Albertsons 2011 Annual Report Download - page 35

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(4) Represents the minimum rents payable under operating leases, excluding common area maintenance,
insurance or tax payments, for which the Company is also obligated, offset by minimum subtenant
rentals of $295, $61, $95, $50 and $89, respectively.
(5) The Company’s benefit obligations include the undiscounted obligations related to sponsored defined
benefit pension and postretirement benefit plans and deferred compensation plans. The defined benefit
pension plan has plan assets of approximately $1,896 as of the end of February 26, 2011.
(6) The Company’s purchase obligations include various obligations that have annual purchase
commitments of $1 or greater. As of February 26, 2011, future purchase obligations existed that
primarily related to supply contracts. In the ordinary course of business, the Company enters into supply
contracts to purchase products for resale. These supply contracts typically include either volume
commitments or fixed expiration dates, termination provisions and other standard contractual
considerations. The supply contracts that are cancelable have not been included above.
Unrecognized tax benefits as of February 26, 2011 of $182 are not included in the contractual obligations table
presented above because the timing of the settlement of unrecognized tax benefits cannot be fully determined.
However, the Company expects to resolve $34, net, of unrecognized tax benefits within the next 12 months.
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 2012 2013 2014 2015 2016 Thereafter
February 26,
2011 Aggregate payments by fiscal year
Summary of Financial Instruments
(in millions, except rates)
Notes receivable
Principal receivable $ 47 $ 44 $ 12 $ 14 $ 4 $ 7 $ 1 $ 6
Average rate receivable 6.4% 5.2% 5.7% 8.1% 6.9% 9.0% 7.9%
Debt with variable interest
rates
Principal payments $ 1,492 $ 1,501 $ 306 $ 498 $ 105 $ 23 $ 569 $ —
Average variable rate 2.3% 1.4% 1.7% 1.3% 1.0% 3.6% —%
Debt with fixed interest rates
Principal payments $ 3,917 $ 4,346 $ 32 $ 308 $ 235 $ 490 $ — $ 3,281
Average fixed rate 7.6% 4.2% 7.5% 7.1% 7.5% —% 7.7%
31