Matthew Stroud - Vice President of Investor Relations Clarence Otis - Executive Chairman, Chief Executive Officer and Chairman of Executive Committee C. Bradford Richmond - Chief Financial Officer, Principal Accounting Officer and Senior Vice President Andrew H. Madsen - President, Chief Operating Officer and Director Eugene I. Lee - President of Specialty Restaurant Group

David Palmer - UBS Investment Bank, Research Division Michael Kelter - Goldman Sachs Group Inc., Research Division Brian J. Bittner - Oppenheimer & Co. Inc., Research Division Joseph T. Buckley - BofA Merrill Lynch, Research Division Jeffrey Andrew Bernstein - Barclays Capital, Research Division Jason West - Deutsche Bank AG, Research Division John W. Ivankoe - JP Morgan Chase & Co, Research Division Keith Siegner - Crédit Suisse AG, Research Division Will Slabaugh - Stephens Inc., Research Division Matthew J. DiFrisco - Lazard Capital Markets LLC, Research Division Mitchell J. Speiser - The Buckingham Research Group Incorporated

Welcome, and thank you for standing by. [Operator Instructions] And today's conference is being recorded. [Operator Instructions] I'd now like to turn the meeting over to Matthew Stroud, Vice President of Investor Relations for Darden. Sir, you may begin.

Great. Thank you, Tim. Good morning, everyone. With me today are Clarence Otis, Darden's Chairman and CEO; Drew Madsen, Darden's President and COO; Brad Richmond, Darden's CFO; and Gene Lee, President of Darden's Specialty Restaurant Group. We welcome those of you joining us by telephone or the Internet. During the course of this conference call, Darden Restaurants' officers and employees may make forward-looking statements concerning the company's expectations, goals or objectives. Forward-looking statements are made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Any forward-looking statements speak only as of the date on which such statements are made, and we undertake no obligation to update such statements to reflect events or circumstances arising after such date. We wish to caution investors not to place undue reliance on any such forward-looking statements. By their nature, forward-looking statements involve risks and uncertainties that could cause actual results to materially differ from those anticipated in the statements. The most significant of these uncertainties are described in Darden's Form 10-K, Form 10-Q and Form 8-K reports, including all amendments to those reports. These risks and uncertainties include food safety and food-borne illness concerns; litigation; unfavorable publicity; federal, state and local regulation of our business including health care reform, labor and insurance costs; technology failures; failure to execute a business continuity plan following a disaster; health concerns including virus outbreaks; the intensely competitive nature of the restaurant industry; factors impacting our ability to drive sales growth; the impact of indebtedness we incurred in the RARE acquisition; our plans to expand our newer brands like Bahama Breeze and Seasons 52; our ability to successfully integrate Eddie V's restaurant operations; a lack of suitable new restaurant locations; higher-than-anticipated costs to open, close or remodel restaurants; increased advertising and marketing costs; a…

Thanks, Matthew. And I'll start just by briefly sharing at a very high level our assessment of the business including performance last year, so fiscal 2012, and what we expect this year, fiscal 2013. Then Brad, Drew and Gene are going to provide more detail on both few years and on the fourth quarter last year. But from a total sales perspective, results in 2012, excluding the Eddie V's acquisition, was just over 6%, which is short of our long-term target for total sales growth of between 7% and 9%. With respect to new restaurants, which is one of our 2 sales growth drivers, growth accelerated significantly in 2012 compared to the prior year and came close to the 5% long-term target that we've had for some time now. Now with the unit potential, new unit potential, of our current portfolio and that's been fortified by the acquisition of Eddie V's, the value-creating returns that we're getting from new restaurants and the strength of our real estate and talent pipelines, and those are the foundations for successful unit expansion, we expect to meet our 5% target for new restaurant growth in fiscal 2013 and then meet or exceed it for at least the next 4 years after that. The second sales growth driver is same-restaurant sales. And in 2012, combined same-restaurant sales growth at our 3 large casual dining brands was roughly 0.5 point -- 0.5 percentage point higher than it was the prior year and 0.5 percentage point higher than the industry average. This growth was fueled by strong results at Red Lobster and LongHorn, and each of those brands is benefiting from successful efforts over the past 2 years to refresh all the things that drive success in this business, including their core menus, promotional strategies, advertising and…

