DARDEN RESTAURANTS

Net Earnings and Net Earnings Per Share Before Restructuring and Asset Impairment Credit, Net
Net earnings before net restructuring and asset impairment credit for 2000 of $173.1 million, or $1.31 per diluted share, increased 27.9 percent, compared to 1999 net earnings before restructuring credit of $135.3 million or 96 cents per diluted share. 1999 net earnings before restructuring credit increased 33 percent, compared to net earnings for 1998 of $101.7 million or 67 cents per diluted share.

Net Earnings and Net Earnings Per Share
Net earnings after net restructuring and asset impairment credit for 2000 of $176.7 million ($1.34 per diluted share) compared with 1999’s net earnings after restructuring credit of $140.5 million (99 cents per diluted share) and 1998’s net earnings of $101.7 million (67 cents per diluted share).

During 1997, an after-tax restructuring and asset impairment charge of $145.4 million (93 cents per diluted share) was taken related to low-performing restaurant properties in the U.S. and Canada and other long-lived assets including those restaurants that have been closed. The pre-tax charge included approximately $160.7 million of non-cash charges primarily related to the write-down of buildings and equipment to net realizable value and approximately $69.2 million of charges to be settled in cash related to carrying costs of buildings and equipment prior to their disposal, lease buy-out provisions, employee severance and other costs. Cash required to carry out these activities is being provided by operations and the sale of closed properties.

After-tax restructuring credits of $5.2 million and $5.2 million were taken in the fourth quarter of 2000 and 1999, respectively, as the Company reversed portions of its 1997 restructuring liability. The reversals primarily resulted from favorable lease terminations in 2000 and due to the Company’s decision to close fewer restaurants than identified for closure as part of the initial restructuring action in 1999. The credits had no effect on the Company’s cash flow.

During 2000, an after-tax asset impairment charge of $1.6 million was taken in the fourth quarter related to additional write-downs of the value of properties held for disposition.

Financial Condition
Short-term debt totaled $115.0 million as of May 28, 2000, up from $23.5 million at May 30, 1999. The increase resulted primarily from increased share repur-chase activity due to favorable Company stock prices during 2000 as well as increased spending on land, buildings and equipment.

Liquidity and Capital Resources
The Company intends to manage its business and its financial ratios to maintain an investment grade bond rating, which allows access to financing at reasonable costs. Currently, the Company’s publicly issued long-term debt carries “Baa1” (Moody’s Investor Services, Inc.), “BBB+” (Standard & Poor’s Corporation) and “BBB+” (Fitch) ratings. The Company’s commercial paper has ratings of “P-2” (Moody’s), “A-2” (Standard & Poor’s) and “F-2” (Fitch).

Darden’s long-term debt includes $150 million of 6.375 percent notes due in February 2006 and $100 million of unsecured 7.125 percent debentures due in February 2016. The effective annual interest rate is 7.57 percent for the notes and 7.82 percent for the debentures, after consideration of loan costs, issuance discounts, and interest-rate swap termination costs. Darden’s long-term debt also includes a $66.9 million commercial bank loan with an outstanding principal balance of $52.6 million as of May 28, 2000, that is used to support two loans from the Company to the Employee Stock Ownership Plan portion of the Darden Savings Plan. Commercial paper is the primary source of short-term financing. Bank credit lines are maintained to ensure availability of short-term funds on an as-needed basis. Available fee-paid credit lines, all of which are unused at May 28, 2000, total $300 million.