potential amount of future payments under the guarantees. The fair value of the maximum potential future payments discounted at our weighted-average cost of capital as of ~~February 23,~~November 29, 2020 and May ~~26, 2019~~,31, 2020, amounted to ~~$108.9~~$102.8 million and ~~$123.2~~$122.4 million,, respectively. ~~We did not record a liability for the guarantees, as the likelihood of the third parties defaulting on the assignment agreements was deemed to be remote.~~ In the event of default by a third party, the indemnity and default clauses in our assignment agreements govern our ability to recover from and pursue the third party for damages incurred as a result of its default. We do not hold any third-party assets as collateral related to these assignment agreements, except to the extent that the assignment allows us to repossess the building and personal property. These guarantees expire over their respective lease terms, which range from fiscal ~~2020~~2021 through fiscal 2034. The likelihood of the third parties defaulting on the assignment agreements was deemed to be remote. In conjunction with the adoption of ASU 2016-13 in the first quarter of fiscal 2021, the liability recorded for our expected credit losses under these leases as of November 29, 2020 was $10.0 million. See Note 1.

We are subject to private lawsuits, administrative proceedings and claims that arise in the ordinary course of our business. A number of these lawsuits, proceedings and claims may exist at any given time. These matters typically involve claims from guests, employees and others related to operational issues common to the restaurant industry, and can also involve infringement of, or challenges to, our trademarks. While the resolution of a lawsuit, proceeding or claim may have an impact on our financial results for the period in which it is resolved, we believe that the final disposition of the lawsuits, proceedings and claims in which we are currently involved, either individually or in the aggregate, will not have a material adverse effect on our financial position, results of operations or liquidity.

Note ~~14.~~12. ~~Leases~~Corporate Restructuring

~~The majority~~During the first quarter of fiscal 2021, as a result of the impact of the COVID-19 pandemic on our business operations, we undertook a strategic restructuring of our ~~restaurant locations, as well as~~corporate organization and workforce in order to reduce costs and better align corporate expenses to our ~~restaurant support center,~~sales levels in the current environment. The corporate restructuring included a voluntary early retirement incentive program and other involuntary strategic workforce reductions. In accordance with these actions, we incurred employee termination benefits costs and other costs of $47.8 million, including cash and non-cash components of $38.1 million and $9.7 million, respectively. These costs are subject to a lease. We evaluate our leases at the commencement of the lease to determine the classification as an operating or finance lease. For operating leases, upon adoption of ASC 842, we recognized operating lease liabilities based on the present value of minimum lease payments over the remaining expected lease termreflected in general and ~~corresponding right-of-use assets. We recognize lease~~administrative expenses and other (income) expense, related to operating leases on a straight-line basis. For finance leases, we record finance lease liabilities at an amount equal to the present value of the minimum lease payments over the remaining expected lease term and corresponding right-of-use assets. Amortization expense and interest expense related to finance leases are included in depreciation and amortization and interest, net ~~respectively,~~ in our consolidated statements of ~~earnings. Sale-leasebacks~~earnings for the six months ended November 29, 2020.

The following table summarizes the accrued employee termination benefits and other costs which are ~~transactions through which we sell assets (such as restaurant properties) at fair value~~included in other current liabilities and subsequently lease them back. The resulting leases generally qualify and are accounted for as operating leases. Failed sale-leaseback transactions are generally classified as finance leases and result in retention of the “sold” assets within land, buildings and equipment with a finance lease liability equal to the amount of proceeds received recorded as a component of other liabilities on our consolidated balance ~~sheets.~~sheet as of November 29, 2020. We expect the remaining

Within the provisions of certain of our leases, there are rent holidays and escalations in payments over the base lease term, as well as renewal periods. The effects of the holidays and escalations have been reflected in lease expense on a straight-line basis for operating leases over the expected lease term. The lease term commences on the date when we have the right to control the use of the leased property, which is typically before lease payments are due under the terms of the lease. Many of our leases have renewal periods totaling 5 to 20 years, exercisable at our option, and require payment of property taxes, insurance and maintenance costs in addition to the lease payments. At lease inception, we include option periods that we are reasonably assured to exercise as failure to renew the lease would impose an economic penalty. The consolidated financial statements reflect the same lease term for amortizing leasehold improvements as we use to determine finance versus operating lease classifications. Variable lease expense is generally based on sales levels and is accrued at the point in time we determine that it is probable that such sales levels will be achieved. Landlord allowances are recorded as an adjustment to the right-of-use assets. Gains and losses on sale-leaseback transactions are recognized immediately.

Table of Contents

DARDEN RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~The components~~liability to be paid by the second quarter of ~~lease expense in the consolidated statement of earnings are as follows:~~

~~The components of lease assets~~(1)Excludes costs associated with equity awards that will be settled in shares upon vesting and ~~liabilities on the consolidated balance sheet are as follows:~~

~~Supplemental cash flow information related to leases:~~

Nine Months Ended
(in millions) February 23, 2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases $ 277.1
Operating cash flows from finance leases 11.5
Financing cash flows from finance leases 3.8
Right-of-use assets obtained in exchange for new operating lease liabilities 164.5
Right-of-use assets obtained in exchange for new finance lease liabilities 166.2

~~The weighted-average remaining lease terms and discount rates as of February 23, 2020 are as follows:~~

~~The annual maturities of our lease liabilities as of February 23, 2020 are as follows:~~

~~Table of Contents~~

~~DARDEN RESTAURANTS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

The annual future lease commitments under capital lease and financing lease obligations and noncancelable operating leases, including those related to restaurants reported as discontinued operations, for each of the five fiscal years subsequent to May 26, 2019 and thereafter is as follows:

Note ~~15.~~13. Subsequent Events

~~In March~~On December 16, 2020, the COVID-19 outbreak was declared a National Public Health Emergency and resulted in a significant reduction in guest traffic at our restaurants due to changes in consumer behavior as individuals are being encouraged to practice social distancing, reduced restaurant seating capacity and other restrictions mandated by state and local governments. As of March 20, 2020, we have closed the dining rooms in all of our restaurants and almost all continue to operate on a “To Go” only or, for some restaurants, “To Go plus delivery” model. We have been in discussions with our major suppliers and currently have not experienced disruptions in our supply chain. Given the level of volatility and uncertainty surrounding the future impact of the COVID-19 outbreak, measures taken to control its spread, the broader US economy and any specific impact on our financial results, our Board of Directors ~~has suspended the quarterly~~declared a cash dividend ~~and intends~~of $0.37 per share to ~~review our dividend policy~~be paid February 1, 2021 to all shareholders of record as ~~developments warrant. Additionally, to secure our liquidity position and provide financial flexibility given uncertain~~of the close of business on January 8, 2021.

Table of Contents

~~DARDEN RESTAURANTS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~market conditions we have fully drawn on our $750.0 million Revolving Credit Agreement and suspended our current share repurchase activity.~~

Given the present uncertainty surrounding the global economy due to the COVID-19 outbreak, including but not limited to stock price volatility in general, the volatility of our stock price as well as our competitors, declining sales at our restaurants and the challenging environment for the restaurant industry, it is possible that non-cash impairments could be identified in our assets, including goodwill. However, the likelihood or the amount of an impairment charge cannot be reasonably estimated at this time.

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

The discussion and analysis below for the Company, which contains forward-looking statements, should be read in conjunction with the unaudited financial statements, the notes to such financial statements and the “Forward-Looking Statements” included elsewhere in this Form 10-Q.

To facilitate review of our discussion and analysis, the following table sets forth our financial results for the periods indicated. All information is derived from the unaudited consolidated statements of earnings for the ~~quarter~~quarters and ~~nine~~six months ended ~~February 23,~~November 29, 2020 and ~~February~~November 24, 2019.


	Three Months Ended						Six Months Ended
(in millions)	November 29, 2020			November 24, 2019		% Chg	November 29, 2020			November 24, 2019			% Chg
Sales	$	1,656.5		$	2,056.4	(19.4)%	$	3,183.9		$	4,190.3		(24.0)%
Costs and expenses:
Food and beverage	475.1			583.0		(18.5)	909.6			1,186.3			(23.3)
Restaurant labor	535.5			692.3		(22.6)	1,036.2			1,396.1			(25.8)
Restaurant expenses	330.5			375.6		(12.0)	621.4			748.0			(16.9)
Marketing expenses	18.8			66.3		(71.6)	47.6			135.0			(64.7)
General and administrative expenses	89.9			91.4		(1.6)	218.2			189.4			15.2
Depreciation and amortization	86.0			87.6		(1.8)	173.6			173.8			(0.1)

Total costs and expenses	$	1,535.8		$	1,896.2	(19.0)	$	3,006.6		$	3,828.6		(21.5)
Operating income	120.7			160.2		(24.7)	177.3			361.7			(51.0)
Interest, net	14.6			13.1		11.5	31.2			24.2			28.9
Other (income) expense, net	0.4			153.3		(99.7)	7.9			153.3			(94.8)
Earnings (loss) before income taxes	105.7			(6.2)		NM	138.2			184.2			(25.0)
Income tax expense (benefit) (1)	8.8			(31.6)		NM	4.0			(13.0)			NM
Earnings from continuing operations	$	96.9		$	25.4	NM	$	134.2		$	197.2		(31.9)
Losses from discontinued operations, net of tax	(0.9)			(0.7)		28.6	(2.1)			(1.9)			10.5
Net earnings	$	96.0		$	24.7	NM	$	132.1		$	195.3		(32.4)%
Diluted net earnings per share:
Earnings from continuing operations	$	0.74		$	0.21	NM	$	1.02		$	1.59		(35.8)%
Losses from discontinued operations	(0.01)			(0.01)		—	(0.01)			(0.02)			(50.0)
Net earnings	$	0.73		$	0.20	NM	$	1.01		$	1.57		(35.7)%

(1) Effective tax rate	8.3		%	NM			2.9		%	(7.1)		%
NM- Percentage not considered meaningful.

