DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS

12 Months Ended

Dec. 31, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS

DERIVATIVES

        The Company is exposed to market risk due to changes in foreign currency exchange rates, commodities pricing and interest rates. To manage that risk, the Company enters into certain derivative financial instruments, when available on a cost-effective basis, to hedge its underlying economic exposure. The Company does not enter into derivatives for speculative purposes. These financial instruments are classified as Level 2 in the fair value hierarchy at December 31, 2014 and 2013, and there were no transfers between levels in the fair value hierarchy during the periods then ended.

        The following table summarizes the fair value of the Company's outstanding derivatives:

			December 31,
(In millions)	Hedge Designation	Balance Sheet Location	2014			2013
Foreign exchange contracts	Cash Flow	Prepaid expenses and Other assets	$	13.0		$	4.2
Interest rate forward swaps	Cash Flow	Other assets	—			19.9
Commodity contracts	Cash Flow	Other assets	—			—
Foreign exchange contracts	Cash Flow	Accrued expenses	(0.2		)	(0.5		)
Commodity contracts	Cash Flow	Accrued expenses	(0.8		)	—
Interest rate swaps	Fair Value	Other Liabilities	(0.9		)	—
Net asset/(liability) of derivatives designated as hedging items			$	11.1		$	23.6

        The Company’s derivative financial instruments present certain market and counterparty risks; however, concentration of counterparty risk is mitigated as the Company deals with a variety of major banks worldwide whose long-term debt is rated A- or higher by Standard & Poor’s Rating Service, Fitch Ratings, or Moody’s Investors Service, Inc. In addition, only conventional derivative financial instruments are used. The Company would not be materially impacted if any of the counterparties to the derivative financial instruments outstanding atDecember 31, 2014failed to perform according to the terms of its agreement.Based upon the risk profile of the Company's portfolio, MJN does not require collateral or any other form of securitization to be furnished by the counterparties to its derivative financial instruments.

Cash Flow Hedges

    As of December 31, 2014 and 2013 all of the Company’s cash flow hedges qualify as hedges of forecasted cash flows and the effective portion of changes in fair value are temporarily reported in accumulated other comprehensive loss. During the period that the underlying hedged transaction impacts earnings, the effective portion of the changes in the fair value of the cash flow hedges is recognized within earnings. The Company assesses effectiveness at inception and on a quarterly basis. These assessments determine whether derivatives designated as qualifying hedges continue to be highly effective in offsetting changes in the cash flows of hedged items. Any ineffective portion of the change in fair value is included in current period earnings.

        The Company will discontinue cash flow hedge accounting when the forecasted transaction is no longer probable of occurring on the originally forecasted date, or 60 days thereafter, or when the hedge is no longer effective. For the years ended December 31, 2014, 2013 and 2012, the Company did not discontinue any cash flow hedges.

Foreign Exchange Contracts

        The Company uses foreign exchange contracts to hedge forecasted transactions, primarily foreign currency denominated inter-company purchases anticipated in the next1.5years and designates these derivative instruments as foreign currency cash flow hedges when appropriate.When the underlying inter-company purchases impact the Company’s consolidated earnings, the effective portion of the hedge is recognized within cost of products sold. For the years ended December 31, 2014, 2013 and 2012, ineffectiveness related to the Company’s foreign exchange hedges on earnings was insignificant.

        The table below summarizes the Company’s outstanding foreign exchange forward contracts at December 31, 2014. The fair value of foreign exchange forward contracts should be viewed in relation to the fair value of the underlying hedged transactions and the overall reduction in exposure to fluctuations in foreign currency exchange rates.

(Dollars in millions)	Weighted-average Forward Rate	Notional Amount		Fair Value Asset		Maturity
Foreign exchange contracts:
Cash flow hedges:
Canadian dollar	1.12	$	39.7	$	1.6	2015
Mexican peso	13.54	91.8		8.2		2015
Malaysian ringgit	3.38	63.5		2.9		2015
Philippine peso	44.84	52.9		0.1		2015
Total foreign exchange contracts		$	247.9	$	12.8

        The change in accumulated other comprehensive loss and the impact on earnings from foreign exchange contracts that qualified as cash flow hedges for the years ended December 31, 2014 and 2013, were as follows:

(In millions)	2014			2013
Balance—January 1	$	3.2		$	(4.1	)
Derivatives qualifying as cash flow hedges deferred in other comprehensive income	12.1			4.8
Derivatives qualifying as cash flow hedges reclassified to cost of products sold	(2.0		)	5.4
Change in deferred taxes	(2.9		)	(2.9		)
Balance—December 31	$	10.4		$	3.2

AtDecember 31, 2014,the portion of changes in cash flow hedges deferred into other comprehensive income that is expected to be reclassified into earnings within the next 12 months was $9.1 million.

