Filed Pursuant to Rule 424(b)(5)
Registration No. 333-213992
The information in this preliminary prospectus
supplement is not complete and may be changed. This preliminary prospectus supplement and the accompanying prospectus are not an offer to sell these securities, and are not soliciting an offer to buy these securities, in any jurisdiction where the
offer or sale is not permitted.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS SUPPLEMENT DATED APRIL 10, 2017
Prospectus Supplement
(To Prospectus dated
October 6, 2016)
$
Darden Restaurants, Inc.
% Senior Notes due 20
We are offering $ million aggregate principal amount
of % senior notes due 20 . The notes will mature on , 20 . Interest on
the notes will be paid semi-annually in arrears
on and of each year, commencing
on , 20 .
On March 27, 2017, we entered into an Agreement and Plan of Merger (the Merger Agreement) with Cheddars
Restaurant Holding Corp. (Cheddars). Under the terms of the Merger Agreement, we will acquire all of Cheddars issued and outstanding stock (the Acquisition) and Cheddars will become our wholly-owned
subsidiary. The offering contemplated hereby is not conditioned upon the completion of the Acquisition, which, if completed, will occur subsequent to the closing of the offering. Upon the first to occur of either (i) September 23, 2017, if
the Acquisition is not consummated on or prior to such date, or (ii) the date on which the Merger Agreement is terminated (each, a Special Mandatory Redemption Trigger), we will be required to redeem the notes, in whole, at a
redemption price equal to 101% of the aggregate principal amount of the notes being redeemed, plus accrued and unpaid interest on the aggregate principal amount of the notes being redeemed to, but excluding, the date of the special mandatory
redemption (the Special Mandatory Redemption). There is no escrow account for, or security interest in, the proceeds from the sales of the notes for the benefit of holders of the notes. See Risk Factors and Description
of NotesSpecial Mandatory Redemption. The notes may also be redeemed at our option, in whole, at any time before September 23, 2017, at a redemption price equal to 101% of the aggregate principal amount of the notes being redeemed,
plus accrued and unpaid interest on the aggregate principal amount of the notes being redeemed to, but excluding, the date of such redemption, if we determine, in our judgment, the Acquisition will not be consummated on or before September 23,
2017 (the Special Optional Redemption). See Description of NotesSpecial Optional Redemption.
We may also redeem the notes, at any time in whole or from time to time in part, at the applicable redemption price in this
prospectus supplement under the section entitled Description of NotesOptional Redemption. In addition, if we experience a Change of Control Triggering Event (as defined herein), we may be required to offer to purchase the notes at
a purchase price equal to 101% of their principal amount, together with accrued and unpaid interest to, but not including, the date of the repurchase. See Description of NotesChange of Control.
The notes will be our senior unsecured obligations and will rank equally in right of payment with all of our existing and future
unsecured and unsubordinated debt, including our revolving credit facility. The notes will rank senior in right of payment to any existing and future subordinated debt. The notes will not be guaranteed by any of our subsidiaries. As a result, the
notes will be effectively subordinated to any liabilities of our subsidiaries. The notes will be effectively subordinated in right of payment to any existing and future secured debt to the extent of the value of the assets securing such debt.
The notes are a new issue of securities with no established trading market. We do not intend to apply to list the notes on any
securities exchange or include the notes in any automated quotation system.
Investing in the notes involves certain risks. See
Risk Factors
beginning on page
S-7 of this prospectus supplement.
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Per
Note
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Total
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Price to Public
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%
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$
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Underwriting Discount
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%
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$
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Proceeds, before expenses, to Darden
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%
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$
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Interest on the notes will accrue from the date of original issuance. Purchasers of the notes
must pay the accrued interest if settlement occurs after that date.
Neither the Securities and Exchange Commission nor
any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus supplement or the accompanying prospectus. Any representation to the contrary is a criminal offense.
Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC on
behalf of the underwriters, expect to deliver the notes on or about April , 2017. Delivery of the notes will be made in book-entry form only through the facilities of The Depository Trust Company and its direct and
indirect participants, including Euroclear Bank S.A/N.V., as operator of the Euroclear System, and Clearstream Banking, société anonyme, against payment therefor in immediately available funds.
Joint Book-Running Managers
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BofA Merrill Lynch
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Goldman, Sachs & Co.
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Wells Fargo Securities
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Fifth Third Securities
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SunTrust Robinson Humphrey
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US Bancorp
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The date of this prospectus supplement is April , 2017.
TABLE OF CONTENTS
Prospectus Supplement
Base Prospectus
All references in this prospectus supplement and the accompanying prospectus to Darden, we,
us, our and our company are to Darden Restaurants, Inc. and not to our consolidated subsidiaries, unless otherwise indicated or the context otherwise requires.
Darden
®
, Darden Restaurants
®
, Olive Garden
®
, LongHorn Steakhouse
®
, The Capital Grille
®
, Bahama Breeze
®
, Seasons 52
®
, Eddie Vs Prime Seafood
®
, Wildfish Seafood Grille
®
and Yard House
®
are our trademarks.
S-i
ABOUT THIS PROSPECTUS SUPPLEMENT
This document is in two parts. The first part is this prospectus supplement, which describes the terms of the notes that we
are currently offering. The second part is the accompanying prospectus, which gives more general information, some of which may not apply to the notes that we are currently offering. Generally, the term prospectus refers to both parts
combined. Both this prospectus supplement and the accompanying prospectus include or incorporate by reference important information about us and other information you should know before investing in the notes. This prospectus supplement also adds,
updates and changes information contained or incorporated by reference in the accompanying prospectus. To the extent that any statement we make in this prospectus supplement is inconsistent with the statements made in the accompanying prospectus,
the statements made in the accompanying prospectus are deemed modified or superseded by the statements made in this prospectus supplement.
This prospectus supplement, the accompanying prospectus and any free-writing prospectus that we file with the Securities and
Exchange Commission, or SEC, contain and incorporate by reference information that you should consider when making your investment decision. We have not, and the underwriters have not, authorized any other person to provide you with additional or
different information. If anyone provides you with different or inconsistent information, you should not rely on it. You should assume that the information contained in this prospectus supplement, the accompanying prospectus and the documents
incorporated by reference herein and therein, is accurate as of its date. Our business, financial condition, results of operations and prospects may have changed since the date of that information.
We are not, and the underwriters are not, making an offer to sell these notes in any jurisdiction where the offer or sale is
not permitted.
AVAILABLE INFORMATION
We file reports, proxy statements and other information with the SEC. You may read and copy any document we file at the
SECs Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330.
The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at
http://www.sec.gov
. Our filings are also available at the offices of the New York Stock Exchange, 11 Wall Street, New York, New York 10005. Information about us, including our SEC filings, is also available at our Internet site at
http://www.darden.com
. However, the information on our Internet site is not incorporated by reference or deemed to be a part of this prospectus or any prospectus supplement.
This prospectus constitutes part of a registration statement on Form
S-3
that we filed
with the SEC under the Securities Act of 1933, as amended (the Securities Act). As permitted by the rules and regulations of the SEC, this prospectus omits some of the information, exhibits and undertakings included in the registration statement.
You may read and copy the information omitted from this prospectus but contained in the registration statement, as well as the periodic reports and other information we file with the SEC, at the addresses and Internet sites listed above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
We have elected to incorporate by reference certain information into this prospectus. By incorporating by
reference, we can disclose important information to you by referring you to another document we have filed separately with the SEC. The information incorporated by reference is deemed to be part of this prospectus, except for information
incorporated by reference that is superseded by information contained in any document we subsequently file with the SEC that is incorporated or deemed to be incorporated by reference in this prospectus. Likewise, any statement in this prospectus or
any document which is incorporated or deemed to be incorporated by reference herein will be deemed to have been modified or superseded to the extent that any
S-ii
statement contained in any document that we subsequently file with the SEC that is incorporated or deemed to be incorporated by reference herein modifies or supersedes that statement. We are
incorporating by reference the following documents that we have previously filed with the SEC (other than information in such documents that is deemed not to be filed):
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Darden Restaurants, Inc.s Annual Report on Form
10-K
for the
fiscal year ended May 29, 2016, filed July 25, 2016;
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Darden Restaurants, Inc.s Quarterly Reports on Form
10-Q
for the
periods ended August 28, 2016, filed October 5, 2016, November 27, 2016, filed January 4, 2017 and February 26, 2017, filed April 4, 2017; and
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Darden Restaurants, Inc.s Current Reports on Form
8-K
filed
July 5, 2016, September 28, 2016, October 4, 2016 (only Item 5.07), October 4, 2016, November 14, 2016 and March 27, 2017 (only Item 1.01 and Exhibit 2.1).
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The preceding list supersedes and replaces the documents listed in the accompanying prospectus under the heading Where
You Can Find More Information About Darden. Any further filings we make with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, (the Exchange Act) prior to the termination of the offering
of the notes made hereby also will be incorporated by reference in this prospectus supplement (other than information in such documents that is deemed not to be filed).
We will provide without charge to each person, including any beneficial owner, to whom a copy of this prospectus has been
delivered, on the written or oral request of that person, a copy of any or all of the documents referred to above which have been or may be incorporated by reference in this prospectus other than exhibits to these documents, unless the exhibits are
also specifically incorporated by reference herein. Requests for copies should be directed to Darden Restaurants, Inc., 1000 Darden Center Drive, Orlando, Florida, 32837, Attention: Investor Relations; telephone number
1-800-832-7336.
The information relating to us contained in this prospectus does not purport to be complete and should be read
together with the information contained in the documents incorporated or deemed to be incorporated by reference in this prospectus.
Descriptions in this prospectus or in any document incorporated by reference herein or therein of contracts or other documents
are not necessarily complete, and in each instance, reference is made to the copies of these contracts or other documents incorporated by reference in this prospectus.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This prospectus supplement, the accompanying prospectus and any term sheet and the documents incorporated by reference in this
prospectus supplement and the accompanying prospectus may contain forward-looking statements regarding the expected net increase in the number of our restaurants, U.S. same-restaurant sales, total sales growth, diluted net earnings per share growth,
and capital expenditures in fiscal 2017, 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 publicly or revise
any forward-looking statements for any reason, whether as a result of new information, future events or otherwise. 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 due to, among others, the risks and uncertainties described under the heading Risk Factors in this prospectus supplement and the documents incorporated by reference in this
prospectus supplement and the accompanying prospectus.
S-iii
SUMMARY
This summary is not complete and does not contain all of the information that you should consider before buying the notes
in this offering. You should read carefully the entire prospectus supplement and the accompanying prospectus, including in particular the section entitled Risk Factors beginning on page S-6 of this prospectus supplement and the more
detailed information and financial statements and related notes appearing elsewhere or incorporated by reference in this prospectus supplement and the accompanying prospectus, before making an investment decision.
Darden
Darden Restaurants, Inc. is a full-service restaurant company, and served over 334 million meals in fiscal 2016. As of
May 29, 2016, we operated through subsidiaries 1,536 restaurants in the United States and Canada. In the United States, we operated 1,530 restaurants in all 50 states, including 837 Olive
Garden
®
, 481 LongHorn Steakhouse
®
, 65 Yard House
®
, 54 The Capital Grille
®
, 37 Bahama Breeze
®
, 40 Seasons 52
®
, 13 Eddie Vs Prime Seafood
®
and three Wildfish Seafood Grille
®
restaurants. In Canada, we operated six Olive Garden restaurants. Through subsidiaries, we own and
operate all of our restaurants in the United States and Canada, except for three restaurants located in Central Florida that are owned by joint ventures we manage. Eight LongHorn Steakhouse
®
restaurants in the United States or Canada are franchised. Of our 1,536 restaurants in the United States and Canada open on May 29, 2016, 87 were located on owned sites and 1,449 were located on leased sites. As of May 29, 2016, we also
had 42 restaurants outside the United States and Canada operated by independent third parties pursuant to area development and franchise agreements, including three Olive Garden and seven LongHorn Steakhouse restaurants in Puerto Rico.
Darden Restaurants, Inc. is a Florida corporation incorporated in March 1995, and is the parent company of GMRI, Inc., also a
Florida corporation. GMRI, Inc. and certain other of our subsidiaries own and operate our restaurants. GMRI, Inc. was originally incorporated in March 1968 as Red Lobster Inns of America, Inc. We were acquired by General Mills, Inc. in 1970 and
became a separate publicly held company in 1995 when General Mills distributed all of our outstanding stock to the stockholders of General Mills. Our principal executive offices and restaurant support center are located at 1000 Darden Center Drive,
Orlando, Florida 32837, telephone (407)
245-4000.
We have a 52/53 week fiscal
year ending the last Sunday in May. Our fiscal year 2016 ended May 29, 2016 and consisted of 52 weeks, fiscal year 2015 ended May 31, 2015 and consisted of 53 weeks, and fiscal year 2014 ended May 25, 2014 and consisted of 52 weeks.
Strategy
We believe
that capable operators of strong multi-unit brands have the opportunity to increase their share of the restaurant industrys full-service segment. Generally, the restaurant industry is considered to be comprised of three segments: quick
service, fast casual, and full-service. All of our restaurants fall within the full-service segment, which is highly fragmented and includes many independent operators and small chains. We believe we have strong brands, and that the breadth and
depth of our experience and expertise sets us apart in the full-service restaurant industry. This collective capability is the product of investments over many years in areas that are critical to success in our business, including restaurant
operations excellence, brand management excellence, supply chain, talent management and information technology, among other things.
During fiscal 2016, our operating philosophy was focused on improving the core operational fundamentals of the business by
providing an outstanding guest experience rooted in culinary innovation, attentive service, engaging atmosphere, and integrated marketing. We enable each brand to reach its full potential by leveraging its
S-1
scale, insight, and experience in a way that protects uniqueness and competitive advantages. Additionally, brands can capitalize on insights to deliver customized
one-to-one
customer relationship marketing. We hold ourselves accountable for operating our restaurants with a sense of urgency to achieve our commitments to all of our
stakeholders.
Restaurant Brands
Olive Garden.
Olive Garden is an internally-developed brand and is the largest full-service dining Italian
restaurant operator in the United States. Olive Garden offers a variety of Italian foods featuring fresh ingredients presented simply with a focus on flavor and quality, and a broad selection of imported Italian wines. In fiscal 1983, Olive Garden
opened its first restaurant in Orlando, Florida.
LongHorn Steakhouse.
LongHorn Steakhouse is a full-service
steakhouse restaurant with locations primarily in the eastern United States, operating in an atmosphere inspired by the American West. We acquired LongHorn Steakhouse in October 2007 as part of the RARE Hospitality International, Inc. (RARE)
acquisition. LongHorn Steakhouse restaurants feature a variety of menu items including signature fresh steaks and chicken, as well as salmon, shrimp, ribs, pork chops, burgers and prime rib.
The Capital Grille.
The Capital Grille is a full-service restaurant with locations in major metropolitan cities
in the United States and features relaxed elegance and style. We acquired The Capital Grille in October 2007 as part of the RARE acquisition. Nationally acclaimed for dry aging steaks on the premises, The Capital Grille is also known for fresh
seafood flown in daily and culinary specials created by its chefs. The restaurants feature an award-winning wine list offering over 350 selections, personalized service, a comfortable club-like atmosphere, and premiere private dining rooms.
Bahama Breeze.
Bahama Breeze is an internally-developed full-service restaurant brand operating primarily in the
eastern United States that offers guests the feeling of a Caribbean escape, with food, drinks and atmosphere found in the islands. The menu features distinctive, Caribbean-inspired fresh seafood, chicken and steaks as well as handcrafted tropical
cocktails. In fiscal 1996, Bahama Breeze opened its first restaurant in Orlando, Florida.
Seasons 52.
Seasons 52 is an internally-developed full-service restaurant brand operating primarily in the eastern United States, with a casually sophisticated, fresh grill and wine bar that offers a seasonally changing menu inspired by the appeal of a
local farmers market. The menu includes an international collection of more than 100 wines, with 52 available by the glass, along with exceptional signature handcrafted cocktails. In fiscal 2003, Seasons 52 opened its first restaurant in
Orlando, Florida.
Eddie Vs.
Eddie Vs is a full-service restaurant with locations in major
metropolitan cities in the United States with a sophisticated and contemporary ambiance, featuring live nightly music in the
V-Lounge.
The menu is inspired by the great classic restaurants of New Orleans, San
Francisco and Boston, with an emphasis on prime seafood creations, USDA prime beef and chops, and fresh oyster bar selections. The atmosphere provides a comfortable dining experience where your pleasure is our sole intention. Wildfish
Seafood Grille is a full-service restaurant providing a dining experience focused on comfort and excitement with fresh seafood daily and high quality USDA steaks. We acquired eight Eddie Vs Prime Seafood restaurants and three Wildfish Seafood
Grille restaurants in November 2011.
Yard House.
Yard House is a full-service restaurant operating in
metropolitan areas across the United States and is known for great food, classic rock and features over 100 draft beer offerings. The American menu includes more than 100 chef driven items with a wide range of appetizers, snacks, burgers and steaks,
street tacos, salads, sandwiches, fresh fish and a generous selection of vegetarian dishes. Yard House opened its first restaurant in 1996 and we acquired Yard House in August 2012.
S-2
Recent Developments
Cheddars Acquisition
On March 27, 2017, we announced that we entered into a Merger Agreement to acquire Cheddars for a total purchase
price of approximately $780 million payable in cash, subject to customary adjustments. On April 7, 2017, the Federal Trade Commission granted our request for early termination of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 with respect to the Acquisition. Upon closing the Acquisition, Cheddars existing debt will be repaid and we will reimburse Cheddars equityholders for any cash on the balance sheet. In addition, the Company will
pay $10 million to Cheddars equityholders for certain transaction-related tax attributes of Cheddars and reimburse Cheddars equityholders for capital expenditures on new restaurants under development made prior to the
completion of the Acquisition.
S-3
The Offering
Issuer
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Darden Restaurants, Inc.
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Securities Offered
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$ million aggregate principal amount of % senior notes due
20 .
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Interest Rate
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The notes will bear interest at a rate of % per year.
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Interest Payment Dates
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Semi-annually in arrears
on and of each year, commencing
on , 20 .
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Ranking
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The notes will be our senior unsecured obligations and will:
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rank equally in right of payment with all of our existing and future unsecured and unsubordinated debt,
including our revolving credit facility;
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rank senior in right of payment to any existing and future subordinated debt;
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rank effectively subordinate to our subsidiaries liabilities; and
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rank effectively subordinate in right of payment to any existing and future secured debt to the extent of the
value of the assets securing such debt.
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As of February 26, 2017, we had approximately $450 million of senior debt outstanding (without giving effect to this offering)
and our subsidiaries had no debt (excluding any intercompany liabilities). As of that date, we had no outstanding borrowings under our $750.0 million revolving credit facility and no commercial paper or letters of credit outstanding, each of
which was backed by our revolving credit facility.
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Covenants
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The indenture governing the notes contains covenants that will limit our ability to:
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incur some liens securing debt;
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engage in some sale-leaseback transactions; and
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enter into some consolidations, mergers or transfers of substantially all of our assets.
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These covenants apply to Darden and to certain of its subsidiaries but do not apply to Dardens subsidiaries that are not
corporations. As of February 26, 2017, less than one percent of Dardens consolidated total assets were held through partnerships and other
non-corporate
entities.
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S-4
Special Mandatory Redemption
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Upon the occurrence of a Special Mandatory Redemption Trigger, we will be required to redeem the notes, in whole, at a redemption price
equal to 101% of the aggregate principal amount of the notes being redeemed, plus accrued and unpaid interest on the aggregate principal amount of the notes being redeemed to, but excluding, the date of such redemption. See Description of
NotesSpecial Mandatory Redemption.
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Special Optional Redemption
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We will have the right to redeem the notes at any time, in whole, before September 23, 2017, at a redemption price equal to 101% of
the aggregate principal amount of the notes being redeemed, plus accrued and unpaid interest on the aggregate principal amount of the notes being redeemed to, but excluding, the date of such redemption, if we determine, in our judgment, the
Acquisition will not be consummated on or before September 23, 2017. See Description of NotesSpecial Optional Redemption.
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Repurchase at the Option of Holders Upon a Change of Control Triggering Event
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If we experience a Change of Control Triggering Event (as defined in Description of NotesChange of
Control), we will be required, unless we have exercised our right to redeem the notes, to offer to purchase the notes at a purchase price equal to 101% of the principal amount plus accrued and unpaid interest to, but not including, the date of
repurchase.
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Optional Redemption
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In addition to the Special Optional Redemption right described above, at any time prior
to , 20 (the Par Call Date), which is a date months prior to maturity of the notes, the
notes will be redeemable at our option, in whole or from time to time in part, at a redemption price equal to the greater of (1) 100% of the principal amount of the notes to be redeemed and (2) the sum of the present values of the remaining
scheduled payments of principal and interest on the notes that would be due if the notes matured on the Par Call Date (exclusive of interest accrued to the date of redemption) discounted to the redemption date on a semiannual basis (assuming a
360-day
year consisting of twelve
30-day
months) at the Treasury Rate plus basis
points plus accrued and unpaid interest to the date of redemption.
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At any time on or after the Par Call Date, the notes will be redeemable at our option, in whole or from time to time in part, at a
redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to the date of redemption. See Description of NotesOptional Redemption.
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Use of Proceeds
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We intend to use the net proceeds from the sale of the notes to fund the Acquisition. See Use of Proceeds.
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S-5
Denominations and Form
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We will issue the notes in the form of one or more fully registered global notes registered in the name of the nominee of The Depository
Trust Company (DTC). The notes will be issued in minimum denominations of $2,000 and in integral multiples of $1,000 in excess thereof.