Thank you, Clarence. Darden's total sales from continuing operations increased 3.8% in the fourth quarter to $2,070,000,000. On a blended same-restaurant sales basis, results for Olive Garden, Red Lobster and LongHorn Steakhouse were down 1.9% in the fourth quarter, which includes the adverse effect of an earlier Lenten season and Easter that impacted blended same-restaurant sales by 40 basis points. Olive Garden's fourth quarter U.S. same-restaurant sales were down 1.8%. Red Lobster's fourth quarter U.S. same-restaurant sales fell 3.9%. This includes the adverse impact of 130 basis points due to the earlier Lenten season and Easter along with the shift of Lobsterfest. LongHorn Steakhouse fourth quarter U.S. same-restaurant sales increased 3.0%, and we saw continued strong same-restaurant sales gains in our Specialty Restaurant Group with plus 2.7% same-restaurant sales growth on a blended basis. For the fourth quarter, same-restaurant sales increased 2.8% at Capital Grille, 2.8% at Bahama Breeze and 1.9% at Seasons 52. Now let's review the margin analysis for the fourth quarter. Food and beverage expenses were 45 basis points higher than last year on a percentage of sales basis. The increase in food and beverage expense is attributable to year-over-year inflation in seafood and beef cost. This is a sharp improvement from the 250 basis points of unfavorability we reported in the first half of the fiscal year and approximately 175 basis points of unfavorability in the third quarter. Fourth quarter same -- fourth quarter restaurant labor expenses were 50 basis points lower than last year on a percentage of sales basis due to increased productivity and lower restaurant manager incentive compensation expense. Restaurant expenses in the quarter were essentially flat to last year on a percentage of sales basis as lower credit card expenses were offset with increased preopening expense related to 9 net units opens…

Thank you, Brad. This morning, I'll discuss fiscal 2012 fourth quarter sales performance and fiscal 2013 strategic priorities for Olive Garden, Red Lobster and LongHorn, and then Gene will do the same for the brands in our Specialty Restaurant Group. As Brad mentioned, our 3 large brands had a combined same-restaurant sales decline of 1.9% during the fourth quarter. And while some of this decline was due to holiday and promotional timing shifts at Red Lobster and lower advertising support at Olive Garden, most of the decline was the result of disappointing promotional performance at those 2 brands. Now let me comment more specifically on our fourth quarter results. Olive Garden opened 16 new restaurants and delivered total sales growth of nearly 3%, high single-digit operating profit growth and solid margin expansion during the fourth quarter. However, same-restaurant sales fell 1.8%, which contrasts with the modest improvement we saw in the third quarter. Olive Garden started the quarter with the final 3 weeks of their 3-course Italian dinner for $12.95 promotion. Now this promotion featured 5 new entrées specifically designed for this price point from a margin perspective, and it included soup or salad plus the choice of an individual-sized dessert. They followed this with Passion for Parmesan that included 3 new entrées: grilled chicken Parmesan, Parmesan-crusted shrimp and Parmesan-crusted steak that leveraged the broad appeal and crave-able nature of Parmesan cheese. In mid-May, Olive Garden launched the Taste of Tuscany promotion with a starting at $10.95 price point. This promotion featured 2 new entrées, sautéed chicken with Asiago tortelloni and grilled Italian sausage with Orecchiette pasta and allowed guests to personalize their entrée choice by adding 2 of 4 new Tuscan-inspired side dishes. The majority of Olive Garden's decline in the fourth quarter versus prior year occurred during May…

Thanks, Drew. Specialty Restaurant Group delivered strong performance in the fourth quarter, growing sales 26.9%. This growth was a result of the strong performance at our 23 net new restaurants across the group, which includes the 11 Eddie V's restaurants we acquired last November and blended same-restaurant sales growth of 2.7%. Our sales growth resulted in significant operating margin expansion during the quarter. In fact, restaurant level margins improved significantly for the group throughout fiscal 2012, and we continue to leverage our support platform to reduce G&A as a percentage of sales. Total annual sales for the group exceeded $620 million. That's an increase of more than 24% over prior year and contributed to 24% of Darden's total annual sales growth for the year. This robust sales growth was driven by annual blended same-restaurant sales growth of 4.6%, building on an already competitively superior average unit volumes of $6.4 million for the group. We believe that Specialty Restaurant Group is well positioned to continue building on this momentum in fiscal 2013. Our key priority remains effectively managing accelerated new restaurant growth while maintaining operational excellence, ensuring our brands and business models continue to improve and remain vibrant. In fiscal 2013, we plan to open 14 to 16 net new restaurants, including 78 Seasons 52s, 3 to 4 Bahama Breezes, 3 Capital Grilles and 1 Eddie V's. At the same time, we are continuing to build the real estate pipeline for each of our brands, including making significant progress on identifying potential sites for Eddie V's future expansion. As we accelerate growth, maintaining a sufficient talent pipeline will also be critically important, and our operations and human resources teams will be intently focused on that this year. In addition, to continue our same-restaurant sales momentum in fiscal 2013, we will focus on further elevating the guest experience along with growing all sales channels including group and event dining, as well as national account relationships and continue to broaden the appeal of our menus. We will also leverage our culinary expertise and strong seasonal and regional culinary platform to drive food and beverage innovation that help offset the higher beef costs. We are confident that Specialty Restaurant Group has what it takes and is working on the right things to achieve the high end of our long-range growth targets of 17% to 20% and continue to add more economically resilient guests to the Darden portfolio. Now I'll hand it back to Brad for the fiscal 2013 financial outlook.

