Kroger 2011 Annual Report Download - page 94

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A-39
NO T E S T O CO N S O L I D A T E D FI N A N C I A L ST A T E M E N T S , CO N T I N U E D
its implied fair value, resulting in a pre-tax impairment charge of $18 ($12 after-tax). In 2009, the Company
disclosed that a 10% reduction in fair value of this supermarket reporting unit would indicate a potential for
impairment. Subsequent to the impairment, no goodwill remains at this reporting unit.
In the third quarter of 2009, the Company’s operating performance suffered due to deflation and intense
competition. During the third quarter of 2009, based on revised forecasts for 2009 and the initial results of
the Company’s 2010 annual budget process of the supermarket reporting units, management believed that
there were circumstances evident to warrant impairment testing of these reporting units. In the third quarter
of 2009, the Company did not test the variable interest entities with recorded goodwill for impairment as no
triggering event occurred.
Based on the results of the Company’s step one analysis in the third quarter of 2009, the Ralphs reporting
unit in Southern California was the only reporting unit for which there was a potential impairment. In 2009,
the operating performance of the Ralphs reporting unit was significantly affected by the economic conditions
at the time and responses to competitive actions in Southern California. As a result of this decline in current
and future expected cash flows, along with comparable fair value information, management concluded that
the carrying value of goodwill for the Ralphs reporting unit exceeded its implied fair value, resulting in a
pre-tax impairment charge of $1,113 ($1,036 after-tax). Subsequent to the impairment, no goodwill remains at
the Ralphs reporting unit. Based on current and future expected cash flows, the Company believes additional
goodwill impairments are not reasonably likely.
3. PR O P E R T Y , PL A N T A N D EQ U I P M E N T , NE T
Property, plant and equipment, net consists of:
2011 2010
Land ...................................................... $ 2,253 $ 2,168
Buildings and land improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,799 7,417
Equipment ................................................. 10,110 9,806
Leasehold improvements ..................................... 6,119 5,852
Construction-in-progress ..................................... 1,202 904
Leased property under capital leases and financing obligations ....... 588 569
Total property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . 28,071 26,716
Accumulated depreciation and amortization ...................... (13,607) (12,569)
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,464 $ 14,147
Accumulated depreciation for leased property under capital leases was $327 at January 28, 2012, and
$317 at January 29, 2011.
Approximately $220 and $247, original cost, of Property, Plant and Equipment collateralized certain
mortgages at January 28, 2012 and January 29, 2011, respectively.