DEBT OBLIGATIONS

9 Months Ended

Nov. 09, 2024

DEBT OBLIGATIONS

DEBT OBLIGATIONS

2. DEBT OBLIGATIONS

Long-term debt consists of:

	November 9,		February 3,
	2024		2024
1.70% to 8.00% Senior Notes due through 2064	$	19,520	$	9,123
Other		1,058		1,064
Total debt, excluding obligations under finance leases		20,578		10,187
Less current portion		(10)		(25)
Total long-term debt, excluding obligations under finance leases	$	20,568	$	10,162

The fair value of the Company’s long-term debt, including current maturities, was estimated based on the quoted market prices for the same or similar issues adjusted for illiquidity based on available market evidence. If quoted market prices were not available, the fair value was based upon the net present value of the future cash flow using the forward interest rate yield curve in effect at November 9, 2024 and February 3, 2024. At November 9, 2024, the fair value of total debt was $19,731 compared to a carrying value of $20,578. At February 3, 2024, the fair value of total debt was $9,401 compared to a carrying value of $10,187.

In the second quarter of 2024, the Company terminated five forward-starting interest rate swaps with a maturity date of August 1, 2027 and an aggregate notional amount totaling $5,350. These forward-starting interest rate swaps were hedging the variability in future benchmark interest payments attributable to changing interest rates on the forecasted issuance of fixed-rate debt that was issued in the third quarter of 2024.  A notional amount of $2,350 of these forward-starting interest rate swaps was designated as a cash-flow hedge as defined by GAAP.  Accordingly, the unamortized gain of $48, $36 net of tax, has been deferred in accumulated other comprehensive income and will be amortized to earnings as the interest payments are made.  The remainder of the notional amount of $3,000 of the forward-starting interest rate swaps was not designated as a cash-flow hedge. Accordingly, the changes in the fair value of these forward-starting interest rate swaps not designated as cash-flow hedges were recognized through net earnings. In the third quarter of 2023, the Company recognized an unrealized gain of $129 related to these forward-starting interest rate swaps that is included in “(Loss) gain on investments” in the Company’s Consolidated Statements of Operations. During the first three quarters of 2024 and 2023, the Company recognized a realized loss of $55 and an unrealized gain of $329, respectively, related to these forward-starting interest rate swaps that is included in “(Loss) gain on investments” in the Company’s Consolidated Statements of Operations.

In the second quarter of 2024, the Company entered into two 10-year treasury lock agreements with an aggregate notional amount of $2,100 and a weighted-average interest rate of 3.91% and two 30-year treasury lock agreements with an aggregate notional amount of $3,250 and a weighted-average interest rate of 4.11%. These treasury locks were an agreement used to hedge the U.S. Treasury benchmark interest rate associated with future interest payments on the forecasted issuance of fixed-rate debt that was issued in the third quarter of 2024. These treasury locks were designated as cash-flow hedges as defined by GAAP. Accordingly, the changes in fair value of these treasury locks are recorded to accumulated other comprehensive income and reclassified into net earnings when the hedged transaction affects net earnings. In the third quarter of 2024, the Company terminated these treasury lock agreements. The unamortized loss of $56, $43 net of tax, has been deferred in accumulated other comprehensive loss and will be amortized to earnings as the interest payments are made.

On September 13, 2024, the Company entered into an unsecured revolving credit facility (the “Credit Agreement”), with a termination date of September 13, 2029, unless extended as permitted under the Credit Agreement. This Credit Agreement amended the Company’s $2,750 credit facility that would otherwise have terminated on July 6, 2026.  Under the Credit Agreement, the aggregate amount of initial commitments under the revolving credit facility is $2,750, which could have been increased by $2,250 to $5,000 upon the closing date of the proposed merger with Albertsons (such additional commitments, the “Albertsons Closing Date Additional Commitments”). Concurrently with the termination of the Merger Agreement on December 11, 2024, the Albertsons Closing Date Additional Commitments were automatically terminated in accordance with the terms of the Credit Agreement. On and after December 11, 2024, the amount of outstanding commitments under the Credit Agreement is $2,750.

Cash paid for interest expense related to long term debt including obligations under finance leases was $355 and $467 for the three quarters ended November 9, 2024 and November 4, 2023, respectively. Interest income of approximately $147 and $29 for the third quarters of 2024 and 2023, respectively, is included in “Net interest expense” in the Company’s Consolidated Statements of Operations. Interest income of approximately $220 and $87 for the first three quarters of 2024 and 2023, respectively, is included in “Net interest expense” in the Company’s Consolidated Statements of Operations.

For additional information about the Company’s unsecured bridge term loan facility, term loan credit agreement and completed senior notes issuance, see Note 10 and Note 11 to the Consolidated Financial Statements.