Albertsons 2015 Annual Report Download - page 74

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72
Level 2 - Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable;
Level 3 - Unobservable inputs in which little or no market activity exists, requiring an entity to develop its own
assumptions that market participants would use to value the asset or liability.
Impairment charges recorded during fiscal 2015, 2014 and 2013 related to lease reserves and properties held and used and held
for sale, as discussed in Note 4—Reserves for Closed Properties and Property, Plant and Equipment-related Impairment
Charges were measured at fair value using Level 3 inputs. Intangible asset impairment charges recorded during fiscal 2013
discussed in Note 3—Goodwill and Intangible Assets were measured at fair value using Level 3 inputs. Discontinued
operations property, plant and equipment impairment charges and finalization adjustments recorded in fiscal 2014 and 2013
related to the sale of NAI were recorded in Income from discontinued operations, net of tax, and are discussed in Note 16—
Discontinued Operations, and were measured at fair value using Level 3 inputs.
Derivative Financial Instruments
On February 24, 2015, the Company entered into a forward starting interest rate swap agreement effectively converting $300 of
variable rate debt under the Company's Secured Term Loan Facility (defined below) to a fixed rate of 5.5075 percent, effective
beginning in February 2016 and through the Secured Term Loan Facility's maturity in March 2019. This transaction was
entered into to reduce the Company's exposure to changes in market interest rates associated with its variable rate debt. The
Company designated this derivative as a cash flow hedge of the variability in expected cash outflows of interest payments. The
fair value of the interest rate swap represents a liability of $0 as of February 28, 2015, which was recorded in Other long-term
liabilities and measured using Level 2 inputs. The interest rate swap agreement is valued using an income approach interest rate
swap valuation model incorporating observable market inputs including interest rates, LIBOR swap rates and credit default
swap rates. As of February 28, 2015, a 100 basis point increase or decrease in forward LIBOR interest rates would increase or
decrease, respectively, the fair value of the interest rate swap by approximately $7.
The fair value of the Company’s fuel derivatives represented a liability of $1 and $0 as of February 28, 2015 and February 22,
2014, respectively, and fuel derivative gains and losses were also insignificant for fiscal 2015, 2014 and 2013.
Other
For certain of the Company’s financial instruments, including cash and cash equivalents, receivables, accounts payable, accrued
salaries and other current assets and liabilities, the fair values approximate carrying values due to their short maturities.
The estimated fair value of notes receivable was greater than the carrying value by $2 as of February 28, 2015 and February 22,
2014. The estimated fair value of notes receivable was calculated using a discounted cash flow approach applying a market rate
for similar instruments using Level 3 inputs.
The estimated fair value of the Company’s long-term debt (including current maturities) was greater than the book value by
approximately $59 and $83 as of February 28, 2015 and February 22, 2014, respectively. The estimated fair value was based on
market quotes, where available, or market values for similar instruments, using Level 2 and 3 inputs.
NOTE 7—LONG-TERM DEBT
The Company’s long-term debt consisted of the following:
February 28,
2015
February 22,
2014
4.50% Secured Term Loan Facility due March 2019 $ 1,469 $ 1,474
6.75% Senior Notes due June 2021 400 400
7.75% Senior Notes due November 2022 350 —
8.00% Senior Notes due May 2016 278 628
1.66% to 4.00% Revolving ABL Credit Facility due September 2019 — —
Other — 18
Net discount on debt, using an effective interest rate of 4.63% to 8.56% (8)(16)
Total debt 2,489 2,504
Less current maturities of long-term debt (9)(18)
Long-term debt $ 2,480 $ 2,486