7. Intangible Assets
The carrying amount of intangible assets as of the respective balance
sheet dates was as follows (in thousands):
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|
|
|
|
|
|
|
|
|
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|
January 1, 2012
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|
|
October 2, 2011
|
|
|
Acquired Favorable Operating Leases
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|
$
|
18,170
|
|
$
|
18,170
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|
|
Pharmacy Scripts
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|
|
602
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|
|
602
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|
|
Total Amortizing Intangibles
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|
|
18,772
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|
|
18,772
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|
|
Accumulated Amortization
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|
|
(5,431
|
)
|
|
(5,163
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)
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|
Total Intangible Assets, Net of Accumulated Amortization
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|
$
|
13,341
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|
$
|
13,609
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|
The Company has no non-amortizing intangible assets. Amortization
expense for intangible assets was $268,000 and $218,000 for the 13
weeks ended January 1, 2012 and January 2, 2011, respectively.
Amortizing intangible assets have remaining useful lives from two to
18 years. Projected amortization expense for intangible assets
existing as of January 1, 2012 is: $803,000 for the remainder of
fiscal 2012 and $1,071,000, $1,004,000, $870,000 and $870,000 for
fiscal years 2013, 2014, 2015 and 2016, respectively.
8. Derivative Financial Instruments
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. Both interest rate swaps were designated as cash
flow hedges. One of the swap agreements expired according to its term
on January 30, 2012. In connection with the closing of the amended
and restated credit agreement, the Company paid off the term loan
utilizing $40 million of cash and $40 million of borrowings under the
new revolver (refer to Note 11).
In the first quarter of fiscal 2011, Harris Teeter entered into a
series of purchased call options and written put options in order to
limit the price variability in fuel purchases. The options
effectively established the purchase price for 1,092,000 gallons of
fuel at $1.95 to $2.56 per gallon, excluding shipping, handling and
taxes. The options expired on April 30, 2011 and were deemed to be
net purchase options which were designated as a cash flow hedge.
In the second quarter of fiscal 2011, Harris Teeter entered into a
series of purchased call options and written put options in order to
limit the price variability in fuel purchases. The options
effectively established the purchase price for 1,344,000 gallons of
fuel at $2.43 to $2.80 per gallon, excluding shipping, handling and
taxes. The options expired on November 30, 2011 and were deemed to be
net purchase options which were designated as a cash flow hedge.
In the fourth quarter of fiscal 2011, Harris Teeter entered into a
series of purchased call options and written put options in order to
limit the price variability in fuel purchases. The options
effectively established the purchase price for 2,478,000 gallons of
fuel at $2.50 to $3.13 per gallon, excluding shipping, handling and
taxes. Options on 1,218,000 gallons of fuel began on December 1, 2011
and expire on May 31, 2012. The remaining options begin on June 1,
2012 and expire on November 30, 2012. All of the options are deemed
to be net purchase options which are designated as a cash flow hedge.
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):
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Carrying
Value
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|
|
Quoted Prices
in Active Markets
for Identical
Instruments
(Level 1)
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|
|
Significant Other
Observable Inputs
(Level 2)
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|
|
Significant
Unobservable
Inputs
(Level 3)
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|
|
Fair Value Measurement at January 1, 2012:
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|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps (included with Other Long-Term
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities on the balance sheet)
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|
$
|
(266
|
)
|
$
|
-
|
|
$
|
(266
|
)
|
$
|
-
|
|
|
Net purchase options (included with Prepaid Expenses
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
and Other Current Assets on the balance sheet)
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|
$
|
340
|
|
$
|
-
|
|
$
|
340
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement at 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
|
|
$
|
-
|
|