Three Months Ended Nine Months Ended
(in millions) February 23,
2020 February 24,
2019 % Chg February 23,
2020 February 24,
2019 % Chg
Sales $ 2,346.5
$ 2,246.5
4.5 % $ 6,536.8
$ 6,281.3
4.1 %
Costs and expenses:
Food and beverage 658.0
638.0
3.1
1,844.3
1,784.6
3.3
Restaurant labor 753.8
711.4
6.0
2,149.9
2,053.1
4.7
Restaurant expenses 396.7
379.5
4.5
1,144.7
1,098.4
4.2
Marketing expenses 71.6
62.4
14.7
206.6
186.9
10.5
General and administrative expenses 100.3
102.8
(2.4 ) 289.6
302.4
(4.2 )
Depreciation and amortization 87.7
85.3
2.8
261.5
248.8
5.1
Impairments and disposal of assets, net 0.1
1.6
(93.8 ) 0.2
4.4
(95.5 )
Total costs and expenses $ 2,068.2
$ 1,981.0
4.4
$ 5,896.8
$ 5,678.6
3.8
Operating income 278.3
265.5
4.8
640.0
602.7
6.2
Interest, net 13.2
12.4
6.5
37.4
38.3
(2.3 )
Other (income) expense, net —
—
—
153.3
—
—
Earnings (loss) before income taxes 265.1
253.1
4.7
449.3
564.4
(20.4 )
Income tax expense (1) 31.8
28.0
13.6
18.8
54.5
(65.5 )
Earnings from continuing operations $ 233.3
$ 225.1
3.6
$ 430.5
$ 509.9
(15.6 )
Losses from discontinued operations, net of tax (1.0 ) (1.5 ) NM
(2.9 ) (4.5 ) NM
Net earnings $ 232.3
$ 223.6
3.9 % $ 427.6
$ 505.4
(15.4 )%
Diluted net earnings per share:
Earnings from continuing operations $ 1.90
$ 1.80
5.6 % $ 3.48
$ 4.06
(14.3 )%
Losses from discontinued operations (0.01 ) (0.01 ) NM
(0.02 ) (0.04 ) NM
Net earnings $ 1.89
$ 1.79
5.6 % $ 3.46
$ 4.02
(13.9 )%

(1) Effective tax rate 12.0 % 11.1 % 4.2 % 9.7 %
NM- Percentage change not considered meaningful.

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The following table details the number of company-owned restaurants currently reported in continuing operations that were open at the end of the ~~third~~second quarter of fiscal ~~2020~~,2021, compared with the number open at the end of fiscal ~~2019~~2020 and the end of the ~~third~~second quarter of fiscal ~~2019~~.2020.


	November 29, 2020	May 31, 2020	November 24, 2019
Olive Garden	874	868	867
LongHorn Steakhouse	527	522	518
Cheddar’s Scratch Kitchen	168	165	166
Yard House	81	81	79
The Capital Grille (1)	60	60	59
Seasons 52	43	44	45
Bahama Breeze	41	41	42
Eddie V’s	24	23	23
Total	1,818	1,804	1,799

February 23,
2020 May 26,
2019 February 24,
2019
Olive Garden 870
866
860
LongHorn Steakhouse 522
514
512
Cheddar’s Scratch Kitchen (1) 169
161
159
Yard House 81
79
78
The Capital Grille (2) 60
58
58
Seasons 52 45
44
43
Bahama Breeze 42
42
42
Eddie V’s 23
21
20
Total 1,812
1,785
1,772


~~(1)~~	~~Includes four restaurants acquired on July 29, 2019 and two restaurants acquired on December 2, 2019.~~


~~(2)~~	~~Includes two The Capital Burger restaurants in fiscal 2020 and one in fiscal 2019.~~

(1)Includes two The Capital Burger restaurants in fiscal 2021 and at the end of fiscal 2020, and one at the end of the second quarter of fiscal 2020.

OVERVIEW OF OPERATIONS

COVID-19 Pandemic

The COVID-19 pandemic has resulted in a significant reduction in guest traffic at our restaurants due to changes in consumer behavior as public health officials encouraged social distancing and state and local governments mandated restrictions including suspension of dine-in operations, reduced restaurant seating capacity, table spacing requirements, bar closures and additional physical barriers. Beginning in late March 2020, we operated with all of our dining rooms closed and served our guests in a To Go only or To Go and delivery format. In late April 2020, state and local governments began to allow us to open dining rooms at limited capacities, along with other operating restrictions. While increasing our in-restaurant dining capacity is subject to the ordinances in the jurisdictions we operate, we are focused on increasing capacity where possible, while continuing to provide a safe environment for our team members and guests, and maintaining many of the operating efficiencies established during this time. As we navigate through the pandemic, we have taken significant steps to adapt our business to allow us to continue to serve guests, support our team members and secure our liquidity position to provide financial flexibility. During the first quarter of fiscal 2021, we undertook a strategic restructuring of our corporate organization and workforce in order to reduce costs and better align corporate expenses to our sales levels in the current environment. The corporate restructuring included a voluntary early retirement incentive program and other involuntary strategic workforce reductions and we incurred employee termination benefits costs and other costs of $47.8 million.

Through our second quarter of fiscal 2021, most of our restaurants were able to operate with at least restricted dine-in capacity. As we progressed into November, rising case rates have resulted in certain jurisdictions implementing restrictions that reduce dining room capacity or mandate the closure of dining rooms. We anticipate continued uncertainty surrounding dining room operations for the near term. As of the date of this filing, 84.0 percent of our restaurants were able to open their dining rooms to some extent. With approved vaccines beginning to be distributed, we expect our restaurants’ dining room capacity to increase as public health conditions improve and restrictions are eased. However, it is possible additional outbreaks could require us to reduce our capacity or further suspend our in-restaurant dining operations.

Financial Highlights - Consolidated

Our sales from continuing operations were ~~$2.35~~$1.66 billion and ~~$6.54~~$3.18 billion for the ~~third~~second quarter and first ~~nine~~six months of fiscal 2021, respectively, compared to $2.06 billion and $4.19 billion for the second quarter and first six months of fiscal 2020, ~~compared to $2.25 billion and $6.28 billion for the third quarter and first nine months of fiscal 2019.~~respectively. The ~~increases of 4.5~~19.4 percent and ~~4.1~~24.0 percent decreases in sales for the ~~third~~second quarter and first ~~nine~~six months of fiscal ~~2020~~2021 were driven by combined Darden same-restaurant sales decreases of 20.6 percent and 24.9 percent for the second quarter and first six months of fiscal 2021, respectively, partially offset by revenue from the addition of 4019 net new company-owned restaurants since the ~~third~~second quarter ~~of fiscal 2019 and combined Darden same-restaurant sales increase of 2.3 percent and 1.8 percent for the third quarter and first nine months~~ of fiscal 2020.

For the ~~third~~second quarter of fiscal ~~2020,~~2021, our net earnings from continuing operations were ~~$233.3~~$96.9 million compared to ~~$225.1~~$25.4 million for the ~~third~~second quarter of fiscal ~~2019,~~2020, and our diluted net earnings per share from continuing operations were ~~$1.90~~$0.74 for the ~~third~~second quarter of fiscal ~~2020~~2021 compared to ~~$1.80~~$0.21 for the ~~third~~second quarter of fiscal ~~2019.~~2020. For the first ~~nine~~six months of fiscal ~~2020,~~2021, our net earnings from continuing operations were ~~$430.5~~$134.2 million compared to ~~$509.9~~$197.2 million for the first ~~nine~~six months of fiscal ~~2019,~~2020, and our diluted net earnings per share from continuing operations were ~~$3.48~~$1.02 for the first ~~nine~~six months of fiscal ~~2020~~2021 compared to ~~$4.06~~$1.59 for the first ~~nine~~six months of fiscal ~~2019.~~2020. Our diluted per share results from continuing operations for the first ~~nine~~

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six months of fiscal 2021 were adversely impacted by approximately $0.28 due to charges associated with our corporate restructuring plan. Our diluted per share results from continuing operations for the second quarter and first six months of fiscal 2020 were adversely impacted by approximately $0.90 due to a pension settlement charge and approximately $0.01 due to an international structure simplification.

~~Recent Developments~~Outlook

~~In March 2020,~~We expect sales for the ~~COVID-19 outbreak was declared a National Public Health Emergency and resulted in a significant reduction in guest traffic at our restaurants due~~third quarter of fiscal 2021 to ~~changes in consumer behavior as individuals are being encouraged~~be approximately 65 to ~~practice social distancing, reduced restaurant seating capacity and other restrictions mandated by state and local governments. As~~70 percent of ~~March 20, 2020,~~sales of the third quarter of fiscal 2020.

Additionally, for the full year we ~~have closed the dining rooms in all of our~~expect to open 35-40 net new restaurants and ~~almost all continue~~we expect capital expenditures incurred to ~~operate on a “To Go” only or,~~build new restaurants, remodel and maintain existing restaurants and for ~~some restaurants, “To Go plus delivery” model. We have been in discussions with our major suppliers~~technology initiatives to be between $250.0 million and currently have not experienced disruptions in our supply chain. In response to the current conditions, our Board of Directors has suspended the quarterly cash dividend and intends to review our dividend policy as developments warrant. Additionally, to secure our liquidity position and provide financial flexibility given uncertain market conditions we have fully drawn on our $750.0 million Revolving Credit Agreement and suspended our current share repurchase activity. See the subsection below entitled "Liquidity and Capital Resources" for further details.$300.0 million.

~~Outlook~~

Given the level of volatility and uncertainty surrounding the future impact of the COVID-19 outbreak, measures taken to control its spread, the broader US economy and any specific impact on our financial results, we have withdrawn our full year financial outlook for fiscal 2020.

