Red Lobster 2014 Annual Report Download - page 42

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Notes to Consolidated Financial Statements
Darden
40 Darden Restaurants, Inc.
Items Measured at Fair Value at May 26, 2013
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) $10.0 $ – $10.0 $ –
U.S. Treasury securities (2) 8.7 8.7 – –
Mortgage-backed securities (1) 5.6 – 5.6 –
Derivatives:
Commodities futures, swaps & options (3) (0.2) – (0.2) –
Equity forwards (4) (1.9) – (1.9) –
Interest rate locks & swaps (5) 1.9 – 1.9 –
Foreign currency forwards (6) 0.6 – 0.6 –
Total $24.7 $8.7 $16.0 $ –
(1) The fair value of these securities is based on closing market prices of the investments, when applicable, or, alternatively, valuations utilizing market data and other observable inputs, inclusive of the risk
of nonperformance.
(2) The fair value of our U.S. Treasury securities is based on closing market prices.
(3) The fair value of our commodities futures, swaps and options is based on closing market prices of the contracts, inclusive of the risk of nonperformance.
(4) The fair value of our equity forwards is based on the closing market value of Darden stock, inclusive of the risk of nonperformance.
(5) The fair value of our interest rate lock and swap agreements is based on current and expected market interest rates, inclusive of the risk of nonperformance.
(6) The fair value of our foreign currency forward contracts is based on closing forward exchange market prices, inclusive of the risk of nonperformance.
The carrying value and fair value of long-term debt including the amounts included in current liabilities, as of May 25, 2014, was $2.50 billion and
$2.63 billion, respectively. The carrying value and fair value of long-term debt as of May 26, 2013, was $2.50 billion and $2.70 billion, respectively. The fair
value of long-term debt, which is classified as Level 2 in the fair value hierarchy, is determined based on market prices or, if market prices are not available,
the present value of the underlying cash flows discounted at our incremental borrowing rates.
Adjustments to the fair values of non-financial assets measured at fair value on a non-recurring basis as of May 25, 2014 and May 26, 2013 were generally
related to impairments of property to be disposed of and were not material.
NOTE 12
FINANCIAL INSTRUMENTS
Marketable securities are carried at fair value and consist of available-for-
sale securities related to insurance funding requirements for our workers’
compensation and general liability claims. The following table summarizes
cost and market value for our securities that qualify as available-for-sale
as of May 25, 2014:
Gross Gross
Unrealized Unrealized Market
(in millions)
Cost Gains Losses Value
Available-for-sale securities $18.3 $0.1 $– $18.4
Earnings include insignificant realized gains and loss from sales of
available-for-sale securities. At May 25, 2014, the scheduled maturities
of our available-for-sale securities are as follows:
Market
(in millions)
Cost Value
Less than 1 year $ 4.5 $ 4.5
1 to 3 years 8.4 8.5
3 to 5 years 5.4 5.4
Total $18.3 $18.4
NOTE 13
STOCKHOLDERS’ EQUITY
SHARE REPURCHASE PROGRAM
Repurchased common stock has historically been reflected as a reduction
of stockholders’ equity. On December 17, 2010, our Board of Directors
authorized an additional share repurchase authorization totaling 25.0 million
shares in addition to the previous authorization of 162.4 million shares.
Share repurchase authorizations and cumulative share repurchases under
these authorizations, are as follows:
(in millions)
May 25, 2014
Share repurchase authorizations 187.4
Cumulative shares repurchased 171.9
The total shares and related cost of our common stock we repurchased
was as follows:
Fiscal Year
(in millions)
2014 2013 2012
Shares Cost Shares Cost Shares Cost
Repurchases of
common stock – $0.5 1.0 $52.4 8.2 $375.1
As of May 25, 2014, of the 171.9 million cumulative shares repurchased,
159.3 million shares were retired and restored to authorized but unissued
shares of common stock. We expect that all shares of common stock acquired
in the future will also be restored to authorized but unissued shares of
common stock.