Derivative Financial Instruments

9 Months Ended

Jul. 03, 2011

Derivative Financial Instruments

Derivative Financial Instruments

Note 3: Derivative Financial Instruments

Cash Flow Hedges

Net derivative losses of $16.0 million and $13.9 million, net of taxes, were included in accumulated other comprehensive income as of July 3, 2011 and October 3, 2010, respectively, related to cash flow hedges. Of the net derivative losses accumulated as of July 3, 2011, $10.5 million pertains to hedging instruments that will be dedesignated within 12 months and will also continue to experience fair value changes before affecting earnings. Ineffectiveness from hedges that were discontinued during the year-to-date periods in fiscal 2011 and 2010 was not material. Outstanding contracts will expire within 27 months.

Net Investment Hedges

Net derivative losses of $29.9 million and $26.7 million, net of taxes, were included in accumulated other comprehensive income as of July 3, 2011 and October 3, 2010, respectively, related to net investment derivative hedges. Outstanding contracts will expire within 33 months.

Other Derivatives

To mitigate the translation risk of certain balance sheet items, we enter into foreign currency forward 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.

We also enter into swap and futures contracts that are not designated as hedging instruments to mitigate the price uncertainty of a portion of our future purchases of dairy products and diesel fuel. These contracts are recorded at fair value, with the changes in fair value recognized in net interest income and other on the consolidated statement of earnings.

The following table presents the pretax effect of derivative instruments on earnings and other comprehensive income for the quarter ended (in millions):

	Cash Flow Hedges						Net Investment Hedges						Other Derivatives
	July 3, 2011			June 27, 2010			July 3, 2011			June 27, 2010			July 3, 2011		June 27, 2010
Gain/(Loss) recognized in earnings	$	(4.7	)	$	(1.4	)	$	0.0		$	0.0		$	1.7	$	0.5
Gain/(Loss) recognized in OCI	$	(5.3	)	$	(2.2	)	$	(5.2	)	$	(4.3	)

The following table presents the pretax effect of derivative instruments on earnings and other comprehensive income for the three quarters ended (in millions):

	Cash Flow Hedges						Net Investment Hedges						Other Derivatives
	July 3, 2011			June 27, 2010			July 3, 2011			June 27, 2010			July 3, 2011		June 27, 2010
Gain/(Loss) recognized in earnings	$	(10.8	)	$	(3.8	)	$	0.0		$	0.0		$	2.2	$	9.1
Gain/(Loss) recognized in OCI	$	(13.3	)	$	(10.7	)	$	(5.1	)	$	(2.3	)

Notional amounts of outstanding derivative contracts as of July 3, 2011:

• $549 million in foreign exchange contracts

• $22 million in dairy contracts

• $4 million in diesel contracts