SALES

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


	Three Months Ended								Six Months Ended
(in millions)	November 29, 2020		November 24, 2019		% Chg		SRS (1)		November 29, 2020		November 24, 2019		% Chg		SRS (1)
Olive Garden	$	829.5	$	1,023.6	(19.0)	%	(19.9)	%	$	1,617.7	$	2,113.8	(23.5)	%	(24.2)	%
LongHorn Steakhouse	$	407.4	$	447.3	(8.9)	%	(11.1)	%	$	784.1	$	897.5	(12.6)	%	(14.6)	%
Fine Dining	$	108.1	$	154.8	(30.2)	%	(31.0)	%	$	191.2	$	291.1	(34.3)	%	(34.8)	%
Other Business	$	311.5	$	430.7	(27.7)	%	(28.6)	%	$	590.9	$	887.9	(33.4)	%	(33.9)	%

Three Months Ended Nine Months Ended
(in millions) February 23, 2020 February 24, 2019 % Chg SRS (1) February 23, 2020 February 24, 2019 % Chg SRS (1)
Olive Garden $ 1,169.3
$ 1,130.2
3.5 % 2.1 % $ 3,283.0
$ 3,180.3
3.2 % 1.9 %
LongHorn Steakhouse $ 510.7
$ 483.2
5.7 % 3.9 % $ 1,408.2
$ 1,326.2
6.2 % 4.4 %
Cheddar’s Scratch Kitchen $ 174.9
$ 166.8
4.9 % (1.6 )% $ 499.9
$ 488.6
2.3 % (2.7 )%
Yard House $ 164.1
$ 154.8
6.0 % 1.8 % $ 476.4
$ 447.3
6.5 % 0.2 %
The Capital Grille $ 142.0
$ 134.3
5.7 % 4.2 % $ 359.1
$ 344.9
4.1 % 2.5 %
Seasons 52 $ 75.3
$ 70.6
6.7 % 3.0 % $ 193.8
$ 186.6
3.9 % (1.3 )%
Bahama Breeze $ 57.6
$ 57.5
0.2 % (0.5 )% $ 176.0
$ 176.2
(0.1 )% (2.6 )%
Eddie V’s $ 46.4
$ 40.2
15.4 % 3.9 % $ 120.3
$ 106.3
13.2 % 2.0 %
(1)Same-restaurant sales is a year-over-year comparison of each period’s sales volumes for a 52-week year and is limited to restaurants open at least 16 months.


~~(1)~~	~~Same-restaurant sales is a year-over-year comparison of each period’s sales volumes for a 52-week year and is limited to restaurants open at least 16 months.~~

Olive Garden’s sales ~~increases~~decrease for the ~~third~~second quarter and first ~~nine~~six months of fiscal ~~2020 were~~2021 was primarily driven by U.S. same-restaurant sales ~~increases combined with~~decreases driven by the impact of COVID-19, partially offset by revenue from new restaurants. The ~~increase~~decrease in U.S. same-restaurant sales for the ~~third~~second quarter of fiscal ~~2020~~2021 resulted from a 21.8 percent decrease in same-restaurant guest counts, partially offset by a 1.9 percent increase in average ~~check combined with a 0.2 percent increase in same-restaurant guest counts.~~check. The ~~increase~~decrease in U.S. same-restaurant sales for the first ~~nine~~six months of fiscal ~~2020~~2021 resulted from a ~~2.5 percent increase in average check partially offset by a 0.6~~25.5 percent decrease in same-restaurant guest ~~counts.~~counts, partially offset by a 1.3 percent increase in average check.

LongHorn Steakhouse’s sales ~~increases~~decrease for the ~~third~~second quarter and first ~~nine~~six months of fiscal ~~2020 were~~2021 was primarily driven by same-restaurant sales ~~increases combined with~~decreases driven by the impact of COVID-19, partially offset by revenue from new restaurants. The ~~increase~~decrease in same-restaurant sales for the ~~third~~second quarter of fiscal ~~2020~~2021 resulted from a ~~2.3~~12.3 percent decrease in same-restaurant guest counts, partially offset by a 1.2 percent increase in average ~~check combined with~~check. The decrease in U.S. same-restaurant sales for the first six months of fiscal 2021 resulted from a ~~1.6~~15.5 percent decrease in same-restaurant guest counts, partially offset by a 0.9 percent increase in average check.

Fine Dining’s sales decrease for the second quarter and first six months of fiscal 2021 was primarily driven by same-restaurant sales decreases driven by the impact of COVID-19, partially offset by revenue from new restaurants. The decrease in same-restaurant sales for the second quarter of fiscal 2021 resulted from a 32.1 percent decrease in same-restaurant guest ~~counts.~~counts, partially offset by a 1.1 percent increase in average check. The ~~increase~~decrease in same-restaurant sales for the first ~~nine~~six months of fiscal ~~2020~~2021 resulted from a ~~2.7~~36.2 percent decrease in same-restaurant guest counts, partially offset by a 1.4 percent increase in average ~~check combined with a 1.7 percent increase in same-restaurant guest counts.~~check.

~~In total, Cheddar’s Scratch Kitchen, Yard House, The Capital Grille, Seasons 52, Bahama Breeze and Eddie V’s generated~~Other Business’ sales decrease for the ~~third~~second quarter and first ~~nine~~six months of fiscal ~~2020, which were approximately 5.8 percent and 4.3 percent above last fiscal year’s~~ ~~third~~ ~~quarter and first nine months, respectively. The sales increases for the~~ ~~third~~ ~~quarter and first nine months of fiscal 2020 were~~2021 was primarily driven ~~by the incremental sales from new restaurants. Sales growth for the~~ ~~third~~ ~~quarter of fiscal 2020 also reflected same-restaurant sales increases at Yard House, The Capital Grille, Seasons 52 and Eddie V’s partially offset~~ by same-restaurant sales decreases ~~at Cheddar’s Scratch Kitchen and Bahama Breeze. Sales growth~~driven by the impact of COVID-19. The decrease in same-restaurant sales for the second quarter of fiscal 2021 resulted from a 29.6 percent decrease in same-restaurant guest counts, partially offset by a 1.0 percent increase in average check. The decrease in same-restaurant sales for the first ~~nine~~six months of fiscal ~~2020 also reflected~~2021 resulted from a 35.3 percent decrease in same-restaurant ~~sales increases at Yard House, The Capital Grille and Eddie V’s~~guest counts, partially offset by ~~same-restaurant sales decreases at Cheddar’s Scratch Kitchen, Bahama Breeze and Seasons 52.~~a 1.4 percent increase in average check.

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COSTS AND EXPENSES

The following table sets forth selected operating data as a percent of sales for the periods indicated. All information is derived from the unaudited consolidated statements of earnings for the quarter and ~~nine~~six months ended ~~February 23,~~November 29, 2020 and ~~February~~November 24, ~~2019~~.2019.


	Three Months Ended				Nine Months Ended					Three Months Ended				Six Months Ended
	February 23, 2020		February 24, 2019		February 23, 2020		February 24, 2019			November 29, 2020		November 24, 2019		November 29, 2020		November 24, 2019
Sales	100.0	%	100.0	%	100.0	%	100.0	%	Sales	100.0	%	100.0	%	100.0	%	100.0	%
Costs and expenses:									Costs and expenses:
Food and beverage	28.0		28.4		28.2		28.4		Food and beverage	28.7		28.4		28.6		28.3
Restaurant labor	32.1		31.7		32.9		32.7		Restaurant labor	32.3		33.7		32.5		33.3
Restaurant expenses	16.9		16.9		17.5		17.5		Restaurant expenses	20.0		18.3		19.5		17.9
Marketing expenses	3.1		2.8		3.2		3.0		Marketing expenses	1.1		3.2		1.5		3.2
General and administrative expenses	4.3		4.6		4.4		4.8		General and administrative expenses	5.4		4.4		6.9		4.5
Depreciation and amortization	3.7		3.8		4.0		4.0		Depreciation and amortization	5.2		4.3		5.5		4.1
Impairments and disposal of assets, net	—		0.1		—		0.1

Total operating costs and expenses	88.1	%	88.2	%	90.2	%	90.4	%	Total operating costs and expenses	92.7	%	92.2	%	94.4	%	91.4	%
Operating income	11.9		11.8		9.8		9.6		Operating income	7.3		7.8		5.6		8.6
Interest, net	0.6		0.6		0.6		0.6		Interest, net	0.9		0.6		1.0		0.6
Other (income) expense, net	—		—		2.3		—		Other (income) expense, net	—		7.5		0.2		3.7
Earnings (loss) before income taxes	11.3		11.3		6.9		9.0		Earnings (loss) before income taxes	6.4		(0.3)		4.3		4.4
Income tax expense	1.4		1.2		0.3		0.9
Income tax expense (benefit)									Income tax expense (benefit)	0.5		(1.5)		0.1		(0.3)
Earnings from continuing operations	9.9	%	10.0	%	6.6	%	8.1	%	Earnings from continuing operations	5.8	%	1.2	%	4.2	%	4.7	%

Quarter Ended ~~February 23,~~November 29, 2020 Compared to Quarter Ended ~~February~~November 24, 2019

•Food and beverage costs increased as a percent of sales primarily due to a 1.7% impact from unfavorable menu mix and inflation, partially offset by a 1.4% impact from pricing and cost savings initiatives.

•Restaurant labor costs decreased as a percent of sales primarily due to a 2.1% impact from productivity improvement driven by operational simplification and a 0.7% impact from pricing leverage, partially offset by a 1.0% impact from sales deleverage and a 0.4% impact from inflation.

•Restaurant expenses increased as a percent of sales primarily due to a 3.9% impact from sales deleverage, partially offset by a 1.0% impact from lower repairs and maintenance expenses, a 0.8% impact from pricing and cost savings initiatives and a 0.4% impact from lower utility costs.

•Marketing expenses decreased as a percent of sales primarily due to a 2.9% impact from lower media spending at Olive Garden and LongHorn Steakhouse, partially offset by a ~~0.6%~~0.8% impact from ~~unfavorable menu mix~~sales deleverage.

•General and ~~inflation.~~administrative expenses increased as a percent of sales primarily due to sales deleverage, with the mark to market impact of our deferred compensation plans being offset by reduced expenses from our corporate restructuring actions during the first quarter of fiscal 2021.

~~Restaurant labor~~•Depreciation and amortization expenses increased as a percent of sales primarily due to sales deleverage.

Six Months Ended November 29, 2020 Compared to Quarter Ended November 24, 2019

•Food and beverage costs increased as a percent of sales primarily due to a ~~1.3%~~0.9% impact from unfavorable menu mix and inflation, partially offset by a ~~0.8%~~0.6% impact from ~~price leverage.~~

~~Marketing expenses increased as a percent of sales primarily resulting from increased media spending at Olive Garden~~pricing and ~~Cheddar’s Scratch Kitchen.~~

~~General and administrative expenses decreased as a percent of sales primarily due to sales leverage.~~cost savings initiatives.

