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Derivative Financial Instruments
 12 Months Ended
Sep. 29, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments Derivative Financial Instruments
Interest Rates
From time to time, we enter into designated cash flow hedges to manage the variability in cash flows due to changes in benchmark interest rates. We enter into interest rate swap agreements and treasury locks, which are synthetic forward sales of U.S. treasury securities settled in cash based upon the difference between an agreed-upon treasury rate and the prevailing treasury rate at settlement. These agreements are cash settled at the time of the pricing of the related debt. Each derivative agreement's gain or loss is recorded in AOCI and is subsequently reclassified to interest expense over the life of the related debt.
To hedge the exposure to changes in the fair value of our fixed-rate debt, we enter into interest rate swap agreements, which are designated as fair value hedges. The changes in fair values of these derivative instruments and the offsetting changes in fair values of the underlying hedged debt due to changes in the relevant benchmark interest rates are recorded in interest expense. Refer to Note 9 Debt, for additional information on our long-term debt.
Foreign Currency
To reduce cash flow volatility from foreign currency fluctuations, we enter into forward and swap contracts to hedge portions of cash flows of anticipated intercompany royalty payments, inventory purchases, and intercompany borrowing and lending activities. The resulting gains and losses from these derivatives are recorded in AOCI and subsequently reclassified to revenue, cost of sales, or interest income and other, net, respectively, when the hedged exposures affect net earnings.
From time to time, we may enter into financial instruments, including but not limited to forward contracts or foreign currency-denominated debt, to hedge the currency exposure of our net investments in certain international operations. The resulting gains and losses from these derivatives are recorded in AOCI and are subsequently reclassified to net earnings when the hedged net investment is either sold or substantially liquidated.
Foreign currency forward and swap contracts not designated as hedging instruments are used to mitigate the foreign exchange risk of certain other balance sheet items. Gains and losses from these derivatives are largely offset by the financial impact of
translating foreign currency-denominated payables and receivables; these gains and losses are recorded in interest income and other, net.
Commodities
Depending on market conditions, we may enter into coffee forward contracts, futures contracts, and collars to hedge anticipated cash flows under our price-to-be-fixed green coffee contracts, which are described further in Note 5, Inventories, or our longer-dated forecasted coffee demand where underlying fixed price and price-to-be-fixed contracts are not yet available. The resulting gains and losses are recorded in AOCI and are subsequently reclassified to cost of sales when the hedged exposure affects net earnings.
Depending on market conditions, we may also enter into dairy forward contracts and futures contracts to hedge a portion of anticipated cash flows under our dairy purchase contracts and our forecasted dairy demand. The resulting gains or losses are recorded in AOCI and are subsequently reclassified to cost of sales when the hedged exposure affects net earnings.
To mitigate the price uncertainty of a portion of our future purchases, including dairy products, diesel fuel and other commodities, we enter into swap contracts, futures and collars that are not designated as hedging instruments. The resulting gains and losses are recorded in interest income and other, net to help offset price fluctuations on our beverage, food, packaging and transportation costs, which are included in cost of sales on our consolidated statements of earnings.
Gains and losses on derivative contracts and foreign currency-denominated debt designated as hedging instruments included in AOCI and expected to be reclassified into earnings within 12 months, net of tax (in millions):
 
Net Gains/(Losses)
Included in AOCI
 
Net Gains/(Losses) Expected to be Reclassified from AOCI into Earnings within 12 Months
 
Outstanding Contract/Debt Remaining Maturity
(Months)
 
Sep 29,
2019
 
Sep 30,
2018
 
Oct 1,
2017
 
 
Cash Flow Hedges:
 
 
 
 
 
 
 
 
 
Interest rates
$
0.5

 
$
24.7

 
$
17.6

 
$
2.4

 
157
Cross-currency swaps
(1.4
)
 
(12.6
)
 
(6.0
)
 
—

 
62
Foreign currency - other
12.9

 
5.8

 
(9.1
)
 
7.8

 
36
Coffee
(1.0
)
 
(0.2
)
 
(6.6
)
 
(0.2
)
 
27
Net Investment Hedges:
 
 
 
 
 
 
 
 
 
Foreign currency
16.0

 
16.0

 
16.2

 
—

 
0
Foreign currency debt
(26.1
)
 
3.6

 
(2.2
)
 
—

 
54

Pretax gains and losses on derivative contracts and foreign currency-denominated long-term debt designated as hedging instruments recognized in OCI and reclassifications from AOCI to earnings (in millions):
 
 
Year Ended
 
 
 
Gains/(Losses)
Recognized in
OCI Before Reclassifications
 
Gains/(Losses) Reclassified from
AOCI to Earnings
Location of gain/(loss)
 
 
Sep 29,
2019
 
Sep 30,
2018
 
Oct 1,
2017
 
Sep 29,
2019
 
Sep 30,
2018
 
Oct 1,
2017
Cash Flow Hedges:
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rates
 
