Albertsons 2004 Annual Report Download - page 69

SUPERVALU INC. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Other acquired intangible assets are a component of other assets in the Consolidated Balance Sheets.
Amortization expense of $4.5 million, $3.9 million and $3.1 million was recorded in fiscal 2004, 2003 and 2002,
respectively. Future amortization expense will approximate $6.0 million per year for each of the next five years.
Intangible assets with a definite life are amortized on a straight-line basis with estimated useful lives ranging
from five to twenty years. All intangible assets are amortizable with the exception of the trademarks.
INVESTMENTS IN UNCONSOLIDATED EQUITY AFFILIATES
The company recognized $39.2 million, $39.7 million and $29.2 million of equity in earnings from
investments in unconsolidated equity affiliates in fiscal 2004, 2003 and 2002, respectively. The equity method of
accounting is used for companies and other investments in which the company has significant influence, which
generally represents common stock ownership or partnership equity of at least 20% and not more than 50%. At
year-end 2004, the company’s investment in unconsolidated equity affiliates primarily include a 22% interest in
WinCo Foods, Inc., a privately-held regional grocery chain that operates stores in Idaho, Oregon, Nevada,
Washington and California, a 26% interest in International Data, LLC, a strategic outsourcing services provider,
specializing in, among other things, data services, check and remittance processing and coupon promotions
processing and a 40% interest in Tidyman’s, LLC, the owner and operator of retail supermarkets located in
Montana, Idaho and Washington. These investments primarily relate to the retail food segment.
On April 1, 2004, the company completed the sale of its minority ownership interest in WinCo Foods, Inc.
This investment basis was approximately $119 million and is a component of other current assets in the
Consolidated Balance Sheets as of February 28, 2004. See Subsequent Events note on page F-36 in the Notes to
Consolidated Financial Statements.
FINANCIAL INSTRUMENTS
Interest Rate Swap Agreements
On February 25, 2001, due to the implementation of SFAS 133, “Accounting for Derivative Instruments and
Hedging Activities”, the company’s existing interest rate swap agreements were recorded at fair market value in
the company’s Consolidated Balance Sheets. On July 6, 2001, the two swaps were terminated and the remaining
fair market value adjustments, which were offsetting, were being amortized over the original term of the hedge.
In conjunction with the company’s early redemption of its $100 million 8.875% Notes due 2022 in fiscal 2004,
the remaining fair market value adjustments of the two terminated swaps relating to these notes were recognized
as interest expense during fiscal 2004. There was no net impact to the Consolidated Statement of Earnings as the
two terminated swaps were offsetting.
In fiscal 2003, the company entered into swap agreements in the notional amount of $225.0 million that
exchange a fixed interest rate payment obligation for a floating interest rate payment obligation. The swaps have
been designated as a fair value hedge on long-term fixed rate debt of the company and are components of other
assets in the Consolidated Balance Sheets. At February 28, 2004, and February 22, 2003, the hedge was highly
effective. Changes in the fair value of the swaps and debt are reflected as a component of selling and
administrative expense in the Consolidated Statements of Earnings, and through February 28, 2004, the net
earnings impact was zero.
The company has limited involvement with derivative financial instruments and uses them only to manage
well-defined interest rate risks. The company does not use financial instruments or derivatives for any trading or
other speculative purposes.
Fair Value Disclosures of Financial Instruments
For certain of the company’s financial instruments, including cash and cash equivalents, receivables and
notes payable, the carrying amounts approximate fair value due to their short maturities.
F-22