Thanks, Gene. Our outlook for fiscal 2013 reflects our very strong business model in the face of what we expect to be a below-normal economic growth levels. In fiscal 2012, we generated $762 million in cash flow from operations in what was a challenging economic environment, and we anticipate generating even stronger cash flows from operations in fiscal 2013, driven by the combination of continuing same-restaurant sales growth, accelerating new unit growth and an improvement in our operating margins. And after investing in our business, we plan to return a meaningful amount of capital to our shareholders through the increase in our dividends, which we announced today and by continuing share repurchases. In fiscal 2013, our outlook is based on combined same-restaurant sales growth for Red Lobster, Olive Garden and LongHorn Steakhouse of between plus 1% and plus 2%. This includes pricing that is estimated to be slightly below 2% for fiscal 2013 and our assumption that, together, traffic and mix changes will be flat to slightly negative. Of course, we will be both above and below this assumed range from month-to-month and quarter-to-quarter depending on promotional calendar, holiday shifts and changing consumer sentiment. Looking ahead to unit growth, new restaurant plans that Drew outlined plus 4 additional Synergy restaurants means that we expect a net new restaurant increase of approximately 100 to 110 restaurants, which is between 5% and 5.5% unit growth on our current base. Given our same-restaurant assumptions and new restaurant plans, we anticipate that the total sales increase for the year will range from plus 6% to plus 7%. With more unit development in fiscal 2013 and our accelerating remodel program at Red Lobster and Olive Garden, we expect capital spending to be somewhat higher than fiscal 2012 levels. We anticipate it will be approximately $750…

Yes, to wrap up, as you all know, the competitive environment's been tough with a frustratingly slow economic recovery that's constrained consumers. And like other leaders in our industry, we're responding to this reality with significant changes in what we offer our guests and how we communicate what we offer. Within our portfolio, Olive Garden got off to a later start in making these changes, but still our double-digit growth in earnings per share in the fourth quarter and second half, once an unusual food cost spike was behind us, indicates that we can deliver strong financial performance even when part of our portfolio is not where we'd like it to be. As discussed, material changes are underway at Olive Garden that will strengthen its guest experience and promotional offerings, and we're working on the right things to sustain momentum at the rest of our brands. We continue to believe that we've got an opportunity to deliver compelling financial value over the next 5 years beginning with solid sales and earnings growth in fiscal 2013. It's a year in which we do expect continued recovery though the improvement in economic and industry conditions is likely to be a lot slower than any of us would like. We're confident though that with a relentless focus on building guest loyalty and on leveraging and enhancing both our expertise in our increasingly cost-effective support platform that we'll navigate that environment well. With that, we've got about 30 minutes to take your questions. We know we've run a little longer given that it's a fiscal year end. So let's get started.

[Operator Instructions] The first question will come from David Palmer from UBS.

I think investors will want color on your targets given the growth rates as you exited fiscal '12. So just a series of small, little questions asking those colors -- that color on the sales. For instance, what sort of industry-wide casual dining chain same-store sales performance do you think it's consistent with your 1% to 2% guidance? Also on sales, could you provide a little color about Olive Garden versus the other chains? Is your belief that Olive Garden will be in line with the 1% to 2% target for fiscal '12? And lastly, first half versus second half, it feels like the first half sales from some of the comments you are making, even though you have some bridge-type marketing with Olive Garden, the first half might be weaker than your target, particularly with the industry environment we saw through May, but the margins may be better than you might have in the second half, perhaps making the EPS growth at or above your targets in the first half, which a below average or below targeted same-store sales.

And I'll start. Just on the industry, we think the industry conditions are going to look a lot like they were in fiscal 2012 and we think the overall economic environment is going to look a lot like that. And so in 2012, we are in an industry that grew at about 1.2% on a same-restaurant sales basis. We think about 1% is a right number. It could be a little bit below that, but that's where we are. In terms of Olive Garden in our mix, as we think about that 1% to 2%, we do expect growth at Olive Garden. And so move it from a decline in fiscal 2012 to growth in fiscal 2013. In terms of the other questions?