Interest Rate Forward Swaps

During 2013, the Company entered into interest rate forward starting swaps with a combined notional value of $500.0 million. The forward starting rates of the swaps ranged from 3.79% to 3.94% and had an effective date of October 31, 2014. The interest rate forward starting swaps effectively mitigated the interest rate exposure associated with the Company’s offering of the 2044 Notes, the proceeds of which were used to redeem the 2014 Notes. These derivative instruments were designated as cash flow hedges at inception and were highly effective in offsetting fluctuations in the benchmark interest rate. During 2014, and around the time of the issuance of the 2044 Notes, the Company paid $45.0 million to settle the outstanding forward swaps. This payment was recognized in accumulated other comprehensive loss and will be amortized over the life of the 2044 Notes. There was $0.5 million of ineffectiveness related to the forward swaps through the date of settlement which was recognized as a loss within other (income)/expenses-net. During the year ended December 31, 2014, $0.9 million of amortization of the settlement amount was recognized as incremental interest expense within interest expense-net.

Commodity Hedges

During the fourth quarter of 2013, the Company began utilizing commodity hedges to minimize the variability in cash flows due to fluctuations in market prices of the Company’s non-fat dry milk purchases for North America. The maturities of the commodity contracts are scheduled to match the pricing terms of the Company’s existing bulk purchase agreements. When the underlying non-fat dry milk purchases impact the Company’s consolidated earnings, the effective portion of the hedge is recognized within cost of products sold.

As of December 31, 2014, there were commodity contracts outstanding which committed the Company to approximately $5.3 million of forecasted non-fat dry milk purchases. The effective portion of the hedges, which was recorded at fair value as a component of accumulated other comprehensive loss was $0.8 million as at December 31, 2014 and immaterial at December 31, 2013. The ineffective portion recognized within other (income)/expenses-net was insignificant for each of the years ended December 31, 2014and 2013.

Fair Value Hedges

Interest Rate Swaps

In November 2009, the Company entered into several interest rate swaps to convert $700.0 million of the Company’s then newly-issued fixed rate debt to be paid in 2014 and 2019 to variable rate debt. In November 2010, the Company settled $200.0 million notional amount of fixed-to-floating interest rate swaps for cash of $15.6 million. In July 2011, the Company settled the remaining $500.0 million notional amount of fixed-to-floating interest rate swaps for cash of $23.5 million. The related basis adjustments of the underlying hedged items are being recognized as a reduction of interest expense over the remaining life of the debt instruments. Because the 2014 Notes were redeemed during 2014, the Company recognized an additional $1.6 million reduction in interest expense during the period, which represented the unamortized portion of the settled 2009 swaps related to the 2014 Notes. Amortization of the settlement related to the 2019 Notes resulted in a $1.9 million reduction in interest expense for each of the years ended December 31, 2014 and 2013.

In May 2014 the Company entered into eight interest rate swaps with multiple counterparties, which have an aggregate notional amount of $700.0 million of outstanding principal. This series of swaps effectively converts the $700.0 million of 2019 Notes from fixed to floating rate debt for the remainder of their term. These interest rate swaps were outstanding as of December 31, 2014and the conversion of fixed to floating rate resulted in a reduction in interest expense of$6.0 millionfor the year ended December 31, 2014.

The following table summarizes the interest rate swaps outstanding as of December 31, 2014, all of which have a hedge inception date of May 2014 and a maturity date of November 2019:

(Dollars in millions)	Notional Amount of Underlying		Fixed Rate Received		Variable Rate Paid (U.S. 3 Month LIBOR +)		Fair Value Liability
Swaps associated with the 2019 Notes	$	700.0	4.9	%	3.14	%	$	(0.9	)

       See Note 15 for discussion on the Company’s debt.

Other Financial Instruments

The Company does not hedge the interest rate risk associated with money market funds, which totaled $395.4 million and $447.8 million as of December 31, 2014 and 2013, respectively. Money market funds are classified as Level 2 in the fair value hierarchy and are included in cash and cash equivalents on the balance sheet. The money market funds have quoted market prices that are generally equivalent to par.