Fair Value Measurements

9 Months Ended

Jun. 25, 2011

Fair Value Measurements

Fair Value Measurements

13. Fair Value Measurements

The Company measures fair value as the selling price that would be received for an asset, or paid to transfer a liability, in the principal or most advantageous market on the measurement date. The hierarchy established by the Financial Accounting Standards Board prioritizes fair value measurements based on the types of inputs used in the valuation technique. The inputs are categorized into the following levels:

Level 1 – Observable inputs such as quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs other than quoted prices that are observable, either directly or indirectly, for identical or similar assets and liabilities in active or non-active markets.

Level 3 – Unobservable inputs not corroborated by market data, therefore requiring the entity to use the best available information, including management assumptions.

The following table discloses the level used by fair value measurements at June 25, 2011:

Financial Instrument	Fair Value Measurements Using							Balance Sheet Classification
	Level 1		Level 2			Level 3
Derivatives	$	—	$	57		$	—	Other current assets
Derivatives		—		(15,939	)		—	Other short-term liabilities
Total	$	—	$	(15,882	)	$	—

The following table discloses the level used by fair value measurements at September 25, 2010:

Financial Instrument	Fair Value Measurements Using							Balance Sheet Classification
	Level 1		Level 2			Level 3
Derivatives	$	—	$	1,717		$	—	Other current assets
Derivatives		—		(4,377	)		—	Other short-term liabilities
Total	$	—	$	(2,660	)	$	—

Derivative financial instruments include coffee futures contracts, interest rate swap and cap agreements and foreign currency option contracts. The Company has identified significant concentrations of credit risk based on the economic characteristics of the instrument that include interest rates, commodity indexes and foreign currency rates and selectively enters into the derivative instruments with counterparties using credit ratings.

To determine fair value, the Company utilizes the market approach valuation technique for coffee futures and foreign currency options and the income approach for interest rate swap agreements. The Company's fair value measurements include a credit valuation adjustment for the significant concentrations of credit risk.

Level 2 derivative financial instruments use inputs that are based on market data of identical (or similar) instruments, including forward prices for commodities, interest rates curves and spot prices, that are in observable markets. Derivatives recorded on the balance sheet are at fair value with changes in fair value recorded in other comprehensive income for cash flow hedges and in the Consolidated Statements of Operations for other derivatives.

As of June 25, 2011 the amount of loss estimated by the Company due to credit risk associated with the derivatives for all significant concentrations was not material based on the factors of an industry recovery rate and a calculated probability of default.