Well, just a little more color on Olive Garden. We're not anticipating any sort of first half to second half hockey stick for Olive Garden we think in the first half, the promotions are going to be meaningfully stronger than they were last year. In first half of fiscal 2012 same-restaurant sales were minus 2.5% to minus 3%. For instance, we think more single-minded focus on affordability in the promotion that starts Monday, the 2 for $25, is going to be much stronger than the carbonara ravioli promotion last year that it’s lapping. And by the same token, we think the new menu that's going to be introduced in the third quarter with more elevated focus on everyday affordability and advertising behind that will help maintain momentum throughout the year.

Our next question comes from Michael Kelter from Goldman Sachs.

I wanted to ask about Red Lobster, which was meaningfully below its prior run rate. With traffic down 7% to 10% every month for the full quarter, I mean I know you guys explained some of your thoughts as to why, but that's a really big decline. And I guess help us understand why we shouldn't be a little bit more worried about that.

Well, I think we talked about it. Really March is when we saw the spike in consumer -- in gasoline prices. As we talked about before, that initial spike is something that matters. It does affect behavior. That starts to dissipate over time. And so we've got a premium price promotion that's timed to Lent, so March was the right time. It actually began at the very end of February and so it's just -- it was not well suited for that environment. In April is where we had some fairly significant year-over-year calendar sort of shifts and so you have to adjust April for that. But April was a better month as some of that consumer concern dissipated. And then we saw the consumer get a lot more cautious in May and that was not just at Red Lobster, but across the restaurant industry and really as we look out at the data that we get generally across the overall consumer environment beyond restaurants.

And certainly the industry softened in May as Clarence just talked about. But stepping back from that and thinking about Red Lobster specifically, we think the results in the fourth quarter demonstrate really the heightened need for affordability that most consumers have in casual dining, particularly the Red Lobster core guest and that is why we've been working so hard over the last year, not just on promotions, but on a core menu that we think makes a meaningful difference in price point accessibility every day for guests. And without dimensionalizing that too much, it's a substantial change in terms of the balance of items on the menu are $15 or below, which we've determined to be sort of a threshold point for affordability for high-quality seafood in casual dining. And that's why we're adding media support starting in the second quarter to tell people about this new menu. So promotions can help address that to a degree, but this core menu transformation, we think, will also help it in addition to the other things we're doing to maintain sales momentum, remodels, new advertising campaigns, service improvements, et cetera.

And then the final thought would just be, as Drew said, I mean we look at a lot of different measures of brand strength and Red Lobster has been improving on all of those. That improvement drove a significant success in the first 3 quarters of the year. So as we look back on the first quarter, same-restaurant sales growth of nearly 11%, almost 7% in the second quarter, a third quarter that had some favorable weather but was still 6%. And so we do think that as we look at the fourth quarter, it's attributable to some very specific promotional dynamics.

And then on Olive Garden where traffic was down quite a bit in May, decelerated a whole lot. You mentioned the promotions, but also mentioned that part of it was your decision not to advertise for 2 weeks during Mother's Day. Can you help us understand why you made that decision, why you didn't advertise during that period and what your plans are in terms of ad spending for Olive Garden in fiscal '13? Are you going to be maintaining or increasing TRPs? Is there going to be any sort of phasing shifts we should be aware of in terms of the timing where advertising won’t come until the back half to coincide with initiatives that are coming? Or how do we think about the ad spending behind the brand?

Yes. Historically, Olive Garden hasn't advertised around Mother's Day. They did last year, but historically they typically don't. And the thought is it's so busy around Mother's Day that we'll target our advertising support for other periods during the year. And as I talked about in the current environment with the competitive challenges, that probably wasn't the right decision. For fiscal 2013, Olive Garden is going to continue to have one of the strongest media budgets in casual dining and it's going to be -- it's comparable in terms of absolute weight to what it was in fiscal 2012. It'll be up a little bit in dollars because the media inflation is going to be up and we're going to get, we think, more impact from that media investment because we're going to be, in the near term, more single-minded on affordability in several promotions. We're going to have a new campaign starting in the second quarter that we think is going to be a little less expected and is going to break through a little more effectively. And then starting in the third quarter, we're going to have some advertising support behind a new menu with more everyday affordability that we think is going to resonate with Olive Garden guests as well.

