Harris Teeter 2009 Annual Report Download - page 32

Download and view the complete annual report

Please find page 32 of the 2009 Harris Teeter annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 119

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119

28
controlling financial interest, and increases the frequency of required reassessments to determine whether a
company is the primary beneficiary of a VIE. It also clarifies, but does not significantly change, the characteristics
that identify a VIE. The new guidance also requires additional year-end and interim disclosures. The updated
standards become effective for the Company’s 2011 fiscal year beginning on October 4, 2010. The Company is
currently evaluating the impact of the updated standards on its consolidated financial statements.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
The Company does not utilize financial instruments for trading or other speculative purposes, nor does it
utilize leveraged financial instruments. The Company’s exposure to market risks results primarily from changes
in interest rates. Generally, the fair value of debt with a fixed interest rate will increase as interest rates fall, and the
fair value will decrease as interest rates rise. As of September 27, 2009, the Company had no significant foreign
exchange exposure and two interest rate swap agreements accounted for as cash flow hedge derivatives.
The table below presents principal cash flows and related weighted average interest rates by expected
maturity dates for the Company’s Senior Notes due at various dates through 2017 (which accounts for 99% of
the Company’s fixed interest debt obligations):
2010 2011 2012 2013 2014 Thereafter Total Fair Value
Senior Notes . . . . . . . . . . . . . . . . . . . $7,143 $7,142 $ — $ — $ — $ 100,000 $114,285 $ 134,322
Weighted average interest rate . . . . . 6.48% 6.48% — — — 7.64% 7.49%
For a more detail description of fair value, refer to the Note entitled “Financial Instruments” of the Notes
to Consolidated Financial Statements in Item 8 hereof.
During fiscal 2009, the Company entered into two separate three-year interest rate swap agreements
with an aggregate notional amount of $80 million. The swap agreements effectively fixed the interest rate on
$80 million of the Company’s term loan, of which $40 million is at 1.81% and $40 million is at 1.80%, excluding
the applicable margin and associated fees. The fair value of these derivatives are recorded on the balance sheet
at their respective fair value and amounted to a liability of $586,000 as of September 27, 2009. For a more
detail description of fair value, refer to the Note entitled “Derivatives” of the Notes to Consolidated Financial
Statements in Item 8 hereof.