Albertsons 2007 Annual Report Download

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Fiscal 2007

Table of contents

  • Page 1
    Fiscal 2007

  • Page 2
    ... in the United States. Today, our shoppers know us by our regional and national banners, which span nearly 2,500 stores under some of the most enviable brands in the market. This expansive retail footprint is supported by an industry-leading supply chain network that serves company-owned and...

  • Page 3
    ... company. Our new business model now represents a national food and drug retail and supply chain powerhouse with a footprint that spans the United States. With the addition of the Acme, Albertsons Southern California and Intermountain West, Bristol Farms, Lucky, Sav-on, Shaw's, Star and Jewel-Osco...

  • Page 4
    ...the stage for SUPERVALU to be an industry leader. Total Store Network 2,473 1,381 Fiscal 2006 Fiscal 2007 During Fiscal 2007 we invested a majority of our $1 billion capital program in our retail stores, which included 72 major store remodels, 34 new grocery stores and 73 new limited assortment...

  • Page 5
    ... operational in one distribution facility later this year - with plans for another installation on the East Coast. Milestone #4 - Creating a New Company Culture The driving goal behind this milestone is to make SUPERVALU the best place to work in our industry. Our associates are customer-focused...

  • Page 6
    [THIS PAGE INTENTIONALLY LEFT BLANK]

  • Page 7
    ... The aggregate market value of the voting and nonvoting stock held by non-affiliates of the registrant as of September 9, 2006 was approximately $6,103,035,102 (based upon the closing price of registrant's Common Stock on the New York Stock Exchange on September 8, 2006). As of April 20, 2007, there...

  • Page 8
    ... and Financial Disclosure ...Controls and Procedures ...Other Information ...PART III 18 20 20 39 39 39 39 40 10. 11. 12. 13. 14. Directors, Executive Officers and Corporate Governance ...Executive Compensation ...Security Ownership of Certain Beneficial Owners and Management and Related...

  • Page 9
    ... banners: Albertsons, Save-A-Lot, Shaw's Supermarkets, Jewel-Osco, Acme Markets, Shoppers Food & Pharmacy, Cub Foods, Farm Fresh, Lucky, Shop 'n Save, Scott's, Star Markets, Bristol Farms, bigg's, Hornbacher's and Sunflower Market. As of the close of the fiscal year, the Company conducted its retail...

  • Page 10
    ... and in-store banks. These product and service offerings allow easy, one-stop shopping. As of February 24, 2007, the Company operated 876 combination stores under the Albertsons, Sav-On, JewelOsco, Shaw's Supermarkets, Acme Markets, Cub Foods, Shoppers Food & Pharmacy, Farm Fresh, Shop 'n Save, bigg...

  • Page 11
    ... opened its first Sunflower Market in fiscal 2006 to focus on the growing market for value-priced natural and organic products. Principal Markets. Albertsons stores operate primarily in Southern California, the Northwestern and Intermountain United States and Southern Nevada. Shaw's Supermarkets...

  • Page 12
    ... of long-term operating trends. There are no unusual industry practices or requirements relating to working capital items. Competition The Company's Retail food and Supply chain services businesses are highly competitive. The Company believes that the success of its Retail food and Supply chain...

  • Page 13
    ... 23,700 employees in Southern California. With this level of negotiations, the Company will be focused on ensuring competitive cost structures in each market while meeting its employees' needs for good wages and affordable health care. The Company believes that it has generally good relations with...

  • Page 14
    ... Chain Services 55 Executive Vice President; President, Retail East 53 Executive Vice President and Chief Financial Officer 2005 Director, Chief Executive Officer and President, 2001-2005 Executive Vice President/President and Chief Operating Officer, Distribution Food Companies, 2001-2005 Senior...

  • Page 15
    ... of all potential risks or uncertainties. General economic conditions affecting the food industry may affect our business. The Retail food and Supply chain services segments are sensitive to a number of economic conditions that may affect our businesses such as: (i) food and drug price inflation or...

  • Page 16
    ... and domestic companies, as well as many smaller, more regional competitors. Both the Retail food and Supply chain services businesses are subject to competitive practices that may affect: (i) the prices at which we are able to sell products at our retail locations, (ii) sales volume, (iii...

  • Page 17
    ... work disruptions from labor disputes may affect sales at our stores as well as our ability to distribute products. A significant number of our employees are subject to collective bargaining agreements, and a majority of those employees are participants in multi-employer health and pension plans...

