Albertsons 2005 Annual Report Download - page 67

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SUPERVALU INC. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
$4.0 million related to the Asset Exchange. Fiscal 2004 other net adjustments of $19.6 million primarily reflect
adjustments related to the net goodwill impact of the Asset Exchange.
Other acquired intangible assets are a component of other assets in the Consolidated Balance Sheets.
Amortization expense of $6.2 million, $4.5 million and $3.9 million was recorded in fiscal 2005, 2004 and 2003,
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 and trade names.
INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES
The company reflected in net sales $14.3 million, $39.2 million and $39.7 million of equity in earnings from
investments in unconsolidated subsidiaries in fiscal 2005, 2004 and 2003, 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 percent and not more than 50
percent. At year-end 2005, the company’s investment in unconsolidated subsidiaries primarily included a 26 percent
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 percent interest in
Tidyman’s, LLC, the owner and operator of retail supermarkets located in Montana, Idaho and Washington. The
food distribution segment recognized $4.4 million, $10.0 million, and $9.4 million of equity in earnings from
investments in unconsolidated subsidiaries in fiscal 2005, 2004, and 2003, respectively, with total investments in
unconsolidated subsidiaries of $21.2 million and $30.6 million in fiscal 2005 and fiscal 2004, respectively. The
retail food segment recognized $9.9 million, $29.2 million, and $30.3 million of equity in earnings from
investments in unconsolidated subsidiaries in fiscal 2005, 2004, and 2003, respectively. The amount of investments
in unconsolidated subsidiaries was $3.9 million and $5.3 million as of the end of fiscal 2005 and 2004, respectively.
Investments in unconsolidated subsidiaries are included in other assets in the Consolidated Balance Sheet.
On April 1, 2004, the company completed the sale of its minority ownership interest in WinCo. This retail
food investment basis was approximately $119 million and was included in other current assets in the
Consolidated Balance Sheets as of February 28, 2004.
FINANCIAL INSTRUMENTS
Interest Rate Swap Agreements
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 26, 2005, and February 28, 2004, the hedge was highly
effective. Changes in the fair value of the swaps and debt are reflected as a component of selling and
administrative expenses in the Consolidated Statements of Earnings, and through February 26, 2005, the net
earnings impact was zero.
In conjunction with the company’s early redemption of its $100 million 8.875 percent Notes due 2022 in
fiscal 2004, the remaining fair market value adjustments of two swaps relating to these notes that previously
terminated on July 6, 2001, were recognized as interest expense during fiscal 2004. There was no net impact to
the Consolidated Statements of Earnings as the two terminated swaps were offsetting.
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.
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