And I think as Brad mentioned when you look at Red Lobster and LongHorn, we do expect increasing rate, and so increased number of TRPs at LongHorn, increased weight at Red Lobster as Drew said. They've been working for a couple of years now to very significantly transform their core menu with a focus on affordability and introducing more price-accessible offerings. And so to drive awareness of that menu, they're going to launch with fairly significant weight behind it.

Our next question comes from Brian Bittner from Oppenheimer. Brian J. Bittner - Oppenheimer & Co. Inc., Research Division: So question is, is what really is giving you this high confidence level in the future, the success of future promotions at Olive Garden, just given the weakness of some -- of the most recent ones. I mean, have the upcoming promotions tested better than Tuscany did, or if you could just please help investors understand the reason for the high confidence just related to the future success of these Olive Garden promotions, and then I have a quick follow-up.

Yes, I would say a lot of the confidence is driven by a couple of things. One is that as we've made this transition, Olive Garden has had promotions that worked really well. And so in the second quarter, for example, we had a promotion that worked quite well for us. And even in the fourth quarter, we had some success with one of the promotions not as much with one of the others. We think that there will be variability as we make the transition. As I said, there'll be less variability as we continue to learn. The second reason for our confidence level is that we've made this transition before with Red Lobster and with LongHorn Steakhouse. And again, the results in fiscal 2012 for Red Lobster on a same-restaurant sales basis with fairly significant increases through the first 3 quarters, a 4.5% increase for the entire year, this transition was -- certainly contributed to that.

And the only other thing I'd add is that we're adjusting the balance in our promotions, as I said, to be more single-mindedly focused on affordability at Olive Garden just in starting this year just like we did a year ago -- a little more than a year ago at Red Lobster, which we think is going to resonate very strongly in current environment. And the testing that we've done on the 2 for $25 offer that starts next week is substantially stronger than the carbonara ravioli promotion that it's going to be lapping from a year ago in the first quarter. Brian J. Bittner - Oppenheimer & Co. Inc., Research Division: But what really went wrong with the Taste of Tuscany?

I think it was we were emphasizing the interest and excitement and imagery of Tuscany more than we were emphasizing the affordability of the new dishes, and that balance while it might help build the brand over the long term is less impactful in the near term when more guests are looking for affordability. And so a 2 for $25 promotion is a very different message than Taste of Tuscany.

Our next question comes from Joe Buckley, Bank of America Merrill Lynch.

I have a couple of questions as well. Can you talk about the wisdom of proceeding with the Olive Garden expansion as you're making these major adjustments to the brand?

Yes, and I would say as we look at new restaurant performance, so we've got a hurdle that those new restaurants have to achieve in order to deliver an appropriate return on capital, a value-creating return. Olive Garden from an earnings perspective, its new restaurants are delivering earnings at 150% of our hurdle rate. And so new restaurants are performing at a pretty high level. So we feel good about continuing to expand.

Okay. And then, yes, just a question also just on kind of the progression of your expectations for the quarter. You've had a pretty typical first quarter track record in recent years, and this one looks a little trickier than most. You've got a July 4 shift from Monday to Wednesday, you've got the Olympics. This is a time I would suggest to be as transparent as possible about the first quarter. It sounds like Red Lobster and Olive Garden are both off to a bad start in June based on your comments. Just talk us through the first quarter versus the full year guidance.

Yes, I think, Joe, we'll stick with the full year. I mean what we've learned over the last several years is that there's tremendous variability across the year, and so you had really strong sales results at Red Lobster first quarter last year, weak earnings results because of the variability in food costs. So you got variability in food costs, you got variability in consumer sentiment and so we think we're pretty comfortable with the annual outlook. Calling that from quarter-to-quarter gets more difficult and we think it's probably not helpful.

Can I just ask that maybe, just a broad sense, you think that July 4 shift is positive or negative and do you think the Olympics matter?

Well, I mean, the Olympics matter from a media planning perspective, a little expensive. The holiday shifts, it depends on consumer sentiment as much as anything else as to whether they matter or not, so that one’s a little more difficult to project.

Jeff Bernstein from Barclays.

Just 2 questions actually. First, on -- broadly on the Olive Garden turnaround. I'm just wondering if you can characterize maybe how you feel about the progress, perhaps putting May aside, which seemed like it was disappointing. But the recent initiatives, the new product news and greater value offerings, would you say they're gaining the desired traction or perhaps would you say the challenges are more or less severe at the brand than you believed just a few quarters ago? And then separately on Red Lobster, you talked about -- I think in the press release, you said competitively strong comps in fiscal '13. Obviously, the bearing’s been volatile in the past. Just wondering how we should think about the comps? I mean you talk about the first quarter being extremely difficult from a comparison standpoint. I think you mentioned you weren't expecting any traffic growth. But even in the fiscal second and third quarter, you're lapping very strong, mid-single digits. So I'm just wondering how you think about Red Lobster through the year relative to the kind of that 1% to 2% for the portfolio.

