Albertsons 2006 Annual Report Download - page 63

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SUPERVALU INC. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table illustrates the effect on net earnings and net earnings per share if the company had
applied the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” as
amended by SFAS No. 148, “Accounting for Stock-Based Compensation,” to stock-based employee
compensation:
2006 2005 2004
(In thousands, except per share data)
Net earnings, as reported $206,169 $385,823 $280,138
Add: stock-based compensation expense included in reported net earnings,
net of related tax effect 1,849 7,732 1,385
Deduct: total stock-based employee compensation expense determined under
fair value based method for all awards, net of related tax effect (17,892) (23,733) (11,643)
Pro forma net earnings 190,126 369,822 269,880
Add: interest and amortization on dilutive convertible debentures, net of
related tax effect 7,070 6,786 7,678
Pro forma net earnings for diluted earnings per share $197,196 $376,608 $277,558
Earnings per share—basic:
As reported $ 1.52 $ 2.86 $ 2.09
Pro forma $ 1.40 $ 2.74 $ 2.01
Earnings per share—diluted:
As reported $ 1.46 $ 2.71 $ 2.01
Pro forma $ 1.36 $ 2.60 $ 1.93
For more information on the method and assumptions used in determining the fair value of stock-based
compensation, see the Stock Option Plans note in the Notes to Consolidated Financial Statements.
Income Taxes:
The company provides for deferred income taxes during the year in accordance with SFAS No. 109,
“Accounting for Income Taxes”. Deferred income taxes represent future net tax effects resulting from temporary
differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect
for the year in which the differences are expected to be settled or realized. The major temporary differences and
their net effect are included in the Income Taxes note in the Notes to Consolidated Financial Statements.
Net Earnings Per Share (EPS):
Basic EPS is calculated using income available to common shareholders divided by the weighted average
number of common shares outstanding during the year. Diluted EPS is similar to basic EPS except that the
weighted average number of common shares outstanding is after giving affect to the dilutive impacts, if any, of
stock options, restricted stock, and outstanding contingently convertible debentures. In addition, for the
calculation of diluted earnings per share, net income is adjusted to eliminate the after tax interest expense
recognized during the year related to contingently convertible debentures, when the contingently convertible
debentures are dilutive. See the Earnings Per Share note in the Notes to Consolidated Financial Statements.
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