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No Listing
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The notes are a new issue of securities with no established trading market. We do not intend to apply for the listing of the notes on
any securities exchange or for the quotation of the notes in any dealer quotation system.
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Risk Factors
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An investment in the notes involves risks. You should carefully consider the information set forth in the section of this prospectus
supplement entitled Risk Factors beginning on page S-7, as well as other information included or incorporated by reference in this prospectus supplement and the accompanying prospectus before deciding whether to invest in the notes.
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Trustee
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Wells Fargo Bank, National Association.
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S-6
RISK FACTORS
An investment in the notes involves risks. Before deciding whether to purchase the notes, you should consider the risks
discussed below and in our filings with the SEC that we have incorporated by reference in this prospectus supplement and the accompanying prospectus. Additional risks and uncertainties not presently known to us or that we currently believe to be
immaterial may also impair our business operations.
Any of the risks discussed below or in our SEC filings
incorporated by reference in this prospectus supplement and the accompanying prospectus, and other risks we have not anticipated or discussed, could have a material impact on our business, financial condition or results of operations. In that case,
our ability to pay interest on the notes when due or to repay the notes at maturity could be adversely affected, and the trading price of the notes could decline substantially.
Risks Related to Our Business
A failure to
maintain food safety throughout the supply chain and food-borne illness concerns may have an adverse effect on our business.
Food safety is a top priority, and we dedicate substantial resources to ensuring that our guests enjoy safe, quality food
products. However, food safety issues could be caused at the point of source or by food suppliers or distributors and, as a result, be out of our control. In addition, regardless of the source or cause, any report of food-borne illnesses such as E.
coli, hepatitis A, trichinosis or salmonella, and other food safety issues including food tampering or contamination, at one of our restaurants could adversely affect the reputation of our brands and have a negative impact on our sales. Even
instances of food-borne illness, food tampering or food contamination occurring solely at restaurants of our competitors could result in negative publicity about the food service industry generally and adversely impact our sales. The occurrence of
food-borne illnesses or food safety issues could also adversely affect the price and availability of affected ingredients, resulting in higher costs and lower margins.
Litigation, including allegations of illegal, unfair or inconsistent employment practices, may adversely affect our business, financial condition and
results of operations.
Our business is subject to the risk of litigation by employees, guests, suppliers,
shareholders, government agencies or others through private actions, class actions, administrative proceedings, regulatory actions or other litigation. These actions and proceedings may involve allegations of illegal, unfair or inconsistent
employment practices, including wage and hour violations and employment discrimination; guest discrimination; food safety issues including poor food quality, food-borne illness, food tampering, food contamination, and adverse health effects from
consumption of various food products or high-calorie foods (including obesity); other personal injury; violation of dram shop laws (providing an injured party with recourse against an establishment that serves alcoholic beverages to an
intoxicated party who then causes injury to himself or a third party); trademark infringement; violation of the federal securities laws; or other concerns. The outcome of litigation, particularly class action lawsuits and regulatory actions, is
difficult to assess or quantify. Plaintiffs in these types of lawsuits may seek recovery of very large or indeterminate amounts, and the magnitude of the potential loss relating to such lawsuits may remain unknown for substantial periods of time.
The cost to defend litigation may be significant. There may also be adverse publicity associated with litigation that could decrease guest acceptance of our brands, regardless of whether the allegations are valid or we ultimately are found liable.
Litigation could impact our operations in other ways as well. Allegations of illegal, unfair or inconsistent employment practices, for example, could adversely affect employee acquisition and retention. As a result, litigation may adversely affect
our business, financial condition and results of operations.
S-7
Unfavorable publicity, or a failure to respond effectively to adverse publicity, could harm our reputation
and adversely impact our guest counts and sales.
The good reputation of our restaurant brands is a key factor in
the success of our business. Actual or alleged incidents at any of our restaurants could result in negative publicity that could harm our brands. Even incidents occurring at restaurants operated by our competitors or in the supply chain generally
could result in negative publicity that could harm the restaurant industry overall and, indirectly, our own brands. Negative publicity may result from allegations of illegal, unfair or inconsistent employment practices, employee dissatisfaction,
guest discrimination, illness, injury, or any of the other matters discussed above that could give rise to litigation. Regardless of whether the allegations or complaints are valid, unfavorable publicity relating to a limited number of our
restaurants, or only to a single restaurant, could adversely affect public perception of the entire brand. Negative publicity also may result from health concerns including food safety and flu outbreaks, publication of government or industry
findings concerning food products, environmental disasters, crime incidents, data privacy breaches, scandals involving our employees, or operational problems at our restaurants, all of which could make our brands and menu offerings less appealing to
our guests and negatively impact our guest counts and sales. Adverse publicity and its effect on overall consumer perceptions of our brands, or our failure to respond effectively to adverse publicity, could have a material adverse effect on our
business.
We are subject to a number of risks relating to public policy changes and federal, state and local regulation of our business, including
in the areas of health care reform, environmental matters, minimum wage, unionization, data privacy, menu labeling, immigration requirements and taxes, and an insufficient or ineffective response to government regulation may impact our cost
structure, operational efficiencies and talent availability.
The restaurant industry is subject to extensive
federal, state, local and international laws and regulations. The development and operation of restaurants depend to a significant extent on the selection and acquisition of suitable sites, which are subject to building, zoning, land use,
environmental, traffic and other regulations and requirements. We are subject to licensing and regulation by state and local authorities relating to health, sanitation, safety and fire standards and the sale of alcoholic beverages. We are subject to
laws and regulations relating to the preparation and sale of food, including regulations regarding product safety, nutritional content and menu labeling. We are subject to federal and state laws governing minimum wages, unionization and other labor
issues. These include the Fair Labor Standards Act of 1938 and requirements concerning overtime, paid or family leave, tip credits, working conditions and safety standards. They also include the Immigration Reform and Control Act of 1986, which
requires among other things the preparation of Form
I-9
to verify that employees are authorized to accept employment in the United States. We are also reviewing the potential impacts of new laws associated
with health care passed by various state and local governments.
We also are subject to federal and state laws which
prohibit discrimination and other laws regulating the design and operation of facilities, such as the ADA. Compliance with these laws and regulations can be costly and increase our exposure to litigation and governmental proceedings, and a failure
or perceived failure to comply with these laws could result in negative publicity that could harm our reputation. New or changing laws and regulations relating to union organizing rights and activities may impact our operations at the restaurant
level and increase our labor costs.
The Affordable Care Act requires restaurant companies such as ours to disclose
calorie information on their menus beginning in May 2017. We do not expect to incur any material costs from compliance with this provision, but cannot anticipate any changes in guest behavior resulting from the implementation of this portion of the
law, which could have an adverse effect on our sales or results of operations.
We are subject to a variety of federal,
state and local laws and regulations relating to the use, storage, discharge, emission and disposal of hazardous materials. There also has been increasing focus by United States and overseas governmental authorities on other environmental matters,
such as climate change, the reduction of
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greenhouse gases and water consumption. This increased focus may lead to new initiatives directed at regulating as yet to be specified array of environmental matters, such as the emission of
greenhouse gases, where cap and trade initiatives could effectively impose a tax on carbon emissions. Legislative, regulatory or other efforts to combat climate change or other environmental concerns could result in future increases in
the cost of raw materials, taxes, transportation and utilities, which could decrease our operating profits and necessitate future investments in facilities and equipment.
We are subject to laws relating to information security, privacy, cashless payments and consumer credit, protection and fraud.
An increasing number of governments and industry groups worldwide have established data privacy laws and standards for the protection of personal information, including social security numbers, financial information (including credit card numbers),
and health information. Compliance with these laws and regulations can be costly, and any failure or perceived failure to comply with those laws or any breach of our systems could harm our reputation or lead to litigation, which could adversely
affect our financial condition.
The impact of current laws and regulations, the effect of future changes in laws or
regulations that impose additional requirements and the consequences of litigation relating to current or future laws and regulations, or an insufficient or ineffective response to significant regulatory or public policy issues, could increase our
cost structure, operational efficiencies and talent availability, and therefore have an adverse effect on our results of operations. Failure to comply with the laws and regulatory requirements of federal, state and local authorities could result in,
among other things, revocation of required licenses, administrative enforcement actions, fines and civil and criminal liability. Compliance with these laws and regulations can be costly and can increase our exposure to litigation or governmental
investigations or proceedings.
A majority of our restaurants are now operated in leased properties and we are committed to long-term and
non-cancelable
leases that we may want to cancel, and may be unable to renew the leases that we may want to extend at the end of their terms.
Under the strategic real estate plan we pursued during fiscal 2016, we transferred the majority of our owned restaurant
properties to Four Corners, with substantially all of Four Corners initial assets being leased back to us. In addition, we sold and leased back 64 other real properties in individual sale leaseback transactions. The initial terms for the
leases for these properties average 15 years, but range from
12-18
years, and have fixed rent escalations for the initial term and multiple renewal options at our discretion. In addition to these new leases,
we previously leased more than 950 properties, and as a result, 1,449 of 1,536 restaurants operating in the United States and Canada as of May 29, 2016 are in leased locations. If we close a restaurant, we may remain committed to perform our
obligations under the applicable lease, which would include, among other things, payment of the base rent for the balance of the lease term. Additionally, the potential losses associated with our inability to cancel leases may result in our keeping
open restaurant locations that are performing significantly below targeted levels. As a result, ongoing lease obligations at closed or underperforming restaurant locations could impair our results of operations. In addition, at the end of the lease
term and expiration of all renewal periods, we may be unable to renew the lease without substantial additional cost, if at all. As a result, we may be required to close or relocate a restaurant, which could subject us to construction and other costs
and risks, and may have an adverse effect on our operating performance.
We may be subject to increased labor and insurance costs.
Our restaurant operations are subject to United States and Canadian federal, state and local laws governing such matters as
minimum wages, working conditions, overtime and tip credits. As federal and state minimum wage rates increase, we may need to increase not only the wages of our minimum wage employees, but also the wages paid to employees at wage rates that are
above minimum wage. Labor shortages, increased employee turnover and health care mandates could also increase our labor costs. This in turn could lead us to increase prices which could impact our sales. Conversely, if competitive pressures or other
factors prevent us from offsetting increased labor costs by increases in prices, our profitability may decline. In addition, the current
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premiums that we pay for our insurance (including workers compensation, general liability, property, health, and directors and officers liability) may increase at any time,
thereby further increasing our costs. The dollar amount of claims that we actually experience under our workers compensation and general liability insurance, for which we carry high
per-claim
deductibles, may also increase at any time, thereby further increasing our costs. Further, the decreased availability of property and liability insurance has the potential to negatively impact the cost of premiums and the magnitude of uninsured
losses.
We rely heavily on information technology in our operations, and 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 could harm our ability to effectively operate our business and/or result in the loss of respected relationships with our guests or employees.
We rely heavily on information systems across our operations, including for marketing programs, employee
engagement, management of our supply chain,
point-of-sale
processing system in our restaurants, and various other processes and transactions. Our ability to effectively
manage our business and coordinate the production, distribution and sale of our products depends significantly on the reliability and capacity of these systems. In addition, we must effectively respond to changing guest expectations and new
technological developments. Disruptions, failures or other performance issues with these guest facing technology systems could impair the benefits that they provide to our business and negatively affect our relationship with our guest. The failure
of these systems to operate effectively, problems with transitioning to upgraded or replacement systems, a material network breach in the security of these systems as a result of a cyber attack, or any other failure to maintain a continuous and
secure cyber network could result in substantial harm or inconvenience to us or an individual. This could include the theft of our intellectual property or trade secrets, or the improper use of personal information or other identity
theft. Each of these situations or data privacy breaches may cause delays in guest service, reduce efficiency in our operations, require significant capital investments to remediate the problem, result in customer or advertiser dissatisfaction
or otherwise result in negative publicity that could harm our reputation and we could be subjected to litigation, regulatory investigations or the imposition of penalties. As privacy and information security laws and regulations change and cyber
risks evolve, we may incur additional costs to ensure we remain in compliance and protect guest, employee and Company information.
Our inability or
failure to execute on a comprehensive business continuity plan following a major natural disaster such as a hurricane or manmade disaster, including terrorism, at our corporate facility could have a materially adverse impact on our business.
Many of our corporate systems and processes and corporate support for our restaurant operations are centralized at
one Florida location. We have disaster recovery procedures and business continuity plans in place to address most events of a crisis nature, including hurricanes and other natural disasters, and back up and
off-site
locations for recovery of electronic and other forms of data and information. However, if we are unable to fully implement our disaster recovery plans, we may experience delays in recovery of data,
inability to perform vital corporate functions, tardiness in required reporting and compliance, failures to adequately support field operations and other breakdowns in normal communication and operating procedures that could have a material adverse
effect on our financial condition, results of operation and exposure to administrative and other legal claims.
Health concerns arising from
food-related pandemics, outbreaks of flu viruses or other diseases may have an adverse effect on our business.
The
United States and other countries have experienced, or may experience in the future, outbreaks of viruses, such as norovirus, avian flu or SARS, and H1N1 or swine flu, or other diseases. To the extent that a virus or disease
is food-borne, or perceived to be food-borne, future outbreaks may adversely affect the price and availability of certain food products and cause our guests to eat less of a product, or could reduce public confidence in food handling and/or public
assembly. For example, public concern over avian flu may cause fear
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about the consumption of chicken, eggs and other products derived from poultry. The inability to serve poultry-based products would restrict our ability to provide a variety of menu items to our
guests. If we change a restaurant menu in response to such concerns, we may lose guests who do not prefer the new menu, and we may not be able to attract a sufficient new guest base to produce the sales needed to make the restaurant profitable. We
also may have different or additional competitors for our intended guests as a result of such a change and may not be able to successfully compete against such competitors. If a virus is transmitted by human contact, our employees or guests could
become infected, or could choose, or be advised, to avoid gathering in public places, any of which could adversely affect our restaurant guest traffic, and our ability to adequately staff our restaurants, receive deliveries on a timely basis or
perform functions at the corporate level. We also could be adversely affected if the World Health Organization and/or the Centers for Disease Control were to restrict travel to affected geographic areas where we source our products, thus possibly
impacting the continuity of supply. Additionally, jurisdictions in which we have restaurants impose mandatory closures, seek voluntary closures or impose restrictions on operations. Even if such measures are not implemented and a virus or other
disease does not spread significantly, the perceived risk of infection or significant health risk may adversely affect our business.
We face
intense competition, and if we have an insufficient focus on competition and the consumer landscape, our business, financial condition and results of operations would be adversely affected.
The full-service dining sector of the restaurant industry is intensely competitive with respect to pricing, service, location,
personnel and type and quality of food, and there are many well-established competitors. We compete within each market with national and regional restaurant chains and locally-owned restaurants. We also face growing competition as a result of the
trend toward convergence in grocery, deli and restaurant services, particularly in the supermarket industry which offers convenient meals in the form of improved entrées and side dishes from the deli section. We compete primarily
on the quality, variety and value perception of menu items. The number and location of restaurants, type of brand, quality and efficiency of service, attractiveness of facilities and effectiveness of advertising and marketing programs are also
important factors. We anticipate that intense competition will continue with respect to all of these factors. If we are unable to continue to compete effectively, our business, financial condition and results of operations would be adversely
affected.
Our failure to drive both short-term and long-term profitable sales growth through brand relevance, operating excellence, and opening new
restaurants of existing brands, and developing new dining brands, could result in poor financial performance.
As
part of our business strategy, we intend to drive profitable sales growth by increasing same-restaurant sales at existing restaurants, continuing to expand our current portfolio of restaurant brands, and developing additional brands that can be
expanded profitably. This strategy involves numerous risks, and we may not be able to achieve our growth objectives.
At
existing brands, we may not be able to maintain brand relevance and restaurant operating excellence to achieve sustainable same-restaurant sales growth and warrant new unit growth. Existing brand short-term sales growth could be impacted if we are
unable to drive near term guest count and sales growth, and long-term sales growth could be impacted if we fail to extend our existing brands in ways that are relevant to our guests. A failure to innovate and extend our existing brands in ways that
are relevant to guests and occasions in order to generate sustainable same-restaurant traffic growth and produce
non-traditional
sales and earnings growth opportunities, insufficient focus on our competition,
or failure to adequately address the decline of the casual dining industry, could have an adverse effect on our results of operations. In addition, we may not be able to support sustained new unit growth or open all of our planned new restaurants,
and the new restaurants that we open may not be profitable or as profitable as our existing restaurants. New restaurants typically experience an adjustment period before sales levels and operating margins normalize, and even sales at successful
newly-opened restaurants generally do not make a significant contribution to profitability in their initial months of operation. The opening of new restaurants can also have an adverse effect on guest counts and sales levels at existing restaurants.
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The ability to open and profitably operate restaurants is subject to various
risks, such as the identification and availability of suitable and economically viable locations, the negotiation of acceptable lease or purchase terms for new locations, the need to obtain all required governmental permits (including zoning
approvals and liquor licenses) on a timely basis, the need to comply with other regulatory requirements, the availability of necessary contractors and subcontractors, the ability to meet construction schedules and budgets, the ability to manage
union activities such as picketing or hand billing which could delay construction, increases in labor and building material costs, the availability of financing at acceptable rates and terms, changes in weather or other acts of God that could result
in construction delays and adversely affect the results of one or more restaurants for an indeterminate amount of time, our ability to hire and train qualified management personnel and general economic and business conditions. At each potential
location, we compete with other restaurants and retail businesses for desirable development sites, construction contractors, management personnel, hourly employees and other resources. If we are unable to successfully manage these risks, we could
face increased costs and lower than anticipated sales and earnings in future periods.
We also may not be able to identify
and integrate additional brands or develop new business opportunities that are as profitable as our existing restaurants.
Failure to complete the
acquisition of Cheddars, or once completed, failure to successfully integrate the Cheddars business, and the additional indebtedness incurred to finance the Cheddars acquisition, could adversely impact our stock price and future
business and operations.
On March 27, 2017, we entered into the Merger Agreement pursuant to which we expect
to complete the acquisition of Cheddars. Completion of the Acquisition is not assured, and is subject to certain closing conditions described in the merger agreement and related documents. If the Acquisition is not completed for any reason, we
may incur acquisition-related expenses without realizing the expected benefits, and the price of our common stock may decline to the extent that the current market price reflects an assumption that the acquisition will be completed.
Our integration of the Cheddars business into our operations will be a complex and time-consuming process that may not
be successful. The primary areas of focus for successfully combining the business of Cheddars with our operations may include, among others: retaining and integrating management and other key employees; integrating information, communications
and other systems; and managing the growth of the combined company.
Even if we successfully integrate the business of
Cheddars into our operations, there can be no assurance that we will realize the anticipated benefits. We are acquiring Cheddars with the expectation that the acquisition will result in various benefits for the combined company
including, among others, business and growth opportunities, and significant synergies from increased efficiency in purchasing, distribution and other restaurant and corporate support. Increased competition and/or deterioration in business conditions
may limit our ability to expand this business. As such, we may not be able to realize the synergies, goodwill, business opportunities and growth prospects anticipated in connection with the acquisition.
If we consummate the Acquisition, we expect to have consolidated indebtedness that will be greater than our indebtedness prior
to the acquisition. The increased indebtedness and higher
debt-to-equity
ratio of our company may have the effect, among other things, of reducing our flexibility to
respond to changing business and economic conditions and increasing borrowing costs. Our level of indebtedness could have important consequences. For example, it may: require a portion of our cash flow from operations for the payment of principal
of, and interest on, our indebtedness, thus reducing our ability to use our cash flow to fund working capital, capital expenditures and general corporate requirements; and limit our ability to obtain additional financing to fund working capital,
capital expenditures, additional acquisitions or general corporate requirements, particularly if the ratings assigned to our debt securities by rating organizations are revised downward.
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Our plans to expand our smaller brands Bahama Breeze, Seasons 52 and Eddie Vs, and the testing of
other new business ventures that have not yet proven their long-term viability, may not be successful, which could require us to make substantial further investments in those brands and new business ventures and result in losses and impairments.
While each of our restaurant brands, as well as each of our individual restaurants, are subject to the risks and
uncertainties described above, there is an enhanced level of risk and uncertainty related to the operation and expansion of our smaller brands such as Bahama Breeze, Seasons 52 and Eddie Vs. These brands and new business ventures have not yet
proven their long-term viability or growth potential. We have made substantial investments in the development and expansion of each of these brands and further investment is required. While we have implemented a number of changes to operations at
Bahama Breeze, and believe we have improved the guest experience and unit economics sufficiently to restart modest unit growth, there can be no assurance that these changes will continue to be successful or that additional new unit growth will
occur. Eddie Vs is still in the early stages of development and will require additional resources to support further growth.
In each case, these brands and business initiatives will continue to be subject to the risks and uncertainties that accompany
any emerging restaurant brand or new business initiative.
A lack of availability of suitable locations for new restaurants or a decline in the
quality of the locations of our current restaurants may adversely affect our sales and results of operations.
The
success of our restaurants depends in large part on their locations. As demographic and economic patterns change, current locations may not continue to be attractive or profitable. Possible declines in neighborhoods where our restaurants are located
or adverse economic conditions in areas surrounding those neighborhoods could result in reduced sales in those locations. In addition, desirable locations for new restaurant openings or for the relocation of existing restaurants may not be available
at an acceptable cost when we identify a particular opportunity for a new restaurant or relocation. The occurrence of one or more of these events could have a significant adverse effect on our sales and results of operations.
