Red Lobster 2012 Annual Report Download - page 55

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Notes to Consolidated Financial Statements
Darden
Darden Restaurants, Inc. 2012 Annual Report 51
The effects of derivative instruments in fair value hedging relationships on the consolidated statements of earnings are as follows:
Amount of Gain (Loss) Location of Gain (Loss) Hedged Item Amount of Gain (Loss) Location of Gain (Loss)
Recognized in Earnings Recognized in Earnings in Fair Value Recognized in Earnings on Recognized in Earnings on
(in millions) on Derivatives on Derivatives Hedge Relationship Related Hedged Item Related Hedged Item
Fiscal Year Fiscal Year
2012 2011 2010 2012 2011 2010
Interest rate $(0.4) $0.2 $3.4 Interest, net Debt $0.4 $(0.2) $(3.4) Interest, net
The effects of derivatives not designated as hedging instruments on the consolidated statements of earnings are as follows:
Amount of Gain (Loss) Recognized in Earnings
Location of Gain (Loss) Fiscal Year
(in millions)
Recognized in Earnings 2012 2011 2010
Commodity contracts Cost of sales (1) $(7.9) $0.6 $(0.2)
Equity forwards Cost of sales (2) 2.3 3.3 2.2
Equity forwards Selling, general and administrative 6.0 3.3 1.3
$ 0.4 $7.2 $ 3.3
(1) Location of the gain (loss) recognized in earnings is food and beverage costs and restaurant expenses, which are components of cost of sales.
(2) Location of the gain (loss) recognized in earnings is restaurant labor expenses, which is a component of cost of sales.
Based on the fair value of our derivative instruments designated as cash flow hedges as of May 27, 2012, we expect to reclassify $7.4 million of net losses on derivative
instruments from accumulated other comprehensive income (loss) to earnings during the next twelve months based on the timing of our forecasted commodity purchases
and maturity of equity forward and interest rate related instruments. However, the amounts ultimately realized in earnings will be dependent on the fair value of the contracts
on the settlement dates.
`NOTE 11
FAIR VALUE MEASUREMENTS
The fair values of cash equivalents, receivables, net, accounts payable and short-term debt approximate their carrying amounts due to their short duration.
The following tables summarize the fair values of financial instruments measured at fair value on a recurring basis at May 27, 2012 and May 29, 2011:
Items Measured at Fair Value at May 27, 2012
Quoted Prices in Active Market Significant Other Significant
Fair Value of Assets for Identical Assets (Liabilities) Observable Inputs Unobservable Inputs
(in millions) (Liabilities) (Level 1) (Level 2) (Level 3)
Fixed-income securities:
Corporate bonds (1) $ 14.5 $ — $ 14.5 $ —
U.S. Treasury securities (2) 13.3 13.3 — —
Mortgage-backed securities (1) 9.9 — 9.9 —
Derivatives:
Commodities futures, swaps & options (3) (0.1) — (0.1) —
Equity forwards (4) 2.8 — 2.8 —
Interest rate locks & swaps (5) (41.7) — (41.7) —
Foreign currency forwards (6) 0.5 — 0.5 —
Total $ (0.8) $13.3 $(14.1) $ —