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FORM 10-K
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Our operations include activities in the United States and Canada. These operations expose us to a variety of
market risks, including the effects of changes in interest rates and foreign currency exchange rates. We monitor
and manage these financial exposures as an integral part of our overall risk management program. Our policies
allow for the use of specified financial instruments for hedging purposes only. Use of derivatives for speculation
purposes is prohibited.
Interest Rate Risk
We have long term debt which includes fixed rate debt and a revolving credit facility that bears interest
based on floating London Interbank Offered Rate (“LIBOR”). As a result, we are exposed to fluctuations in
interest rates on our long term debt. Long term debt excluding capital lease and other long term obligations was
$5.1 billion and $3.3 billion as of September 26, 2014 and September 27, 2013, respectively. See “Item 7.
Liquidity and Capital Resources” for more information on our debt offerings and any outstanding debt. As of
September 26, 2014, a hypothetical 10% increase or decrease in interest rates would change the fair value of our
fixed rate debt by approximately $151 million and would not materially impact earnings or cash flows. As of
September 26, 2014, the exposure associated with our variable rate borrowings to a hypothetical 10% increase or
decrease in interest rates was not material to earnings, fair values or cash flows.
To help manage borrowing costs, we may from time to time enter into interest rate swap transactions with
financial institutions acting as principal counterparties. During the year ended September 26, 2014, we entered
into interest rate swap transactions to hedge $1 billion of our fixed rate debt. The interest rate swap transactions
are designated as fair value hedges, with the objective of managing the exposure to interest rate risk by
converting the interest rates on the fixed-rate notes to floating rates. As of September 26, 2014, our exposure to a
hypothetical 10% increase or decrease in interest rates was not material to earnings, fair values or cash flows
associated with the swap contracts.
Foreign Currency Risk
We have exposure to the effects of foreign currency exchange rate fluctuations on the results of our
Canadian operations. Our Canadian operations use the Canadian dollar to conduct business, but our results are
reported in U.S. dollars.
We are periodically exposed to the foreign currency rate fluctuations that affect transactions not
denominated in the functional currency of our U.S. and Canadian operations. We may from time to time use
financial derivatives, which may include forward foreign currency exchange contracts and foreign currency
options, to hedge this risk. We generally do not hedge investments in foreign subsidiaries since such investments
are long-term in nature. We hedge our exposure to fluctuations in foreign currency exchange rates through the
use of forward foreign currency exchange contracts.
During fiscal year 2014, our largest exposure to foreign exchange rates existed with the Canadian dollar
against the U.S. dollar. As of September 26, 2014, our exposure to a hypothetical 10% increase or decrease in the
value of the U.S. dollar relative to the Canadian dollar exchange rate was not material to earnings, fair values or
cash flows.
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