Albertsons 2006 Annual Report Download - page 17

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Fiscal 2006 store activity, including licensed units, resulted in 68 new stores opened and 85 stores closed.
Exclusive of the Chicago, Pittsburgh and Deals stores, total retail square footage, including licensed stores,
increased approximately two percent over the prior year.
Supply chain services sales for fiscal 2006 were $9.2 billion compared with $9.0 billion last year, an
increase of $0.2 billion or 2.6 percent compared with last year, primarily reflecting new business from the
traditional food distribution business, the recent acquisition of Total Logistics and temporary new business of
approximately three percent, three percent and two percent, respectively, partially offset by customer attrition,
which includes the fiscal 2006 impact of cycling three large customer transitions to other suppliers in the prior
year.
Gross Profit
Gross profit (calculated as net sales less cost of sales), as a percent of net sales, was 14.5 percent for fiscal
2006 compared with 14.6 percent last year. Gross profit as a percent of net sales primarily reflects the benefits of
retail merchandising execution and the acquisition of Total Logistics, a higher margin third party logistics
business, which was more than offset by the impact of supply chain costs of approximately $22 million related to
costs for new growth initiatives for supply chain technology and the launch of our specialty produce distribution
business, W. Newell and Co. (“growth initiatives”) and approximately $0.6 million of losses related to minority
owned investments in contrast to $14.3 million of earnings in fiscal 2005.
Selling and Administrative Expenses
Selling and administrative expenses, as a percentage of net sales, were 12.3 percent for fiscal 2006
compared with 11.4 percent last year. The increase primarily reflects approximately $174 million of pre-tax costs
related to charges for Chicago, Pittsburgh, Deals and the Hurricane.
Restructure and Other Charges
For fiscal 2006 and fiscal 2005, the company incurred $4.5 million and $26.4 million, respectively, in
pre-tax restructure and other charges. These charges primarily reflect changes in estimates on exited real estate
for fiscal 2006 and the increased liabilities associated with employee benefits related costs from previously
exited distribution facilities as well as changes in estimates on exited real estate for fiscal 2005.
Operating Earnings
Operating earnings for fiscal 2006 were $435.2 million compared with $715.6 million last year. Results for
fiscal 2006 include charges of approximately $174 million pre-tax related to Chicago, Pittsburgh, Deals and the
Hurricane and $4.5 million of restructuring and other charges. Fiscal 2005 includes a pre-tax gain of
approximately $109 million pre-tax gain on the sale of WinCo and $26.4 million of restructure and other charges.
Retail food fiscal 2006 operating earnings were $268.8 million, or 2.5 percent of net sales, compared to last
year’s operating earnings of $446.3 million, or 4.2 percent of net sales. The decrease in retail food operating
earnings, as a percent of net sales, primarily reflects charges of approximately $174 million pre-tax related to
Chicago, Pittsburgh, Deals and the Hurricane. Supply chain services fiscal 2006 operating earnings were $214.4
million, or 2.3 percent of net sales compared to last year’s operating earnings of $234.6 million, or 2.6 percent of
sales. The decrease in supply chain services operating earnings, as a percent of net sales, primarily reflects the
start-up costs related to growth initiatives and losses from minority owned investments, which more than offset
the benefit of the higher margin third party logistics business acquired in February 2005.
Net Interest Expense
Net interest expense decreased to $106.0 million for fiscal 2006 compared with $114.8 million last year.
The decrease primarily reflects lower borrowing levels partially offset by higher borrowing rates and the absence
of the $5.7 million early redemption costs relating to the $250 million notes redeemed in the first quarter of fiscal
2005.
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