Derivative Financial Instruments And Hedging

12 Months Ended

Sep. 30, 2011

Derivative Financial Instruments And Hedging [Abstract]

Derivative Financial Instruments And Hedging

NOTE 13 – DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING

     In the ordinary course of business, the Company is exposed to commodity price risks relating to the acquisition of raw materials and supplies, interest rate risks relating to debt, and foreign currency exchange rate risks relating to its foreign subsidiaries. Authorized individuals within the Company may utilize derivative financial instruments, including (but not limited to) futures contracts, option contracts, forward contracts and swaps, to manage certain of these exposures by hedging when it is practical to do so. The terms of these instruments generally do not exceed eighteen months for commodities, ten years for interest rates, and two years for foreign currency. The Company is not permitted to engage in speculative or leveraged transactions and will not hold or issue financial instruments for trading purposes.

     As of September 30, 2011, the Company's derivative instruments consisted of commodity contracts (options, futures, and swaps) used as cash flow hedges on purchases of raw materials (ingredients and packaging) and energy (fuel) and foreign currency forward contracts used as cash flow hedges on receipts of foreign currency-denominated accounts receivable. Certain commodity-related derivatives do not meet the criteria for cash flow hedge accounting or simply are not designated as hedging instruments; nonetheless, they are used to manage the future cost of raw materials. The following table shows the notional amounts of derivative instruments held.

	Sept. 30,	Sept. 30,
	2011	2010
Raw materials (thousands of pounds)	1,395,470	679,393
Natural gas (thousands of MMBTUs)	3,885	3,200
Other fuel (thousands of gallons)	12,966	8,001
Currency (thousands of dollars)	83,250	69,450

     The following table shows the fair value and balance sheet location of the Company's derivative instruments as of September 30, 2011 and 2010, all of which were designated as hedging instruments under ASC Topic 815 except $34.3 of commodity contracts in a net liability position as of September 30, 2011.

		Fair Value
		2011			2010	Balance Sheet Location
Liability Derivatives:
Commodity contracts	$	49.0		$	2.6	Other current liabilities
Foreign exchange contracts		4.1			-	Other current liabilities
	$	53.1		$	2.6
Asset Derivatives:
Commodity contracts	$	.3	$	15.8		Prepaid expenses and other current assets
Foreign exchange contracts		-			.9	Prepaid expenses and other current assets
	$	.3	$	16.7

     The following tables illustrate the effects of the Company's derivative instruments on the statement of operations (Earnings) and other comprehensive income (OCI) for the years ended September 30, 2011 and 2010.

														Gain (Loss)
								Gain (Loss)						Recognized in
		Amount of Gain						Reclassified from						Earnings [Ineffective
		(Loss) Recognized						Accumulated OCI						Portion and Amount
Derivatives in		in OCI						into Earnings						Excluded from
ASC Topic 815 Cash Flow		[Effective Portion]						[Effective Portion]						Effectiveness Testing]
Hedging Relationships		2011			2010			2011			2010			2011	2010			Location in Earnings
Commodity contracts	$	9.4		$	15.7		$	33.3		$	(13.5	)	$	2.5	$	(.3	)	Cost of goods sold
Foreign exchange contracts		(1.2	)		1.2			3.5			8.5			-		-		SG&A
Interest rate contracts		-			(14.4	)		(1.5	)		(1.3	)		-		-		Interest expense, net
	$	8.2		$	2.5		$	35.3		$	(6.3	)	$	2.5	$	(.3	)
	Derivatives in							Amount of Gain (Loss)
ASC Topic 815 Fair Value								Recognized in Earnings						Location of Gain (Loss)
Hedging Relationships								2011			2010			Recognized in Earnings
Commodity contracts					$			(.1	) $		.2			Cost of goods sold
Interest rate contracts								.2			-			Interest expense, net
Derivatives Not Designated								Amount of Gain (Loss)
as Hedging Instruments								Recognized in Earnings						Location of Gain (Loss)
Under ASC Topic 815								2011			2010			Recognized in Earnings
Commodity contracts					$			(28.9	) $		-			Cost of goods sold

     

     Approximately $15.9 of the net cash flow hedge losses reported in accumulated OCI at September 30, 2011 is expected to be reclassified into earnings within the next twelve months. For gains or losses associated with commodity contracts, the reclassification will occur when the products produced with hedged materials are sold. For gains or losses associated with foreign exchange contracts, the reclassification will occur as hedged foreign currency-denominated accounts receivable are received. For gains or losses associated with interest rate swaps, the reclassification occurs on a straight-line basis over the term of the related debt.

     Certain of the Company's derivative instruments contain provisions that require the Company to post collateral when the derivatives in liability positions exceed a specified threshold, and others require collateral even when the derivatives are in asset positions. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a liability position on September 30, 2011 and 2010 was $3.9 and $2.6, respectively, and the related collateral posted was $8.2 and $10.0, respectively.