Derivative Financial Instruments

3 Months Ended

Dec. 29, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Depending on market conditions, we enter into interest rate swap agreements to hedge the variability in cash flows due to changes in the benchmark interest rate related to anticipated debt issuances. When these agreements are cash settled at the time of the pricing of the related debt, the resulting net gains or losses are included in accumulated other comprehensive income and subsequently amortized using the constant effective yield method as an adjustment to interest expense over the life of the related debt, as the underlying interest expense is recognized in the consolidated statements of earnings.

Net derivative gains from these cash flow hedges of $38.8 million and $41.4 million, net of taxes, were included in accumulated other comprehensive income as of December 29, 2013 and September 29, 2013, respectively. Of the net derivative gains accumulated as of December 29, 2013, $3.2 million is expected to be reclassified into earnings within 12 months.

Foreign Currency

We enter into forward and swap contracts to hedge portions of cash flows of anticipated revenue streams and inventory purchases in currencies other than the entity's functional currency. Net derivative gains from these cash flow hedges of $6.8 million and net derivative losses of $0.3 million, net of taxes, were included in accumulated other comprehensive income as of December 29, 2013 and September 29, 2013, respectively. Of the net derivative gains accumulated as of December 29, 2013, $4.7 million is expected to be reclassified into earnings within 12 months and will also continue to experience fair value changes before affecting earnings. Outstanding contracts will expire within 33 months.

We also enter into net investment derivative instruments to hedge certain of our equity method investments, to minimize foreign currency exposure. Net derivative losses from net investment hedges of $6.7 million and $12.9 million, net of taxes, were included in accumulated other comprehensive income as of December 29, 2013 and September 29, 2013, respectively. Outstanding contracts will expire within 26 months.

In addition to the hedging instruments above, to mitigate the translation risk of certain balance sheet items, we enter into foreign currency swap contracts that are not designated as hedging instruments. These contracts are recorded at fair value, with the changes in fair value recognized in net interest income and other on the consolidated statements of earnings. Gains and losses from these instruments are largely offset by the financial impact of translating foreign currency denominated payables and receivables, which is also recognized in net interest income and other.

Coffee

Depending on market conditions, we enter into futures contracts to hedge a portion of anticipated cash flows under our price-to-be-fixed green coffee contracts, which are described further in Note 4. Net derivative losses of $3.4 million and $12.2 million, net of taxes, were included in accumulated other comprehensive income as of December 29, 2013 and September 29, 2013, respectively, related to coffee hedges. Of the net derivative losses accumulated as of December 29, 2013, $2.7 million is expected to be reclassified into earnings within 12 months and will also continue to experience fair value changes before affecting earnings. Outstanding contracts will expire within 16 months.

Dairy

To mitigate the price uncertainty of a portion of our future purchases of dairy products, we enter into futures contracts that are not designated as hedging instruments. These contracts are recorded at fair value, with the changes in fair value recognized in net interest income and other. Gains and losses from these instruments are largely offset by price fluctuations on our dairy purchases, which are included in cost of sales.

Diesel Fuel

To mitigate the price uncertainty of a portion of our future purchases of diesel fuel, we enter into swap contracts that are not designated as hedging instruments. These contracts are recorded at fair value, with the changes in fair value recognized in net interest income and other. Gains and losses from these instruments are largely offset by the financial impact of diesel fuel fluctuations on our shipping costs, which are included in operating expenses.

The following table presents the pretax effect of derivative contracts designated as hedging instruments on earnings and other comprehensive income ("OCI") for the quarters ended (in millions):

	Interest Rates				Foreign Currency					Coffee
Quarter Ended	Dec 29, 2013		Dec 30, 2012		Dec 29, 2013		Dec 30, 2012			Dec 29, 2013			Dec 30, 2012
Cash Flow Hedges:
Gain/(Loss) recognized in earnings	$	1.2	$	—	$	1.2	$	(0.6	)	$	(10.0	)	$	(5.2	)
Gain/(Loss) recognized in OCI	$	0.5	$	—	$	11.6	$	4.6		$	(0.3	)	$	(21.5	)
Net Investment Hedges:
Gain/(Loss) recognized in earnings					$	—	$	—
Gain/(Loss) recognized in OCI					$	9.8	$	14.7

Interest Rates Foreign Currency Coffee

The amounts shown in the above table as recognized in earnings for interest rates, foreign currency and coffee hedges represent the realized gains/(losses) reclassified from OCI to net earnings during the year. The amounts shown as recognized in OCI are prior to these reclassifications.

The following table presents the pretax effect of derivative contracts not designated as hedging instruments on earnings for the quarters ended (in millions):

	Foreign Currency						Coffee					Dairy					Diesel Fuel
	Dec 29, 2013			Dec 30, 2012			Dec 29, 2013		Dec 30, 2012			Dec 29, 2013		Dec 30, 2012			Dec 29, 2013		Dec 30, 2012
Gain/(Loss) recognized in earnings for the quarter ended	$	(0.9	)	$	(1.1	)	$	—	$	(2.7	)	$	4.5	$	(1.5	)	$	—	$	—

Notional amounts of outstanding derivative contracts (in millions):

	Dec 29, 2013		Sep 29, 2013
Foreign currency	$	494	$	452
Coffee	1		—
Dairy	43		38
Diesel fuel	$	14	$	17