Derivative Instruments

9 Months Ended

Jun. 27, 2014

Summary of Derivative Instruments [Abstract]

Derivative Instruments

17. Derivative Instruments

The Company is exposed to certain risks relating to its business operations. Foreign currency option and forward contracts are used to manage the foreign exchange exposures of operations outside the U.S. Swap contracts on commodities historically have been periodically entered into to manage the price risk associated with forecasted purchases of commodities used in the Company's manufacturing processes. Risks that relate to interest rate exposure are managed by using derivative instruments, such as interest rate lock contracts. Changes in the fair value of the derivative financial instruments are recognized in the Company's earnings unless specific hedge criteria are met.

Foreign Exchange Exposure

The Company has foreign exchange exposure on the translation of the financial statements and on transactions denominated in foreign currencies. The Company's policy allows for the use of various forward and option contracts to manage foreign currency exposures on accounts and notes receivable, accounts payable, intercompany loans, intercompany cash pooling arrangements and forecasted transactions that are denominated in certain foreign currencies.

The location and amount of the net gain (loss) on foreign exchange forward and option contracts not designated as hedging instruments was recorded as follows:

	Three Months Ended						Nine Months Ended
	June 27, 2014			June 28, 2013			June 27, 2014			June 28, 2013
Cost of sales	$	(0.3	)	$	1.2		$	(0.7	)	$	1.7
Selling, general and administrative	—			(0.1		)	0.3			—
Other (expense) income, net	(4.2		)	—			1.5			—
	$	(4.5	)	$	1.1		$	1.1		$	1.7

Foreign currency gains included within net income for the three months ended June 27, 2014 was $1.7 million and a loss of $7.6 million for the nine months ended June 27, 2014 compared with losses for the three and nine months ended June 28, 2013 were $2.9 million and $3.4 million, respectively.

The fair value of foreign exchange forward and option contracts were included in the following captions of our unaudited condensed consolidated balance sheets at the end of each period:

	June 27, 2014		September 27, 2013
Prepaid expenses and other current assets	$	—	$	0.9
Accrued and other current liabilities	0.2		1.4

Commodities Exposure

Prior to the Separation, Covidien entered into gas commodity swap contracts on behalf of the Company, which were accounted for as cash flow hedges. As of June 27, 2014, there were no outstanding gas commodity swap contracts; however, the Company may utilize such contracts in the future to mitigate price risk associated with its forecasted commodity purchases. The amounts of the net losses on these contracts recorded during the three and nine months ended June 28, 2013 were as follows:

	Three Months Ended		Nine Months Ended
Cost of sales	$	0.1	$	0.3
Selling, general and administrative	0.2		0.8
	$	0.3	$	1.1

Interest Rate Exposure

MIFSA entered into three forward interest rate lock contracts in March 2013 and April 2013, each with a $300.0 million notional value and designated as cash flow hedges, against the risk of variability in market interest rates in advance of its anticipated issuance of its ten-year fixed rate senior notes due April 2023. Each interest rate lock contract was considered to be highly effective and the $7.6 million loss resulting from their settlements was recorded in accumulated other comprehensive income. As of June 27, 2014, $6.8 million of this loss remains in accumulated other comprehensive income and will be amortized to interest expense over the remaining term of the ten-year notes.