To Our Shareholders, Employees, and Guests Joe R. Lee Chairman and Chief Executive Officer I welcome this opportunity to share with you our fiscal 2004 results.  It was clearly a challenging year, with uncertainties such as the  war in Iraq, the continuing threat of terrorism, and lackluster job  growth affecting our industry and our Company. Our Company  was also challenged by management transition in key positions.  Consumer confidence was volatile throughout the year, and the casual  dining industry, while showing some growth, did not experience the  robust sales growth we had anticipated. And, while we are stronger  following our executive leadership changes, we experienced some  transition disruption as new responsibilities and reporting relation- ships were established, which adversely affected our performance. Despite the challenges, we achieved a great deal in fiscal 2004 and  remain focused on our long-term objective of providing industry- leading shareholder value. • Sales increased 7.5 percent to $5 billion for the fiscal year, driven  primarily by new restaurant growth at Olive Garden and Smokey  Bones, same-restaurant sales growth at Olive Garden, and an  additional operating week in the fourth quarter. • Net earnings were $231.5 million, or $1.36 per diluted share, for  the 53-week fiscal year. These results include fourth quarter asset  impairment and restructuring charges totaling approximately  $23.1 million after tax associated with the closing of six Bahama  Breeze restaurants and the write-down of the carrying value of  four other Bahama Breeze restaurants, one Olive Garden restau- rant, and one Red Lobster restaurant. • Bahama Breeze’s total sales of $176 million were up 28 percent from  last year. In May 2004, Bahama Breeze closed six underperforming  restaurants as part of our plan to improve overall profitability,  • Olive Garden’s total sales were a record $2.21 billion, up 11.1 percent  from last year. Operating profit also reached new record levels,  with a double-digit increase versus last year. Average annual sales  per restaurant were a record $4.1 million (on a 52-week basis),  and Olive Garden built 19 net new restaurants. Olive Garden’s  U.S. same-restaurant sales growth for the year was 4.6 percent,  and Olive Garden ended the year with 39 consecutive quarters  of same-restaurant sales growth. Olive Garden continues to  demonstrate how strong brand positioning, brilliance with the  basics of in-restaurant operations, compelling food news, and  great advertising combine to drive excellent guest satisfaction,  as well as strong growth in sales, traffic, and operating profit. • Red Lobster’s total sales were a record $2.44 billion, a 0.1 percent  increase from last year. Average annual sales per restaurant were  $3.6 million (on a 52-week basis), and Red Lobster built seven net  new restaurants. Red Lobster’s new leadership team is in place and  working to improve operating efficiency and sharpen the position- ing of the brand, while achieving sustainable and profitable growth. • As described in the 2004 Financial Highlights, net earnings for the  fiscal year excluding the asset impairment and restructuring charges  were $254.5 million, or $1.50 per diluted share, on 53-week sales  of $5.0 billion. Last year, net earnings were $232.3 million, or  $1.31 per diluted share, on 52-week sales of $4.7 billion.  6  Darden Restaurants Leadership Defined