Red Lobster 2015 Annual Report Download - page 49

DARDEN RESTAURANTS, INC. | 2015 ANNUAL REPORT 45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DARDEN
Items Measured at Fair Value at May 25, 2014
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) $ 9.7 $ — $ 9.7 $ —
U.S. Treasury securities (2) 6.1 6.1 — —
Mortgage-backed securities (1) 2.6 — 2.6 —
Derivatives:
Equity forwards (3) (1.7) — (1.7) —
Interest rate locks & swaps (4) 1.6 — 1.6 —
Foreign currency forwards (5) 0.1 — 0.1 —
Total $18.4 $6.1 $12.3 $ —
(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 equity forwards is based on the closing market value of Darden stock, inclusive of the risk of nonperformance.
(4) 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.
(5) 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 31, 2015, was $1.47 billion and $1.57 billion,
respectively. The carrying value and fair value of long-term debt including the amounts included in current liabilities as of May 25, 2014, was $2.48 billion and
$2.63 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.
The fair value of non-financial assets measured at fair value on a non-recurring basis as of May 31, 2015 was approximately $55.4 million. Adjustments to
the fair values of these non-financial assets as of May 31, 2015 are discussed in Note 4 – Impairments and Disposal of Assets, Net. The fair value of non-financial
assets measured at fair value on a non-recurring basis, which is classified as Level 3 in the fair value hierarchy, is determined based on appraisals or sales prices
of comparable assets and estimates of future cash flows. Adjustments to the fair values of non-financial assets measured at fair value on a non-recurring basis
as of May 25, 2014 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’ com-
pensation and general liability claims. The following table summarizes cost
and market value for our securities that qualify as available-for-sale as of
May 31, 2015:
Gross Gross
Unrealized Unrealized Market
(in millions) Cost Gains Losses Value
Available-for-sale securities $8.8 $ — $ — $8.8
Earnings include insignificant realized gains and loss from sales of
available-for-sale securities. At May 31, 2015, the scheduled maturities
of our available-for-sale securities are as follows:
Market
(in millions) Cost Value
Less than 1 year $1.7 $1.7
1 to 3 years 6.4 6.4
3 to 5 years 0.7 0.7
Total $8.8 $8.8