Albertsons 2006 Annual Report Download - page 68

SUPERVALU INC. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Fiscal 2006 additions primarily reflect the acquisition of certain retail properties. Fiscal 2005 additions
primarily reflect the acquisition of Total Logistics. Fiscal 2006 other net adjustments of $20.7 million primarily
reflect purchase accounting adjustments between deferred income taxes and goodwill related to former
acquisitions of $29.5 million, reductions of goodwill of $11.2 million primarily related to Shop ’n Save
Pittsburgh, which were partially offset by purchase accounting adjustments to increase goodwill $20.0 million for
the finalization of the valuation related to the acquisition of Total Logistics in fiscal 2005. Fiscal 2005 other net
adjustments of $49.9 million primarily reflect purchase accounting adjustments between deferred income taxes
and goodwill relating to former acquisitions of $45.8 million and $4.0 million related to the Asset Exchange.
Other acquired intangible assets are a component of other assets in the Consolidated Balance Sheets.
Amortization expense of $6.7 million, $6.2 million and $4.5 million was recorded in fiscal 2006, 2005 and 2004,
respectively. Future amortization expense will approximate $6.3 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 generally
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 in the Consolidated Statements of Earnings equity in earnings (losses) of
($0.6) million, $14.3 million and $39.2 million from investments in unconsolidated subsidiaries in fiscal 2006,
2005 and 2004, 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 2006, the supply chain services segment’s
primary investment in unconsolidated subsidiaries included a 25.5 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. At year-end 2006, the retail food segment held investments in
various retail properties. The supply chain services segment recognized $(9.5) million, $4.4 million, and $10.0
million of equity in earnings (loss) from investments in unconsolidated subsidiaries in fiscal 2006, 2005 and
2004, respectively, with total investments in unconsolidated subsidiaries of $7.4 million and $21.2 million as of
the end of fiscal 2006 and 2005, respectively. The retail food segment recognized $8.9 million, $9.9 million and
$29.2 million of equity in earnings from investments in unconsolidated subsidiaries in fiscal 2006, 2005 and
2004, respectively. The amount of investments in unconsolidated subsidiaries was $2.9 million and $3.9 million
as of the end of fiscal 2006 and 2005, respectively. Investments in unconsolidated subsidiaries are included in
other assets in the Consolidated Balance Sheet.
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 25, 2006, and February 26, 2005, 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 25, 2006, 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.
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