~~Nine~~• ~~Months Ended February 23, 2020 Compared to~~ ~~Nine~~ ~~Months Ended February 24, 2019~~

~~Food and beverage~~Restaurant labor costs decreased as a percent of sales primarily due to a ~~1.1%~~2.7% impact from productivity improvement driven by operational simplification and a 0.8% impact from pricing ~~and cost savings initiatives~~leverage, partially offset by a ~~0.9%~~2.2% impact from ~~unfavorable menu mix~~sales deleverage and a 0.5% impact from inflation.

•Restaurant ~~labor costs~~expenses increased as a percent of sales primarily due to a ~~1.3%~~4.9% impact from ~~inflation~~sales deleverage, partially offset by a ~~0.7%~~1.3% impact from ~~price leverage~~lower repairs and maintenance expenses, a 1.1% impact from pricing and cost savings initiatives, a 0.6% impact from lower utility costs and a 0.3% impact from ~~improved productivity.~~business interruption insurance proceeds.

•Marketing expenses decreased as a percent of sales primarily due to a 2.7% impact from lower media spending at Olive Garden and LongHorn Steakhouse, partially offset by a 1.0% impact from sales deleverage.

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•General and administrative expenses increased as a percent of sales primarily ~~resulting~~due to a 1.5% impact from ~~increased media spending at Cheddar’s Scratch Kitchen.~~costs associated with our corporate restructuring in the first quarter of fiscal 2021 and a 1.4% impact from sales deleverage, partially offset by a 0.5% impact from cost savings initiatives.

~~General~~•Depreciation and ~~administrative~~amortization expenses ~~decreased~~increased as a percent of sales primarily ~~driven by a 0.2% impact related~~due to sales ~~leverage~~deleverage.

INTEREST EXPENSE

Net interest expense increased as a percent of sales for the second quarter of fiscal 2021 primarily due to sales deleverage. Net interest expense increased as a percent of sales for the first six months of fiscal 2021 primarily due to interest incurred on our $270.0 million term loan and ~~a 0.1% impact related to lower management incentive expense.~~sales deleverage.

OTHER (INCOME) EXPENSE, NET

Other (income) expense, net was ~~$0.0~~$0.4 million for the ~~third~~second quarter and ~~$153.3~~$7.9 million ~~of expense~~ for the first ~~nine~~six months of fiscal ~~2020 compared with $0.0 for the third quarter and first nine months of fiscal 2019. The expense increase for the first nine months of fiscal 2020 was~~2021 primarily due to a ~~pre-tax pension settlement charge~~postretirement benefit plan valuation adjustment resulting from our corporate restructuring in the ~~termination~~first quarter of ~~our primary non-contributory defined benefit pension plan.~~

fiscal 2021.

INCOME TAXES

The effective income tax rate for continuing operations for the quarter ended ~~February 23,~~November 29, 2020 was ~~12.0~~8.3 percent, reflecting income tax expense of $8.8 million compared to an effective income tax rate ~~of 11.1 percent~~ for the quarter ended ~~February~~November 24, ~~2019.~~2019 of (509.7) percent, reflecting an income tax benefit of $31.6 million. The effective income tax rate for continuing operations for the ~~nine~~six months ended ~~February 23,~~November 29, 2020 was ~~4.2~~2.9 percent, reflecting income tax expense of $4.0 million compared to an effective income tax rate of ~~9.7~~(7.1) percent for the ~~nine~~six months ended ~~February~~November 24, ~~2019. The effective~~2019, reflecting an income tax ~~rate increase for~~benefit of $13.0 million. The change was driven primarily by lower net earnings from continuing operations in the quarter ended ~~February 23,~~November 24, 2019, compared to the quarter ended November 29, 2020 ~~was~~due primarily ~~due~~ to ~~higher earnings before income taxes. The effective income~~a pension settlement charge recorded during the second quarter of fiscal 2019 and the impact of certain tax ~~rate decrease for the nine months ended February 23, 2020 was primarily due to~~credits on our lower earnings before income ~~taxes for fiscal 2020 driven primarily by a pension settlement charge.~~taxes.

LOSSES FROM DISCONTINUED OPERATIONS

On an after-tax basis, losses from discontinued operations for the ~~third~~second quarter and first ~~nine~~six months of fiscal ~~2020~~2021 were ~~$1.0~~$0.9 million ($0.01 per diluted share) and ~~$2.9~~$2.1 million ($~~0.02~~0.01 per diluted share) compared with losses from discontinued operations for the ~~third~~second quarter and first ~~nine~~six months of fiscal ~~2019~~2020 of ~~$1.5~~$0.7 million ($0.01 per diluted share) and ~~$4.5~~1.9 million ($~~0.04~~0.02 per diluted share).

SEGMENT RESULTS

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

Our management uses segment profit as the measure for assessing performance of our segments. Beginning in fiscal 2020 we changed the allocation of non-cash real estate-related expenses from our operating segments to corporate. Fiscal 2019 segment profit has been restated to conform to the current year presentation.

The following table presents segment profit margin for the periods indicated.


	Three Months Ended			Six Months Ended
Segment	November 29, 2020	November 24, 2019	Change	November 29, 2020	November 24, 2019	Change
Olive Garden	21.1%	18.6%	250 BPS	21.6%	19.8%	180	BPS
LongHorn Steakhouse	16.3%	16.1%	20 BPS	15.7%	16.3%	(60)	BPS
Fine Dining	18.8%	19.6%	(80) BPS	15.8%	17.4%	(160)	BPS
Other Business	12.6%	11.1%	150 BPS	12.7%	12.6%	10	BPS

Three Months Ended Nine Months Ended
Segment February 23, 2020 February 24, 2019 Change February 23, 2020 February 24, 2019 Change
Olive Garden 21.1% 21.7% (60 ) BP 20.3% 20.3% —
BP
LongHorn Steakhouse 20.5% 20.1% 40
BP 17.8% 17.8% —
BP
Fine Dining 24.8% 24.9% (10 ) BP 20.3% 20.5% (20 ) BP
Other Business 14.5% 15.1% (60 ) BP 13.3% 14.2% (90 ) BP

The ~~decrease~~increase in Olive Garden’s segment profit margin for the ~~third~~second quarter and first six months of fiscal ~~2020~~2021 was driven primarily by ~~increased~~decreased restaurant labor costs ~~due to inflation as well as incremental~~and decreased television and digital media related marketing expense, ~~primarily related to television media. Olive Garden’s segment profit margin for~~partially offset by negative same restaurant sales resulting from the ~~first nine months~~economic impact of ~~fiscal 2020 was flat compared to prior year.~~COVID-19. The increase in LongHorn Steakhouse’s segment profit margin for the ~~third~~second quarter of fiscal ~~2020~~2021 was driven primarily by ~~leveraging positive same-restaurant sales.~~a decrease in television and digital media related marketing expense, partially offset by negative same restaurant sales resulting from the economic impact of COVID-19. The decrease in LongHorn Steakhouse’s segment profit margin for the first ~~nine~~six months of fiscal ~~2020~~2021 was ~~flat compared to prior year~~ driven primarily by ~~leveraging positive~~negative same-restaurant sales resulting from the economic impact of COVID-19, partially offset by ~~increased food and beverage costs due to promotional changes.~~decreased marketing costs. The decrease in Fine Dining’s segment profit ~~margin~~margins for the ~~third~~second quarter and first ~~nine~~six months of fiscal ~~2020~~2021 was driven primarily by ~~new restaurant labor inefficiencies and incremental pre-opening expenses.~~negative same-restaurant sales

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resulting from the economic impact of COVID-19, partially offset by decreased marketing costs. The ~~decrease~~increase in Other Business’ segment profit margin for the ~~third~~second quarter and first ~~nine~~six months of fiscal ~~2020~~2021 was driven primarily by ~~incremental~~decreased marketing ~~expense, primarily at Cheddar’s Scratch Kitchen~~ and ~~margin~~restaurant labor costs, partially offset by negative same restaurant sales resulting from the economic impact ~~from negative same-restaurant sales.~~of COVID-19.

SEASONALITY

Our sales volumes fluctuate seasonally. Typically, our average sales per restaurant are highest in the winter and spring, followed by the summer, and lowest in the fall. Holidays, changes in the economy, severe weather and similar conditions may impact sales volumes seasonally in some operating regions. Because of the seasonality of our business, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year. We are not able to predict the impact that the COVID-19 pandemic may have on the seasonality of our business.

LIQUIDITY AND CAPITAL RESOURCES

Typically, cash flows generated from operating activities are our principal source of liquidity, which we use to finance capital expenditures for new restaurants and to remodel and maintain existing restaurants, to pay dividends to our shareholders and to repurchase shares of our common stock. Since substantially all of our sales are for cash and cash equivalents, and accounts payable are generally paid in 5 to 6090 days, we are typically able to carry current liabilities in excess of current assets. As previously noted, in March 2020, all of our restaurants ~~are currently~~began operating at reduced capacities due to the COVID-19 outbreak and ~~may~~initially were not be able to generate sufficient cash from operations to cover all of our projected expenditures while operating at ~~these~~those reduced capacities. Accordingly, ~~in response~~we took significant steps to ~~the current conditions, we have suspended~~adapt our ~~dividend until further notice,~~business, which allowed us to continue to serve guests, support our team members and to secure our liquidity position ~~and~~to provide financial ~~flexibility,~~flexibility. As state and local governments allowed us to open dining rooms at limited capacities our cash flows have improved, and during fiscal 2021 we have ~~drawn $750.0~~generated positive operating cash flows and fully repaid our $270.0 million ~~from~~364-day term loan prior to maturity. Additionally, our ~~Revolving Credit Agreement (see below for additional information) and suspended our current~~Board of Directors has declared a cash dividend of $0.37 per share ~~repurchase activity. We may also continue~~ to ~~pursue additional liquidity alternatives with our relationship banks~~be paid February 1, 2021 to all shareholders of record as ~~conditions warrant.~~of the close of business on January 8, 2021.

