Table of Contents Strategic Framework 2003 Financial Highlights Operating Company Overviews Great Expectations   Ambience   Service   Attentiveness   Knowledge   Friendliness   Cleanliness Letter To Shareholders Operating Highlights   Red Lobster   Olive Garden   Bahama Breeze   Smokey Bones BBQ New Business Opportunities Financial Review 2003   Management’s Discussion and Analysis...   Report of Management Responsibilities   Independent Auditors’ Report   Consolidated Statements of Earnings   Consolidated Balance Sheets   Consolidated Statements of Changes...   Consolidated Statements of Cash Flows   Notes to Consolidated Financial Statements Corporate Responsibility Board of Directors Corporate Officers Shareholders Information
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)      In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” SFAS No. 150 establishes accounting standards for the classification and measurement of certain financial instruments with characteristics of both liabilities and equity. It requires certain financial instruments that were previously classified as equity to be classified as assets or liabilities. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. Adoption of SFAS No. 150 is not expected to materially impact our consolidated financial statements. Forward-Looking Statements Certain statements included in this report and other materials filed or to be filed by us with the SEC (as well as information included in oral or written statements made or to be made by us) may contain statements that are forward-looking within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Words or phrases such as “believe,” “plan,” “will,” “expect,” “intend,” “estimate,” and “project,” and similar expressions are intended to identify forward-looking statements. All of these statements, and any other statements in this report that are not historical facts, are forward-looking. Examples of forward-looking statements include, but are not limited to, projections regarding expected casual dining sales growth; the ability of the casual dining segment to weather economic downturns; demographic trends; our expansion plans, capital expenditures, and business development activities; and our long-term goals of increasing market share, expanding margins on incremental sales, and earnings growth. These forward-looking statements are based on assumptions concerning important factors, risks, and uncertainties that could significantly affect anticipated results in the future and, accordingly, could cause the actual results to differ materially from those expressed in the forward-looking statements. These factors, risks, and uncertainties include, but are not limited to: the highly competitive nature of the restaurant industry, especially pricing, service, location, personnel, and type and quality of food; economic, market, and other conditions, including a protracted economic slowdown or worsening economy, industry-wide cost pressures, weak consumer demand, changes in consumer preferences, demographic trends, weather conditions, construction costs, and the cost and availability of borrowed funds; the price and availability of food, labor, utilities, insurance and media, and other costs, including seafood costs, employee benefits, workers’ compensation insurance, and the general impact of inflation; unfavorable publicity relating to food safety or other concerns, including litigation alleging poor food quality, food-borne illness, or personal injury; the availability of desirable restaurant locations; government regulations, including those relating to zoning, land use, environmental matters, and liquor licenses; and growth plans, including real estate development and construction activities, the issuance and renewal of licenses and permits for restaurant development, and the availability of funds to finance growth.