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## To Our Shareholders, Employees, and Guests 

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. 

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• 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. 

• 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. 

• 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. 

• 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, 