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

•Moody’s Investors Service “Baa3”;

•Standard & Poor’s ~~“BBB”~~“BBB-”; and

•Fitch ~~“BBB”~~“BBB-”.

Our commercial paper has ratings of:

•Moody’s Investors Service “P-3”;

•Standard & Poor’s ~~“A-2”~~“A-3”; and

•Fitch ~~“F-2”~~“F-3”.

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

We maintain a $750.0 million 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 ~~February 23,~~November 29, 2020, we were in compliance with all covenants under the Revolving Credit Agreement.

The Revolving Credit Agreement matures on October 27, 2022, and the proceeds may be used for working capital and capital expenditures, the refinancing of certain indebtedness, certain acquisitions and general corporate purposes. Loans under the Revolving Credit Agreement bear interest at a rate of LIBOR plus a margin determined by reference to a ratings-based pricing grid (Applicable Margin), or the base rate (which is defined as the highest of the BOA prime rate plus 0.075 percent, the Federal Funds rate plus 0.500 percent, and the Eurocurrency Rate plus ~~1.00~~1.075 percent) plus the Applicable Margin. Assuming a ~~“BBB”~~“BBB-” equivalent credit rating level, the Applicable Margin under the Revolving Credit Agreement will be ~~1.000~~1.075 percent for LIBOR loans and 00.075 percent for base rate loans. As of ~~February 23,~~November 29, 2020, we had no outstanding balances under the Revolving Credit Agreement.

As noted above, on March 17, 2020, we provided notice to the lenders to borrow the full $750.0 million available under the Revolving Credit Agreement. The applicable interest rate for this loan is currently 1.773 percent. We may use the proceeds from the Revolving Credit Agreement borrowing for working capital, ongoing operating needs and general corporate purposes.

As of ~~February 23,~~November 29, 2020, our outstanding long-term debt consisted principally of:

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

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

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

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

The interest rate on our $42.8 million senior notes due in October 2037 is subject to adjustment from time to time if the debt rating assigned to such series of notes is downgraded below a certain rating level (or subsequently upgraded). The

maximum adjustment is 2.000 percent above the initial interest rate and the interest rate cannot be reduced below the initial interest rate. As of ~~February 23,~~November 29, 2020, no such adjustments are made to this rate.

We may from time to time repurchase our remaining outstanding debt in privately negotiated transactions. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements and other factors.

From time to time we enter into interest rate derivative instruments. See Note 119 to our unaudited consolidated financial statements in Part I, Item 1 of this report, which is incorporated by reference.

Net cash flows provided by operating activities of continuing operations ~~increased~~decreased to ~~$922.4~~$428.6 million for the first ~~nine~~six months of fiscal ~~2020,~~2021, from ~~$920.0~~$443.1 million for the first ~~nine~~six months of fiscal ~~2019.~~2020. Net cash flows provided by operating activities include net earnings from continuing operations of $134.2 million and $197.2 million in the first six months of fiscal 2021 and 2020, respectively. The decrease in net earnings is primarily driven by the impact of COVID-19.

Net cash flows used in investing activities of continuing operations were ~~$447.4~~$109.7 million for the first ~~nine~~six months of fiscal 2021, compared to $309.7 million for the first six months of fiscal 2020. Capital expenditures decreased to $108.2 million for the first six months of fiscal 2021 from $256.5 million for the first six months of fiscal 2020 compared to $349.7 million for the first nine months of fiscal 2019. Capital expenditures increased to $374.5 million for the first nine months of fiscal 2020 from $346.9 million for the first nine months of fiscal 2019 reflecting ~~an increase~~a decrease in new restaurant construction and remodel activity during fiscal ~~2020.~~2021. Net cash flows used in investing activities for fiscal 2020 also reflect net cash used of ~~$50.1~~$37.0 million in the acquisition of Cheddar's Scratch Kitchen restaurants from existing franchisees.

Net cash flows used in financing activities of continuing operations were ~~$608.1~~$308.4 million for the first ~~nine~~six months of fiscal ~~2020,~~2021, compared to ~~$403.8~~$433.8 million for the first ~~nine~~six months of fiscal ~~2019.~~2020. Net cash flows used in financing activities for the first ~~nine~~six months of fiscal ~~2020~~2021 included ~~share repurchases~~repayment of ~~$300.3~~a 364-day term loan of $270.0 million ~~and~~prior to maturity as well as dividends paid of ~~$322.3 million.~~$39.1 million partially offset by proceeds from the exercise of employee stock options. Net cash flows used in financing activities for the first ~~nine~~six months of fiscal ~~2019~~2020 reflected dividends paid of ~~$278.4~~$215.7 million and share repurchases of ~~$166.0~~$230.9 million partially offset by proceeds from the exercise of employee stock options. Dividends declared by our Board of Directors totaled ~~$2.64~~$0.30 and $1.76 per share for the first ~~nine~~six months of fiscal 2021 and 2020, ~~compared to $2.25 per share for the same period in fiscal 2019.~~respectively.

On September 18, 2019, our Board of Directors authorized a new share repurchase program under which we may repurchase up to $500.0 million of our outstanding common stock. This repurchase program does not have an expiration and replaces all other outstanding share repurchase authorizations. During the quarter and ~~nine~~six months ended ~~February 23,~~November 29, 2020, we repurchased ~~0.6~~0.0 million and ~~2.6~~0.1 million shares of our common stock, respectively, compared to ~~0.7~~1.2 million and ~~1.6~~2.0 million shares of our common stock, respectively, during the quarter and ~~nine~~six months ended ~~February~~November 24, 2019. ~~As of February 23, 2020, of the 195.9 million cumulative~~All shares repurchased ~~under current~~during the quarter and ~~previous authorizations, 184.6 million~~six months ended November 29, 2020 were solely shares ~~were retired and restored~~withheld for taxes on vesting of restricted stock, shares delivered or deemed to ~~authorized but unissued~~be delivered to us on tender of stock in payment for the exercise price of options, or shares ~~of common stock.~~reacquired pursuant to tax withholding on option exercises.

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

AsImpairment of ~~February 23,~~our assets, including goodwill or trademarks, adversely affects our financial position and results of operations, and our leverage ratio for purposes of our Revolving Credit Agreement. A leverage ratio exceeding the maximum permitted under our Revolving Credit Agreement would be a default under our Revolving Credit Agreement. At November 29, 2020, ~~a write down~~write-downs of goodwill, other indefinite-lived intangible assets, or any other assets in excess of approximately ~~$1.22~~$1.32 billion would have been required to cause our leverage ratio to exceed the permitted ~~maximum under the Revolving Credit Agreement. After giving consideration~~maximum. As our leverage ratio is determined on a quarterly basis, and due to the ~~$750.0 million borrowing on the Revolving Credit Agreement mentioned above,~~seasonal nature of our business, a ~~write down~~lesser amount of ~~goodwill, other indefinite-lived intangible assets, or any other assets~~impairment in ~~excess of approximately $970.0 million would have been required to~~future quarters could cause our leverage ratio to exceed the permitted maximum. We conduct our annual impairment test on the first day of our fourth quarter. Given the present uncertainty surrounding the global economy due to the COVID-19 outbreak, including but not limited to stock price volatility in general, the volatility of our stock price as well as our competitors, declining sales at our restaurants and the challenging environment for the restaurant industry, it is possible that our analysis could result in a non-cash impairment loss of a portion or all of our goodwill, other indefinite-lived intangible assets, or other assets. If we recorded an impairment loss, our financial position and results of operations would be adversely affected and our leverage ratio for purposes of our Revolving Credit Agreement would increase. If such leverage ratio were to exceed the maximum permitted under that agreement, we would be in default.

FINANCIAL CONDITION

Our current assets totaled ~~$686.0 million~~$1.11 billion as of ~~February 23,~~November 29, 2020, compared to ~~$892.6 million~~$1.10 billion as of May ~~26, 2019.~~31, 2020. The increase was primarily due to an increase in cash and cash equivalents.

Our current liabilities totaled $1.55 billion as of November 29, 2020, compared to $1.79 billion as of May 31, 2020. The decrease was primarily ~~due to a decrease in cash and cash equivalents primarily~~ driven by ~~the repurchase~~repayment of ~~our common stock and~~short-term debt, partially offset by ~~dividends paid.~~

~~Our current liabilities totaled~~ ~~$1.68 billion~~ ~~as of~~ ~~February 23, 2020, compared to $1.47 billion as of~~ ~~May 26, 2019. The increase was primarily related to~~ an increase in other current liabilities due to the operating lease liability recorded as a result of the adoption of the new lease accounting guidance as well as an increase in unearned revenues associated with gift card sales in excess of gift card redemptions.liabilities.

CRITICAL ACCOUNTING ESTIMATES

We prepare our consolidated financial statements in conformity with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales, costs and expenses during the reporting period. Actual results could differ from those estimates. We have discussed the development, selection and disclosure of those estimates with the Audit Committee. Our critical accounting

estimates have not changed materially from those previously reported in our Annual Report on Form 10-K for the fiscal year ended May ~~26, 2019~~.31, 2020.