$
(27.8
)
 
$
14.1

 
$
—

 
$
4.7

 
$
4.9

 
$
4.8

Interest expense
Cross-currency swaps
 
(5.9
)
 
(6.1
)
 
59.5

 
0.1

 
0.3

 
(0.9
)
Interest expense
 
 
 
 
(19.8
)
 
1.9

 
58.1

Interest income and other, net
Foreign currency - other
 
20.8

 
16.7

 
1.8

 
7.0

 
(0.3
)
 
3.0

Licensed stores revenues
 
 
 
 
4.4

 
(3.3
)
 
8.4

Cost of sales
Coffee
 
(1.2
)
 
(0.3
)
 
(8.1
)
 
(0.3
)
 
(7.4
)
 
(2.7
)
Cost of sales
Net Investment Hedges:
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency
 
—

 
(0.1
)
 
23.6

 
—

 
—

 
—

 
Foreign currency debt
 
(39.8
)
 
7.9

 
(3.5
)
 
—

 
—

 
—

 

Pretax gains and losses on non-designated derivatives and designated fair value hedging instruments and the related hedged item recognized in earnings (in millions):
 
 
 
Gains/(Losses) Recognized in Earnings
 
Location of gain/(loss) recognized in earnings
 
Year Ended
 
 
Sep 29, 2019
 
Sep 30, 2018
 
Oct 1, 2017
Non-Designated Derivatives:
 
 
 
 
 
 
 
Foreign currency - other
Interest income and other, net
 
$
(8.1
)
 
$
4.6

 
$
4.6

Dairy
Interest income and other, net
 
(1.9
)
 
(2.4
)
 
—

Diesel fuel and other commodities
Interest income and other, net
 
(5.9
)
 
3.7

 
1.3

Fair Value Hedges:
 
 
 
 
 
 
 
Interest rate swap
Interest expense
 
54.7

 
(33.7
)
 
(5.2
)
Long-term debt (hedged item)
Interest expense
 
(50.7
)
 
33.7

 
5.2


Notional amounts of outstanding derivative contracts (in millions):
 
Sep 29, 2019
 
Sep 30, 2018
Interest rate swaps
$
1,500

 
$
750

Cross-currency swaps
341

 
434

Foreign currency - other
1,125

 
914

Coffee
52

 
—

Dairy
1

 
16

Diesel fuel and other commodities
17

 
21


Fair value of outstanding derivative contracts (in millions) including the location of the asset and/or liability on the consolidated balance sheets:
 
 
 
Derivative Assets
 
Balance Sheet Location
 
Sep 29, 2019
 
Sep 30, 2018
Designated Derivative Instruments:
 
 
 
 
 
Interest rates
Other long-term assets
 
$
0.1

 
$
—

Cross-currency swaps
Other long-term assets
 
0.2

 
5.8

Foreign currency - other
Prepaid expenses and other current assets
 
11.4

 
9.0

Other long-term assets
 
7.8

 
4.6

Interest rate swap
Other long-term assets
 
18.2

 
—

Non-designated Derivative Instruments:
 
 
 
 
 
Foreign currency
Prepaid expenses and other current assets
 
1.0

 
13.7

Dairy
Prepaid expenses and other current assets
 
—

 
0.2

Diesel fuel and other commodities
Prepaid expenses and other current assets
 
0.2

 
1.6

 
 
 
 
 
 
 
 
 
Derivative Liabilities
 
Balance Sheet Location
 
Sep 29, 2019
 
Sep 30, 2018
Designated Derivative Instruments:
 
 
 
 
 
Interest rates
Other long-term liabilities
 
$
2.6

 
$
—

Cross-currency swaps
Other long-term liabilities
 
9.7

 
9.3

Foreign currency - other
Accrued liabilities
 
0.6

 
3.6

Other long-term liabilities
 
0.1

 
1.7

Coffee
Accrued liabilities
 
1.0

 
—

Other long-term liabilities
 
0.1

 
—

Interest rate swap
Other long-term liabilities
 
—

 
32.5

Non-designated Derivative Instruments:
 
 
 
 
 
Foreign currency
Accrued liabilities
 
3.0

 
2.5

Dairy
Accrued liabilities
 
—

 
0.1

Diesel fuel and other commodities
Accrued liabilities
 
1.1

 
0.3


The following amounts were recorded on the consolidated balance sheets related to fixed-to-floating interest rate swaps designated in fair value hedging relationships:
 
Carrying amount of hedged item
 
Cumulative amount of fair value hedging adjustment included in the carrying amount
 
Sep 29, 2019
 
Sep 30, 2018
 
Sep 29, 2019
 
Sep 30, 2018
Location on the balance sheet
 
 
 
 
 
 
 
Long-term debt
$
761.8

 
$
711.0

 
$
11.8

 
$
(39.0
)

Additional disclosures related to cash flow gains and losses included in AOCI, as well as subsequent reclassifications to earnings, are included in Note 11, Equity