Albertsons 2010 Annual Report Download - page 38

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market pricing risk consisting of interest rate risk related to debt obligations
outstanding, its investment in notes receivable and, from time to time, derivatives employed to hedge interest
rate changes on variable and fixed rate debt. The Company does not use financial instruments or derivatives
for any trading or other speculative purposes.
The Company manages interest rate risk through the strategic use of fixed and variable rate debt and, to a
limited extent, derivative financial instruments. Variable interest rate debt (bank loans, industrial revenue bonds
and other variable interest rate debt) is utilized to help maintain liquidity and finance business operations.
Long-term debt with fixed interest rates is used to assist in managing debt maturities and to diversify sources
of debt capital.
The Company makes long-term loans to certain Supply chain customers and as such, holds notes receivable in
the normal course of business. The notes generally bear fixed interest rates negotiated with each retail
customer. The market value of the fixed rate notes is subject to change due to fluctuations in market interest
rates.
The table below provides information about the Company’s financial instruments that are sensitive to changes
in interest rates, including notes receivable and debt obligations. For debt obligations, the table presents
principal payments and related weighted average interest rates by maturity dates, excluding the net discount on
acquired debt and original issue discounts. For notes receivable, the table presents the expected collection of
principal cash flows and weighted average interest rates by expected maturity dates.
Fair
Value Total 2011 2012 2013 2014 2015 Thereafter
February 27, 2010 Aggregate payments by fiscal year
Summary of Financial Instruments
(In millions, except rates)
Notes receivable
Principal receivable $ 48 $ 49 $ 14 $ 6 $ 13 $ 3 $ 7 $ 6
Average rate receivable 6.8% 6.5% 8.3% 5.6% 8.0% 6.7% 8.2%
Debt with variable interest rates
Principal payments $ 1,404 $ 1,444 $ 123 $ 309 $ 984 $ 10 $ 18 $ —
Average variable rate 1.4% 1.1% 1.2% 1.5% 0.3% 0.3% —%
Debt with fixed interest rates
Principal payments $ 4,910 $ 5,182 $ 856 $ 12 $ 308 $ 235 $ 490 $ 3,281
Average fixed rate 7.6% 7.6% 6.1% 7.5% 7.1% 7.5% 7.7%
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