APPLICATION OF NEW ACCOUNTING STANDARDS

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

FORWARD-LOOKING STATEMENTS

Statements set forth in or incorporated into this report regarding the expected increase in the number of our restaurants ~~projections for U.S. same-restaurant sales~~ and capital expenditures in fiscal ~~2020~~,2021, projections for sales and all other statements that are not historical facts, including without limitation statements with respect to the financial condition, results of operations, plans, objectives, future performance and business of Darden Restaurants, Inc. and its subsidiaries that are preceded by, followed by or that include words such as “may,” “will,” “expect,” “intend,” “anticipate,” “continue,” “estimate,” “project,” “believe,” “plan,” “outlook” or similar expressions, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are included, along with this statement, for purposes of complying with the safe harbor provisions of that Act. Any forward-looking statements speak only as of the date on which such statements are made, and we undertake no obligation to update such statements for any reason to reflect events or circumstances arising after such date. By their nature, forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by such forward-looking statements. In addition to the risks and uncertainties of ordinary business obligations, and those described in information incorporated into this report, the forward-looking statements contained in this report are subject to the risks and uncertainties described in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended May ~~26, 2019~~31, 2020 and in our Forms 10-Q (including this report), which are summarized as follows:

•The impacts of the novel coronavirus (COVID-19) pandemic on our business, ~~and~~including the response of governments and of our company to the ~~outbreak;~~pandemic and the effectiveness, acceptance, availability, timing and distribution of approved vaccines;

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

•Insufficient guest or employee facing technology, or a failure to maintain a continuous and secure cyber network, free from material failure, interruption or security breach;

•Food safety and food-borne illness concerns throughout the supply chain;

•The inability to hire, train, reward and retain restaurant team ~~members or an inability to adequately monitor and proactively respond to employee dissatisfaction;~~members;

•A failure to recruit, develop and retain effective leaders or the loss or shortage of key ~~personnel, or an inability to adequately monitor and respond to employee dissatisfaction;~~personnel;

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

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

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

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

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

•Labor and insurance costs;

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

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

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

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

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

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

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

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

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

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

•Adverse weather conditions and natural disasters;

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

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

•Economic and business factors specific to the restaurant industry and other general macroeconomic factors including energy prices and interest rates that are largely out of our control;

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

•Risks associated with doing business with franchisees and licensees;

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

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

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

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

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

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

Item 3.Quantitative and Qualitative Disclosures About Market Risk

We are exposed to a variety of market risks, including fluctuations in interest rates, foreign currency exchange rates, compensation and commodity prices. To manage this exposure, we periodically enter into interest rate, foreign currency exchange rate, equity forward and commodity derivative instruments for other than trading purposes (see Note 119 to our unaudited consolidated financial statements in Part I, Item 1 of this report).

We use the variance/covariance method to measure value at risk, over time horizons ranging from one week to one year, at the 95 percent confidence level. As of ~~February 23,~~November 29, 2020,, our potential losses in future net earnings resulting from changes in equity forwards, commodity instruments and floating rate debt interest rate exposures were approximately ~~$37.2~~$31.8 million over a period of one year. The value at risk from an increase in the fair value of all of our long-term fixed-rate debt, over a period of one year, was approximately ~~$82.5~~$77.5 million. The fair value of our long-term fixed-rate debt outstanding as of ~~February 23,~~November 29, 2020, averaged ~~$997.9~~$974.3 million, with a high of $1.04 billion and a low of ~~$963.5~~$917.27 million during the first ~~nine~~six months of fiscal ~~2020.~~2021. Our interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flows by targeting an appropriate mix of variable and fixed-rate debt.

Item 4.Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of ~~February 23,~~November 29, 2020,, the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of ~~February 23, 2020~~.November 29, 2020.

During the ~~first~~fiscal quarter ~~of fiscal~~ended November 29, 2020, ~~in conjunction with our adoption of the new lease accounting guidance, we implemented a new lease accounting system and modified our related internal controls. There were~~there was no ~~other changes~~change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that ~~have~~has materially affected, or ~~are~~is reasonably likely to materially affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION

Item 1.Legal Proceedings

See the discussion of legal proceedings contained in the third paragraph of Note 1311 to our unaudited consolidated financial statements in Part I, Item 1 of this report, which is incorporated herein by reference.

Item 1A.Risk Factors

The Company is providing this ~~additional~~updated risk factor to supplement the risk factors contained in Item 1A of our Annual Report on Form 10-K for the year ended May ~~26, 2019.~~

31, 2020.

The ~~novel coronavirus (COVID-19) outbreak~~COVID-19 pandemic has disrupted and is expected to continue to disrupt our business, which has affected and could continue to materially affect our operations, financial condition and results of operations for an extended period of time.

The COVID-19 pandemic, ~~novel coronavirus (COVID-19) outbreak,~~including related federal, state and local government responses, tochanging consumer behavior as a result of the COVID-19 pandemic and our Company’s responses ~~to the outbreak have all~~thereto, has disrupted and will continue to disrupt our business. In the United States, individuals are being encouraged or mandated to practice social distancing ~~restricted from~~and limit or avoid gathering in groups, ~~and~~especially indoors. From time to time, in ~~some areas,~~certain localities, individuals have been or may be placed on complete restriction from non-essential movements outside of their homes. Many consumers have modified their behavior accordingly, and some consumers have chosen and may continue to choose to reduce or avoid in-person dining or limit the size of their dining parties in response to the COVID-19 pandemic. Individuals and businesses have also reduced their travel, and as a result, have reduced related dining occasions, which also has impacted and may continue to impact our business, especially in locations which traditionally have relied on tourism and business dining to drive traffic.

In response to the COVID-19 ~~outbreak~~pandemic and these changing conditions, we have taken many steps to modify our operations and respond to these challenges. Over the course of the COVID-19 pandemic, we closed the dining rooms in all of our restaurants for some portion of the 2020 calendar year and operated in a To Go or To Go plus delivery format only. We reopened most of our dining rooms by July 2020, but we have continued to close and reopen dining rooms in various locations as circumstances and public health mandates warrant, and we ~~are operating on a “To Go” only, or, for some of our restaurants, “To Go plus delivery” model in the jurisdictions where government regulations permit restaurants~~expect to continue to do so. As of the date of this report, 84.0 percent of our dining rooms were open in at least a limited capacity. Our dining rooms that are permitted to open continue to operate ~~and where the guest demand makes such operations sustainable.~~with at least some capacity reduction implemented as a result of state or local government regulations and/or our adoption of public health recommendations. We have also closed certain restaurants, modified work hours for our restaurant team members ~~and identified~~ and implemented cost savings measures throughout our operations. As the COVID-19 case rates continue to rise in certain areas of the country, there could be additional federal, state or local responses that restrict in-person dining and/or movement of guests or otherwise impact our business. The COVID-19 ~~outbreak~~pandemic and these responses have affected and will continue to adversely affect our guest traffic, sales and operating costs and we cannot predict how long the outbreak will last or what other government responses may ~~occur.~~impact us.

The COVID-19 outbreak has also adversely affected our ability to open new restaurants. Due to the uncertainty in the economy and to preserve liquidity, we have paused nearly all construction of new restaurants and certain remodeling projects at existing restaurants. These changes may materially adversely affect our ability to grow our business, particularly if these construction pauses are in place for a significant amount of time.

As discussed in this report, we have fully drawn the $750.0 million capacity of the Company’s Revolving Credit Agreement and we continue to pursue additional liquidity alternatives with our relationship banks. A material increase in our level of debt or material impairments of our assets could cause our debt to total capitalization ratio to exceed the maximum level permitted under the covenant in our Revolving Credit Agreement. If the business interruptions caused by COVID-19 during the fourth quarter of fiscal 2020 led us to take actions to reinforce our liquidity position, including entering into a term loan, which we have since repaid, and raising $505.1 million in a public equity offering in April 2020. Our liquidity position has strengthened as a result of those actions and as we have reopened many of our dining rooms, but if the pandemic were to accelerate or if restrictions on our operations were to become more severe or last longer than we expect, we may need to seek other sources of liquidity. ~~The COVID-19 outbreak is adversely affecting the availability of liquidity generally in the credit markets, and there~~There can be no guarantee that additional liquidity will be readily available or available on favorable ~~terms, especially~~terms.

In December 2020, the United States began distributing two vaccines that, in addition to other vaccines under development, are expected to help to reduce the spread of the coronavirus that causes COVID-19 once they are widely distributed. If the vaccines prove less effective than currently understood by the scientific community and the United States Food and Drug Administration, or if there are problems with the acceptance, availability, timing or other difficulties with widely distributing the vaccines, the pandemic may last longer ~~the COVID-19 outbreak lasts.~~than we currently expect and could continue to impact our business for longer than we expect.

Our restaurant operations could be further disrupted if ~~any~~large numbers of our employees isare diagnosed with ~~COVID-19 since this could require us~~or exposed to ~~quarantine some or all of a restaurant’s employees and disinfect our restaurant facilities.~~COVID-19. If a significant percentage of our workforce is unable to work, whether because of illness, quarantine, limitations on travel or other government or public health restrictions in connection with COVID-19, our operations may be negatively impacted, potentially materially adversely affecting our liquidity, financial condition or results of operations.

Our suppliers could be adversely impacted by the COVID-19 outbreak. If our suppliers’ employees are unable to work, whether because of illness, quarantine, limitations on travel or other government or public health restrictions in connection with

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COVID-19, we could face shortages of food items or other supplies at our restaurants and our operations, sales and ~~sales~~financial condition could be adversely impacted by such supply interruptions.

~~The equity markets in the United States~~ We provide personal protective equipment (PPE) to our team members and have ~~been extremely volatile due~~added additional supplies of sanitization products to ~~the COVID-19 outbreak~~our restaurants for team member and ~~the Company’s stock price has fluctuated significantly. We have equity hedges in place to protect the Company from exposure to market risk related to future payout~~guest use. A shortage of ~~equity-based compensation awards. However, because these hedges also net settle on a cash basis quarterly, we may be required to make cash payments at those quarterly settlement dates and the amounts~~supply of ~~those payments are difficult to predict due to the recent extreme volatility of the equity markets. These cash payments may ultimately be offset by payments to us from the hedge counterparties~~PPE or ~~reductions in expected payouts to employees when those equity hedges finally fully settle and the related equity awards pay out.~~

sanitization products could adversely impact our restaurant operations.

Additional government regulations, public health guidance or legislation as a result of COVID-19, in addition to decisions we have made and may make in the future relating to the compensation of and benefit offerings for our restaurant team members, could also have an adverse effect on our business. We cannot predict the types of additional government regulations or legislation that may be passed relating to employee compensation as a result of the COVID-19 outbreak. We have implemented permanent paid sick leave, emergency pay policies and taken other compensation and benefit actions to support our restaurant team members during the COVID-19 business interruption, but those actions may not be sufficient to compensate our team members for the entire duration of any business ~~interruption~~interruptions resulting from COVID-19. Those team members might seek and find other employment during ~~that interruption,~~those interruptions, which could materially adversely affect our ability to properly staff and fully reopen our restaurants with experienced team members when the business interruptions caused by COVID-19 abate or end.

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

The table below provides information concerning our repurchase of shares of our common stock during the quarter ended November 29, 2020.


