Albertsons 2006 Annual Report Download - page 66

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SUPERVALU INC. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
RESERVES FOR CLOSED PROPERTIES AND ASSET IMPAIRMENT CHARGES
During fiscal 2006, the company announced the plans to dispose of twenty corporate operated Shop ‘n Save
retail stores in Pittsburgh. Related to this disposition, the company recorded a charge of $64.6 million, which
included property, plant and equipment related impairment charges of $52.4 million, goodwill impairment
charges of $6.7 million and other charges of $5.5 million. During the fourth quarter of fiscal 2006, the company
recorded a charge of $7.3 million related to this disposition. The company anticipates completing the disposition
in fiscal 2007.
Reserves for Closed Properties:
The company maintains reserves for estimated losses on retail stores, distribution warehouses and other
properties that are no longer being utilized in current operations. Included in this activity is the Pittsburgh activity
discussed above. The reserves for closed properties include management’s estimates for lease subsidies, lease
terminations and future payments on exited real estate. Details of the activity in the closed property reserves for
fiscal 2006, 2005 and 2004 are as follows:
2006 2005 2004
(in thousands)
Beginning balance $ 37,446 $ 47,205 $ 49,873
Additions 10,404 12,889 10,809
Usage (10,076) (22,648) (13,477)
Ending balance $ 37,774 $ 37,446 $ 47,205
Asset Impairment:
The company recognized asset impairment charges of $66.5 million during fiscal 2006 on the write-down of
property, plant and equipment for closed properties, primarily related to the plan to dispose of corporate operated
Shop ‘n Save retail stores in Pittsburgh and the impairment of certain assets following the planned disposition of
Deals stores, including charges of $12.7 million in the fourth quarter. For fiscal 2006, the asset impairment
charges related to the retail food segment. The company recognized asset impairment charges of $4.8 million and
$7.6 million in fiscal 2005 and 2004, respectively, on the write-down of property, plant and equipment for closed
properties. For fiscal 2005, the asset impairment charge related to the retail food segment. For fiscal 2004, of the
$7.6 million asset impairment charge recognized, $6.2 million related to the retail food segment and $1.4 million
related to the supply chain services segment. Impairment charges, a component of selling and administrative
expenses in the Consolidated Statements of Earnings, reflect the difference between the carrying value of the
assets and the estimated fair values, which were based on the estimated market values for similar assets.
SALE OF CUB FOODS—CHICAGO
Concurrent with the Proposed Transaction, the company sold 26 Cub Foods stores located primarily in the
Chicago area in January 2006 to the Cerberus Group for a pretax and after tax loss of approximately $95 million
and $61 million, respectively. The pretax loss is included in selling and administrative expenses on the
Consolidated Statements of Earnings.
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