Well, starting with the Olive Garden question, I guess I would ground our response in saying we believe the fundamentals in the business are still very strong so whether that's average unit volume or restaurant level returns, the way new units are performing, it's obviously the opportunity that we're focused on is more consistent same-restaurant sales growth. And the work we need to do to generate consistent same-restaurant sales growth takes some time. And we've been working on that for much of the past year changing promotion strategy, which has had a very strong impact when we did the 3-course meal for $12.95, not as strong in Taste of Tuscany. That has led us to say we need to continue on this new approach of having a different type of platform, but that platform idea needs to be more around affordability and we think that will help us next year. We've also been working on a new ad campaign that we think will break through more effectively, get noticed more readily, won't feel as expected. That's not in the market now. It will be in the market in the second quarter. We think we need to continue to evolve the menu. So beyond promotions, we need new advertising, new menu. We've been working on that core menu. We'll be taking a big step towards the future menu in the third quarter, but we'll have more to do following that. And remodel is important. So we think we're in a position to confirm that we've got the right design, the right investment level and to start accelerating remodels of roughly 430 Olive Garden restaurants starting in the second half. So we think we've identified what we need to do. We're confident in the initiatives that we're preparing to implement next year, and guests will start seeing more and more of it as the year unfolds.

And I would say at Red Lobster, we think Red Lobster will have growth in same-restaurant sales in fiscal 2013 on top of the strong growth that they had in fiscal 2012. Certainly, in 2012, a lot of it was driven by much better promotional effectiveness, which reflect several years of work prior to that. As Drew mentioned, this year Olive Garden -- I'm sorry, Red Lobster is rolling out one of the biggest changes in core menu that they've done in at least a decade. 80% of our guests are ordering off the core menu. So that's very important. It is a slower build than a promotion might be, but that is part of the reason why we would expect growth at Red Lobster. We have confidence that the core menu is moving in the right direction. And as Drew just reminded me, there is extra media behind that core menu. So we hoped to get that build a little faster than we might without that.

Next, we have Jason West from Deutsche Bank.

Yes, just want to follow up on one of the comments you guys made that you expect the check average to be a little bit better than the pricing. And just want to understand how that takes place given that you are running more value at Olive Garden and a new menu at Red Lobster that has price points that are more in the $15 below emphasis. I would think that would put some downward pressure on check. Just want to understand that comment and how you guys are able to measure the impact as these things roll out.

I think the biggest dynamic is that we experienced at all of our large casual dining brands, during 2012 we experienced a meaningful amount of menu mix, negative menu mix. So guests trading down to lower-priced items, ordering fewer appetizers, fewer desserts. And we think that, that step-down is going to moderate during fiscal 2013. So we wouldn't expect that negative trend in guest behavior to continue. And second, internally, we think we've gotten a little smarter in the way we merchandise items and in the way we bring news to the market that can help moderate that as well.

And I would say as you look back at fiscal 2012, that smarter that Drew talked about really starts to show up in second half. And so that trading that he talked about was much more pronounced in the first half than it was in the second half as we took steps to address it.

And the lower price point items, are those, as in the past, engineered to protect margins or do you feel like you need to offer a little more to the guests in terms of portion size or quality elements that you're not able to trim back some on those areas to protect margins?

Yes. No, we're not making a trade-off in quality at all. And the new dishes our guests are finding very compelling. So it's a combination of having new dishes that are a little more accessible from a price point standpoint, additional media and incremental traffic, all of which is going to help maintain.

Yes, and the dishes from a culinary development perspective are constructed so that they have margin that we feel pretty comfortable with.

Next, we have John Ivankoe from JPMorgan. John W. Ivankoe - JP Morgan Chase & Co, Research Division: Again, getting back to Olive Garden, I mean obviously it's been discussed just the absolute average check of the brand, that the increases that have been taken in pricing over the past decade even to your own admission did begin to make you expensive relative to maybe what customers wanted to pay relative to the peers. So a couple things, and maybe a follow-up on the previous question is I mean how can you defend that average ticket? And it does seem just -- there seems to be a little bit of a disconnect between your prepared remarks and what you talked about doing with the brand and focusing more on value including dinner for 2 for $25 with the idea that the average ticket increases more than the modest amount of price, the 1% to 2% price that you're taking in the quarter. So just give us a sense on -- I mean if you don't mind revisiting it specifically on this promotion of how that average ticket at Olive Garden can go up given the fact that you and the customers seem to both agree that it has gotten a little bit expensive. And secondly, whether that increase in the average check can be accomplished permanently through something like dinner for 2 for $25 if that's going to be your permanent option.