  • Page 18
    ... our reserve estimates include changes in benefit levels, medical fee schedules, medical utilization guidelines, vocation rehabilitation and apportionment. If the number or severity of claims for which we are self-insured increases, or we are required to accrue or pay additional amounts because the...

  • Page 19
    ... g Washington g Wisconsin Wyoming Total Retail Square q Footage g ( (000's): ) Owned (f) () Leased Total 49,530 , 16,755 , 5,200 , ( (e) ) (a) The Company operates combination stores under the Albertsons, Sav-On, Jewel-Osco, Shaw's Supermarkets, Acme Markets, Cub Foods, Shoppers Food & Pharmacy...

  • Page 20
    ... food segment: Supply Third Party Retail Stores and Company-Owned Stores 1 - 2 1 1 1 - - 1 1 2 - 1 - - - 11 Alabama Florida Illinois Indiana Maryland y Minnesota Mississippi pp Montana North Dakota Ohio Pennsylvania y Texas Virginia g Washington g Wisconsin West Virginia g Total Square q Footage...

  • Page 21
    ... 2000, a class action complaint was filed against Albertsons, Inc., as well as American Stores Company, American Drug Stores, Inc., Sav-on Drug Stores, Inc. and Lucky Stores, Inc., wholly-owned subsidiaries of Albertsons, Inc., in the Superior Court for the County of Los Angeles, California (Gardner...

  • Page 22
    ... and Dennis Taber filed a complaint, later certified as a class action, in California Superior Court in and for the County of San Diego, alleging that Albertson's Inc. failed to pay wages for time worked during meal breaks to its non-exempt employees employed in key carrier positions. The lawsuit...

  • Page 23
    ... material changes in such predictions or estimates, could have a material adverse effect on the Company's financial condition, results of operations or cash flows. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There was no matter submitted during the fourth quarter of fiscal year 2007...

  • Page 24
    ... two fiscal years and dividend information is found under the heading "Common Stock Price" in Part II, Item 7 of this Annual Report on Form 10-K. The following table sets forth the Company's purchase of equity securities for the periods indicated: Total Number of Shares Purchased as Part of Publicly...

  • Page 25
    .... (3) The 2006 Peer Group consists of Great Atlantic & Pacific Tea Company, Inc., Ingles Markets, Incorporated, The Kroger Co., Pathmark Stores, Inc., Safeway Inc. and Weis Markets, Inc. (4) In fiscal 2007, the Company acquired the core supermarket businesses of Albertsons. This acquisition greatly...

  • Page 26
    ..., Jewel-Osco, Shaw's Supermarkets, Star Market, the Albertsons banner in the Intermountain, Northwest and Southern California regions, the related in-store pharmacies under the Osco and Sav-On banners, 10 distribution centers, certain regional offices and certain corporate offices in Boise, Idaho...

  • Page 27
    ... will benefit from our efficient and low-cost supply chain and new economies of scale as we leverage our Retail food and Supply chain services operations. We plan to expand regional retail banner square footage through selective new store growth in key markets where we have significant market share...

  • Page 28
    ...square feet at the end of fiscal 2006. Supply chain services sales for fiscal 2007 were $9,390 compared with $9,229 last year, an increase of 2 percent. This increase is primarily due to new business from the traditional food distribution business and temporary business, partially offset by customer...

  • Page 29
    ...operating for four full quarters, including store expansions, decreased 0.5 percent compared to fiscal 2005. 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...

  • Page 30
    ... 2006 compared with 14.6 percent in fiscal 2005. Gross profit, as a percent of Net sales, primarily reflects the benefits of retail merchandising execution and the acquisition of Total Logistics, which was more than offset by the impact of Supply chain services costs of approximately $22 related...

  • Page 31
    ... including stock option activity, share repurchases under the treasury plan and dilution impacts. CRITICAL ACCOUNTING POLICIES The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to...

  • Page 32
    ...-insured for workers' compensation, health care for certain employees and general and automobile liability costs. It is the Company's policy to record its self-insurance liabilities based on claims filed and an estimate of claims incurred but not yet reported, discounted at a risk-free interest rate...

  • Page 33
    ... rate, the expected long-term rate of return on plan assets and the rates of increase in compensation and health care costs. In accordance with generally accepted accounting principles, actual results that differ from the Company's assumptions are accumulated and amortized over future periods...

  • Page 34
    ... with the Acquisition, and senior notes issued in October 2006 partially offset by repayment of long-term debt of Albertsons standalone drug business payables related to the sale of Albertsons. Fiscal 2006 financing activities primarily reflect the repayments of long-term debt, the payment of...

