Red Lobster 2016 Annual Report Download - page 44

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DARDEN
40
The effects of derivatives not designated as hedging instruments in 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 2016 2015 2014
Equity forwards Restaurant labor expenses $ 3.9 $ 4.0 $(0.5)
Equity forwards General and administrative expenses 7.5 9.2 (1.3)
$11.4 $13.2 $(1.8)
Based on the fair value of our derivative instruments designated as cash flow hedges as of May 29, 2016, we expect to reclassify $0.3 million of net gains
on derivative instruments from accumulated other comprehensive income (loss) to earnings during the next 12 months based on the maturity of equity forward
contracts. However, the amounts ultimately realized in earnings will be dependent on the fair value of the contracts on the settlement dates.
NOTE 9
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 29, 2016 and May 31, 2015:
Items Measured at Fair Value at May 29, 2016
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) $ 2.0 $ — $2.0 $ —
U.S. Treasury securities (2) 3.9 3.9 — —
Mortgage-backed securities (1) 1.0 — 1.0 —
Derivatives:
Equity forwards (3) 3.8 — 3.8 —
Total $10.7 $3.9 $6.8 $ —
Items Measured at Fair Value at May 31, 2015
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) $ 2.2 $ — $2.2 $ —
U.S. Treasury securities (2) 5.0 5.0 — —
Mortgage-backed securities (1) 1.6 — 1.6 —
Derivatives:
Equity forwards (3) 1.7 — 1.7 —
Interest rate swaps (4) 3.6 — 3.6 —
Total $14.1 $5.0 $9.1 $ —
(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.