DARDEN RESTAURANTS

The Company’s adjusted debt-to-total capital ratio (which includes 6.25 times the total annual restaurant minimum rent and 3.00 times the total annual restaurant equipment minimum rent as a component of debt and total capital) was 42 percent and 39 percent at May 28, 2000, and May 30, 1999, respectively. The Company’s fixed-charge coverage ratio, which measures the number of times each year that the Company earns enough to cover its fixed charges, amounted to 7.1 times at May 28, 2000, and 6.2 times at May 30, 1999. Based on these ratios, the Company believes its financial condition remains strong. The composition of the Company’s capital structure is shown in the following table.

On July 13, 2000, the Company filed a registration statement with the Securities and Exchange Commission. The purpose of the filing was to register $500 million of debt securities using a shelf registration process. Under this process, the Company may offer, from time to time, up to $500 million of debt securities.

In 2000, 1999 and 1998, the Company declared eight cents per share in annual dividends paid in two installments. In March 2000, the Company’s Board approved an additional authorization for the ongoing stock buy-back plan whereby the Company may purchase on the open market up to 20.0 million additional shares of Darden common stock. This buy-back authorization is in addition to previously approved authorizations by the Board covering open market purchases of up to 44.6 million shares of Darden common stock. In 2000, 1999 and 1998, the Company purchased treasury stock totaling $202 million, $228 million, and $171 million, respectively. As of May 28, 2000, 44.1 million shares have been purchased under the stock buy-back plan.

The Company generated $337 million, $348 million and $236 million in funds from operating activities during 2000, 1999, and 1998, respectively. The Company requires capital principally for building new restaurants, replacing equipment and remodeling existing restaurants. Capital expenditures were $269 million in 2000, compared to $124 million in 1999, and $112 million in 1998. The increased expenditures in 2000 resulted primarily from new restaurant growth as well as remodeling activity at Olive Garden and Red Lobster restaurants. The 2000, 1999 and 1998 capital expenditures, treasury stock purchases and dividend requirements were financed primarily through the issuance of commercial paper and internally generated funds. This has resulted in the Company carrying current liabilities in excess of current assets.

Year 2000
During 2000 and 1999, the Company addressed a matter commonly referred to as the “Year 2000” issue. The Company implemented extensive testing of its own date-sensitive systems and also assessed the year 2000 compliance status of third parties such as suppliers, banks, vendors and others with whom it does significant business. As of the end of 2000, the Company had spent approximately $3.4 million on the Year 2000 issue. The Company has not experienced any material Year 2000 problems nor does it believe there will be any future material adverse impact to the Company’s business, operations or financial position as a result of the Year 2000 issue.

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