We may experience higher-than-anticipated costs associated with the opening of new restaurants or with the closing, relocating and remodeling of
existing restaurants, which may adversely affect our results of operations.
Our sales and expenses can be impacted
significantly by the number and timing of the opening of new restaurants and the closing, relocating and remodeling of existing restaurants. We incur substantial
pre-opening
expenses each time we open a new
restaurant and other expenses when we close, relocate or remodel existing restaurants. The expenses of opening, closing, relocating or remodeling any of our restaurants may be higher than anticipated. An increase in such expenses could have an
adverse effect on our results of operations.
A failure to identify and execute innovative marketing and guest relationship tactics, ineffective or
improper use of other marketing initiatives, and increased advertising and marketing costs, could adversely affect our results of operations.
If our competitors increase their spending on advertising and promotions, if our advertising, media or marketing expenses
increase, or if our advertising and promotions become less effective than those of our competitors, or if we do not adequately leverage technology and data analytic capabilities needed to generate concise competitive insight, we could experience a
material adverse effect on our results of operations. A failure to sufficiently innovate, develop guest relationship initiatives, or maintain adequate and effective advertising could inhibit our ability to maintain brand relevance and drive
increased sales.
As part of our marketing efforts, we rely on search engine marketing and social media platforms to
attract and retain guests. These initiatives may not be successful, and pose a variety of other risks, as discussed below under the heading: Our inability or failure to recognize, respond to and effectively manage the accelerated impact of
social media could have a material adverse impact on our business.
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A failure to recruit, develop and retain effective leaders, the loss or shortage of personnel with key
capacities and skills, or an inability to adequately monitor and proactively respond to employee dissatisfaction could impact our strategic direction and jeopardize our ability to meet our growth targets.
Our future growth depends substantially on the contributions and abilities of key executives and other employees. Our future
growth also depends substantially on our ability to recruit and retain high-quality employees to work in and manage our restaurants. We must continue to recruit, retain and motivate management and other employees in order to maintain our current
business and support our projected growth. Changes in senior management could expose us to significant changes in strategic discretion and initiatives. A failure to maintain appropriate organizational capacity and capability to support leadership
excellence (adequate resources, innovative skill sets and expectations) and build adequate bench strength required for growth, a loss of key employees or a significant shortage of high-quality restaurant employees and an inability to adequately
monitor and proactively respond to employee dissatisfaction could lead to poor guest satisfaction, high turnover, litigation and unionization, which could jeopardize our ability to meet our growth targets.
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, could compress our margins and adversely affect our sales and results of operations.
Our results of operations depend significantly on our ability to anticipate and react to changes in the price and availability
of food, ingredients, labor, health care, utilities, and other related costs over which we may have little control. Operating margins for our restaurants are subject to changes in the price and availability of food commodities, including shrimp,
lobster, crab and other seafood, as well as beef, pork, chicken, cheese and produce. The introduction of or changes to tariffs on other food products, such as shrimp, could increase our costs and possibly impact the supply of those products. We
cannot predict whether we will be able to anticipate and react to changing food costs by adjusting our purchasing practices and menu prices, and a failure to do so could adversely affect our operating results. We attempt to leverage our size to
achieve economies of scale in purchasing, but there can be no assurances that we can always do so effectively. We are subject to the general risks of inflation. Increases in minimum wage, health care and other benefit costs may have a material
adverse effect on our labor costs. We operate in many states and localities, where the minimum wage is significantly higher than the federal minimum wage. Increases in minimum wage may also result in increases in the wage rates paid for
non-minimum
wage positions. Our restaurants operating margins are also affected by fluctuations in the price of utilities such as electricity and natural gas, whether as a result of inflation or otherwise, on
which the restaurants depend for their energy supply. In addition, interruptions to the availability of gas, electric, water or other utilities, whether due to aging infrastructure, weather conditions, fire, animal damage, trees, digging accidents
or other reasons largely out of our control, may adversely affect our operations. Our inability to anticipate and respond effectively to an adverse change in any of these factors could have a significant adverse effect on our sales and results of
operations.
We may lose sales or incur increased costs if our restaurants experience shortages or interruptions in the delivery of food and other
products from our third party vendors and suppliers.
Shortages or interruptions in the supply of food items and
other supplies to our restaurants may be caused by inclement weather; natural disasters such as hurricanes, tornadoes, floods, droughts and earthquakes; the inability of our vendors to obtain credit in a tightened credit market or remain solvent
given disruptions in the financial markets; or other conditions beyond our control. Such shortages or interruptions could adversely affect the availability, quality and cost of the items we buy and the operations of our restaurants. We may have a
limited number of suppliers for certain of our products. Supply chain risk could increase our costs and limit the availability of products that are critical to our restaurant operations. If we raise prices as a result of increased food costs or
shortages, it may negatively impact our sales. If we temporarily close a restaurant or remove popular items from a restaurants menu, that restaurant may experience a significant reduction in sales during the time affected by the shortage or
thereafter as a result of our guests changing their dining habits.
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Adverse weather conditions and natural disasters could adversely affect our restaurant sales.
Adverse weather conditions can impact guest traffic at our restaurants, cause the temporary underutilization of outdoor patio
seating and, in more severe cases such as hurricanes, tornadoes or other natural disasters, cause temporary closures, sometimes for prolonged periods, which would negatively impact our restaurant sales. Changes in weather could result in
construction delays, interruptions to the availability of utilities, and shortages or interruptions in the supply of food items and other supplies, which could increase our costs. Some climatologists predict that the long-term effects of climate
change and global warming may result in more severe, volatile weather or extended droughts, which could increase the frequency and duration of weather impacts on our operations.
Volatility in the market value of derivatives we use to hedge exposures to fluctuations in commodity and broader prices may cause volatility in our
gross margins and net earnings.
We use or may use derivatives to hedge price risk for some of our principal
ingredient, labor, and energy costs, including but not limited to coffee, butter, wheat, soybean oil, pork, beef, diesel fuel, gasoline and natural gas. Changes in the values of these derivatives are recorded in earnings currently, resulting in
volatility in both gross margin and net earnings. These gains and losses are reported as a component of cost of sales in our Consolidated Statements of Earnings included in our consolidated financial statements.
Certain economic and business factors specific to the restaurant industry and other general macroeconomic factors including unemployment, energy prices
and interest rates that are largely beyond our control may adversely affect consumer behavior and our results of operations.
Our business results depend on a number of industry-specific and general economic factors, many of which are beyond our
control. The full-service dining sector of the restaurant industry is affected by changes in international, national, regional and local economic conditions, seasonal fluctuation of sales volumes, consumer spending patterns and consumer preferences,
including changes in consumer tastes and dietary habits, and the level of consumer acceptance of our restaurant brands. The performance of individual restaurants may also be adversely affected by factors such as demographic trends, severe weather
including hurricanes, traffic patterns and the type, number and location of competing restaurants.
General economic
conditions may also adversely affect our results of operations. Recessionary economic cycles, a protracted economic slowdown, a worsening economy, increased unemployment, increased energy prices, rising interest rates, a downgrade of the U.S.
governments long-term credit rating, the European debt crisis, or other industry-wide cost pressures could affect consumer behavior and spending for restaurant dining occasions and lead to a decline in sales and earnings. Job losses,
foreclosures, bankruptcies and falling home prices could cause guests to make fewer discretionary purchases, and any significant decrease in our guest traffic or average profit per transaction will negatively impact our financial performance. In
addition, if gasoline, natural gas, electricity and other energy costs increase, and credit card, home mortgage and other borrowing costs increase with rising interest rates, our guests may have lower disposable income and reduce the frequency with
which they dine out, may spend less on each dining out occasion, or may choose more inexpensive restaurants.
Furthermore,
we cannot predict the effects that actual or threatened armed conflicts, terrorist attacks, efforts to combat terrorism, heightened security requirements, or a failure to protect information systems for critical infrastructure, such as the
electrical grid and telecommunications systems, could have on our operations, the economy or consumer confidence generally. Any of these events could affect consumer spending patterns or result in increased costs for us due to security measures.
Unfavorable changes in the above factors or in other business and economic conditions affecting our guests could increase
our costs, reduce traffic in some or all of our restaurants or impose practical limits on pricing, any of which could lower our profit margins and have a material adverse effect on our sales, financial condition and results of operations.
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Disruptions in the financial and credit markets may adversely impact consumer spending patterns, affect the
availability and cost of credit and increase pension plan expenses.
Our ability to make scheduled payments or to
refinance our debt and to obtain financing for acquisitions or other general corporate and commercial purposes will depend on our operating and financial performance, which in turn is subject to prevailing economic conditions and to financial,
business and other factors beyond our control. Turmoil in global credit markets could adversely impact the availability of credit already arranged, and the availability and cost of credit in the future. There can be no assurances that we will be
able to arrange credit on terms we believe are acceptable or that permit us to finance our business with historical margins. A lack of credit could have an adverse impact on certain of our suppliers, landlords and other tenants in retail centers in
which we are located. If these issues occur, they could negatively affect our financial results. Any new disruptions in the financial markets may also adversely affect the U.S. and world economy, which could negatively impact consumer spending
patterns. Changes in the capital markets could also have significant effects on our pension plan. Our pension income or expense is affected by factors including the market performance of the assets in the master pension trust maintained for the
pension plans for some of our employees, the weighted average asset allocation and long-term rate of return of our pension plan assets and the discount rate used to determine the interest cost component of our net periodic pension cost. If our
pension plan assets do not achieve positive rates of return, or if our estimates and assumed rates are not accurate, our earnings may decrease because net periodic pension costs would rise and we could be required to provide additional funds to
cover our obligations to employees under the pension plan.
We face a variety of risks associated with doing business with franchisees, business
partners and vendors in foreign markets.
Our expansion into international markets could create risks to our brands
and reputation. We believe that we have selected high-caliber international operating partners and franchisees with significant experience in restaurant operations, and are providing them with training and support. However, the probability of
opening, ultimate success and quality of any franchise restaurant rests principally with the franchisee. If the franchisee does not successfully open and operate its restaurants in a manner consistent with our standards, or guests have negative
experiences due to issues with food quality or operational execution, our brand values could suffer, which could have an adverse effect on our business.
There also is no assurance that international operations will be profitable or that international growth will continue. Our
international operations are subject to all of the same risks associated with our domestic operations, as well as a number of additional risks. These include, among other things, international economic and political conditions, foreign currency
fluctuations, and differing cultures and consumer preferences.
We also are subject to governmental regulations throughout
the world that impact the way we do business with our international franchisees and vendors. These include antitrust and tax requirements, anti-boycott regulations, import/export/customs regulations and other international trade regulations, the USA
Patriot Act, the Foreign Corrupt Practices Act and applicable local law. Failure to comply with any such legal requirements could subject us to monetary liabilities and other sanctions, which could harm our business, results of operations and
financial condition.
Failure to protect our service marks or other intellectual property could harm our business.
We regard our Darden
®
, Darden Restaurants
®
, Olive Garden
®
, LongHorn Steakhouse
®
, The Capital Grille
®
, Bahama Breeze
®
, Seasons 52
®
, Eddie Vs Prime Seafood
®
, Wildfish Seafood Grille
®
and Yard House
®
service marks, and other service marks
and trademarks related to our restaurant businesses, as having significant value and being important to our marketing efforts. We rely on a combination of protections provided by contracts, copyrights, patents, trademarks, service marks and other
common law rights, such as trade secret and unfair competition laws, to protect our restaurants and services from infringement. We have registered certain
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trademarks and service marks in the United States and foreign jurisdictions. However, we are aware of names and marks identical or similar to our service marks being used from time to time by
other persons. Although our policy is to oppose any such infringement, further or unknown unauthorized uses or other misappropriation of our trademarks or service marks could diminish the value of our brands and adversely affect our business. In
addition, effective intellectual property protection may not be available in every country in which we have or intend to open or franchise a restaurant. Although we believe we have taken appropriate measures to protect our intellectual property,
there can be no assurance that these protections will be adequate, and defending or enforcing our service marks and other intellectual property could result in the expenditure of significant resources.
Impairment of the carrying value of our goodwill or other intangible assets could adversely affect our financial condition and consolidated results of
operations.
Goodwill represents the difference between the purchase price of acquired companies and the related
fair values of net assets acquired. We test goodwill for impairment annually and whenever events or changes in circumstances indicate that impairment may have occurred. We compare the carrying value of a reporting unit, including goodwill, to the
fair value of the unit. Carrying value is based on the assets and liabilities associated with the operations of that reporting unit. If the carrying value is less than the fair value, no impairment exists. If the carrying value is higher than the
fair value, there is an indication of impairment. A significant amount of judgment is involved in determining if an indication of impairment exists. Factors may include, among others: a significant decline in our expected future cash flows; a
sustained, significant decline in our stock price and market capitalization; a significant adverse change in legal factors or in the business climate; unanticipated competition; the testing for recoverability of a significant asset group within a
reporting unit; and slower growth rates. Any adverse change in these factors would have a significant impact on the recoverability of these assets and negatively affect our financial condition and consolidated results of operations. We compute the
amount of impairment by comparing the implied fair value of reporting unit goodwill with the carrying amount of that goodwill. We are required to record a
non-cash
impairment charge if the testing performed
indicates that goodwill has been impaired.
We evaluate the useful lives of our other intangible assets, primarily the
LongHorn Steakhouse
®
, The Capital Grille
®
, Yard House
®
, and Eddie Vs
Prime Seafood
®
trademarks, to determine if they are definite or indefinite-lived. Reaching a determination on useful life requires significant judgments and assumptions regarding the future
effects of obsolescence, demand, competition, other economic factors (such as the stability of the industry, legislative action that results in an uncertain or changing regulatory environment, and expected changes in distribution channels), the
level of required maintenance expenditures, and the expected lives of other related groups of assets.
As with goodwill,
we test our indefinite-lived intangible assets (primarily trademarks) for impairment annually and whenever events or changes in circumstances indicate that their carrying value may not be recoverable. We estimate the fair value of the trademarks
based on an income valuation model using the relief from royalty method, which requires assumptions related to projected sales from our annual long-range plan, assumed royalty rates that could be payable if we did not own the trademarks and a
discount rate.
We cannot accurately predict the amount and timing of any impairment of assets. Should the value of
goodwill or other intangible assets become impaired, there could be an adverse effect on our financial condition and consolidated results of operations.
Failure of our internal controls over financial reporting and future changes in accounting standards may cause adverse unexpected operating results,
affect our reported results of operations or otherwise harm our business and financial results.
Our management is
responsible for establishing and maintaining effective internal control over financial reporting. Internal control over financial reporting is a process to provide reasonable assurance regarding the
S-17
reliability of financial reporting for external purposes in accordance with accounting principles generally accepted in the United States. Because of its inherent limitations, internal control
over financial reporting is not intended to provide absolute assurance that we would prevent or detect a misstatement of our financial statements or fraud. Our growth and acquisition of other restaurant companies with procedures not identical to our
own could place significant additional pressure on our system of internal control over financial reporting. Any failure to maintain an effective system of internal control over financial reporting could limit our ability to report our financial
results accurately and timely or to detect and prevent fraud. A significant financial reporting failure or material weakness in internal control over financial reporting could cause a loss of investor confidence and decline in the market price of
our common stock, increase our costs, lead to litigation or result in negative publicity that could damage our reputation.
A change in accounting standards can have a significant effect on our reported results and may affect our reporting of
transactions before the change is effective. New pronouncements and varying interpretations of pronouncements have occurred and may occur in the future. Changes to existing accounting rules or the questioning of current accounting practices may
adversely affect our reported financial results. Additionally, our assumptions, estimates and judgments related to complex accounting matters could significantly affect our financial results. Generally accepted accounting principles and related
accounting pronouncements, implementation guidelines and interpretations with regard to a wide range of matters that are relevant to our business, including but not limited to, revenue recognition, fair value of investments, impairment of long-lived
assets, leases and related economic transactions, derivatives, pension and post-retirement benefits, intangibles, self-insurance, income taxes, property and equipment, unclaimed property laws and litigation, and stock-based compensation are highly
complex and involve many subjective assumptions, estimates and judgments by us. Changes in these rules or their interpretation or changes in underlying assumptions, estimates or judgments by us could significantly change our reported or expected
financial performance.
Our inability or failure to recognize, respond to and effectively manage the accelerated impact of social media could have a
material adverse impact on our business.
There has been a marked increase in the use of social media platforms and
similar devices which allow individuals access to a broad audience of consumers and other interested persons. Many social media platforms immediately publish the content their subscribers and participants can post, often without filters or
checks on accuracy of the content posted. Information posted on such platforms at any time may be adverse to our interests or may be inaccurate, each of which may harm our performance, prospects, or business. The harm may be immediate without
affording us an opportunity for redress or correction. The dissemination of information online could harm our business, prospects, financial condition, and results of operations, regardless of the informations accuracy.
Many of our competitors are expanding their use of social media and new social media platforms are rapidly being developed,
potentially making more traditional social media platforms obsolete. As a result, we need to continuously innovate and develop our social media strategies in order to maintain broad appeal with guests and brand relevance. As part of our marketing
efforts, we rely on search engine marketing and social media platforms to attract and retain guests. We also continue to invest in other digital marketing initiatives that allow us to reach our guests across multiple digital channels and build their
awareness of, engagement with, and loyalty to our brands. These initiatives may not be successful, resulting in expenses incurred without the benefit of higher revenues, increased employee engagement or brand recognition. In addition, a variety of
risks are associated with the use of social media, including the improper disclosure of proprietary information, negative comments about us, exposure of personally identifiable information, fraud, or
out-of-date
information. The inappropriate use of social media vehicles by our guests or employees could increase our costs, lead to litigation or result in negative publicity that could damage our
reputation.
S-18
Risks Related to the Notes
Our indebtedness could adversely affect our financial results and prevent us from fulfilling our obligations under the notes.
As of February 26, 2017, we had approximately $450 million of senior debt outstanding (without giving effect to this
offering) and our subsidiaries had no debt (excluding any intercompany liabilities). Our level of indebtedness could have important consequences to holders of the notes. For example, in addition to the risks described above, our level of
indebtedness could, among other things, make it more difficult for us to satisfy our financial obligations, including those relating to the notes, our other existing notes and our revolving credit facility.
The notes are effectively subordinated to the obligations of our subsidiaries.
Our operations are conducted through our subsidiaries, none of which are guarantors of the notes. As of February 26, 2017,
our subsidiaries had no debt (excluding any intercompany liabilities). Although the notes are unsubordinated obligations, they will be effectively subordinated to all liabilities, including trade payables, of our current or future subsidiaries. Our
subsidiaries are separate and distinct legal entities and have no obligation to pay any amounts due under our indebtedness, including the notes, or to make any funds available to us, whether by paying dividend, distribution, loan or other payments.
Payments to us by our subsidiaries will also be contingent upon our subsidiaries earnings and their business considerations.
The notes will
be unsecured. Therefore, any of our future secured creditors would have a prior claim, ahead of the notes, on our assets and our subsidiaries assets to the extent such assets secure that secured debt.
The notes will be our senior unsecured debt. As of February 26, 2017, we had no secured debt. While the indenture contains
restrictions on liens, we have the ability to incur some secured debt. Holders of any future secured debt that we or our subsidiaries may incur will have claims that are prior to your claims as holders of the notes to the extent of the value of the
assets securing such debt. In addition, if we fail to meet our payments or other obligations under any future secured debt, the holders of that secured debt would be entitled to foreclose on our assets securing that secured debt and liquidate those
assets to the exclusion of the holders of the notes, even if an event of default existed under the indenture governing the notes at such time.
We
and our subsidiaries may incur substantially more debt.
The indenture does not limit the amount of debt that we or
our subsidiaries may incur. Other than as described under Description of NotesChange of Control in this prospectus supplement and in the accompanying prospectus under the section entitled Description of Debt
SecuritiesSome Restrictive Covenants, the indenture does not contain any financial covenants or provisions that would afford the holders of the notes protection in the event we incur new debt, including in connection with a highly
leveraged transaction. If new debt is added to our and our subsidiaries current debt levels, the risks related to our indebtedness described above could intensify.
Our credit ratings may not reflect all risks of your investment in the notes.
Our credit ratings are an assessment by rating agencies of our ability to pay our debts when due. Consequently, real or
anticipated changes in our credit ratings will generally affect the market value of the notes and our access to the capital markets. These credit ratings may not reflect the potential impact of risks relating to structure or marketing of the notes.
Agency ratings are not a recommendation to buy, sell or hold any security, and may be revised or withdrawn at any time by the issuing organization. Each agencys rating should be evaluated independently of any other agencys rating.
S-19
We may choose to redeem the notes when prevailing interest rates are relatively low.
The notes are redeemable at our option and we may choose to redeem some or all of the notes from time to time, especially when
prevailing interest rates are lower than the rate borne by the notes. If prevailing rates are lower at the time of redemption, you would not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high
as the interest rate on the notes being redeemed. Please see the section entitled Description of NotesOptional Redemption.
An
increase in market interest rates could result in a decrease in the value of the notes.
In general, as market
interest rates rise, notes bearing interest at a fixed rate decline in value because the premium, if any, over market interest rates will decline. Consequently, if you purchase the notes and market interest rates increase, the market values of your
notes may decline. We cannot predict the future level of market interest rates.
If an active trading market does not develop for the notes, you may
be unable to sell your notes or to sell your notes at a price that you deem sufficient.
