Starbucks 2013 Annual Report Download - page 66

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58
In addition to the hedging instruments above, to mitigate the translation risk of certain balance sheet items, we enter into certain
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 1. Net derivative losses of $12.2 million and $32.9
million, net of taxes, were included in accumulated other comprehensive income as of September 29, 2013 and September 30,
2012, respectively. Of the net derivative losses accumulated as of September 29, 2013, $11.5 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 6 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 fiscal years ending (in millions):
Interest Rates Foreign Currency Coffee
Sep 29, 2013 Sep 30, 2012 Sep 29, 2013 Sep 30, 2012 Sep 29, 2013 Sep 30, 2012
Cash Flow Hedges:
Gain/(Loss) recognized in earnings $ 0.5 $ — $ 3.5 $ (11.5) $ (49.4) $ (3.4)
Gain/(Loss) recognized in OCI $ 66.2 $ — $ 7.4 $ (2.5) $ (26.5) $ (39.8)
Net Investment Hedges:
Gain/(Loss) recognized in earnings $ — $ —
Gain/(Loss) recognized in OCI $ 32.8 $ 1.1
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
fiscal years ending (in millions):
Foreign Currency Coffee Dairy Diesel Fuel
Sep 29,
2013
Sep 30,
2012
Sep 29,
2013
Sep 30,
2012
Sep 29,
2013
Sep 30,
2012
Sep 29,
2013
Sep 30,
2012
Gain/(Loss) recognized in earnings $ (1.8) $ (2.2) $ (2.1) $ — $ (4.7) $ 7.8 $ 0.3 $ 3.1
2013 10-K
Starbucks Corporation Form