Harris Teeter 2012 Annual Report Download - page 41

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In order to limit the price variability in fuel purchases associated with its distribution operations, the Company has entered
into a series of purchased call options and written put options. The options effectively establish a low and high purchase price,
excluding shipping, handling and taxes, for a set amount of gallons. All of the options are deemed to be net purchase options
which are designated as a cash flow hedge. The following table summarizes the primary terms for options that have been entered
into or were in effect during the reporting periods:
Option Period Price Per Gallon
Contract Date Gallons Under Options Begin End Low High
12-14-09 1,092,000 01-01-10 06-30-10 $1.62 $2.40
05-04-10 168,000 08-01-10 10-31-10 $2.09 $2.60
05-04-10 588,000 07-01-10 10-31-10 $2.12 $2.60
11-16-10 1,092,000 12-01-10 04-30-11 $1.95 $2.56
01-05-11 1,344,000 05-01-11 11-30-11 $2.43 $2.80
08-05-11 1,218,000 12-01-11 05-31-12 $2.77 $3.13
10-04-11 1,260,000 06-01-12 11-30-12 $2.50 $2.88
05-08-12 1,260,000 12-01-12 11-30-13 $2.84 $3.20
06-07-12 1,260,000 12-01-12 11-30-13 $2.59 $2.96
The following tables present the required fair value quantitative disclosures, on a combined basis, for the Company’s
financial instruments, designated as cash flow hedges (in thousands):
Carrying Value
Quoted Prices
in Active
Markets for
Identical
Instruments
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Fair Value Measurement as of October 2, 2012:
Net purchase options (included with Prepaid Expenses and
Other Current Assets on the balance sheet) $302 $- $302 $-
Fair Value Measurement as of October 2, 2011:
Interest rate swaps (included with Other Long-Term
Liabilities on the balance sheet) $565 $- $565 $-
Net purchase options (included with Prepaid Expenses and
Other Current Assets on the balance sheet) $ 16 $- $ 16 $-
Net purchase options (included with Accounts Payable on
the Balance Sheet) $276 $- $276 $-
There were no transfers into or out of Level 1 and Level 2 fair value measurements during the year ended October 2, 2012.
The pre-tax unrealized gains (losses) associated with the cash flow hedges for the fiscal years were as follows (in
thousands):
2012 2011 2010
Unrealized gains (losses) recorded in other comprehensive income $1,036 $758 $(975)
11. FINANCIAL INSTRUMENTS
Financial instruments which potentially subject the Company to concentration of credit risk consist principally of cash
equivalents and notes receivables. The Company limits the amount of credit exposure to each individual financial institution
and places its temporary cash into investments of high credit quality. Concentrations of credit risk with respect to receivables
are limited due to their dispersion across various companies and geographies.
The carrying amounts for certain of the Company’s financial instruments, including cash and cash equivalents, accounts and
notes receivable, accounts payable and other accrued liabilities approximate fair value because of their short maturities. The fair value
of variable interest debt is equal to its carrying amount. The estimated fair value of the Company’s Senior Notes due at various dates
through 2017 (which accounts for 98% of the Company’s fixed interest debt obligations) is computed based on borrowing rates
currently available to the Company for loans with similar terms and maturities. The estimated fair value of the Company’s Senior
HARRIS TEETER SUPERMARKETS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
37