The notes are a new issue
of securities for which there currently is no established trading market. We do not intend to list the notes on a national securities exchange. While the underwriters of the notes have advised us that they intend to make a market in the notes, the
underwriters will not be obligated to do so and may stop their market-making at any time. No assurance can be given:
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that a market for any series of notes will develop or continue;
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as to the liquidity of any market that does develop; or
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as to your ability to sell any notes you may own or the price at which you may be able to sell your notes.
|
We may not be able to repurchase the notes upon a change of control.
Upon the occurrence of specific kinds of change of control events, unless we have exercised our right to redeem the notes, each
holder of notes will have the right to require us to repurchase all or any part of such holders notes at a price equal to 101% of the principal amount plus accrued and unpaid interest to the date of purchase. If we experience a Change of
Control Triggering Event (as defined below), there can be no assurance that we would have sufficient financial resources available to satisfy our obligations to repurchase the notes. For example, in order to obtain sufficient funds to pay the
purchase price of the notes, and our other existing notes which contain similar change of control provisions, we expect that we would have to refinance the notes. We may not, under these circumstances, be able to refinance the notes on reasonable
terms, if at all. Our failure to purchase the notes as required would result in a default under the indenture. Such an event of default may cause the acceleration of the notes and our other indebtedness. Our revolving credit facility also contains
restrictions on repayment requirements with respect to specified events or transactions that constitute a change of control. Our future indebtedness may also contain restrictions on repayment requirements with respect to specified events or
transactions that constitute a change of control. Please see the section entitled Description of NotesChange of Control.
Upon the
occurrence of a Special Mandatory Redemption Trigger, we will be required to redeem the notes. In addition, the notes may also be redeemed at our option, if, in our judgment, the Acquisition will not be consummated on or before September 23,
2017. If we redeem the notes, holders may not obtain their expected return on the notes.
The closing of the
offering contemplated hereby is not conditioned on, and is expected to be consummated before, the closing of the Acquisition, which is expected to occur before the end of our fiscal fourth quarter. We may not be able to consummate the Acquisition
within the timeframe specified under Description of the NotesSpecial Mandatory Redemption or at all.
S-20
Upon the occurrence of a Special Mandatory Redemption Trigger, we will be
required to redeem the notes, in whole, at a redemption price equal to 101% of the aggregate principal amount of the notes being redeemed, plus accrued and unpaid interest on the aggregate principal amount of the notes being redeemed to, but
excluding, the date of such redemption. The notes may also be redeemed at our option, in whole, at any time before September 23, 2017, at a redemption price equal to 101% of the aggregate principal amount of the notes being redeemed, plus
accrued and unpaid interest on the aggregate principal amount of the notes being redeemed to, but excluding, the date of such redemption, if, in our judgment, the Acquisition will not be consummated on or before September 23, 2017. Holders of
the notes will have no rights under the Special Mandatory Redemption provision if the Acquisition closes, nor will holders of the notes have any right to require us to repurchase the notes if, between the closing of the offering contemplated hereby
and the completion of the Acquisition, we experience any changes (including any material adverse changes) in our business or financial condition, or if the terms of the Merger Agreement change, including in any material respect.
If the notes are redeemed, holders may not obtain their expected return on the notes and may not be able to reinvest the
proceeds from redemption in an investment that results in a comparable return. In addition, as a result of such redemption provisions of the notes, the trading prices of the notes may not reflect the financial results of our business or
macroeconomic factors.
We are not obligated to place the net proceeds from the sales of the notes in escrow prior to the closing of the Acquisition
and, as a result, we may not be able to repurchase the notes upon a Special Mandatory Redemption Trigger.
We are
not obligated to place the net proceeds from the sales of the notes in escrow prior to the closing of the Acquisition or to provide a security interest in those proceeds, and the indenture imposes no restrictions on our use of these proceeds during
that time. Accordingly, the source of funds for any redemption of notes upon a Special Mandatory Redemption Trigger would be the proceeds that we have voluntarily retained or other sources of liquidity, including available cash, borrowings, sales of
assets or sales of equity securities. We may not be able to satisfy our obligation to redeem the notes following a Special Mandatory Redemption Trigger because we may not have sufficient financial resources to pay the aggregate redemption price on
the notes. As a result, the net proceeds from the sales of the notes may be subject to a greater risk of loss than if they were deposited into escrow, which may jeopardize our ability to fund the Acquisition or, upon the occurrence of a Special
Mandatory Redemption Trigger, the Special Mandatory Redemption. Our failure to redeem or repurchase the notes as required under the indenture would result in a default under the indenture, which could result in defaults under certain of our other
debt agreements and have material adverse consequences for us and the holders of the notes.
S-21
USE OF PROCEEDS
We estimate that we will receive net proceeds from this offering of approximately
$ million, after deducting the underwriting discounts and our estimated offering expenses. We intend to use the net proceeds from the sale of the notes for the Acquisition.
RATIO OF EARNINGS TO FIXED CHARGES
Our consolidated ratios of earnings to fixed charges for the periods indicated are as follows:
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Fiscal Year Ended
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Three Months
Ended
|
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Nine Months
Ended
|
May 29,
2016
|
|
May 31,
2015
|
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May 25,
2014
|
|
May 26,
2013
|
|
May 27,
2012
|
|
February 26,
2017
|
|
February 26,
2017
|
2.7
|
|
1.7
|
|
1.9
|
|
2.5
|
|
3.4
|
|
6.6
|
|
5.1
|
Earnings represent consolidated earnings from continuing operations before income taxes plus
fixed charges (net of capitalized interest). Fixed charges represent interest costs, whether expensed or capitalized, including interest recognized in connection with our unrecognized tax benefits, and the percent of minimum restaurant and equipment
lease payments deemed to represent the interest factor.
S-22
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth selected historical consolidated financial information of Darden for the periods presented. We
derived the selected historical consolidated financial information presented below for each of the three fiscal years in the period ended May 29, 2016 from our audited consolidated financial statements and our 2016 Annual Report to
Shareholders. We derived the selected historical consolidated financial information presented below for the quarters ended February 26, 2017 and February 28, 2016 from our unaudited consolidated financial statements which include, in the
opinion of our management, all adjustments, consisting of normal recurring adjustments, necessary to present fairly our results of operations and financial position for the periods and dates presented. The results of operations for an interim period
are not necessarily indicative of results for the full year or any other interim period.
You should read the selected
historical consolidated financial information presented below in conjunction with our audited and unaudited consolidated financial statements, the related notes and other financial information contained in our Annual Report on Form
10-K
for the year ended May 29, 2016 and our Quarterly Report on Form
10-Q
for the quarter ended February 26, 2017, which are incorporated by reference in this
prospectus supplement and the accompanying prospectus. See the section entitled Where You Can Find More Information About Darden in the accompanying prospectus.
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Fiscal Year Ended
|
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|
Nine Months Ended
|
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May 29,
2016
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May 31,
2015
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May 25,
2014
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February 26,
2017
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February 28,
2016
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(Unaudited)
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(In millions, expect per share data)
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Income Statement Data
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Sales
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$
|
6,933.5
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|
|
$
|
6,764.0
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|
$
|
6,285.6
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|
|
$
|
5,235.6
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|
|
$
|
5,143.3
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|
|
|
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Costs and expenses:
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Cost of sales:
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Food and beverage
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2,039.7
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|
2,085.1
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|
1,892.2
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|
1,512.8
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|
1,522.7
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Restaurant labor
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|
2,189.2
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|
|
|
2,135.6
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|
|
|
2,017.6
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|
|
1,662.2
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|
|
|
1,632.3
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Restaurant expenses
|
|
|
1,163.5
|
|
|
|
1,120.8
|
|
|
|
1,080.7
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|
|
|
929.4
|
|
|
|
855.1
|
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Marketing expenses
|
|
|
238.0
|
|
|
|
243.3
|
|
|
|
252.3
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|
|
|
175.4
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|
|
|
174.6
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|
General and administrative expenses
|
|
|
384.9
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|
|
|
430.2
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|
|
|
413.1
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|
|
|
254.4
|
|
|
|
294.2
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Depreciation and amortization
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|
|
290.2
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|
|
|
319.3
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|
|
|
304.4
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|
|
|
202.5
|
|
|
|
223.4
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Impairments and disposal of assets, net
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5.8
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|
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62.1
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16.4
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(8.4
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)
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3.9
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Total operating costs and expenses
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$
|
6,311.3
|
|
|
$
|
6,396.4
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|
|
$
|
5,976.7
|
|
|
$
|
4,728.3
|
|
|
$
|
4,706.2
|
|
|
|
|
|
|
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|
|
|
|
|
|
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|
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|
|
|
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Operating income
|
|
|
622.2
|
|
|
|
367.6
|
|
|
|
308.9
|
|
|
|
507.3
|
|
|
|
437.1
|
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Interest, net
|
|
|
172.5
|
|
|
|
192.3
|
|
|
|
134.3
|
|
|
|
28.7
|
|
|
|
162.8
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|
|
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|
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|
|
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Earnings before income taxes
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|
|
449.7
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|
|
|
175.3
|
|
|
|
174.6
|
|
|
|
478.6
|
|
|
|
274.3
|
|
Income tax expense (benefit)
|
|
|
90.0
|
|
|
|
(21.1
|
)
|
|
|
(8.6
|
)
|
|
|
121.5
|
|
|
|
55.0
|
|
|
|
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|
|
|
|
|
|
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|
|
|
|
|
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Earnings from continuing operations
|
|
$
|
359.7
|
|
|
$
|
196.4
|
|
|
$
|
183.2
|
|
|
$
|
357.1
|
|
|
$
|
219.3
|
|
Earnings (loss) from discontinued operations, net of taxes
|
|
|
15.3
|
|
|
|
513.1
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|
|
|
103.0
|
|
|
|
(1.8
|
)
|
|
|
16.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Net earnings
|
|
$
|
375.0
|
|
|
$
|
709.5
|
|
|
$
|
286.2
|
|
|
$
|
355.3
|
|
|
$
|
235.4
|
|
|
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Basic net earnings per share:
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|
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|
|
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Earnings from continuing operations
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|
$
|
2.82
|
|
|
$
|
1.54
|
|
|
$
|
1.40
|
|
|
$
|
2.88
|
|
|
$
|
1.72
|
|
Earnings (loss) from discontinued operations
|
|
|
0.12
|
|
|
|
4.02
|
|
|
|
0.78
|
|
|
|
(0.02
|
)
|
|
|
0.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
2.94
|
|
|
$
|
5.56
|
|
|
$
|
2.18
|
|
|
$
|
2.86
|
|
|
$
|
1.84
|
|
|
|
|
|
|
|
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|
|
|
|
|
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|
|
|
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|
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|
S-23
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|
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|
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|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
Nine Months Ended
|
|
|
|
May 29,
2016
|
|
|
May 31,
2015
|
|
|
May 25,
2014
|
|
|
February 26,
2017
|
|
|
February 28,
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
(In millions, expect per share data)
|
|
Diluted net earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations
|
|
$
|
2.78
|
|
|
$
|
1.51
|
|
|
$
|
1.38
|
|
|
$
|
2.84
|
|
|
$
|
1.69
|
|
Earnings (loss) from discontinued operations
|
|
|
0.12
|
|
|
|
3.96
|
|
|
|
0.77
|
|
|
|
(0.02
|
)
|
|
|
0.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
2.90
|
|
|
$
|
5.47
|
|
|
$
|
2.15
|
|
|
$
|
2.82
|
|
|
$
|
1.82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
4,582.6
|
|
|
$
|
5,994.7
|
|
|
$
|
7,082.7
|
|
|
$
|
4,679.8
|
|
|
$
|
4,501.9
|
|
Land, buildings and equipment, net
|
|
$
|
2,041.6
|
|
|
$
|
3,215.8
|
|
|
$
|
3,381.0
|
|
|
$
|
2,069.1
|
|
|
$
|
2,058.1
|
|
Goodwill
|
|
$
|
872.3
|
|
|
$
|
872.4
|
|
|
$
|
872.5
|
|
|
$
|
872.3
|
|
|
$
|
872.3
|
|
Long-term debt, less current portion
|
|
$
|
440.0
|
|
|
$
|
1,452.3
|
|
|
$
|
2,463.4
|
|
|
$
|
440.7
|
|
|
$
|
439.7
|
|
Stockholders equity
|
|
$
|
1,952.0
|
|
|
$
|
2,333.5
|
|
|
$
|
2,156.9
|
|
|
$
|
1,972.8
|
|
|
$
|
1,918.2
|
|
|
|
|
|
|
|
Other Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from operations
|
|
$
|
820.4
|
|
|
$
|
874.3
|
|
|
$
|
555.4
|
|
|
$
|
703.2
|
|
|
$
|
597.2
|
|
Capital expenditures
|
|
$
|
228.3
|
|
|
$
|
296.5
|
|
|
$
|
414.8
|
|
|
$
|
214.0
|
|
|
$
|
172.8
|
|
Dividends paid
|
|
$
|
268.2
|
|
|
$
|
278.9
|
|
|
$
|
288.3
|
|
|
$
|
208.9
|
|
|
$
|
204.8
|
|
Dividends paid per share
|
|
$
|
2.10
|
|
|
$
|
2.20
|
|
|
$
|
2.20
|
|
|
$
|
1.68
|
|
|
$
|
1.60
|
|
Number of restaurants
|
|
|
1,536
|
|
|
|
1,534
|
|
|
|
1,501
|
|
|
|
1,545
|
|
|
|
1,535
|
|
Number of employees
|
|
|
150,942
|
|
|
|
148,892
|
|
|
|
206,489
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Advertising expense
|
|
$
|
238.0
|
|
|
$
|
243.3
|
|
|
$
|
252.3
|
|
|
|
N/A
|
|
|
|
N/A
|
|
S-24
DESCRIPTION OF NOTES
The following description of the particular terms of the notes we are offering supplements and, to the extent inconsistent,
supersedes the description of the general terms of the debt securities set forth under the section entitled Description of Debt Securities in the accompanying prospectus. You should read the accompanying prospectus in conjunction with
this prospectus supplement. Because this is a summary, it does not contain all the information that may be important to you. You should also read the entire indenture, including the definitions of some terms, before you make any investment decision.
General
The notes
will be issued under the indenture dated as of January 1, 1996 between us and Wells Fargo Bank, National Association (as successor to Wells Fargo Bank Minnesota, National Association, formerly known as Norwest Bank Minnesota, National
Association), as trustee. The notes are a separate series of debt securities under the indenture. The notes will be issued in an initial aggregate principal amount of $ million and will mature
on , 20 .
The notes will bear interest at the rate of % per year,
from , 2017, or from the most recent date to which interest has been paid or provided for, payable semi-annually in arrears
on and of each year, commencing
on , 2017, to the persons in whose names the notes are registered at the close of business on the next
preceding or , respectively.
The notes will be our senior unsecured obligations and will rank equally in right of payment with all of our existing and
future unsecured and unsubordinated debt, including our revolving credit facility. The notes will rank senior in right of payment to any existing and future subordinated debt. The notes will not be guaranteed by any of our subsidiaries. As a result,
the notes will be effectively subordinated to any liabilities of our subsidiaries. The notes will be effectively subordinated in right of payment to any existing and future secured debt (to the extent of the value of the assets securing such debt).
As of February 26, 2017, we had approximately $450 million of senior debt outstanding (without giving effect to this offering) and our subsidiaries had no debt (excluding any intercompany liabilities). As of that date, we had no
outstanding borrowings under our $750.0 million revolving credit facility and we had no commercial paper or letters of credit outstanding, each of which was backed by our revolving credit facility. Except as described under the section entitled
Change of Control below and the section entitled Description of Debt SecuritiesSome Restrictive Covenants in the accompanying prospectus, the indenture does not restrict the amount of secured or unsecured debt
that we or our subsidiaries may incur.
We will issue the notes only in book-entry form in minimum denominations of $2,000
and in integral multiples of $1,000 in excess thereof. See Book-Entry System below.
We do not intend to
apply to list the notes on any securities exchange or include the notes in any automated quotation system. The notes will not be entitled to the benefits of any sinking fund.
Optional Redemption
At
any time prior to , 20 (which is a date months prior to maturity of the notes) (the Par Call
Date), we may redeem the notes at our option, in whole or from time to time in part, at a redemption price equal to the greater of (1) 100% of the principal amount of the notes to be redeemed and (2) the sum of the present values of the
remaining scheduled payments of principal and interest thereon that would be due if the notes matured on the Par Call Date (exclusive of interest accrued to the date of redemption) discounted to the redemption date on a semiannual basis (assuming a
360-day
year consisting of twelve
30-day
months) at the Treasury Rate plus basis points plus accrued and unpaid interest
thereon to the date of redemption. At any time on or after the Par Call Date, we may redeem the notes at our option, in whole or from time to time in part, at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus
accrued and unpaid interest thereon to the date of redemption.
S-25
Treasury Rate means, with respect to any redemption date, the rate
per year equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such
redemption date.
Comparable Treasury Issue means the United States Treasury security or securities selected
by an Independent Investment Banker as having an actual or interpolated maturity comparable to the remaining term of the notes to be redeemed (assuming for this purpose, that the notes matured on the Par Call Date) that would be utilized, at the
time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities having such comparable maturity.
Independent Investment Banker means one of the Reference Treasury Dealers appointed by Darden.
Comparable Treasury Price means, with respect to any redemption date, (1) the average of the Reference
Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (2) if the Company receives fewer than four such Reference Treasury Dealer Quotations, the average of all
such quotations.
Reference Treasury Dealer Quotations means, with respect to each Reference Treasury Dealer
and any redemption date, the average, as determined by the Company, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Company by such Reference
Treasury Dealer at 5:00 p.m. New York time on the third business day preceding such redemption date.
Reference
Treasury Dealer means each of (1) Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC, or their respective affiliates that are Primary Treasury Dealers, and their
respective successors, and (2) at least one other primary U.S. Government securities dealer in the City of New York (Primary Treasury Dealer) selected by us;
provided, however,
that if any of the foregoing shall cease to be a
Primary Treasury Dealer, Darden shall substitute therefor another Primary Treasury Dealer.
Notice of any redemption will
be mailed by first class mail at least 30 days but not more than 60 days before the redemption date to each holder of notes to be redeemed at its registered address.
In the case of a partial redemption, selection of the notes for redemption will be made pro rata, by lot or by such other
method as the trustee in its sole discretion deems appropriate and fair. No notes of a principal amount of $2,000 or less will be redeemed in part. If any note is to be redeemed in part only, the notice of redemption that relates to the note will
state the portion of the principal amount of the note to be redeemed. A new note in a principal amount equal to the unredeemed portion of the note will be issued in the name of the holder of the note upon surrender for cancellation of the original
note.
Unless we default in payment of the redemption price, on and after the redemption date interest will cease to
accrue on the notes or portions thereof called for redemption.
We will pay interest to a person other than the holder of
record on the record date if we elect to redeem the notes on a date that is after a record date but on or prior to the corresponding interest payment date. In this instance, we will pay accrued interest on the notes being redeemed to, but not
including, the redemption date to the same person to whom we will pay the principal of those notes.
Special Mandatory Redemption
Upon the occurrence of a Special Mandatory Redemption Trigger, we will be required to redeem the notes, in whole, at a
redemption price equal to 101% of the aggregate principal amount of the notes being redeemed,
S-26
plus accrued and unpaid interest on the aggregate principal amount of the notes being redeemed to, but excluding, the date of such redemption.
Within five business days after the occurrence of the Special Mandatory Redemption Trigger, we will give notice of the Special
Mandatory Redemption to each holder of the notes and to the trustee, stating, among other matters prescribed in the indenture, that a Special Mandatory Redemption Trigger has occurred and that all of the notes being redeemed will be redeemed on the
redemption date set forth in such notice (which will be no earlier than three business days and no later than 30 days from the date such notice is given).
The aggregate net proceeds from the sale of the notes will not be held in escrow, and holders of the notes will not have any
special access or rights to or a security interest or encumbrance of any kind on the net proceeds from the offering of the notes.
Upon the occurrence of the closing of the Acquisition, the foregoing provisions regarding the Special Mandatory Redemption
will cease to apply.
Special Optional Redemption
We will have the right to redeem the notes, in whole, at any time before September 23, 2017, at a redemption price equal
to 101% of the aggregate principal amount of the notes being redeemed, plus accrued and unpaid interest on the aggregate principal amount of the notes being redeemed to, but excluding, the date of such redemption, if we determine, in our judgment,
the Acquisition will not be consummated on or before September 23, 2017. If we exercise the Special Optional Redemption right, we will provide notice to each holder of the notes to be redeemed and to the trustee, stating, among other matters
prescribed in the indenture, the exercise of the Special Optional Redemption right and that all of the notes being redeemed will be redeemed on the redemption date set forth in such notice (which will be no earlier than three business days and no
later than 30 days from the date such notice is given). Upon the occurrence of the closing of the Acquisition, the foregoing provisions regarding the Special Optional Redemption will cease to apply.
Change of Control
If a
Change of Control Triggering Event occurs, unless we have exercised our right to redeem the notes as described above, holders of notes will have the right to require us to repurchase all or any part (no note of a principal amount of $2,000 or less
will be repurchased in part) of their notes pursuant to the offer described below (the Change of Control Offer). In the Change of Control Offer, we will be required to offer payment in cash equal to 101% of the aggregate principal amount of notes
repurchased plus accrued and unpaid interest, if any, on the notes repurchased, to the date of repurchase (the Change of Control Payment). Within 30 days following any Change of Control Triggering Event, or, at our option, prior to any Change of
Control, but after the public announcement of the Change of Control, we will be required to mail a notice to holders of notes describing the transaction or transactions that constitute or may constitute the Change of Control Triggering Event and
offering to repurchase the notes on the date specified in the notice, which date will be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the Change of Control Payment Date), pursuant to the procedures required
by the notes and described in such notice. The notice shall, if mailed prior to the date of consummation of the Change of Control, state that the offer to purchase is conditioned on the Change of Control Triggering Event occurring on or prior to the
payment date specified in the notice. We will comply with the requirements of Rule
14e-1
under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations
are applicable in connection with the repurchase of the notes as a result of a Change of Control Triggering Event. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control provisions of the notes,
we will be required to comply with the applicable securities laws and regulations and will not be deemed to have breached our obligations under the Change of Control provisions of the notes by virtue of such conflict and compliance with laws.
