Jiazi Cui Siyang Zhang Qun Yu (Jett) April 15th, 2014

Agenda Introduction Macro & Industry Outlook Company & Business Overview Financial Analysis Financial Projection Valuation Summary Recommendation Q & A

Introduction Name: Darden Restaurant, Inc. Ticker: DRI Upscale, casual, full-service dining restaurant operator Ticker: DRI Industry: Restaurants Sector: Service Market Cap: $6.39B Headquarter: Orlando, FL Employees: 206,578 Market Price: $48.46 (as of 4/14/2014) Source: finance.yahoo.com

Macroeconomics Source: www.tradingeconomics.com

Macroeconomics Source: www.tradingeconomics.com

Macroeconomics Source: www.tradingeconomics.com

Industry Performance Restaurant Industry Sales, in billions 1970 1980 1990 2000 2010 2014 Source: National Restaurant Association

Industry Food service market share A casual dining restaurant is a restaurant that serves moderately-priced food in a casual atmosphere. Except for buffet-style restaurants, casual dining restaurants typically provide table service. Source: Chain Store Guide’s Database of Chain Restaurant Operators

Industry Major Multi-brand restaurant operators: Dine Equity Inc. (Applebee’s, IHOP) Bob Evans Farms CBRL Group Inc. (Cracker Barrel Old Country Store) Brinker International Inc. (Chili’s, Maggiano) Others Source: www.ibisworld.com

Company Overview The world’s largest company-owned and operated full service restaurant company and served over 441 million meals in fiscal 2013. Owns 2138 restaurants in both Canada and United States. Red Lobster (678 restaurants) Olive Garden (822 restaurants) Longhorn Steakhouse (430 restaurants) The Capital Grille (49 restaurants) Bahama Breeze (33 restaurants) Seasons 52 (31 restaurants) Eddie V’s Prime Seafood (9 restaurants) A small amount of franchising activity in other countries. Source: Darden 10-K

Company History Bill Darden, age 19, opened his first restaurant 1938 Bill Darden, age 19, opened his first restaurant 1968 First Red Lobster opened in Lakeland, FL 1970 Red Lobster was acquired by General Mills 1995 Darden Restaurants, Inc. is spun off from General Mills as a public company with Joe Lee named Chairman & CEO 2007 Darden acquires RARE Hospitality and its two brands: LongHorn Steakhouse and The Capital Grille 2013 Darden announces formal area development agreement to develop and operate a minimum of 13 Red Lobster, Olive Garden and LongHorn Steakhouse locations in Malaysia Source: www.darden.com

Management Clarence Otis, CEO, Joined 2004 Andrew H. (Drew) Madsen, President & COO Joined 2004 David C. George, President of Olive Garden, joined 2003 Valerie Insignares, President of LongHorn Stakehouse, Joined 2004 Source: Darden 10-K

Sales - FY2013 Sales from continuing operations were $8.55 billion in fiscal 2013 8.6 8.6 Sales Others 12% 8.4 LongHorn 8.2 14% Olive Garden 43% 8.0 8.0 7.8 7.6 31% 7.5 Red Lobster 0.0 Source: Darden 10-K

Sales - FY2014 (9 months) Sales from continuing operations were $6.44 billion in first 9 months of fiscal 2014, compared to 6.25 million in first 9 months of fiscal 2013 Q3 sales in FY2014 decreased 1.1%. Sales decreased 5.6 % for Red Lobster, LongHorn and Olive Garden 83 new restaurants opened so far in fiscal 2014 Severe winter weather Source: Darden 10-K

Porter’s 5 Factors High Low-Medium Medium Bargaining Power with Suppliers High Bargaining Power with Customers Low-Medium Threats of Substitutes Medium New Entrants Threats Competitive Rivalry within Industry

SWOT Strengths Weaknesses Opportunities Threats Strong brand recognition High-traffic store locations Well-diversified restaurant brands High-quality service Economy of scale Strengths Weak marketing strategy Less innovated menu Debt increase from the acquisition of Yard House Weaknesses Strong market demand Potential international expansions Opportunities Highly competitive market Fluctuate economic condition Threats

Stock Performance

Stock Performance

Financial Analysis

Financial Analysis

Financial Analysis

Financial Analysis

Revenue Projections New restaurant openings Existing-restaurant Sales Growth Sales Projections ($$ in mm USD) FY2011 FY2012 FY2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 Red Lobster   Number of Restaurants 698 704 705 706 707 708 709 710 New Openings 6 1 Average Unit Sale $ 3.70 $ 3.77 $ 3.81 $ 3.85 $ 3.89 $ 3.93 Total Sales from Red Lobster $ 2,609 $ 2,664 $ 2,695 $ 2,726 $ 2,757 $ 2,788 Olive Garden 754 792 828 843 858 873 888 893 38 36 15 5 $ 4.60 $ 4.67 $ 4.74 $ 4.81 $ 4.88 $ 4.96 Total Sales from Olive Garden $ 3,809 $ 3,936 $ 4,066 $ 4,199 $ 4,335 $ 4,425 Longhorn 354 386 430 470 510 550 590 600 32 44 40 10 Sales per Restaurant $ 3.00 $ 3.05 $ 3.09 $ 3.14 $ 3.18 $ 3.23 Total Sales from Longhorn $ 1,290 $ 1,431 $ 1,576 $ 1,725 $ 1,879 $ 1,939 Specialty Restaurant Group 87 110 129 148 170 196 225 259 % New Restaurant Growth 15% $ 6.70 $ 6.90 $ 7.11 $ 7.32 $ 7.54 $ 7.77 % Same-restaurant Growth 3% Total Sales from SRG $ 864 $ 1,021 $ 1,208 $ 1,435 $ 1,697 $ 2,012 longer opening hours, more tables, higher traffic Slow down the expansion of red lobster and olive garden. Longhorn is positioned as a cash cow which provides cash not only for its own expansions but also extra funds for the other brands.

Cash Flow Projections COGS/SG&A--proportional to Total Company Sales Depreciation & Amortization: proportional to PP&E Interest Expenses: Cost of Debt * Debt Outstanding Effective tax rate – 25%

DCF Evaluation

Comparable

Comparable Analysis

Summary Thirsty for organizational changes Low organic growth – future potential relies largely on acquisitions or divestures International market explorations Debt issues vs. high dividend payout Fairly priced or slightly underpriced

Recommendation Watch List

Questions?