Derivative Financial Instruments

6 Months Ended

Apr. 01, 2012

Derivative Financial Instruments [Abstract]

Derivative Financial Instruments

Note 3: Derivative Financial Instruments

Cash Flow Hedges

Net derivative losses of $23.1 million and $11.1 million, net of taxes, were included in accumulated other comprehensive income as of April 1, 2012 and October 2, 2011, respectively, related to cash flow hedges. Included in the net derivative losses for the quarter was the impact of cash flow derivative instruments entered into during the period to hedge portions of our future coffee purchases. Of the net derivative losses accumulated as of April 1, 2012, $5.7 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 during the year-to-date periods in fiscal 2012 and 2011 was not material. Outstanding contracts will expire within 18 months.

Net Investment Hedges

Net derivative losses of $27.8 million and $34.2 million, net of taxes, were included in accumulated other comprehensive income as of April 1, 2012 and October 2, 2011, respectively, related to investment derivative hedges. Outstanding contracts will expire within 36 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 and two quarters ended (in millions):

	Cash Flow Hedges						Net Investment Hedges				Other Derivatives
	Apr 1, 2012			Apr 3, 2011			Apr 1, 2012		Apr 3, 2011		Apr 1, 2012			Apr 3, 2011
Quarter Ended:
Gain/(Loss) recognized in earnings	$	(2.8	)	$	(3.3	)	$	0.0	$	0.0	$	(5.7	)	$	(1.2	)
Gain/(Loss) recognized in OCI	$	(15.2	)	$	0.2		$	10.3	$	3.7

	Cash Flow Hedges						Net Investment Hedges				Other Derivatives
	Apr 1, 2012			Apr 3, 2011			Apr 1, 2012		Apr 3, 2011		Apr 1, 2012		Apr 3, 2011
Two Quarters Ended:
Gain/(Loss) recognized in earnings	$	(5.9	)	$	(6.2	)	$	0.0	$	0.0	$	4.0	$	0.5
Gain/(Loss) recognized in OCI	$	(16.5	)	$	(8.1	)	$	10.3	$	0.1

The amounts shown as recognized in earnings for cash flow and net investment hedges represent the realized gains/(losses) transferred out of other comprehensive income ("OCI") to earnings during the year. The amounts shown as recognized in OCI are prior to these transfers of realized gains/(losses) to earnings.

Notional amounts of outstanding derivative contracts as of April 1, 2012:

• $416 million in foreign exchange contracts

• $200 million in coffee contracts

• $31 million in dairy contracts

• $16 million in diesel contracts