S-27
On the Change of Control Payment Date, we will be required, to the extent lawful,
to:
|
|
|
accept for payment all notes or portions of notes properly tendered pursuant to the Change of Control Offer;
|
|
|
|
deposit with the paying agent an amount equal to the Change of Control Payment in respect of all notes or
portions of notes properly tendered; and
|
|
|
|
deliver or cause to be delivered to the trustee the notes properly accepted together with an officers
certificate stating the aggregate principal amount of notes or portions of notes being purchased.
|
The
paying agent will promptly pay, from funds deposited by us for such purpose, to each holder of notes properly tendered the Change of Control Payment in respect of such notes, and the trustee will promptly authenticate and mail (or cause to be
transferred by book-entry) to each holder a new note equal in principal amount to any unpurchased portion of any notes surrendered.
We will not be required to make a Change of Control Offer if a third party makes an offer in the manner, at the times and
otherwise in compliance with the requirements for a Change of Control Offer made by us and such third party purchases all notes properly tendered and not withdrawn under its offer. In addition, we will not repurchase any notes if there has occurred
and is continuing on the Change of Control Payment Date an event of default under the indenture, other than a default in the payment of the Change of Control Payment upon a Change of Control Triggering Event.
The definition of Change of Control includes a phrase relating to the direct or indirect sale, transfer, conveyance or other
disposition of all or substantially all of our properties or assets, taken as a whole with our subsidiaries. Although there is a limited body of case law interpreting the phrase substantially all, there is no precise
established definition of the phrase under applicable law. Accordingly, the ability of a holder of notes to require us to repurchase the notes as a result of a sale, transfer, conveyance or other disposition of less than all of the properties or
assets of us and our subsidiaries taken as a whole to another person or group may be uncertain.
For purposes of the
foregoing discussion of a repurchase of the notes at the option of holders upon a Change of Control, the following definitions will be applicable:
Change of Control means the occurrence of any of the following:
(1) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in
one or a series of related transactions, of all or substantially all of the properties or assets of us and our subsidiaries taken as a whole to any person (as that term is used in Section 13(d)(3) of the Exchange Act) other than us or
one of our subsidiaries;
(2) the consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any person (as that term is used in Section 13(d)(3) of the Exchange Act) (other than us or one of our subsidiaries) becomes the beneficial owner (as defined in Rules
13d-3
and
13d-5
under the Exchange Act), directly or indirectly, of more than 50% of our Voting Stock measured by voting power rather than number of shares; or
(3) the first day on which a majority of the members of our Board of Directors are not Continuing Directors.
Notwithstanding the foregoing, a transaction will not be deemed to involve a Change of Control if (1) pursuant to such
transaction, we become a wholly owned subsidiary of a holding company that has agreed to be bound by the terms of the notes and (2)(A) the holders of the Voting Stock of such holding company immediately following that transaction are substantially
the same as the holders of our Voting Stock immediately prior to that transaction or (B) immediately following that transaction no person is the beneficial owner, directly or indirectly, of more than 50% of the Voting Stock of the holding
company.
S-28
Change of Control Triggering Event means the occurrence of both a
Change of Control and a Rating Event. Notwithstanding the foregoing, no Change of Control Triggering Event will be deemed to have occurred in connection with any particular Change of Control unless and until such Change of Control has actually been
consummated.
Continuing Directors means, as of any date of determination, members of our Board of Directors
who (1) were members of our Board of Directors on the date of the issuance of the notes or (2) were nominated for election or elected to our Board of Directors with the approval of a majority of the continuing directors under clause
(1) or (2) of this definition who were members of our Board of Directors at the time of such nomination or election (either by a specific vote or by approval of our proxy statement in which such member was named as a nominee for election as a
director, without objection to such nomination).
Fitch means Fitch Ratings Inc.
Investment Grade Rating means a rating equal to or higher than Baa3 (or the equivalent) by Moodys and equal
to or higher than
BBB-
(or the equivalent) by S&P and Fitch (or, in each case, if such rating agency ceases to rate the notes or fails to make a rating of the notes publicly available for reasons
considered outside of our control, the equivalent investment grade credit rating from any rating agency selected by us as a replacement rating agency as set forth in the definition of Rating Agencies below).
Moodys means Moodys Investors Service, Inc.
Rating Agencies means (1) each of Fitch, Moodys and S&P; and (2) if Fitch, Moodys or
S&P ceases to rate the notes or fails to make a rating of the notes publicly available for reasons outside of our control, a nationally recognized statistical rating organization as defined in Section 3(a)(62) of the Exchange Act,
selected by us (as certified by a resolution of our Board of Directors) as a replacement agency for Fitch, Moodys or S&P, or any of them, as the case may be.
Rating Event means the notes are rated below an Investment Grade Rating by each of the Rating Agencies (as defined
below) on any date from the date of the public notice of an arrangement that could result in a Change of Control until the end of the
60-day
period following public notice of the occurrence of a Change of
Control (which
60-day
period shall be extended so long as the rating of the notes is under publicly announced consideration for possible downgrade below investment grade by any of the Rating Agencies);
provided that a Rating Event otherwise arising by virtue of a particular reduction in rating shall not be deemed to have occurred in respect of a particular Change of Control (and thus shall not be deemed a Rating Event for purposes of the
definition of Change of Control Triggering Event) if the Rating Agencies making the reduction in rating to which this definition would otherwise apply do not announce or publicly confirm or inform the trustee in writing at our request that the
reduction was the result, in whole or in part, of any event or circumstance comprised of or arising as a result of, or in respect of, the applicable Change of Control (whether or not the applicable Change of Control shall have occurred at the time
of the Rating Event).
S&P means Standard & Poors Ratings Services LLC, a division of
S&P Global, Inc.
Voting Stock means, with respect to any specified person (as that term is
used in Section 13(d)(3) of the Exchange Act) as of any date, the capital stock of such person that is at the time entitled to vote generally in the election of the board of directors of such person.
Covenants
The notes are
subject to the restrictive covenants described under the section entitled Description of Debt SecuritiesSome Restrictive Covenants in the accompanying prospectus. These covenants apply to Darden and to certain of its subsidiaries
but do not apply to Dardens subsidiaries that are not corporations. As of February 26, 2017, less than one percent of Dardens consolidated total assets were held through partnerships and other
non-corporate
entities.
S-29
Consolidation, Merger and Sale of Assets
The notes are subject to some limitations on our ability to enter into some consolidations, mergers or transfers of
substantially all of our assets as described under the section entitled Description of Debt SecuritiesConsolidation, Merger and Sale of Assets in the accompanying prospectus.
Events of Default
The
notes are subject to the events of default described under the section entitled Description of Debt Securities
Events of Default in the accompanying prospectus.
Defeasance and Discharge Provisions
The notes are subject to defeasance and discharge of debt or to defeasance of some restrictive covenants as described under the
section entitled Description of Debt SecuritiesDefeasance in the accompanying prospectus.
Modification and Waiver
The notes are subject to provisions allowing, under some conditions, the modification or amendment of the indenture or waiving
our compliance with some provisions of the indenture, as described under the section entitled Description of Debt SecuritiesModification and Waiver in the accompanying prospectus.
Book-Entry System
DTC.
DTC will act as securities depositary for the notes. The notes will be represented by one or more registered
global securities (referred to as the registered global security) registered in the name of Cede & Co. (the nominee of DTC), or such other name as may be requested by an authorized representative of DTC. Accordingly, beneficial interests in
the notes will be shown on, and transfers of the notes will be effected only through, records maintained by DTC and its participants. Except in the limited circumstances described in the indenture, owners of beneficial interests in the registered
global security representing the notes will not be entitled to receive notes in definitive form and will not be considered holders of notes under the indenture.
DTC has advised us and the underwriters as follows: DTC is a limited-purpose trust company organized under the New York
Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code and a
clearing agency registered pursuant to the provisions of Section 17A of the Exchange Act. DTC holds securities that its participants (referred to as direct participants) deposit with DTC. DTC also facilitates the post-trade settlement
among direct participants of sales and other securities transactions, in deposited securities through electronic computerized book-entry changes in direct participants accounts, thereby eliminating the need for physical movement of securities
certificates. Direct participants include both U.S. and
non-U.S.
securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is a wholly-owned subsidiary
of The Depository Trust & Clearing Corporation (DTCC). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the
users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and
non-U.S.
securities brokers and dealers, banks, trust companies, and clearing corporations that
clear through or maintain a custodial relationship with a direct participant, either directly or indirectly (referred to as indirect participants). The DTC rules applicable to its participants are on file with the SEC. More information about DTC can
be found at www.dtcc.com and www.dtc.org.
Purchases of notes under DTCs system must be made by or through direct
participants, which will receive a credit for such notes on DTCs records. The ownership interest of each actual purchaser of notes represented by
S-30
the registered global security (referred to as the beneficial owner) is in turn to be recorded on the direct and indirect participants records. Beneficial owners will not receive written
confirmation from DTC of their purchase, but beneficial owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the direct or indirect participants through
which such beneficial owners entered into the transaction. Transfers of ownership interests in the registered global security representing notes are to be accomplished by entries made on the books of direct and indirect participants acting on behalf
of beneficial owners. Beneficial owners will not receive notes in definitive form, except in the event that use of the book-entry system for such notes is discontinued or upon the occurrence of certain other events described in the accompanying
prospectus and in this prospectus supplement.
To facilitate subsequent transfers, the registered global security
representing notes that are deposited by direct participants is registered in the name of DTCs partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of DTC. The deposit of the
registered global security with DTC and its registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual beneficial owners of the registered global
security representing the notes; DTCs records reflect only the identity of the direct participants to whose accounts such notes are credited, which may or may not be the beneficial owners. The direct or indirect participants will remain
responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other
communications by DTC to direct participants, by direct participants to indirect participants, and by direct participants and indirect participants to beneficial owners will be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time.
Redemption notices shall be sent to DTC. If less than all
of the notes are being redeemed, DTCs practice is to determine by lot the amount of the interest of each direct participant in such issue to be redeemed.
Neither DTC nor Cede & Co. (or any other DTC nominee) will consent or vote with respect to the registered global
security representing the notes unless authorized by a direct participant in accordance with DTCs procedures. Under its usual procedures, DTC mails an omnibus proxy (referred to as an omnibus proxy) to us as soon as possible after the
applicable record date. The omnibus proxy assigns Cede & Co.s consenting or voting rights to those direct participants to whose accounts the notes are credited on the applicable record date (identified in a listing attached to the
omnibus proxy).
Principal, premium, if any, and interest payments on the registered global security representing the
notes will be made to Cede & Co., or such nominee as may be requested by an authorized representative of DTC. DTCs practice is to credit direct participants accounts upon DTCs receipt of funds and corresponding detail
information from us or the trustee on the payment date in accordance with their respective holdings shown on DTCs records. Payments by direct and indirect participants to beneficial owners will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of those direct and indirect participants and not of DTC, the trustee or
Darden, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, premium, if any, and interest to Cede & Co. (or such other nominee) is the responsibility of Darden or the trustee,
disbursement of those payments to direct participants is the responsibility of DTC, and disbursement of those payments to the beneficial owners is the responsibility of the direct and indirect participants. Neither Darden nor the trustee will have
any responsibility or liability for the disbursements of payments in respect of ownership interests in the notes by DTC or the direct or indirect participants or for maintaining or reviewing any records of DTC or the direct or indirect participants
relating to ownership interests in the notes or the disbursement of payments in respect of the notes.
DTC may discontinue
providing its services as securities depositary with respect to the notes at any time by giving reasonable notice to us or the trustee. Under such circumstances, and in the event that a successor
S-31
securities depositary is not obtained, notes in definitive form are required to be printed and delivered to each holder.
We may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depositary). In
that event, notes in definitive form will be printed and delivered.
The information in this section concerning DTC and
DTCs book-entry system has been obtained from sources that we believe to be reliable, but we take no responsibility for the accuracy of this information.
Clearstream.
Clearstream has advised us that it is a limited liability company organized under Luxembourg law.
Clearstream holds securities for its participating organizations (Clearstream Participants) and facilitates the clearance and settlement of securities transactions between Clearstream Participants through electronic book-entry changes in accounts of
Clearstream Participants, thereby eliminating the need for physical movement of certificates. Clearstream provides to Clearstream Participants, among other things, services for safekeeping, administration, clearance and settlement of internationally
traded securities and securities lending and borrowing. Clearstream interfaces with domestic markets in several countries. Clearstream is registered as a bank in Luxembourg, and as such is subject to regulation by the Commission de Surveillance du
Secteur Financier. Clearstream Participants are recognized financial institutions around the world, including underwriters, securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations and may include
the underwriters. Indirect access to Clearstream is available to other institutions that clear through or maintain a custodial relationship with a Clearstream Participant. Distributions with respect to the global notes held beneficially through
Clearstream will be credited to cash accounts of Clearstream Participants in accordance with its rules and procedures, to the extent received by DTC for Clearstream.
Euroclear.
Euroclear advises that it was created in 1968 to hold securities for participants of Euroclear
(Euroclear Participants) and to clear and settle transactions between Euroclear Participants through simultaneous electronic book-entry delivery against payment, thereby eliminating the need for physical movement of certificates and any risk from
lack of simultaneous transfers of securities and cash. Euroclear includes various other services, including securities lending and borrowing and interfaces with domestic markets in several countries.
Euroclear is operated by Euroclear Bank S.A./N.V. (the Euroclear Operator), under contract with Euroclear Clearance Systems
S.C., a Belgian cooperative corporation (the Cooperative). All operations are conducted by the Euroclear Operator, and all Euroclear securities clearance accounts and Euroclear cash accounts are accounts with the Euroclear Operator, not the
Cooperative. The Cooperative establishes policy for Euroclear on behalf of Euroclear Participants. Euroclear Participants include banks, securities brokers and dealers and other professional financial intermediaries and may include the underwriters.
Indirect access to Euroclear is also available to other firms that clear through or maintain a custodial relationship with a Euroclear Participant, either directly or indirectly.
The Euroclear Operator is regulated and examined by the Belgian Banking and Finance Commission. Securities clearance accounts
and cash accounts with the Euroclear Operator are governed by the Terms and Conditions Governing Use of Euroclear and the related Operating Procedures of the Euroclear System, and applicable Belgian law (collectively, Terms and Conditions). These
Terms and Conditions govern transfers of securities and cash within Euroclear, withdrawals of securities and cash from Euroclear, and receipts of payments with respect to securities in Euroclear. All securities in Euroclear are held on a fungible
basis without attribution of specific certificates to specific securities clearance accounts. The Euroclear Operator acts under the Terms and Conditions only on behalf of Euroclear Participants, and has no record of or relationship with persons
holding through Euroclear Participants.
Distributions with respect to the global notes held beneficially through
Euroclear will be credited to the cash accounts of Euroclear Participants in accordance with the terms and conditions of Euroclear, to the extent received by the U.S. depositary for Euroclear.
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Global Clearance and Settlement Procedures
Initial settlement for the notes will be made in immediately available funds. Secondary market trading between the participants
in the depositary will occur in the ordinary way in accordance with the depositarys rules and will be settled in immediately available funds using DTCs
Same-Day
Funds Settlement System. Secondary
market trading between Clearstream Participants and/or Euroclear Participants will occur in the ordinary way in accordance with the applicable rules and operating procedures of Clearstream and Euroclear and will be settled using the procedures
applicable to conventional Eurobonds in immediately available funds.
Cross-market transfers between persons holding
directly or indirectly through DTC on the one hand, and directly or indirectly through Clearstream or Euroclear Participants, on the other, will be effected in DTC in accordance with the DTC rules on behalf of the relevant European international
clearing system by its U.S. depositary; however, such cross-market transactions will require delivery of instructions to the relevant European international clearing system by the counterparty in such system in accordance with its rules and
procedures and within its established deadlines (European time). The relevant European international clearing system will, if the transaction meets its settlement requirements, deliver instructions to its U.S. depositary to take action to effect
final settlement on its behalf by delivering interests in the notes to or receiving interests in the notes from DTC, and making or receiving payment in accordance with normal procedures for
same-day
funds
settlement applicable to DTC. Clearstream Participants and Euroclear Participants may not deliver instructions directly to DTC.
Because of time-zone differences, credits of interests in the notes received in Clearstream or Euroclear as a result of a
transaction with a depositary Participant will be made during subsequent securities settlement processing and will be credited the business day following the DTC settlement date. Such credits or any transactions involving interests in such notes
settled during such processing will be reported to the relevant Euroclear or Clearstream Participants on such business day. Cash received in Clearstream or Euroclear as a result of sales of interests in the notes by or through a Clearstream
Participant or a Euroclear Participant to a depositary participant will be received with value on the DTC settlement date but will be available in the relevant Clearstream or Euroclear cash account only as of the business day following settlement in
DTC.
Although DTC, Clearstream and Euroclear have agreed to the foregoing procedures in order to facilitate transfers of
the notes among participants of DTC, Clearstream and Euroclear, they are under no obligation to perform or continue to perform such procedures and such procedures may be discontinued at any time. The Company will have no responsibility for the
performance by DTC, Clearstream and Euroclear or their direct participants or indirect participants under the rules and procedures governing DTC, Clearstream or Euroclear, as the case may be.
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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes the material U.S. federal income tax considerations, and in the case of
non-U.S.
holders (as defined below), the material U.S. federal estate tax consequences, relating to the acquisition, ownership and disposition of the notes.
This discussion is based upon provisions of the Internal Revenue Code of 1986, as amended (the Code), applicable regulations,
administrative rulings and judicial decisions currently in effect, any of which may subsequently be changed, possibly retroactively, or interpreted differently by the Internal Revenue Service (the IRS) or the courts so as to result in U.S. federal
income and estate tax consequences different from those discussed below. This discussion deals only with a note held as a capital asset by a beneficial owner who purchased the note at its issue price (generally, the first price at which
a substantial portion of the notes is issued to the public) pursuant to this offering.
This discussion does not describe
all of the U.S. federal income and estate tax considerations which may be relevant to investors in light of their particular investment or other circumstances. This discussion also does not discuss the particular tax consequences that might be
relevant to you if you are subject to special rules under the U.S. federal income tax laws. Special rules apply, for example, if you are:
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a bank, thrift, insurance company, regulated investment company or other financial institution or financial
service company;
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a broker or dealer in securities or foreign currency;
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a U.S. person that has a functional currency other than the U.S. dollar or that holds notes through a
non-U.S.
broker or other
non-U.S.
intermediary;
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a partnership or other entity classified as a partnership for U.S. federal income tax purposes (and their
beneficial owners);
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a person subject to alternative minimum tax;
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a person who owns the notes as part of a straddle, hedging transaction, constructive sale transaction or other
risk-reduction transaction;
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a person who has ceased to be a United States citizen or to be taxed as a resident alien; or
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a person who acquires the notes in connection with employment or other performance of services.
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In addition, the following discussion does not address all possible tax considerations related to the
acquisition, ownership and disposition of the notes. In particular, except as specifically provided, it does not discuss any estate, gift, generation-skipping, transfer, state, local or foreign tax consequences, or the consequences arising under any
tax treaty. We have not sought, and do not intend to seek, a ruling from the IRS with respect to the statements made and the conclusions reached in the following discussion, and there can be no assurance that the IRS or the courts will agree with
these statements and conclusions.
Prospective investors should consult their own tax advisors with regard to the
application of the United States federal income tax considerations discussed below to their particular situations as well as the application of any state, local or foreign tax laws.
U.S. Holders
For
purposes of this discussion, you are a U.S. holder if you are a beneficial owner of notes and for U.S. federal income tax purposes are:
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an individual who is a citizen or resident of the United States;
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a corporation or other entity treated as a corporation for U.S. federal income tax purposes that is created or
organized in or under the laws of the United States, any of the fifty states or the District of Columbia;
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an estate the income of which is subject to federal income taxation regardless of its source; or
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a trust if (a) a court within the United States is able to exercise primary supervision over the
administration of the trust and one or more United States persons (as defined in the Code) have the authority to control all substantial decisions of the trust or (b) the trust has validly elected to be treated as a United States person.
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If a partnership (including any entity or arrangement treated as a partnership for U.S. federal income
tax purposes) holds the notes, the tax treatment of a partner in such partnership will generally depend upon the status of the partner and upon the activities of the partnership. If you are a partner in a partnership holding notes, you should
consult your tax advisor as to the particular U.S. federal income tax considerations relevant to the acquisition, ownership and disposition of the notes.
Payment of Interest
It is anticipated, and this discussion assumes, that the notes will be issued with no more than de minimis original issue
discount for U.S. federal income tax purposes. In such case, interest on a note will generally be taxable to you as ordinary income at the time it is received or accrued, in accordance with your usual method of accounting for tax purposes. If,
however, the issue price of the notes is less than their stated principal amount and the difference is equal to or more than a de minimis amount (as set forth in the applicable Treasury regulations), you will be required to include the difference in
income as original issue discount as it accrues in accordance with a constant yield method.