(Dollars in millions, except per share data)	Total Number of Shares Purchased (1) (2)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (3)
August 31, 2020 through October 4, 2020	1,615	$	92.94	1,615	$	283.8
October 5, 2020 through November 1, 2020	58	$	97.17	58	$	283.8
November 2, 2020 through November 29, 2020	10	$	91.92	10	$	283.8
Total	1,683	$	93.08	1,683	$	283.8

(1)~~February 23,~~All of the shares purchased during the quarter ended November 29, 2020 were purchased as part of our repurchase program. On September 18, 2019, our Board of Directors authorized a new share repurchase program under which the Company may repurchase up to $500.0 million of its outstanding common stock. This repurchase program, which was announced publicly in a press release issued on September 19, 2019, does not have an expiration and replaced the previously existing share repurchase authorization.

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

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

(Dollars in millions, except per share data)
Total Number of
Shares Purchased (1) (2)

Average
Price Paid
per Share

Total Number of
Shares Purchased as
Part of Publicly
Announced Plans
or Programs

Maximum Dollar Value of
Shares that May Yet
be Purchased
Under the Plans or
Programs (3)
November 25, 2019 through December 29, 2019 455,252
$ 113.20
455,252
$ 338.5
December 30, 2019 through January 26, 2020 95,977
$ 109.39
95,977
$ 328.0
January 27, 2020 through February 23, 2020 61,444
$ 119.46
61,444
$ 320.6
Total 612,673
$ 113.23
612,673
$ 320.6

~~(1)~~

~~All of the shares purchased during the quarter ended~~ ~~February 23, 2020~~ were purchased as part of our repurchase program. On September 18, 2019, our Board of Directors authorized a new share repurchase program under which the Company may repurchase up to $500.0 million of its outstanding common stock. This repurchase program, which was announced publicly in a press release issued on September 19, 2019, does not have an expiration and replaced the previously existing share repurchase authorization.

~~(2)~~

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


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

~~Item 5.Other Information~~Table of Contents

Effective March 25, 2020, we entered into an amendment to our existing Revolving Credit Agreement with Bank of America, N.A, as agent, and the lenders and other agents party thereto (the Amendment), intended to replace and update certain obsolete defined terms that have been made obsolete due to our adoption of ASC 842 during the first quarter of fiscal 2020. Pursuant to the terms of the Amendment, the definition of Consolidated Indebtedness was amended to delete the concept of “Consolidated Operating Lease Obligations” and the definition of Consolidated Total Debt was amended to delete the concept of “Consolidated Operating Lease Obligations” and substitute the new term, “Consolidated Lease Obligations” which is defined as: “at any date of determination, the aggregate amount of lease and rental commitments (in the minimum amount required by the applicable lease or rental agreements) of the Borrower and its Subsidiaries for the most recently ended period of four consecutive fiscal quarters, on a consolidated basis (such consolidation to be in accordance with GAAP).” The Amendment has not resulted in a material change in our financial covenant under the Revolving Credit Agreement nor in our compliance with that covenant. This description of the terms of the Amendment is qualified in its entirety by reference to the full text of the Amendment, which is attached as Exhibit 10.43 to this Report.

Item 6.Exhibits



Exhibit No.		Exhibit Title
~~Exhibit No.~~31(a)		~~Exhibit Title~~
~~10.43~~	~~Letter Amendment dated as of March 25, 2020 among Darden Restaurants, Inc., certain lenders party thereto and Bank of America, N.A. as Administrative Agent.~~
~~31(a)~~	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002.~~2002.
31(b)		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32(a)		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32(b)		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002.~~2002.
101.INS		XBRL Instance Document
101.SCH		XBRL Schema Document
101.CAL		XBRL Calculation Linkbase Document
101.DEF		XBRL Definition Linkbase Document
101.LAB		XBRL Label Linkbase Document
101.PRE		XBRL Presentation Linkbase Document

Table of Contents

SIGNATURE

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

DARDEN RESTAURANTS, INC.

Dated:

~~March 31, 2020~~January 6, 2021

By:

/s/ ~~Ricardo Cardenas~~Rajesh Vennam

~~Ricardo Cardenas~~Rajesh Vennam

Senior Vice President, ~~and~~ Chief Financial Officer and Treasurer

(Principal financial officer)


	November 29, 2020		May 31, 2020
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	777.3	$	763.3
Receivables, net	46.2		49.8
Inventories	203.0		206.9
Prepaid income taxes	21.8		18.4
Prepaid expenses and other current assets	61.4		63.0
Total current assets	$	1,109.7	$	1,101.4
Land, buildings and equipment, net of accumulated depreciation and amortization of $2,719.1 and $2,640.9, respectively	2,776.0		2,756.9
Operating lease right-of-use assets	3,909.8		3,969.2
Goodwill	1,037.4		1,037.4
Trademarks	806.3		805.9
Other assets	288.4		275.3
Total assets	$	9,927.6	$	9,946.1
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	235.6	$	249.4
Short-term debt	0		270.0
Accrued payroll	130.0		150.0
Accrued income taxes	6.1		6.2
Other accrued taxes	47.6		43.4
Unearned revenues	439.9		467.9

Other current liabilities	686.9		605.9
Total current liabilities	$	1,546.1	$	1,792.8
Long-term debt	929.4		928.8
Deferred income taxes	45.1		56.1
Operating lease liabilities - non-current	4,222.8		4,276.3
Other liabilities	729.1		560.9
Total liabilities	$	7,472.5	$	7,614.9
Stockholders’ equity:
Common stock and surplus	$	2,239.0	$	2,205.3
Retained earnings	223.2		143.5
Accumulated other comprehensive income (loss)	(7.1)		(17.6)

Total stockholders’ equity	$	2,455.1	$	2,331.2
Total liabilities and stockholders’ equity	$	9,927.6	$	9,946.1



	February 23, 2020			May 26, 2019
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	321.7		$	457.3
Receivables, net	51.2			88.3
Inventories	229.6			207.3
Prepaid income taxes	19.6			41.6
Prepaid expenses and other current assets	63.9			98.1
Total current assets	$	686.0		$	892.6
Land, buildings and equipment, net of accumulated depreciation and amortization of $2,615.5 and $2,482.6, respectively	2,794.9			2,552.6
Operating lease right-of-use assets	4,030.4			—
Goodwill	1,205.5			1,183.7
Trademarks	950.8			950.8
Other assets	305.7			313.1
Total assets	$	9,973.3		$	5,892.8
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	360.1		$	332.6
Accrued payroll	155.2			175.3
Accrued income taxes	5.4			11.6
Other accrued taxes	52.2			54.2
Unearned revenues	475.7			428.5
Other current liabilities	634.5			471.9
Total current liabilities	$	1,683.1		$	1,474.1
Long-term debt	928.5			927.7
Deferred income taxes	188.5			156.9
Operating lease liabilities - non-current	4,317.4			—
Deferred rent	—			354.4
Other liabilities	514.6			587.1
Total liabilities	$	7,632.1		$	3,500.2
Stockholders’ equity:
Common stock and surplus	$	1,693.0		$	1,685.0
Retained earnings	648.6			806.6
Accumulated other comprehensive income (loss)	(0.4		)	(98.2		)
Unearned compensation	—			(0.8		)
Total stockholders’ equity	$	2,341.2		$	2,392.6
Total liabilities and stockholders’ equity	$	9,973.3		$	5,892.8



	Common Stock And Surplus			Retained Earnings			Treasury Stock		Accumulated Other Comprehensive Income (Loss)			Unearned Compensation			Total Stockholders’ Equity
Balance at November 24, 2019	$	1,690.0		$	584.5		$	—	$	(0.5	)	$	(0.3	)	$	2,273.7
Net earnings	—			232.3			—		—			—			232.3
Other comprehensive income (loss)	—			—			—		0.1			—			0.1
Dividends declared ($0.88 per share)	—			(107.4		)	—		—			—			(107.4		)
Stock option exercises (0.1 shares)	0.7			—			—		—			—			0.7
Stock-based compensation	8.7			—			—		—			—			8.7
Repurchases of common stock (0.6 shares)	(8.6		)	(60.8		)	—		—			—			(69.4		)
Issuance of stock under Employee Stock Purchase Plan and other plans (0.0 shares)	2.2			—			—		—			—			2.2
Other	—			—			—		—			0.3			0.3
Balance at February 23, 2020	$	1,693.0		$	648.6		$	—	$	(0.4	)	$	—		$	2,341.2

Balance at May 26, 2019	$	1,685.0		$	806.6		$	—	$	(98.2	)	$	(0.8	)	$	2,392.6
Net earnings	—			427.6			—		—			—			427.6
Other comprehensive income (loss)	—			—			—		97.8			—			97.8
Dividends declared ($2.64 per share)	—			(324.9		)	—		—			—			(324.9		)
Stock option exercises (0.3 shares)	11.5			—			—		—			—			11.5
Stock-based compensation	24.3			—			—		—			—			24.3
Repurchases of common stock (2.6 shares)	(35.8		)	(264.5		)	—		—			—			(300.3		)
Issuance of stock under Employee Stock Purchase Plan and other plans (0.1 shares)	6.2			—			—		—			—			6.2
Other	1.8			3.8			—		—			0.8			6.4
Balance at February 23, 2020	$	1,693.0		$	648.6		$	—	$	(0.4	)	$	—		$	2,341.2


