Kroger 2011 Annual Report Download - page 98

A-43
NO T E S T O CO N S O L I D A T E D FI N A N C I A L ST A T E M E N T S , CO N T I N U E D
related to the Company’s commitment to fund the UFCW consolidated pension plan. The Company may repay
the Credit Agreement in whole or in part at any time without premium or penalty. The Credit Agreement is
not guaranteed by the Company’s subsidiaries.
In addition to the Credit Agreement, the Company maintained two uncommitted money market lines
totaling $75 in the aggregate. The money market lines allow the Company to borrow from banks at mutually
agreed upon rates, usually at rates below the rates offered under the credit agreement. As of January 28, 2012,
the Company had $370 of borrowings of commercial paper and no borrowings under our Credit Agreement
and money market lines.
As of January 28, 2012, the Company had outstanding letters of credit in the amount of $261, of which $19
reduce funds available under the Company’s Credit Agreement. The letters of credit are maintained primarily
to support performance, payment, deposit or surety obligations of the Company.
Most of the Company’s outstanding public debt is subject to early redemption at varying times and
premiums, at the option of the Company. In addition, subject to certain conditions, some of the Company’s
publicly issued debt will be subject to redemption, in whole or in part, at the option of the holder upon the
occurrence of a redemption event, upon not less than five days’ notice prior to the date of redemption, at a
redemption price equal to the default amount, plus a specified premium. “Redemption Event” is defined in
the indentures as the occurrence of (i) any person or group, together with any affiliate thereof, beneficially
owning 50% or more of the voting power of the Company, (ii) any one person or group, or affiliate thereof,
succeeding in having a majority of its nominees elected to the Company’s Board of Directors, in each case,
without the consent of a majority of the continuing directors of the Company or (iii) both a change of control
and a below investment grade rating.
The aggregate annual maturities and scheduled payments of long-term debt, as of year-end 2011, and for
the years subsequent to 2011 are:
2012 .................................................... $ 1,275
2013 .................................................... 1,514
2014 .................................................... 374
2015 .................................................... 517
2016 .................................................... 463
Thereafter ............................................... 3,600
Total debt ............................................... $7,743
6. DE R I VAT I V E FI N A N C I A L IN S T R U M E N T S
GAAP defines derivatives, requires that derivatives be carried at fair value on the balance sheet, and provides
for hedge accounting when certain conditions are met. The Company’s derivative financial instruments are
recognized on the balance sheet at fair value. Changes in the fair value of derivative instruments designated as
“cash flow” hedges, to the extent the hedges are highly effective, are recorded in other comprehensive income,
net of tax effects. Ineffective portions of cash flow hedges, if any, are recognized in current period earnings.
Other comprehensive income or loss is reclassified into current period earnings when the hedged transaction
affects earnings. Changes in the fair value of derivative instruments designated as “fair value” hedges, along
with corresponding changes in the fair values of the hedged assets or liabilities, are recorded in current period
earnings. Ineffective portions of fair value hedges, if any, are recognized in current period earnings.
The Company assesses, both at the inception of the hedge and on an ongoing basis, whether derivatives
used as hedging instruments are highly effective in offsetting the changes in the fair value or cash flow of
the hedged items. If it is determined that a derivative is not highly effective as a hedge or ceases to be highly
effective, the Company discontinues hedge accounting prospectively.