Yes, I think in our prepared comments we may have given you the impression that the difference between pricing and check is significantly greater than it really is. So our pricing is very modestly below 2%, and our check growth is very modestly above 2%. So essentially, we're expecting our check growth to equal pricing this year. And when you think about a 2 for $25 offer, that's $12.50 per guest. By the time you add a beverage, you're at $15.50. You're very close to the Olive Garden's kind of roughly $16 menu average. So it's really a very modest investment in check.

And then I would say on the core menu, in a different -- in addition to making changes that really add compelling price-approachable sort of offers, Olive Garden's also working to make sure it adds items that really are seen as extremely high quality at a reasonable price to really continue to resonate with that guest who has the willingness and ability to pay more, and so that dynamic is going on as well inside the core menu. John W. Ivankoe - JP Morgan Chase & Co, Research Division: And understood. And if you don't mind me pushing this a little bit, I mean have you actually tested this in market? I mean do you have the data that supports that you'll be able to support average check, or are we still kind of in the theoretical in doing things in headquarters in a more closed environment?

No, the Red Lobster menu has been in the market for several months. The Olive Garden menu is in the market now, and we've got plenty of experience with a promotion like 2 for $25 that would support what I was suggesting before that by the time people add a beverage, you're very close to our average ticket.

And I do think, John, you point to a factor here, which is we talk about and we've been talking about for a year, for example, the direction we want to go in but the development times -- the development cycles are fairly extended because we have to develop dishes. We have to test those dishes. We've got to run in-market tests to get a confidence level. And so a significant change like Red Lobster's making has taken 2 years, will have taken 2 years, by the time they introduced their major core menu change. Olive Garden has been working on an even more accelerated basis and so will have taken about a year. So these take time because we feel that, that time is required to really do it right.

Our next question, and forgive me if I mispronounce the name, Keith Siegner from Credit Suisse. Keith Siegner - Crédit Suisse AG, Research Division: I want to ask kind of a follow-up to one of John's questions here just to make sure I understood it, too. I mean it does sound like there's a lot riding on the Olive Garden menu coming in third quarter, and I think you just said something about the market -- the menu being in market. So just to clarify, have you tested and in maybe a little bit more granular detail maybe how many stores, how long is the third quarter menu been in test, what have maybe you learned from this in terms of like actual impact on sales. Sort of just more details around this test, anything you're willing to give would be really helpful.

Well, first of all, I'd say that our confidence in Olive Garden improving same-restaurant sales next year is really driven by several initiatives that will be hitting the market. So it's important to think about a very different promotion strategy with a more single-minded focus on affordability in these -- in the platforms that we advertise, a new advertising campaign and a new menu. In terms of new menu, we've done extensive testing on what sort of dishes consumers are interested in conceptually, both more approachable dishes with more approachable price points and more distinctive dishes for a different consumer, different consumer audience. We've developed and tested those dishes to make sure that people are satisfied when they order them, and now we're testing the combined impact of those new dishes on the menu in the market now. And that's why we're introducing it in the third quarter, not in the first quarter this fiscal year because we want to make sure that guests find it compelling, our operators can execute it at a high level and that combined with the new ad campaign and the promotions that we're talking about, it does contribute to consistent profitable same-restaurant sales growth. Keith Siegner - Crédit Suisse AG, Research Division: How many restaurants?

A couple of markets and 40 or 50 restaurants.

Our next question comes from Will Slabaugh from Stephens.

Just curious if there's anywhere else outside of that Red Lobster promotion that you mentioned where you felt like the price increase is too aggressive. And I guess on the back of that, if you actually plan on peeling that back a little bit and again if that would apply anywhere else.

Well, we had 2 promotions in the fourth quarter at Red Lobster that we think weren't as powerful as they could have been because of affordability. Lobsterfest is just, by nature, a more premium priced promotion and then the Festival of Shrimp is the promotion you're referring to. And it demonstrates the need for balance in our promotions, which we're going to continue to have next year also emphasizes the need for more approachability in prices on our core menu. I think Clarence mentioned this earlier. But if we’re doing at Red Lobster $3.6 million or $3.7 million a unit, 85% plus of that is coming from the base menu. So we need to make sure if we're addressing affordability that, that everyday affordability is available, which is what the second quarter menu introduction is designed to complement in addition to promotion.

