Tyson Foods 2009 Annual Report Download - page 49

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49
As of October 3, 2009, we had the following aggregated notionals of outstanding forward contracts accounted for as cash flow
hedges:
Notional Volume
Commodity:
Corn
4 million bushels
Soy meal
16,900 tons
The net amount of pretax losses in accumulated OCI as of October 3, 2009, expected to be reclassified into earnings within the next
12 months was $3 million. During fiscal 2009, 2008 and 2007, we did not reclassify any pretax gains/losses into earnings as a result
of the discontinuance of cash flow hedges due to the probability the original forecasted transaction would not occur by the end of the
originally specified time period or within the additional period of time allowed by generally accepted accounting principles.
The following table sets forth the pretax impact of cash flow hedge derivative instruments on the Consolidated Statements of Income
(in millions):
Gain/(Loss)
Consolidated
Gain/(Loss)
Recognized in OCI
Statements of Income
Reclassified from
on Derivatives
Classification
OCI to Earnings
2009
2008
2007
2009
2008
2007
Cash Flow Hedge - Derivatives
designated as hedging instruments:
Commodity contracts
$
(61
)
$
39
$
33
Cost of Sales
$
(67
)
$
42
$
34
Foreign exchange contracts
8
(2
)
-
Other Income/Expense
6
-
-
Total
$
(53
)
$
37
$
33
$
(61
)
$
42
$
34
Fair value hedges
We designate certain futures contracts as fair value hedges of firm commitments to purchase livestock for slaughter. Our objective of
these hedges is to minimize the risk of changes in fair value created by fluctuations in commodity prices associated with fixed price
livestock firm commitments. As of October 3, 2009, we had the following aggregated notionals of outstanding forward contracts
entered into to hedge forecasted commodity purchases which are accounted for as a fair value hedge:
Notional Volume
Commodity:
Live Cattle
133 million pounds
Lean Hogs
171 million pounds
For these derivative instruments we designate and qualify as a fair value hedge, the gain or loss on the derivative, as well as the
offsetting gain or loss on the hedged item attributable to the hedged risk, are recognized in earnings in the current period. We include
the gain or loss on the hedged items (i.e., livestock purchase firm commitments) in the same line item, cost of sales, as the offsetting
gain or loss on the related livestock forward position.
in millions
Consolidated
Statements of Income
Classification
2009
2008
2007
Gain/(loss) on forwards
Cost of Sales
$
152
$
65
$
(13
)
Gain/(loss) on purchase contract
Cost of Sales
(152
)
(65
)
13
Ineffectiveness related to our fair value hedges was not significant during fiscal 2009, 2008 and 2007.
Foreign net investment hedges
We utilize forward foreign exchange contracts to protect the value of our net investments in certain foreign subsidiaries. For
derivative instruments that are designated and qualify as a hedge of a net investment in a foreign currency, the gain or loss is reported
in OCI as part of the cumulative translation adjustment to the extent it is effective, with the related amounts due to or from
counterparties included in other liabilities or other assets. We utilize the forward-rate method of assessing hedge effectiveness. Any
ineffective portions of net investment hedges are recognized in the Consolidated Statements of Income during the period of change.
Ineffectiveness related to our foreign net investment hedges was not significant during fiscal 2009, 2008 and 2007. As of October 3,
2009, we had no forward foreign currency contracts accounted for as foreign net investment hedges.