Additional Payments
Upon the occurrence of a change of control triggering event, you will have the right to require us to repurchase all or any
part of the notes, as described in Description of NotesChange of Control, at a price that may include an additional amount in excess of the principal amount of the notes. Further, upon the occurrence of a Special Mandatory
Redemption Event or our exercise of the Special Optional Redemption right, we will be required to repurchase all of the notes as described in Description of NotesSpecial Mandatory Redemption and Special Optional
Redemption at a price that may include an additional amount in excess of the principal amount of the notes. Because we believe the likelihood that we will make any such additional payments on the notes is remote, we intend to take the position
(and this discussion assumes) that the notes will not be treated as contingent payment debt instruments and that the premium payable upon redemption will not affect the yield to maturity or the maturity date of the notes. Assuming this position is
respected, you would be required to include in income such additional amounts at the time the payments are received or accrued, in accordance with your method of accounting for U.S. federal income tax purposes.
Our determination that the notes are not contingent payment debt instruments is not binding on the IRS. If the IRS were to
successfully challenge our determination and the notes were treated as contingent payment debt instruments, you would be required, among other things, to accrue interest income at a rate higher than the stated interest rate on the notes regardless
of your method of tax accounting and to treat as ordinary income, rather than capital gain, any gain recognized on a sale, exchange or redemption of a note. Our determination that the notes are not contingent payment debt instruments is binding on
you unless you disclose your contrary position to the IRS in the manner that is required by applicable U.S. Treasury regulations.
Sale or Other
Taxable Disposition of the Notes
As a holder, you generally will recognize gain or loss upon the sale, exchange,
redemption, retirement or other disposition of the notes equal to the difference between (a) the amount realized upon the sale, retirement or
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other taxable disposition (except to the extent attributable to accrued and unpaid stated interest, which will generally be taxable as ordinary income to the extent not previously included in
income), and (b) your tax basis in the notes. Your tax basis in a note generally will equal your purchase price for the note.
Gain or loss on the disposition of notes will generally be capital gain or loss and will be long-term capital gain or loss if
the notes have been held for more than one year at the time of disposition. Certain
non-corporate
U.S. holders, including individuals, may be eligible for a reduced rate of tax on long-term capital gains. The
deductibility of capital losses is subject to certain limitations.
Medicare Tax
Certain U.S. holders that are individuals, estates or trusts will be subject to a 3.8% tax on all or a portion of their
net investment income, which may include all or a portion of their interest income and net gains from the disposition of the notes. Each U.S. holder that is an individual, estate or trust is urged to consult its tax advisors regarding
the applicability of the Medicare tax to its income and gains in respect of its investment in the notes.
Information Reporting and Backup
Withholding Tax
In general, information reporting requirements will apply to payments to certain
non-corporate
U.S. holders of principal and interest on a note and the proceeds of the sale of a note. If you are a U.S. holder, you may be subject to backup withholding, at a current rate of 28%, when you receive
interest with respect to the notes, or when you receive proceeds upon the sale, exchange, redemption, retirement or other disposition of the notes. In general, you can avoid this backup withholding by properly executing, under penalties of perjury,
an IRS Form
W-9
or suitable substitute form that provides:
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your correct taxpayer identification number; and
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a certification that (a) you are exempt from backup withholding because you are a corporation or come
within another enumerated exempt category, (b) you have not been notified by the IRS that you are subject to backup withholding, or (c) you have been notified by the IRS that you are no longer subject to backup withholding.
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If you do not provide your correct taxpayer identification number on IRS Form
W-9
or suitable substitute form in a timely manner, you may be subject to penalties imposed by the IRS.
Backup withholding will not apply, however, with respect to payments made to certain holders, including corporations and
tax-exempt
organizations, provided their exemptions from backup withholding are properly established. Backup withholding is not an additional tax and amounts withheld may be refunded or credited against your federal
income tax liability, provided you furnish required information to the IRS.
Non-U.S.
Holders
For purposes of this discussion, a
non-U.S.
holder is any beneficial owner
of a note that is neither a U.S. holder nor a partnership (including any entity or arrangement that is treated as a partnership) for U.S. federal income tax purposes.
Payment of Interest
As discussed above, it is anticipated, and this discussion assumes, that the notes will not be issued with more than a de
minimis amount of original issue discount. Subject to the discussion below under Information Reporting and Backup Withholding Tax and Foreign Account Tax Compliance Act, a
non-U.S.
holder generally will not be subject to U.S. federal income or withholding tax on payments of interest on the notes that
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is not effectively connected with the conduct by the
non-U.S.
holder of a trade or business within the United States provided that such
non-U.S.
holder:
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does not directly or indirectly, actually or constructively, own 10% or more of the total combined voting
power of all of our classes of stock entitled to vote;
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is not a controlled foreign corporation that is related to us directly or constructively through stock
ownership;
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is not a bank receiving such interest on an extension of credit made pursuant to a loan agreement entered into
in the ordinary course of its trade or business; and
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either (a) you provide a Form
W-8BEN,
W-8BEN-E
or
W-8IMY
(together with appropriate attachments), or a suitable substitute form, signed under penalties of perjury that
includes your name and address and certifies as to your
non-U.S.
holder status, or (b) a securities clearing organization, bank or other financial institution that holds customers securities in the
ordinary course of its trade or business provides a statement to us or our agent under penalties of perjury in which it certifies that a Form
W-8BEN,
W-8BEN-E
or
W-8IMY
(together with appropriate attachments), or a suitable substitute form, has been received by it from you or a qualifying intermediary and furnishes
us or our agent with a copy of that form. In addition, we or our agent must not have actual knowledge or reason to know that the beneficial owner of the notes is a United States person.
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Interest on the notes that is not exempt from U.S. withholding tax as described above and is not effectively connected with a
U.S. trade or business generally will be subject to U.S. withholding tax at a 30% rate (or, if applicable, a lower treaty rate). If you are engaged in a trade or business in the U.S. and interest on a note is effectively connected with the conduct
of that trade or business and, if required by an applicable income tax treaty, is attributable to a U.S. permanent establishment or fixed base, then you (although exempt from the 30% withholding tax) will generally be subject to U.S. federal income
tax on that interest on a net income basis in the same manner as if you were a U.S. person as defined under the Code. In addition, if you are a foreign corporation, you may be subject to a branch profits tax equal to 30% (or lower applicable treaty
rate) of your earnings and profits for the taxable year, subject to adjustments, that are effectively connected with your conduct of a trade or business in the U.S.
To claim the benefit of a tax treaty you must provide a properly executed Form
W-8BEN
or Form
W-8BEN-E.
To claim exemption from withholding because the income is effectively connected with a U.S. trade or business, you must provide a properly executed
W-8ECI.
Under applicable Treasury regulations, you may under certain circumstances be required to obtain a U.S. taxpayer identification number and make certain certifications to us. Special certification and other
rules apply to payments made through qualified intermediaries. Prospective investors should consult their tax advisors regarding the effect, if any, of these certification rules.
Sale or Other Taxable Disposition of the Notes
Subject to the discussions below under Information Reporting and Backup Withholding Tax and
Foreign Account Tax Compliance Act, a
non-U.S.
holder generally will not be subject to the United States federal income tax or withholding tax on any gain realized on the sale, exchange,
redemption, retirement or other disposition of the note, unless:
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the gain is effectively connected with the conduct by such
non-U.S.
holder of a U.S. trade or business (and, if required by an applicable income treaty, the gain is attributable to a U.S. permanent establishment or fixed base); or
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the
non-U.S.
holder is a
non-resident
alien individual and is present in the United States for a period or periods aggregating 183 days or more during the taxable year of the disposition (as determined under the Code) and certain
other conditions are met.
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If you are a
non-U.S.
holder described in
the first bullet point above, you will be subject to tax on the net gain derived from the sale, redemption, or other taxable disposition under regular graduated U.S. federal income tax rates and in the same manner as if you were a U.S. holder. In
addition, if you are a foreign corporation, you may be subject to the branch profits tax equal to 30% of your effectively connected earnings and profits for that taxable year, subject to certain adjustments, or at such lower rate as may be specified
by an applicable income tax treaty. If you are an individual described in the second bullet point above, you will be subject to a flat 30% tax on the gain derived from the sale, redemption, or other taxable disposition, which may be offset by U.S.
source capital losses, recognized in the taxable year of the disposition even though you are not considered a resident of the United States.
Estate
Taxes
If you are an individual who is not a citizen of or domiciled in the United States (as determined for U.S.
federal estate tax purposes) and you hold a note at the time of your death, it will not be includable in your gross estate for U.S. estate tax purposes, provided that you do not at the time of death actually or constructively own 10% or more of the
combined voting power of all of our classes of stock entitled to vote, and provided that, at the time of death, payments with respect to such note would not have been effectively connected with your conduct of a trade or business within the United
States. In addition, under the terms of an applicable estate tax treaty, U.S. federal estate tax may not apply with respect to a note.
Information
Reporting and Backup Withholding Tax
Generally, we must report to the IRS and to you the amount of interest paid
to you and the amount of tax, if any, withheld with respect to those payments. Copies of the information returns reporting such interest payments and any withholding may also be made available to the tax authorities in the country in which you
reside under the provisions of an applicable income tax treaty or other agreement. Backup withholding will not be required with respect to interest paid to you, provided either the statement described above in the last bullet point under
Payment of Interest or a properly executed Form
W-8ECI
has been received and the payor does not have actual knowledge or reason to know that you are a U.S. person.
Information reporting and backup withholding may apply to the proceeds of a sale of the notes made within the United States or
conducted through certain U.S.-related financial intermediaries, unless the statement described above or a properly executed Form
W-8ECI
has been received and the payor does not have actual knowledge or reason
to know that you are a U.S. person or you otherwise establish an exemption.
Amounts withheld under the backup withholding
rules are not an additional tax and may be refunded or credited against your federal income tax liability, provided you furnish required information to the IRS.
Foreign Account Tax Compliance Act
Under the Foreign Account Tax Compliance Act and related IRS guidance (FATCA), a 30% U.S. withholding tax is
imposed on certain payments (which currently includes interest payments on the notes and will include gross proceeds, including the return of principal, from the sale or other disposition, including redemptions, of the notes beginning
January 1, 2019) made to a
non-United
States entity that fails to take required steps to provide information regarding its United States accounts or its direct or indirect substantial
United States owners, as applicable, or to make a required certification that it has no such accounts or owners. We will not be obligated to make any gross up or additional payments in respect of amounts withheld on the notes if we
determine that we must so withhold in order to comply with FATCA in respect of the amounts described above. Prospective investors should consult their own tax advisors regarding FATCA and whether it may be relevant to the acquisition, ownership and
disposition of the notes.
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UNDERWRITING
We are selling the notes to the underwriters named in the table below pursuant to an underwriting agreement between us and the
underwriters named below, for whom Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC are acting as a representatives. Subject to certain conditions, we have agreed to sell to
each of the underwriters, and each of the underwriters has severally agreed to purchase, the principal amount of notes set forth opposite that underwriters name in the table below:
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Underwriter
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Principal Amount
of Notes
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Goldman, Sachs & Co.
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$
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Merrill Lynch, Pierce, Fenner & Smith
Incorporated
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Wells Fargo Securities, LLC
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Fifth Third Securities, Inc.
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SunTrust Robinson Humphrey, Inc.
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U.S. Bancorp Investments, Inc.
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Total
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$
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The underwriting agreement provides that the obligations of the several underwriters to
purchase the notes offered hereby are subject to certain conditions and that the underwriters are obligated to purchase all of the notes in the offering if any are purchased. The underwriting agreement also provides that if an underwriter defaults,
the purchase commitments of
non-defaulting
underwriters may be increased or the offering of the notes may be terminated. The offering of the notes by the Underwriter is subject to receipt and acceptance of the
notes and subject to the Underwriters right to reject any order in whole or in part.
We have been advised by the
representatives of the underwriters that the underwriters propose to offer the notes directly to the public at the public offering prices set forth on the cover page of this prospectus supplement and to certain dealers at such prices less a
concession not in excess of % of the principal amount of the notes. The underwriters may allow, and such dealers may
re-allow,
a concession not in excess
of % of the principal amount of the notes to certain other dealers. After the initial public offering, the representatives of the underwriters may change the offering price and other selling terms.
Indemnification and Expenses
We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or
contribute to payments the underwriters may be required to make in respect of those liabilities.
We estimate that our
share of the total expenses of this offering, excluding underwriting discounts, will be approximately $1.0 million.
New Issue
The notes are a new issue of securities with no established trading market. We do not intend to apply to list the notes on any
securities exchange or on any automated dealer quotation system. The underwriters may make a market in the notes after completion of the offering, but will not be obligated to do so and may discontinue any market-making activities at any time
without notice. No assurance can be given as to the liquidity of the trading market for the notes or that an active public market for the notes will develop. If an active public trading market for the notes does not develop, the market price and
liquidity of the notes may be adversely affected.
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Settlement
It is expected that delivery of the notes will be made against payment therefor on or about
April , 2017 which is the fifth trading day following the date hereof (such settlement cycle being referred to as T+5). Purchasers of notes should note that the ability to settle secondary market trades of the notes
effected on the date of pricing and the next succeeding business day may be affected by the T+5 settlement. Accordingly, purchasers who wish to trade the notes on the date of this prospectus supplement or the following business day will be required
to specify an alternative settlement cycle at the time of any such trade to prevent a failed settlement and should consult their own legal advisors.
Price Stabilization and Short Positions
In connection with the offering of the notes, certain of the underwriters may engage in transactions that stabilize, maintain
or otherwise affect the price of the notes. Specifically, the underwriters may overallot in connection with the offering, creating a short position. Short sales involve the sale by the underwriters of a greater number of notes than they are required
to purchase in this offering. In addition, the underwriters may bid for, and purchase, the notes in the open market to cover short positions or to stabilize the price of the notes. Stabilizing transactions consist of certain bids or purchases made
for the purpose of preventing or retarding a decline in the market prices of the notes while the offering is in progress. The underwriters also may, subject to applicable laws and regulations, impose a penalty bid. This occurs when a particular
underwriter repays to the underwriters a portion of the underwriting discount received by it because one of the representatives of the underwriters has repurchased notes sold by or for the account of that underwriter in stabilizing or covering short
transactions. Finally, the underwriting syndicate may reclaim selling concessions allowed to an underwriter or a dealer for distributing the notes in the offering, if the syndicate repurchases previously distributed notes in transactions to cover
syndicate short positions, in stabilization transactions or otherwise. Any of these activities may stabilize or maintain the market price of the notes above independent market levels, but no representation is made hereby of the magnitude of any
effect that the transactions described above may have on the market price of the notes. The underwriters will not be required to engage in these activities, and may engage in these activities, and may end any of these activities at any time without
notice.
Selling Restrictions
The notes are offered for sale in those jurisdictions in the United States, Europe, Canada and elsewhere where it is lawful to
make such offers.
Notice to Prospective Investors in the European Economic Area
In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a
Relevant Member State), each underwriter has represented and agreed that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the Relevant Implementation
Date) it has not made and will not make an offer of the notes which is the subject of the offering contemplated by this prospectus supplement to the public in that Relevant Member State except that it may, with effect from and including the
Relevant Implementation Date, make an offer to the public of such notes in the Relevant Member State:
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at any time to any legal entity which is a qualified investor as defined in the Prospectus
Directive;
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at any time to fewer than 150 natural or legal persons (other than qualified investors as defined
in the Prospectus Directive) as permitted under the Prospectus Directive, subject to obtaining the prior consent of the relevant underwriter or underwriters nominated by us for any such offer; or
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at any time in any other circumstances falling within Article 3(2) of the Prospectus Directive,
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provided that no such offer of the notes shall require us or any underwriter to publish a prospectus
pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive.
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For the purposes of this provision, the expression an offer to the
public in relation to any notes in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the notes to be offered so as to enable an investor to decide to purchase
or subscribe for notes, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State. For the purposes of this provision, the expression Prospectus Directive
means Directive 2003/71/EC, as amended, including by Directive 2010/73/EU, and includes any relevant implementing measure in the Relevant Member State.
The seller of the notes has not authorized and does not authorize the making of any offer of the notes through any financial
intermediary on its behalf, other than offers made by the underwriters with a view to the final placement of the notes as contemplated in this prospectus supplement. Accordingly, no purchaser of the notes, other than the underwriters, is authorized
to make any further offer of the notes on behalf of the seller or the underwriters.
Notice to Prospective Investors in the United Kingdom
Each underwriter has advised us that in the United Kingdom it has only communicated and caused to be communicated
and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000 (FSMA)) received by it in connection
with the issue or sale of any notes included in this offering to persons who are qualified investors (as defined in Section 86(7) of FSMA) and who are also:
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persons having professional experience in matters relating to investments falling within the definition
investment professionals in Article 19(5) of The Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (Order); or
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high net worth bodies corporate, unincorporated associations and partnerships and trustees of high value
trusts as described in Article 49(2) of the Order; or
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persons to whom an invitation or inducement to engage in investment activity may be communicated without
contravening section 21 of FSMA,
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and each underwriter has complied and will comply with all applicable
provisions of the FSMA with respect to anything done by it in relation to the notes included in this offering in, from or otherwise involving the United Kingdom.
Notice to Prospective Investors in Canada
The notes may be sold in Canada only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited
investors, as defined in National Instrument
45-106
Prospectus Exemptions
or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument
31-103
Registration Requirements, Exemptions and Ongoing Registrant Obligations
.
Any resale of the notes must be made in accordance with an exemption from, or in a transaction not subject to, the
prospectus requirements of applicable securities laws.
Securities legislation in certain provinces or territories of
Canada may provide a purchaser with remedies for rescission or damages if this prospectus supplement (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser
within the time limit prescribed by the securities legislation of the purchasers province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchasers province or territory for
particulars of these rights or consult with a legal advisor.
Pursuant to section 3A.3 of National Instrument
33-105
Underwriting Conflicts (NI
33-105),
the underwriters are not required to comply with the disclosure requirements of NI
33-105
regarding underwriter conflicts of interest in connection with this offering.
S-41
Certain Relationships
Certain of the underwriters and their affiliates have provided, from time to time, and may continue to provide to us,
investment banking, commercial banking, financial and other services, including letters of credit, share repurchase, depository and account processing services, for which we have paid and intend to pay customary fees.
In addition, in the ordinary course of their business activities, the underwriters and their affiliates may make or hold a
broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and
securities activities may involve securities and/or instruments of ours or our affiliates. Certain of the underwriters or their affiliates that have a lending relationship with us routinely hedge their credit exposure to us consistent with their
customary risk management policies. Typically, such underwriters and their affiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in our
securities, including potentially the notes offered hereby. Any such credit default swaps or short positions could adversely affect future trading prices of the notes offered hereby. The underwriters and their affiliates may also make investment
recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.
Affiliates of the underwriters are lenders or agents under our revolving credit facility. Bank of America, N.A., an affiliate
of Merrill Lynch, Pierce, Fenner & Smith Incorporated, serves as administrative agent and Wells Fargo Bank, N.A., an affiliate of Wells Fargo Securities, LLC, serves as syndication agent under our revolving credit facility. Merrill Lynch,
Pierce, Fenner & Smith Incorporated is serving as financial advisor to us in connection with the Acquisition.
An
affiliate of one of the underwriters, Wells Fargo Securities, LLC, is the trustee under the indenture relating to the notes.
VALIDITY OF THE NOTES
The validity of the notes offered by this prospectus supplement will be passed upon for us
by Hunton & Williams LLP. Certain matters of Florida law will be passed upon for us by Anthony G. Morrow, Esq., our Senior Vice President, Division General CounselSecurities and Finance. As of April 6, 2017, Anthony G. Morrow
owned 1,426 shares of our common stock, 2,008 unvested shares of restricted stock units, 1,102 unvested Darden performance share units that may settle in cash, 3,042 unvested Darden performance share units that may settle in shares of our common
stock, 21 shares of our common stock held through a partnership and held options to purchase 38,208 shares of our common stock, 16,613 of which are unvested. Pillsbury Winthrop Shaw Pittman LLP will pass upon certain legal matters relating to this
offering for the underwriters.
EXPERTS
The consolidated financial statements of Darden Restaurants, Inc. as of May 29, 2016 and May 31, 2015, and for each
of the years in the three-year period ended May 29, 2016, and the effectiveness of internal control over financial reporting as of May 29, 2016 have been incorporated by reference herein and in the registration statement in reliance upon
the reports of KPMG LLP, independent registered public accounting firm, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.
S-42
PROSPECTUS
DARDEN RESTAURANTS, INC.
Debt Securities
We may offer and sell from time to time, in one or more series, unsecured debt securities described in this prospectus, which
may consist of notes, debentures or other evidences of indebtedness, in one or more offerings.
We may offer and sell
these debt securities directly or to or through underwriters, agents or dealers. The supplements to this prospectus or a term sheet will describe the terms of any particular plan of distribution including names of any underwriters, agents or
dealers.
We will provide the specific terms of these debt securities in a prospectus supplement or term sheet. This
prospectus may not be used to carry out sales of securities unless accompanied by a prospectus supplement or term sheet. You should read this prospectus and prospectus supplement or term sheet carefully before you invest.
Investing in our securities involves risks. See
Risk Factors
on page 2 of this
prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of
this prospectus is October 6, 2016.
