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SU
PERVAL
U
IN
C
. and
S
ubsidiaries
N
OTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
N
O
TE 8—FINAN
C
IAL IN
S
TR
U
MENT
S
I
nterest Rate Swap
A
greement
s
I
n fiscal 2003, the Compan
y
entered into swap a
g
reements in the a
gg
re
g
ate notional amount of $225 relatin
g
to
the Company’s 7.87
5
percent fixed interest rate promissory notes due fiscal 2010. The Company receives a fixed
interest rate of 7.875 percent on the notional amount of the swaps and pays interest based on the three-mont
h
U.S. dollar LIBOR rate (
5
.36 percent and 4.68 percent as of Februar
y
24, 2007 and Februar
y
2
5
, 2006,
respectively) plus 2.
55
percent to 2.60 percent. The swaps have been designated as a fair value hedge on long-
term
fi
xe
d
rate
d
e
b
to
f
t
h
e Company an
d
are a component o
f
Ot
h
er assets
i
nt
h
e Conso
lid
ate
d
Ba
l
ance S
h
eets. On
a
quarterl
y
basis, the Compan
y
performs an assessment of effectiveness and a measurement of ineffectiveness
.
T
hrough February 24, 2007, the net earnings impact was zero. See Note 19 – Subsequent Events
.
F
air Va
l
ue Disc
l
osures of Financia
l
Instrument
s
F
or certa
i
no
f
t
h
e Company’s
fi
nanc
i
a
li
nstruments,
i
nc
l
u
di
ng cas
h
an
d
cas
h
equ
i
va
l
ents, rece
i
va
bl
es, account
s
pa
y
able and notes pa
y
able, the fair values approximate book values due to their short maturities
.
Th
e est
i
mate
df
a
i
rva
l
ue o
f
notes rece
i
va
bl
e approx
i
mates t
h
e
b
oo
k
va
l
ue at Fe
b
ruary 24, 2007. Notes rece
i
va
bl
e
a
re valued based on a discounted cash flow approach appl
y
in
g
a rate that is comparable to publicl
y
traded debt
instruments of similar credit quality
.
T
he estimated fair value of the Compan
y
’s lon
g
-term debt (includin
g
current maturities) was in excess of th
e
b
ook value by approximately
$
380 at February 24, 2007. The estimated fair value was based on market quotes,
wh
ere ava
il
a
bl
e
,
or mar
k
et va
l
ues
f
or s
i
m
il
ar
i
nstruments
.
T
he estimated fair value of the Company’s interest rate swaps was equal to the book value at February 24, 2007
.
Th
e
f
a
i
rva
l
ue o
fi
nterest rate swaps
i
st
h
e amount at w
hi
c
h
t
h
ey cou
ld b
e sett
l
e
d
an
di
s est
i
mate
db
yo
b
ta
i
n
i
ng
q
uotes from brokers. See Note 19 – Subse
q
uent Events.
N
O
TE 9—DEBT
As a result of the Acquisition, the Company assumed
$
5,183 of the Acquired Operations’ outstanding long-ter
m
d
e
b
t, exc
l
u
di
ng cap
i
ta
ll
eases (see Note 3 – Bus
i
ness Acqu
i
s
i
t
i
on). In accor
d
ance w
i
t
h
t
h
e app
li
cat
i
on o
f
t
he
purchase method of accountin
g
, the Compan
y
estimated the fair value of the debt assumed from New Albertson
s
a
s a result of the Acquisition. This resulted in an aggregate net discount related to the New Albertsons long-ter
m
d
ebt of
$
231 as of the Acquisition Date, which will be amortized to Interest expense using the effective interes
t
method over the remainin
g
terms of the respective debt instruments. In the table below, the stated interest rate
s
f
or the debt assumed from New Albertsons are followed by the effective rates in parentheses resulting from th
e
di
scounts an
d
prem
i
ums
d
ue to purc
h
ase account
i
ng
f
a
i
rva
l
ue a
dj
ustments. Borrow
i
ngs are unsecure
d
un
l
ess
indicated otherwise.
F-
28