Balance at November 25, 2018	$	1,675.5		$	662.5		$	(7.8	)	$	(78.7	)	$	(1.2	)	$	2,250.3
Balance at August 25, 2019																			Balance at August 25, 2019	$	1,692.9	$	789.9	$	(101.0)	$	(0.5)	$	2,381.3
Net earnings	—			223.6			—			—			—			223.6			Net earnings	—		24.7		—		—		24.7
Other comprehensive income (loss)	—			—			—			(2.3		)	—			(2.3		)	Other comprehensive income (loss)	—		—		100.5		—		100.5
Dividends declared ($0.75 per share)	—			(93.6		)	—			—			—			(93.6		)
Dividends declared ($0.88 per share)																			Dividends declared ($0.88 per share)	—		(109.1)		—		—		(109.1)
Stock option exercises (0.0 shares)	1.8			—			—			—			—			1.8			Stock option exercises (0.0 shares)	1.6		—		—		—		1.6
Stock-based compensation	7.2			—			—			—			—			7.2			Stock-based compensation	8.0		—		—		—		8.0
Repurchases of common stock (0.7 shares)	(9.6		)	(64.1		)	—			—			—			(73.7		)
Issuance of stock under Employee Stock Purchase Plan and other plans (0.0 shares)	1.9			—			—			—			0.4			2.3
Repurchases of common stock (1.2 shares)																			Repurchases of common stock (1.2 shares)	(16.3)		(119.8)		—		—		(136.1)
Issuance of stock under Employee Stock Purchase Plan and other plans (0.1 shares)																			Issuance of stock under Employee Stock Purchase Plan and other plans (0.1 shares)	2.0		—		—		—		2.0
Other	—			—			—			—			0.1			0.1			Other	1.8		(1.2)		—		0.2		0.8
Balance at February 24, 2019	$	1,676.8		$	728.4		$	(7.8	)	$	(81.0	)	$	(0.7	)	$	2,315.7
Balance at November 24, 2019																			Balance at November 24, 2019	$	1,690.0	$	584.5	$	(0.5)	$	(0.3)	$	2,273.7

Balance at May 27, 2018	$	1,631.9		$	657.6		$	(7.8	)	$	(85.2	)	$	(1.7	)	$	2,194.8
Balance at May 26, 2019																			Balance at May 26, 2019	$	1,685.0	$	806.6	$	(98.2)	$	(0.8)	$	2,392.6
Net earnings	—			505.4			—			—			—			505.4			Net earnings	—		195.3		—		—		195.3
Other comprehensive income (loss)	—			—			—			4.2			—			4.2			Other comprehensive income (loss)	—		—		97.7		—		97.7
Dividends declared ($2.25 per share)	—			(280.2		)	—			—			—			(280.2		)
Stock option exercises (0.9 shares)	40.2			—			—			—			—			40.2
Dividends declared ($1.76 per share)																			Dividends declared ($1.76 per share)	—		(217.5)		—		—		(217.5)
Stock option exercises (0.2 shares)																			Stock option exercises (0.2 shares)	10.8		—		—		—		10.8
Stock-based compensation	20.0			—			—			—			—			20.0			Stock-based compensation	15.6		—		—		—		15.6
Repurchases of common stock (1.6 shares)	(21.2		)	(144.8		)	—			—			—			(166.0		)
Repurchases of common stock (2.0 shares)																			Repurchases of common stock (2.0 shares)	(27.2)		(203.7)		—		—		(230.9)
Issuance of stock under Employee Stock Purchase Plan and other plans (0.1 shares)	5.2			—			—			—			0.8			6.0			Issuance of stock under Employee Stock Purchase Plan and other plans (0.1 shares)	4.0		—		—		—		4.0
Other	0.7			(9.6		)	—			—			0.2			(8.7		)	Other	1.8		3.8		—		0.5		6.1
Balance at February 24, 2019	$	1,676.8		$	728.4		$	(7.8	)	$	(81.0	)	$	(0.7	)	$	2,315.7
Balance at November 24, 2019																			Balance at November 24, 2019	$	1,690.0	$	584.5	$	(0.5)	$	(0.3)	$	2,273.7


(in millions)	February 23, 2020			May 26, 2019			(in millions)	November 29, 2020		May 31, 2020
Unearned revenues							Unearned revenues
Deferred gift card revenue	$	505.4		$	453.6		Deferred gift card revenue	$	469.3	$	494.6
Deferred gift card discounts	(31.1		)	(26.4		)	Deferred gift card discounts	(29.9)		(28.2)
Other	1.4			1.3			Other	0.5		1.5
Total	$	475.7		$	428.5		Total	$	439.9	$	467.9

Other liabilities							Other liabilities
Deferred franchise fees - non-current	$	2.3		$	3.9		Deferred franchise fees - non-current	$	2.2	$	2.8


~~(1)~~	~~Primarily included in food and beverage costs and restaurant expenses. See Note 11 for additional details.~~


~~(2)~~	~~For fiscal 2020, included in general and administrative expenses. For fiscal 2019, included in restaurant labor costs and general and administrative expenses. See Note 11 for additional details.~~


~~(3)~~	~~Included in interest, net on our consolidated statements of earnings.~~


~~(5)~~	~~Included in the computation of net periodic benefit costs - other plans, which is a component of general and administrative expenses.~~



	Defined Benefit Plans
	Three Months Ended					Nine Months Ended
(in millions)	February 23, 2020		February 24, 2019			February 23, 2020			February 24, 2019
Interest cost	$	—	$	2.4		$	3.2		$	7.0
Expected return on plan assets	—		(2.8		)	(4.0		)	(8.4		)
Pension settlement expense	—		—			147.1			—
Recognized net actuarial loss	0.1		0.6			1.8			1.9
Net periodic benefit cost	$	0.1	$	0.2		$	148.1		$	0.5



	Postretirement Benefit Plan
	Three Months Ended						Nine Months Ended
(in millions)	February 23, 2020			February 24, 2019			February 23, 2020			February 24, 2019
Interest cost	$	0.2		$	0.2		$	0.5		$	0.6
Amortization of unrecognized prior service credit	(1.2		)	(1.2		)	(3.5		)	(3.6		)
Recognized net actuarial loss	0.4			0.4			1.1			1.2
Net periodic benefit credit	$	(0.6	)	$	(0.6	)	$	(1.9	)	$	(1.8	)



	Stock Options Granted
	Nine Months Ended
	February 23, 2020			February 24, 2019
Weighted-average fair value	$	19.94		$	18.78
Dividend yield	3.0		%	3.2		%
Expected volatility of stock	22.5		%	22.6		%
Risk-free interest rate	1.9		%	2.9		%
Expected option life (in years)	6.3			6.4
Weighted-average exercise price per share	$	124.24		$	107.05



	Granted in Fiscal Year Ended
	Nine Months Ended
	February 23, 2020			February 24, 2019
Dividend yield (1)	0.0		%	0.0		%
Expected volatility of stock	23.1		%	23.4		%
Risk-free interest rate	1.8		%	2.7		%
Expected option life (in years)	2.9			2.9
Weighted-average grant date fair value per unit	$	124.41		$	115.07


~~(1)~~	~~Derivative assets and liabilities are included in receivables, net and other current liabilities, as applicable, on our consolidated balance sheets.~~


~~(1)~~	~~In fiscal 2020, location of the gain (loss) reclassified from AOCI to earnings is general and administrative expenses.~~


~~(2)~~	~~In fiscal 2019, location of the gain (loss) reclassified from AOCI to earnings is restaurant labor expenses and general and administrative expenses.~~


~~(3)~~	~~Location of the gain (loss) reclassified from AOCI to earnings is food and beverage costs and restaurant expenses.~~


~~(4)~~	~~Location of the gain (loss) reclassified from AOCI to earnings is interest, net.~~


Items Measured at Fair Value at February 23, 2020
Items Measured at Fair Value at November 29, 2020												Items Measured at Fair Value at November 29, 2020
(in millions)		Fair value of assets (liabilities)			Quoted prices in active market for identical assets (liabilities) (Level 1)		Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)		(in millions)		Fair value of assets (liabilities)		Quoted prices in active market for identical assets (liabilities) (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Derivatives:												Derivatives:
Commodities futures, swaps & options	(1)	$	(0.7	)	$	—	$	(0.7	)	$	—	Commodities futures, swaps & options	(1)	$	(0.2)	$	0	$	(0.2)	$	0
Equity forwards	(2)	0.5			—		0.5			—		Equity forwards	(2)	(0.1)		0		(0.1)		0
Total		$	(0.2	)	$	—	$	(0.2	)	$	—	Total		$	(0.3)	$	0	$	(0.3)	$	0


~~(1)~~	~~The fair value of our commodities futures, swaps and options is based on closing market prices of the contracts, inclusive of the risk of nonperformance.~~


~~(2)~~	~~The fair value of equity forwards is based on the closing market value of Darden stock, inclusive of the risk of nonperformance.~~


(in millions)	Initial Liability		Payments		Balance at November 29, 2020
Accrued liability (1)	$	38.1	$	(10.6)	$	27.5



	February 23, 2020
(in millions)	Weighted-Average Remaining Lease Term (Years)	Weighted-Average Discount Rate (1)
Operating leases	17.1	4.2	%
Finance leases	20.3	4.8	%


~~(1)~~	We cannot determine the interest rate implicit in our leases. Therefore, the discount rate represents our incremental borrowing rate and is determined based on the risk-free rate, adjusted for the risk premium attributed to our corporate credit rating for a secured or collateralized instrument.



(in millions)
Fiscal Year	Operating Leases			Finance Leases
Three months ended May 31, 2020	$	93.4		$	5.9
2021	379.8			25.1
2022	383.4			25.5
2023	387.7			26.0
2024	390.2			26.3
2025	394.9			26.8
Thereafter	4,514.3			433.0
Total future lease commitments (1)	$	6,543.7		$	568.6
Less imputed interest	(2,066.2		)	(217.8		)
Present value of lease liabilities (2)	$	4,477.5		$	350.8


~~(1)~~	~~Of the $6.54 billion of total future operating lease commitments and $568.6 million of total future finance lease commitments, $2.95 billion and $317.8 million, respectively, are noncancelable.~~


~~(2)~~	~~Excludes approximately $185.9 million of net present value of lease payments related to 38 real estate leases signed, but not yet commenced.~~



(in millions)
Fiscal Year	Capital			Financing			Operating
2020	$	8.9		$	12.2		$	372.9
2021	8.9			12.4			355.0
2022	8.8			12.6			326.7
2023	8.9			12.8			299.8
2024	8.7			13.0			262.7
Thereafter	81.4			128.0			1,434.0
Total future lease commitments	$	125.6		$	191.0		$	3,051.1
Less imputed interest (at 6.5%), (various)	(41.6		)	(99.7		)
Present value of future lease commitments	$	84.0		$	91.3
Less current maturities	(4.1		)	(2.7		)
Obligations under capital and financing leases, net of current maturities	$	79.9		$	88.6