TABLE OF CONTENTS
All references in this prospectus to Darden, we, us, our and our
company are to Darden Restaurants, Inc. and not to our consolidated subsidiaries, unless otherwise indicated or the context otherwise requires. Olive Garden
®
, LongHorn Steakhouse
®
, The Capital Grille
®
, Yard House
®
, Seasons 52
®
, Bahama Breeze
®
, Eddie Vs Prime Seafood
®
and Wildfish Seafood Grille
®
(collectively Eddie Vs) are our trademarks.
All
references in this prospectus to $, U.S. Dollars and dollars are to United States dollars.
ABOUT THIS PROSPECTUS
This prospectus is part of an automatic shelf registration statement on Form S-3 that we
filed with the Securities and Exchange Commission (SEC) as a well-known seasoned issuer as defined in Rule 405 under the Securities Act of 1933, as amended (the Securities Act). Under this shelf registration, we
may sell the debt securities described in this prospectus. The registration statement that contains this prospectus (including the exhibits to the registration statement) contains additional information about us and the debt securities we are
offering under this prospectus. You can read that registration statement at the SEC web site at http://www.sec.gov or at the SEC office mentioned under the heading Where You Can Find More Information About Darden.
This prospectus provides you with a general description of the debt securities we may offer. Each time we sell any of these
debt securities, we will provide one or more prospectus supplements or term sheets containing specific information about the terms of that offering. The prospectus supplements or term sheets may also add, update or change information contained in
this prospectus. If information in the prospectus supplement or term sheets is inconsistent with the information in this prospectus, then the information in the prospectus supplement or term sheets will apply and will supersede the information in
this prospectus. You should carefully read both this prospectus and any prospectus supplement or term sheet together with additional information described under the heading Where You Can Find More Information About Darden before you
invest.
You should rely only on the information contained or incorporated by reference in this prospectus and any
accompanying prospectus supplement or term sheet. We have not authorized anyone to provide you with different or additional information. If anyone provides you with different or additional information, you should not rely on it. You should assume
that the information appearing in this prospectus and any accompanying prospectus supplement or term sheet, as well as information we previously filed or subsequently file with the SEC that is incorporated by reference, is accurate as of its date
only. Our business, financial condition, results of operations and prospects may have changed since the date of that information.
Neither we nor anyone acting on our behalf is making an offer to sell these securities in any jurisdiction where the offer or
sale is not permitted.
i
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS
This prospectus, any prospectus supplement or term sheet and the documents incorporated by reference in this prospectus or any
prospectus supplement or term sheet may contain forward-looking statements with respect to the financial condition, results of operations, plans, objectives, future performance and business of Darden Restaurants, Inc. and its subsidiaries.
Statements preceded by, followed by or that include words believe, will, expect, intend, estimate, project, outlook and similar expressions are intended to identify some
of the 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. These forward-looking
statements involve risks and uncertainties. Actual results may differ materially from those contemplated by the forward-looking statements due to, among others, the risks and uncertainties described in the applicable prospectus supplement or term
sheet and the documents incorporated by reference in this prospectus and any applicable prospectus supplement or term sheet. We undertake no obligation to update publicly or revise any forward-looking statements for any reason, whether as a result
of new information, future events or otherwise.
ii
DARDEN RESTAURANTS, INC.
Darden Restaurants, Inc. is the worlds largest company-owned and operated full service restaurant company, and served
over 334 million meals in fiscal 2016. As of May 29, 2016, we owned and operated through subsidiaries 1,536 restaurants in the United States and Canada. In the United States, we operated 1,530 restaurants in all 50 states, including 837
Olive Garden
®
, 481 LongHorn Steakhouse
®
, 54 The Capital Grille
®
, 65 Yard
House
®
, 37 Bahama Breeze
®
, 40 Seasons 52
®
, 13 Eddie Vs Prime Seafood
®
, and three Wildfish Seafood Grille
®
restaurants. In Canada, we operated six Olive Garden restaurants. We own and operate all of our
restaurants in the United States and Canada through subsidiaries, except for three restaurants located in Florida and three restaurants in California that are owned jointly by us and third parties, and managed by us, and eight franchised
restaurants, including six franchised LongHorn Steakhouse restaurants in the San Antonio, Texas area and two franchised airport restaurants. None of our restaurants in Canada are franchised. Of our 1,536 restaurants in the United States and Canada
open on May 29, 2016, 1,449 were located on leased sites. As of May 29, 2016, we also had 50 restaurants operated internationally by independent third parties pursuant to area development and franchise agreements, including three Olive
Garden restaurants and seven LongHorn Steakhouse restaurants in Puerto Rico, five Olive Garden restaurants and two LongHorn Steakhouse restaurants in the Middle East region, 19 Olive Garden restaurants, one LongHorn Steakhouse restaurant and one The
Capital Grille restaurant in the Central and South American region, and two Olive Garden restaurants and two LongHorn Steakhouse restaurants in Malaysia.
Darden Restaurants, Inc. is a Florida corporation incorporated in March 1995, and is the parent company of GMRI, Inc., also a
Florida corporation. GMRI, Inc. and certain other of our subsidiaries own and operate our restaurants. GMRI, Inc. was originally incorporated in March 1968 as Red Lobster Inns of America, Inc. We were acquired by General Mills, Inc. in 1970 and
became a separate publicly held company in 1995 when General Mills distributed all of our outstanding stock to the stockholders of General Mills. Our principal executive offices and restaurant support center are located at 1000 Darden Center Drive,
Orlando, Florida 32837, telephone (407) 245-4000.
1
RISK FACTORS
Investing in our securities involves certain risks. You are urged to read and consider risk factors relating to an investment
in our securities as described from time to time in our Annual Reports on Form 10-K filed with the SEC, as may be updated from time to time in our Quarterly Reports on Form 10-Q, and other of our filings with the SEC, each as incorporated by
reference in this prospectus. Before making an investment decision, you should carefully consider these risks as well as other information we include or incorporate by reference in this prospectus. The risks and uncertainties we have described are
not the only ones we face. The prospectus supplement or term sheet applicable to each series of debt securities we offer might contain a discussion of additional risks applicable to an investment in us and the particular securities we are offering
under that prospectus supplement or term sheet.
USE OF PROCEEDS
Unless the applicable prospectus supplement or term sheet states otherwise, we will use the net proceeds we receive from the
sale of the debt securities for general corporate purposes, which may include, among other things, working capital, capital expenditures, stock repurchases, debt repayment or the financing of acquisitions. The prospectus supplement or term sheet
relating to a particular offering of debt securities by us will identify the use of proceeds for that offering.
2
DESCRIPTION OF DEBT SECURITIES
This section describes the general terms and provisions of the debt securities that we may offer using this prospectus and the indenture
described below. This section is only a summary and does not purport to be complete. You must look to the relevant form of debt security and the indenture for a full understanding of all terms of any series of debt securities. The form of debt
security and the indenture have been or will be filed or incorporated by reference as exhibits to the registration statement of which this prospectus is a part. See Where You Can Find More Information About Darden for information on how
to obtain copies.
A prospectus supplement or term sheet will describe the specific terms of any particular series of debt securities
offered under that prospectus supplement or term sheet, including any of the terms in this section that will not apply to that series, and any special considerations, including tax considerations, applicable to investing in those debt securities.
In some instances, certain of the precise terms of debt securities you are offered may be described in a further prospectus supplement or
term sheet, known as a pricing supplement.
General
We will issue the debt securities in one or more series under the indenture dated as of January 1, 1996 between us and Wells Fargo Bank,
National Association (as successor to Wells Fargo Bank Minnesota, National Association, formerly known as Norwest Bank Minnesota, National Association), as trustee. The indenture does not limit the amount of debt securities that we may issue under
it at any time. We may issue additional debt securities under the indenture in one or more series from time to time with terms different from those of other debt securities already issued under the indenture.
Ranking
The debt securities will be our
unsecured and unsubordinated obligations and will rank equally and ratably with our other current and future unsecured and unsubordinated debt. The debt securities will be effectively subordinated to all of our secured debt (as to the collateral
pledged to secure this debt). In addition, except to the extent we have a priority or equal claim against our subsidiaries as a creditor, the debt securities will be effectively subordinated to debt and other obligations at the subsidiary level
because, as the common stockholder of our direct and indirect subsidiaries, we will be subject to the prior claims of creditors of our subsidiaries. Except as described under the section entitled Some Restrictive Covenants below,
the indenture does not restrict the amount of secured or unsecured debt that we or our subsidiaries may incur.
Terms
The prospectus supplement or term sheet, including any separate pricing supplement, relating to a series of debt securities that we offer using
this prospectus will describe the following terms of that series, if applicable:
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the title of the offered debt securities;
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any limit on the aggregate principal amount of the offered debt securities;
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the person to whom interest is payable, if other than the person in whose name it is registered as of the record date for payment of interest;
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the date or dates on which the offered debt securities will mature and any rights of extension;
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the annual rate or rates, if any, which may be fixed or variable, at which the offered debt securities will bear interest, or the method by which such rate or rates will be determined;
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the date from which interest will accrue, the interest payment date or dates and the regular related record
date or dates;
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the place or places where the principal, premium, if any, and interest on the offered debt securities will be
payable;
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the period or periods, if any, within which and the price or prices at which the offered debt securities may
be redeemed, under any redemption provisions, at our option, and other detailed terms of the optional redemption provisions;
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our obligation to redeem or purchase the offered debt securities under any sinking fund, or at your option,
and the terms and conditions under which the offered debt securities may be redeemed or purchased, in whole or in part, under this obligation;
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if other than in denominations of U.S. $1,000 or multiples of U.S. $1,000, the denominations in which the
offered debt securities will be issued;
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any index or formula used to determine the amount of principal, premium, if any, or interest payable on the
offered debt securities;
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the currency or currency units in which the offered debt securities are denominated, and principal and
interest may be payable, and for which the debt securities may be purchased, if other than in U.S. dollars;
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if the principal, premium, if any, or interest paid on the offered debt securities are specified or payable at
our option or at yours, in a currency other than U.S. dollars, whether and under what terms and conditions this election can be made and the amount payable, or the manner in which this amount is determined;
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if other than the principal amount of the offered debt security, the portion of the principal payable at
acceleration of the offered debt securities following an event of default;
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if the principal amount payable at maturity of the offered debt securities will not be determinable as of any
date prior to maturity, the principal amount of offered debt securities at that date, including the principal amount deemed outstanding as of any date prior to maturity, or in any case, the manner in which this amount is determined;
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if the offered debt securities are not defeasible as described under the section entitled
Defeasance below;
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whether the offered debt securities are to be issued in whole or in part in the form of one or more global
securities and, if so, the identity of the depositary for the global security or debt securities and the circumstances under which you may exchange any global security for debt securities registered in the name of an entity other than the depositary
or its nominee, and under which any transfer of the global security may be registered to such an entity;
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any event of default or covenant related to the offered debt securities of a particular series, if not
specified in this prospectus; and
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any other terms of the offered debt securities that will not conflict with the provisions of the indenture.
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Unless the applicable prospectus supplement or term sheet specifies otherwise, we will issue the debt
securities in fully registered form denominated in U.S. dollars in denominations of $1,000 or multiples of $1,000. We may issue the offered debt securities in the form of one or more global certificates, as described below under the section entitled
Global Securities.
Although debt securities offered by this prospectus will be issued under the
indenture, there is no requirement that we issue future debt securities under the indenture. Accordingly, we may use other indentures or documentation containing different provisions in connection with future issuances of our debt.
4
We may issue the debt securities as original issue discount securities, which
will be offered and sold at a substantial discount below their stated principal amount. The prospectus supplement or term sheet relating to those debt securities will describe the federal income tax consequences and other special considerations
applicable to them. In addition, if we issue any debt securities denominated in foreign currencies or currency units, the prospectus supplement or term sheet relating to those debt securities will also describe any federal income tax consequences
and other special considerations applicable to those debt securities.
The indenture does not contain covenants or other
provisions designed to afford holders of debt securities protection in the event of a highly-leveraged transaction involving us. If this protection is provided for the offered debt securities, we will describe the applicable provisions in the
prospectus supplement or term sheet relating to those debt securities.
Exchange, Registration and Transfer
You may exchange debt securities of any series that are not global securities for other registered securities of the same
series and of like aggregate principal amount in different authorized denominations. Transfers and exchanges may be made without service charge and after payment of any taxes or other governmental charges as described in the indenture. We have
appointed the trustee as security registrar as provided under the indenture. The security registrar will effect the transfer or exchange when it is satisfied with the documents of title and identity of the person making the request.
If a debt security is issued as a global security, only the depositary or its nominee as the sole holder of the debt security
will be entitled to transfer and exchange the debt security as described under the section entitled Global Securities below.
Payment and Paying Agent
Unless the applicable prospectus supplement or term sheet specifies otherwise, we will pay the principal, premium, if any, and
interest on the offered debt securities at the principal corporate trust office of the trustee, and the trustee will act as paying agent for the offered debt securities. In addition, unless the applicable prospectus supplement or term sheet
specifies otherwise, and with the exception of global securities, we may, at our option, pay interest by check mailed to the address of the person entitled to it, as it appears on our security register.
Global Securities
We may
issue a series of debt securities offered by this prospectus, in whole or in part, in the form of one or more global securities, which will have an aggregate principal amount equal to that of the debt securities represented thereby.
Unless it is exchanged in whole or in part for the individual debt securities it represents, a global security may be
transferred only as a whole
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by the applicable depositary to a nominee of the depositary;
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by any nominee to the depositary itself or another nominee; or
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by the depositary or any nominee to a successor depositary or any nominee of the successor.
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We will describe the specific terms of the depositary arrangement related to a series of debt
securities in the applicable prospectus supplement or term sheet. We anticipate that the following provisions will generally apply to depositary arrangements for the offered debt securities.
5
Each global security will be registered in the name of a depositary or its
nominee identified in the applicable prospectus supplement or term sheet and will be deposited with the depositary or its nominee or a custodian. The global security will bear a legend regarding the restrictions on exchanges and registration of
transfer referred to below and any other matters as may be provided in the indenture.
As long as the depositary, or its
nominee, is the registered holder of the global security, the depositary or nominee, as the case may be, will be considered the sole owner and holder of the debt securities represented by the global security for all purposes under the indenture.
Except in limited circumstances, owners of beneficial interests in a global security:
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will not be entitled to have the global security or any of the underlying debt securities registered in their
names;
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will not receive or be entitled to receive physical delivery of any of the underlying debt securities in
definitive form; and
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will not be considered to be the owners or holders under the indenture relating to those debt securities.
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All payments of principal of and any premium and interest on a global security will be made to the
depositary or its nominee, as the case may be, as the registered owner of the global security representing those debt securities. The laws of some states require that some purchasers of securities take physical delivery of securities in definitive
form. These limits and laws may impair the ability to transfer beneficial interests in a global security.
Ownership of
beneficial interests in a global security will be limited to institutions that have accounts with the depositary or its nominee, which institutions we refer to as the participants, and to persons that may hold beneficial interests through
participants. In connection with the issuance of any global security, the depositary will credit, on its book-entry registration and transfer system, the respective principal amounts of debt securities represented by the global security to the
accounts of its participants. Ownership of beneficial interests in a global security will be shown only on, and the transfer of those ownership interests will be effective only through, records maintained by the depositary and its participants.
Payments, transfers, exchanges and other matters relating to beneficial interests in a global security may be subject to various policies and procedures adopted by the depositary from time to time. Neither we, the trustee, nor any of our or the
trustees agents will have any responsibility or liability for any aspect of the depositarys or any participants records relating to, or for payments made on account of, beneficial interests in a global security, or for maintaining,
supervising or reviewing any records relating to beneficial interests.
Some Restrictive Covenants
Unless the applicable prospectus supplement or term sheet specifies otherwise, the debt securities will be subject to certain
restrictive covenants described below. These covenants apply to us and to certain of our subsidiaries but do not apply to our subsidiaries that are not corporations. Any additional restrictive covenants applicable to a particular series of debt
securities that we offer will be described in the applicable prospectus supplement or term sheet.
Limitations on Liens
Unless the applicable prospectus supplement or term sheet specifies otherwise, neither we nor any restricted subsidiary will
incur, issue, assume or guarantee any debt secured by a lien on any principal property, of ours or of any restricted subsidiary, or on shares of capital stock or debt issued by any restricted subsidiary and owned by us or any restricted subsidiary,
whether the principal property, shares or debt were owned on the date of the indenture or acquired after that date, without providing that the debt securities will be secured equally and ratably with all other debt also secured, as long as this debt
is secured.
6
Debt means any obligation of ours or of any of our subsidiaries, or
any obligation guaranteed by us or any of our subsidiaries to repay money borrowed, whether evidenced by bonds, debt securities, notes or similar instruments, and including reimbursement obligations related to commercial letters of credit,
bankers acceptances or similar facilities.
Lien means, for any property or asset, any mortgage or deed
of trust, pledge, hypothecation, assignment, security interest, lien, encumbrance, or other security arrangement of any kind related to that property or asset, including any conditional sale or other title retention agreement having substantially
the same economic effect as any of the foregoing.
Principal property means all restaurant or related
equipment and real property, in each case which is owned by us or a subsidiary and which constitutes all or part of any restaurant located within the United States or Canada.
Restricted subsidiary means any subsidiary of ours which does not meet one of the following conditions:
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the greater portion of the operating assets is located, or the principal business is carried on, outside the
United States and Canada, or which, during the 12 most recent calendar months, or shorter period elapsed since its organization, derived the major portion of its gross revenues from sources outside the United States or Canada;
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the principal business consists of financing or assisting in the financing of dealers, distributors or other
customers to facilitate:
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the acquisition or disposition of our products or of any of our subsidiaries, or
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obtaining equipment or machinery used in this acquisition or disposition;
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the principal business consists of owning, leasing, dealing in or developing real property; or
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substantially all of the assets consist of securities of subsidiaries described in the first three bullet
points above.
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Subsidiary means a corporation in which we or one or more subsidiaries
directly or indirectly own more than 50% of the outstanding voting stock. Voting stock is a stock which ordinarily has voting power for the election of directors, at all times or as long as no senior class of stock has this voting power due to a
contingency.
The limitations on liens do not apply to:
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liens existing on the date of the indenture;
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liens on any principal property acquired, constructed or improved by us or any restricted subsidiary after the
date of the indenture which are created or assumed at the time of, or within 180 days of the acquisition, construction or improvement, to secure or provide for the payment of all or any part of the cost of the acquisition, construction or
improvement;
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liens on property, shares of capital stock or debt existing at the time they are acquired by us whether by
merger, consolidation, purchase, lease or some other method, including liens existing at the time that the corporation becomes a restricted subsidiary;
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liens in favor of us or any of our restricted subsidiaries;
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liens in favor of the state or federal government, any department, agency or subdivision of any state or
federal government, or Canada or any political subdivision of Canada, to secure partial, progress, advance or other payments, to secure other contractual or statutory obligations, or to secure any debt incurred to finance the cost of acquiring,
constructing or improving the property that is subject to the lien, including liens incurred in connection with pollution control, industrial revenue or similar financings;
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liens on any property created, assumed or otherwise brought into existence in contemplation of the sale or
other disposition of the underlying property, whether directly or indirectly, by way of share disposition or otherwise if we disposed of the property within 180 days after the creation of these liens and if any debt secured by these liens will be
without recourse to us or any subsidiary;
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liens imposed by law, including mechanics, workmens, repairmens, materialmens,
carriers, warehousemens, vendors or other liens arising in the ordinary course of business, or federal, state or municipal liens arising out of contracts for the sale of products or services by us or any restricted subsidiary, or
deposits or pledges to obtain the release of any of these liens;
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pledges or deposits under workmens compensation or similar laws or under other circumstances;
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liens in connection with legal proceedings, including liens arising out of judgments or awards, contested in
good faith by us or our restricted subsidiary, or liens incurred by us or our restricted subsidiary to obtain a stay or discharge in the course of legal proceedings;
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liens for taxes or assessments not yet due or delinquent, or which can be paid without penalty, or contested
in good faith by appropriate proceedings;
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liens consisting of restrictions on the use of real property which do not interfere materially with the
propertys use or value; or
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any extension, renewal or replacement, as a whole or in part, of any lien existing on the date of the
indenture or of any lien referred to in the second, third and in the last six bullet points above. This extension, renewal or replacement lien must, however, be limited to all or part of the same property, shares of stock or debt that secured the
lien extended, renewed or replaced, plus improvements on the property, and the debt secured by the lien at that time must not be increased.
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The limitations on liens also do not apply if at the time and after giving effect to any debt secured by a lien and any
retirement of debt secured by a lien:
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the total amount of all existing debt secured by liens which could not have been incurred by us or our
restricted subsidiary without equally or ratably securing the debt securities, and which is not subject to the exceptions described above, plus
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the attributable value of all sale and leaseback transactions entered into in reliance on the penultimate
paragraph of the section titled Limitations on Sale and Leaseback Transactions
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does not exceed the greater of 10% of
our consolidated capitalization or $250,000,000.
Consolidated capitalization means consolidated total assets
less consolidated non-interest bearing current liabilities, all as shown by our consolidated balance sheet and the consolidated balance sheet of our subsidiaries, whether or not consolidated for accounting purposes.
Limitations on Sale and Leaseback Transactions
Unless the applicable prospectus supplement or term sheet specifies otherwise, neither we nor any of our restricted
subsidiaries will enter into any sale and leaseback transaction involving the leasing for a period greater than three years of any principal property, unless either:
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we or our restricted subsidiary would be, at the time of entering into the sale and leaseback transaction,
entitled, without equally and ratably securing the debt securities then existing, to incur, issue, assume or guarantee debt secured by a lien on the property, under the provisions described above in the section entitled Limitations on
Liens; or
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within 180 days after that sale or transfer, we apply to retire our funded debt, subject to credits for some
voluntary retirements of funded debt, an amount equal to the greater of:
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the net proceeds of the sale of the principal property sold and leased back under that arrangement, or
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the fair market value of the principal property so sold and leased back.