Okay. And then just a clarification question quickly on the incentive comp that you mentioned. If I heard you correctly, there will be increase in fiscal '13 cost around $0.14. Just curious on the dynamics there considering it looks like you had better control over performance at least in the fiscal '12 year than you're guiding for in fiscal '13. So just any color around that would be appreciated.

Sure. And I would say in fiscal '12, we had a very significant cost-reduction initiative on top of some of the transformative cost-reduction initiatives that we've had going multi-year now. And so that is indeed the fact. And the compensation swings reflect people performance. I mean we missed our initial targets for the year fairly significantly and that's reflected in incentives from the top all the way down through the restaurants as we reset to normalized levels with an expectation that we will hit our plan and pay out at normalized levels as you said -- as Brad said, that's worth about $0.15 a share. So fairly significant swing.

Our next question comes from Matthew DiFrisco from Lazard.

Actually, I got a follow-up on that. I was wondering when you referenced G&A in that normalized -- is FY '11 sort of the growth rate in G&A, is that a normalized period around that 7% or so or 8% growth rate on the G&A line? And then I have a follow-up.

Yes, I'll let Brad answer that. I would just say incentive compensation shows up on a number of different line items, and so it's not just in G&A, the in-restaurant, restaurant manager incentive shows up on a different line.

Yes, the additional color I would say is what's going on with the media piece of that in terms of our support cost structure. We continue to get more efficient there. We continue to leverage new unit growth so that puts downward pressure on that as a percentage of sales. There will be that lift on -- going into '13 with incentive piece. And then media, we talked about a little bit more media going in place to support the new menu at Red Lobster. And then we've talked about elevated media inflation is our expectation right now. So those are the real drivers that we see that somewhat, I'd say, when you net all those together, consistent on a year-over-year basis though.

And I would also add just a lot of the cost reduction that we did in the fourth quarter is sustaining -- ongoing. And as Brad said, contributes to that continuously cost-effective support platform. We just have time for one more question.

I had a follow-up.

Sure.

With respect to sort of your guidance I guess your top line hasn't changed from the historical pace. Commodity costs are coming down yet the earnings growth of 8% to 12% is below that -- below your goal. I guess is that to then read through that even if top line growth is sort of in line with overall historical pace, the substitution of expansion in place of same-store sales, if this is a pattern, would relegate you sort of the 8% to 12%. I'm wondering if there's something you need to...

No, no. Not at all. In fact, if you just take the incentive reset alone, that's worth 4 points of EPS growth. And so that, alone, takes it to 8% to 12% instead of 12% to 16%. So that is probably the biggest factor. We do have, as we said, some investments and some initiatives to drive growth beyond 2013 and that has an effect as well, but not nearly as significant as the incentive reset.

Our final question will come from Mitch Speiser from Buckingham Research.

And my question's on Olive Garden and the 2 for $25 promotion. And of course, we all know there's a lot of 2 for $20-type promotions from competitors out there, so when we think about affordability, can you maybe describe to us if you are -- if and when you're advertising 2 for $25, what is going to be the value -- incremental value component, to cut through the clutter to make people think that, that's a value versus your peers who are probably going to continue to advertise 2 for $20.

Yes, I would say Olive Garden offers unlimited soup, salad and breadsticks with their entrées and so that will be a clue to the guests, they know it, and we will reinforce that, that first course is on us.

That's the fundamental difference. In the 2 for $20 offers that are out there, it's 2 entrées and an appetizer typically. This is 2 entrées, an appetizer or a dessert plus unlimited soup or salad and breadsticks at the start of the meal. And when we tested -- we've changed our testing methodology conceptually to reflect the fact that it's just a much more promotional environment. So in addition to getting a sense for how these concepts and promotion platforms rank against what we've done historically, we've also added a number of competitive benchmarks into our testing. And the 2 for $25 that includes unlimited soup and salad in addition to an appetizer or dessert and 2 entrées is statistically more compelling than the competitive options out there.

Great. And my one follow-up is just on the new core menu at Olive Garden. I thought it was coming out in the fiscal second quarter. I just want to make sure it's now the fiscal third quarter. Were there any, if it was a delay, can you discuss why it was pushed back a bit?

Well, it's not really pushed back. We've been thinking about introducing it in the second or third quarter for some time. And so now with where we stand in development and getting a read in market, we're more comfortable with the third quarter.

We'd like to thank everybody for joining us today in the call. We know there are several of you still left in the queue. We certainly are here in Orlando to answer your questions. We appreciate your interest in the story. We look forward to talking to you again in September. Thank you.

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