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This limitation will not apply to a sale and leaseback transaction between us and a restricted subsidiary, or between
restricted subsidiaries, or involving the taking back of a lease for a period of less than three years.
Funded
debt means notes, bonds, debt securities or other debt for money borrowed which by its terms matures at, or is extendible or renewable at the option of the lender to a date more than 12 months after the date of the creation of that debt.
This limitation on sale and leaseback transactions also does not apply if at the time of the sale and leaseback:
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the attributable value of all sale and leaseback transactions existing at that time and which are not subject
to the exceptions described above, plus
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the total amount of all existing debt secured by liens that we entered into in reliance on the penultimate
paragraph of the section entitled Limitations on Liens
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does not exceed the greater of 10% of our consolidated net
tangible assets or $250,000,000.
Attributable value means, for any sale and leaseback transaction, at the
time of determination, the lesser of:
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the sale price of the principal property so leased, multiplied by a fraction, the numerator of which is the
remaining portion of the base term of the lease included in sale and leaseback transaction and the denominator of which is the base term of such lease, and
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the total obligation, discounted to present value at the highest rate of interest specified by the terms of
any series of debt securities then outstanding compounded semi-annually, of the lessee for rental payments, other than amounts required to be paid on account of property taxes as well as maintenance, repairs, insurance, water rates and other items
which do not constitute payments for property rights, during the remaining portion of the base term of the lease included in that sale and leaseback transaction.
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Events of Default
Events
of default when used in the indenture, mean any of the following for a series of offered debt securities:
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failure to pay any interest on any debt security for 30 days after the interest becomes due;
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failure to pay the principal or premium, if any, on any debt security when due;
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failure to deposit any sinking fund payment on any debt security when due;
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failure to perform or breach of any other covenant in the indenture that continues for 60 days after written
notice;
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a default under any bond, debt security, note or other debt for money borrowed by us, including a default
related to debt securities of any series other than that series, or under any mortgage, indenture or instrument, including the indenture, under which there may be issued or by which there may be secured or evidenced any debt for money borrowed by
us, having an aggregate principal amount
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outstanding of at least $25,000,000, whether that debt now exists or is later created, which debt has become due and has not been paid, or whose maturity has been accelerated, and which debt has
not been discharged or that acceleration has not been annulled within 10 business days after written notice as provided in the indenture;
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some events of bankruptcy, insolvency or reorganization; and
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any other event of default related to the debt securities of that series.
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Any additional events of default applicable to a particular series of debt securities that we offer will be described in the
applicable prospectus supplement or term sheet.
If any event of default, other than an event of default described in the
second to last bullet point above for any series, occurs and is continuing, the trustee or the holders of at least 25% in principal amount of the outstanding debt securities of that series may declare the principal amount, or, if any of the debt
securities of that series are original issue discount debt securities, the lesser portion of the principal amount of these debt securities as may be specified by their terms, of all of the debt securities of that series to be due and immediately
payable.
If an event of default described in the sixth bullet point above occurs, the principal amount, or if any of the
debt securities of that series are original issue discount securities, the portion of the principal amount of these debt securities as may be specified by their terms, will automatically become immediately due and payable, and without any
declaration or other action on the part of the trustee or any holder.
The trustee is required, within 90 days after the
occurrence of an event of default related to the debt securities of any series, to give to the holders of the debt securities of that series notice of the default that it actually knows of, if not cured or waived. However, except in the case of
default in the payment of principal, premium, if any, or interest on any debt security of that series, or in the deposit of any sinking fund payment which is provided, the trustee will be protected in withholding the notice if the trustee in good
faith determines that the withholding of the notice is in the interest of the holders of the debt securities of that series. In addition, the notice will not be given until 30 days after the occurrence of an event of default related to the debt
securities of any series in the performance of a covenant in the indenture other than for the payment of the principal, premium, if any, or interest on any debt security of that series or the deposit of any sinking fund payment with respect to the
debt securities of that series.
At any time after a declaration of acceleration of any debt securities of a series is
made, but before the trustee has obtained a judgment for payment of money, the holders of a majority in aggregate principal amount of the existing debt securities of that series may, under some circumstances, rescind this acceleration.
The indenture contains provisions entitling the trustee to be indemnified by the holders of the debt securities of the
relevant series before proceeding to exercise any right or power under the indenture at the request of those holders. Subject to these provisions for the indemnification of the trustee, the holders of a majority in aggregate principal amount of the
outstanding debt securities of any series will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the trustee, or exercising any trust or power conferred on the trustee, related to the debt
securities of that series.
The holder of debt securities will not have any right to institute any proceeding related to
the indenture, or for the appointment of a receiver or trustee for any other remedy under the indenture, unless:
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the holder has previously given to the trustee written notice of a continuing event of default related to the
debt securities of that series;
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holders of at least 25% in aggregate principal amount of the outstanding debt securities of that series have
made a written request to the trustee to institute the proceeding and the holders have offered reasonable indemnity; and
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the trustee has failed to institute the proceeding, and has not received from the holders of a majority in
aggregate principal amount of the outstanding debt securities of that series instructions which conflict with that request, within 60 days after the notice, request and offer.
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The indenture requires us to file annually with the trustee a certificate executed by two of our officers, indicating whether
such officers have knowledge of any default under the indenture.
The right of any holder to receive payment of the
principal, premium, if any, and interest on the debt securities or to institute a legal proceeding cannot be impaired without the holders consent.
Modification and Waiver
With the consent of the holders of at least a majority in aggregate principal amount of the outstanding debt securities of any
series affected by the modification or amendment, voting as one class, we and the trustee may execute supplemental indentures modifying or amending the indenture or any supplemental indenture.
Without the consent of the holder of each debt security affected by the modification, we may not:
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change the maturity of, the principal of, or any installment of principal or interest on any debt security;
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reduce the principal amount of the debt security;
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reduce the rate of interest on the debt security;
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reduce any premium payable at redemption of the debt security;
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reduce the amount of the principal of an original issue discount security due or any other security due at
acceleration of maturity;
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change the place of payment, or coin or currency in which the principal, premium, if any, or interest on any
debt security is payable;
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impair the right to institute suit for the enforcement of any payment on or after maturity, or in the case of
redemption or repayment, on or after the redemption or repayment date;
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reduce the percentage in principal amount of outstanding debt securities of any series, the consent of the
holders of which is required for modification or amendment of the indenture;
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reduce the percentage of outstanding debt securities necessary to waive compliance with some provisions of the
indenture or for waiver of some defaults; or
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modify the foregoing requirements.
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The holders of at least a majority in aggregate principal amount of the outstanding debt securities of each series may, on
behalf of the holders of all debt securities of that series, waive, for that series, our compliance with some provisions of the indenture.
The holders of at least a majority in aggregate principal amount of the outstanding debt securities of each series may, on
behalf of the holders of all debt securities of that series, waive any past default under the indenture for the debt securities of that series, except a default:
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in the payment of principal, premium, if any, or interest on any debt security, or
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related to a covenant or provision of the indenture which cannot be modified or amended without the consent of
the holder of each outstanding debt security of the series affected.
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The indenture provides that, in determining whether the holders of the requisite
principal amount of the outstanding debt securities have given, made or taken any request, demand, authorization, direction, notice, consent, waiver or other action as of any date:
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the principal amount of an original issue discount security deemed outstanding will be the amount of the
principal of the original issue discount security due at acceleration of maturity to that date;
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if, as of that date, the principal amount payable at the maturity of a debt security cannot be determined, the
principal amount of the debt security deemed outstanding will be the amount determined under a board resolution and specified in an officers certificate, or determined in one or more supplemental indentures, prior to the issuance of the debt
securities;
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the principal amount of a debt security denominated in one or more foreign currencies or currency units deemed
outstanding will be the U.S. dollar equivalent, determined as of that date as described in the previous bullet point, of the principal amount of the debt security, or in the case of a debt security described in either of the first two bullet points,
of the amount determined as described in that bullet point above; and
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debt securities owned by us or any other obligor on the debt securities, or any affiliates of ours or of any
obligor, will be disregarded and deemed not to be outstanding, except that in determining whether the trustee will be protected in relying on such request, demand, authorization, direction, notice, consent, waiver or other action, only debt
securities which the trustee knows to be so owned will be disregarded.
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Debt securities so owned which
have been pledged in good faith may be regarded as outstanding if the pledgee establishes to the satisfaction of the trustee the pledgees right to so act for the debt securities and that the pledgee is not us or any other obligor on the debt
securities or any of our affiliates or other obligor.
Consolidation, Merger and Sale of Assets
We may not consolidate with or merge into another entity or convey, transfer or lease our property and assets substantially as
an entirety to any other entity, and we may not permit any entity to consolidate with or merge into us or convey, transfer or lease their properties and assets substantially as an entirety to us, unless:
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any successor or purchaser is a corporation, partnership, limited liability company or trust organized under
the laws of the United States, any State or the District of Columbia, and this successor or purchaser expressly assumes our obligations on the debt securities under a supplemental indenture in a form satisfactory to the trustee;
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immediately after giving effect to the transaction, no event of default, and no event which after notice or
lapse of time or both would become an event of default, occurred and is continuing;
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if, as a result of this transaction, our property or assets become subject to a lien which is not permitted by
the indenture, our successor or we, as the case may be, takes the necessary steps to secure the debt securities issued under the indenture equally and ratably with debt secured by the lien; and
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other conditions required under the indenture are met.
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If we consolidate or merge into or if we convey, transfer or lease our assets substantially as an entirety, our successor will
succeed to, and will be substituted for us under the indenture, and in this case, but not in the case of a lease, we will be relieved of all obligations and covenants under the indenture and debt securities.
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Defeasance
Unless the applicable prospectus supplement or term sheet specifies otherwise, the following provisions relating to defeasance
and discharge of debt, or relating to defeasance of some restrictive covenants under the indenture, will apply to the debt securities of any series, or to any specified part of a series.
The indenture contains a provision which permits us to elect:
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to defease and be discharged from all of our obligations, subject to limited exceptions, related to any series
of debt securities then outstanding, which we refer to as legal defeasance; or
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to be released from our obligations under some restrictive covenants, including those described above under
the section entitled Some Restrictive Covenants, which we refer to as covenant defeasance.
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To make
this election, we must:
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deposit in trust for the benefit of the holders of the debt securities, money or U.S. government obligations,
or both, which, through the payment of principal, premium, if any, and interest in accordance with their terms, will provide sufficient money to repay in full the series of debt securities and any mandatory sinking fund payments on the respective
maturities;
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deliver to the trustee an opinion of counsel as provided under the indenture, that holders of debt securities
will not recognize gain or loss for federal income tax purposes as a result of the deposit, defeasance and discharge and will be subject to federal income tax in the same amount, in the same manner and at the same times as would have been the case
if this deposit, defeasance and discharge had not occurred; and
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comply with other conditions of the indenture.
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If we exercised the legal defeasance option on any debt securities and these debt securities were declared due and payable
because an event of default occurred, the amount of money and U.S. government obligations deposited in trust would be sufficient to pay the amounts due on the debt securities at the time of their respective maturities but may not be sufficient to
pay the amounts due on the debt securities at acceleration resulting from the event of default. In that case, we would remain liable for the payments.
U.S. government obligation means:
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a direct obligation of the United States for the payment of which the full faith and credit of the United
States is pledged, or
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an obligation of a person controlled or supervised by and acting as an agency or instrumentality of the United
States the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States, which, in case of either this bullet point or the previous bullet point, is not callable or redeemable at the option of the issuer;
and
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any depositary receipt issued by a bank, as custodian for any U.S. government obligation which is specified in
the first bullet point above and held by that bank for the account of the holder of the depositary receipt, or for any specific payment of principal or interest on any U.S. government obligation so specified and held, provided that, except as
required by law, the custodian is not authorized to make any deduction from the amount payable to the holder of the depositary receipt from any amount received by the custodian for the U.S. government obligation or the specific payment of principal
or interest evidenced by the depositary receipt.
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The Trustee
Wells Fargo Bank, National Association (as successor to Wells Fargo Bank Minnesota, National Association, formerly known as
Norwest Bank Minnesota, National Association) is the trustee under the indenture. The trustee may resign or be removed by the act of holders of a majority in principal amount of the securities of a series, with respect to one or more series of debt
securities, and we may appoint a successor trustee to act for these series. If two or more persons are acting as trustee for different series of debt securities, each trustee will be a trustee of a trust under the indenture separate and apart from
the trust administered by any other trustee, and any action described in this prospectus to be taken by the trustee may then be taken by each trustee for, and only for, the series of securities for which it is trustee.
In the ordinary course of business, Wells Fargo Bank, National Association and its affiliates have engaged, and may in the
future engage, in investment banking, commercial banking and other transactions with us and our affiliates. Wells Fargo Bank, National Association is the syndication agent and a co-lender under our revolving credit facility and maintains customary
banking relationships with us. In addition, to hedge our exposure on particular securities, we have from time to time entered into transactions involving derivative instruments, such as swaps, with Wells Fargo Bank, National Association. Wells Fargo
Bank, National Association also serves as the transfer agent and registrar for our common stock and as the sponsor and administrator of our Shareowner Service Plus Plan direct investment program.
Governing Law
The
indenture and the offered debt securities will be governed by, and construed under, the laws of the State of New York.
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PLAN OF DISTRIBUTION
We may offer and sell the debt securities offered by this prospectus:
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directly to one or more purchasers; or
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through some combination of these methods.
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The applicable prospectus supplement or term sheet will describe the terms of the offering of any debt securities, including
the name or names of any underwriters, dealers or agents, the price of the offered securities and the net proceeds to us from the sale, including any underwriting discounts and commissions or other items constituting underwriters compensation,
and any discounts, commissions or fees allowed or paid to dealers or agents.
By Underwriters
If underwriters are used in the sale, the offered debt securities will be acquired by the underwriters for their own account
and may be resold from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale. If we sell securities to underwriters, we will execute an
underwriting agreement with them at the time of sale and will name them in the applicable prospectus supplement or term sheet. The debt securities may be offered to the public either through underwriting syndicates represented by managing
underwriters or directly by one or more investment banking firms or others, as designated. Unless the applicable prospectus supplement or term sheet specifies otherwise, the obligations of the underwriters or agents to purchase the offered debt
securities will be subject to some conditions. The underwriters will be obligated to purchase all the offered debt securities if any of the securities are purchased. Any initial public offering price and any underwriting commissions or other items
constituting underwriters compensation may be changed from time to time.
By Dealers
If a dealer is utilized in the sale of any debt securities offered by this prospectus, we will sell those debt securities to
the dealer, as principal. The dealer may then resell the debt securities to the public at varying prices to be determined by the dealer at the time of resale. We will set forth the names of the dealers and the terms of the transaction in the
applicable prospectus supplement or term sheet.
By Agents
We may also sell debt securities offered by this prospectus through agents. We will name any agent involved in the offer and
sale and describe any commissions payable by us in the applicable prospectus supplement or term sheet. Unless otherwise indicated in the prospectus supplement or term sheet, any agent will be acting on a reasonable efforts basis for the period of
its appointment.
By Direct Sales
We may also directly sell debt securities offered by this prospectus. In this case, no underwriters, dealers or agents would be
involved. We will describe the terms of any of those sales in the applicable prospectus supplement or term sheet.
15
General Information
Underwriters, agents and dealers that participate in the distribution of the debt securities offered by this prospectus may be
deemed underwriters under the Securities Act and any discounts or commissions they receive from us and any profit on their resale of the debt securities may be treated as underwriting discounts and commissions under the Securities Act.
If the applicable prospectus supplement or term sheet so indicates, we will authorize underwriters, agents or dealers to
solicit offers by some specified institutions to purchase offered debt securities from us at the public offering price specified in the prospectus supplement or term sheet under delayed delivery contracts providing for payment and delivery on a
specified date in the future. These contracts will be subject only to those conditions stated in the prospectus supplement or term sheet, and the prospectus supplement or term sheet will specify the commission payable for solicitation of the
contracts.
Under agreements entered into with us, underwriters and agents who participate in the distribution of the
offered debt securities may be entitled to indemnification by us against some civil liabilities, including liabilities under the Securities Act or to contribution regarding payments that the underwriters or agents may be required to make.
Underwriters and agents may be customers of, engage in transactions with, or perform services for us in the ordinary course of business.
The offered debt securities will be a new issue of securities with no established trading market. Any underwriters or agents
to or through whom we sell the debt securities for public offering and sale may make a market in the debt securities. The underwriters or agents are not obligated to make a market in the offered debt securities and may discontinue market making at
any time without notice. We cannot predict the liquidity of the trading market for any debt securities.
In connection
with an offering of our debt securities, underwriters, agents or dealers may purchase and sell them in the open market. These transactions may include stabilizing transactions and purchases to cover syndicate short positions created in connection
with the offering. Stabilizing transactions consist of some bids or purchases for the purpose of preventing or slowing a decline in the market price of the debt securities, and syndicate short positions involve the sale by the underwriters or
agents, as the case may be, of a greater number of securities than they are required to purchase from us in the offering. Underwriters may also impose a penalty bid, which means that the underwriting syndicate may reclaim selling concessions allowed
to syndicate members or other broker dealers who sell securities in the offering for their account if the syndicate repurchases the securities in stabilizing or covering transactions. These activities may stabilize, maintain or otherwise affect the
market price of the debt securities, which may be higher than the price that might otherwise prevail in the open market. These activities, if commenced, may be discontinued at any time without notice. These transactions may be affected on any
securities exchange on which the debt securities may be listed, in the over-the-counter market or otherwise.
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VALIDITY OF DEBT SECURITIES
The validity of the offered debt securities will be passed upon for us by Hunton & Williams LLP. Certain matters of
Florida law will be passed upon for us by Anthony G. Morrow, Esq., our Senior Vice President, Division General Counsel, Securities & Finance. As of September 30, 2016, Anthony G. Morrow owned 3,141 shares of our common stock, 3,042
unvested Darden performance share units that may settle in shares of our common stock, 21 shares of our common stock held through a partnership and held options to purchase 38,208 shares of our common stock, 16,613 of which are unvested. Any
underwriters will be advised about other issues relating to any offering by their own legal counsel.
EXPERTS
The consolidated financial statements of Darden Restaurants, Inc. as of May 29, 2016 and May 31, 2015, and
for each of the years in the three-year period ended May 29, 2016, and managements assessment of the effectiveness of internal control over financial reporting as of May 29, 2016 have been incorporated by reference herein and in the
registration statement in reliance upon the reports of KPMG LLP, independent registered public accounting firm, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION ABOUT DARDEN
We file annual, quarterly and current reports, proxy statements and other information with the SEC. Our SEC filings are
available to the public through the Internet at the SEC web site at http://www.sec.gov. You may also read and copy any document we file with the SEC at the SECs public reference room at 100 F Street, N.E., Room 1580, Washington, D.C., 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the public reference facilities and their copy charges. You may also obtain copies of our SEC filings at the office of the New York Stock Exchange, Inc., 20 Broad Street, New York, New
York, 10005. For further information on obtaining copies of Dardens public filings at the New York Stock Exchange, you should call 1-212-656-3000. Information about us, including our SEC filings, is also available at our Internet site at
http://www.darden.com. However, the information on our Internet site is not a part of this prospectus or any prospectus supplement.
The SEC allows us to incorporate by reference into this prospectus the information we file with them. This allows us to
disclose important information to you by referencing those filed documents. We have previously filed the following documents with the SEC and are incorporating them by reference into this prospectus (excluding any documents or portions of documents
not deemed to be filed):
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Our Annual Report on Form 10-K for the year ended May 29, 2016;
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Our Quarterly Report on Form 10-Q for the quarter ended August 28, 2016; and
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Our Current Reports on Form 8-K filed with the SEC on July 5, 2016, September 28,
2016 and October 4, 2016 (two reports).
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We also are incorporating by reference any future filings
made by us with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, after the date of the initial filing of the registration statement of which this prospectus is a part and prior to the
termination of the offering of the securities described in this prospectus. The most recent information that we file with the SEC automatically updates and supersedes more dated information. We will provide without charge to each person, including
any beneficial owner, to whom this prospectus is delivered, upon his or her written or oral request, a copy of any or all documents referred to above which have been or may be incorporated by reference into this prospectus excluding exhibits to
those documents unless they are specifically incorporated by reference into those
17
documents. You can obtain those documents from our website at www.darden.com or request them in writing or by telephone at the following address or telephone number:
Investor Relations
Darden
Restaurants, Inc.
1000 Darden Center Drive
Orlando, Florida 32837
1-407-245-6458
You should rely only on the information contained or incorporated by reference in this prospectus or the prospectus supplement
or term sheet relating to the offered debt securities. We have not authorized anyone to provide you with different information. We are not offering to sell the debt securities in any jurisdiction where the offer or sale is not permitted. You should
not assume that the information in this prospectus or any prospectus supplement or term sheet is accurate as of any date other than the date on the front cover of those documents. Our business, financial condition, results of operations and
prospects may have changed since those dates.
18
$
Darden Restaurants, Inc.
% Senior Notes due 20
Prospectus Supplement
Joint
Book-Running Managers
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BofA Merrill Lynch
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Goldman, Sachs & Co.
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Wells Fargo Securities
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Fifth Third Securities
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SunTrust Robinson Humphrey
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US Bancorp
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April , 2017
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