  • Page 35
    ... letters of credit issued under separate agreements with financial institutions. In November 2006, the Company executed a 364-day accounts receivable securitization program, under which the Company can borrow up to $200 on a revolving basis, with borrowings secured by eligible accounts receivable...

  • Page 36
    ... to call the debentures for cash at any time, the debentures are classified as current debt. The Company assumed 46,000,000 of 7.25 percent mandatory convertible securities ("Corporate Units") upon the Acquisition of New Albertsons. Each Corporate Unit consisted of a forward stock purchase contract...

  • Page 37
    ... resulted in the rates on the outstanding Term Loan A and Term Loan B balances changing to LIBOR plus 1.375 percent and LIBOR plus 1.50 percent, respectively. On April 18, 2007, the Company's Board of Directors adopted a new share repurchase program authorizing the Company to purchase up to $235...

  • Page 38
    ...ordinary course of business. These contracts primarily relate to the Company's commercial contracts, operating leases and other real estate contracts, financial agreements, agreements to provide services to the Company, and agreements to indemnify officers, directors and employees in the performance...

  • Page 39
    ..., 2007. Payments Due Per Period Fiscal Fiscal Fiscal 2008 2009-2010 2011-2012 Total Thereafter Contractual Obligations: Debt (1) Interest on long-term debt Operating leases (2) Capital and direct financing leases (3) Benefit obligations (4) Construction commitments Deferred income taxes Purchase...

  • Page 40
    ... PRICE SUPERVALU's common stock is listed on the New York Stock Exchange under the symbol SVU. At fiscal 2007 year end, there were 31,614 shareholders of record compared with 6,206 at the end of fiscal 2006. Common Stock Price Range 2007 2006 High Low High Low Dividends Per Share 2007 2006 Fiscal...

  • Page 41
    ... status of a benefit plan in its statement of financial position, (b) recognize as a component of other comprehensive income, net of tax, the gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net periodic benefit cost pursuant to...

  • Page 42
    ... capital. The Company makes long-term loans to certain Supply chain customers and as such, holds notes receivable in the normal course of business. The notes generally bear fixed interest rates negotiated with each retail customer. The market value of the fixed rate notes is subject to change due...

  • Page 43
    ..., 2007 Fair Value Total Summary of Financial Instruments Aggregate payments by fiscal year 2008 2009 2010 2011 (in millions, except rates) 2012 Thereafter Notes receivable Principal receivable Average rate receivable Debt with variable interest rates Principal payable Average variable rate payable...

  • Page 44
    ... prices, which could impact consumer spending and buying habits and the cost of doing business The availability of favorable credit and trade terms Softness in national and local economies Changes in interest rates Competitive Practices Competition from other food and/or drug retail chains...

  • Page 45
    ... supply chain QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ITEM 7A. The information called for by Item 7A is found under the heading of "Quantitative and Qualitative Disclosure About Market Risk" under Part II, Item 7 of this Annual Report on Form 10-K. ITEM 8. FINANCIAL STATEMENTS...

  • Page 46
    ... that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Management's Annual Report on Internal Control Over Financial Reporting The...

  • Page 47
    ...OFFICERS AND CORPORATE GOVERNANCE The information called for by Item 10, as to compliance with Section 16(a) of the Exchange Act, is incorporated by reference to the Company's definitive Proxy Statement to be filed with the SEC pursuant to Regulation 14A in connection with the Company's 2007 Annual...

  • Page 48
    ...Statement to be filed with the SEC pursuant to Regulation 14A in connection with the Company's 2007 Annual Meeting of Stockholders under the heading "Board Practices - Policy and Procedures Regarding Transactions with Related Persons." ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The information...

  • Page 49
    ... schedules to the Company listed in the accompanying "Index of Selected Financial Data and Financial Statements and Schedules" together with the reports of KPMG LLP, independent registered public accountants, are filed as part of this Annual Report on Form 10-K. (3) Exhibits: (2) Plan of Acquisition...

  • Page 50
    ...8-K filed with the SEC on June 7, 2006. First Amendment to Credit Agreement, dated March 8, 2007, among SUPERVALU INC., The Royal Bank of Scotland PLC, as Administrative Agent, and the Lenders. Indenture dated as of May 1, 1992, between Albertson's, Inc. and Morgan Guaranty Trust Company of New York...

  • Page 51
    ... to Exhibit 10.32 to the Company's Annual Report on Form 10-K for the year ended February 25, 2006.* Form of SUPERVALU INC. 2002 Stock Plan Stock Option Agreement for Non-Employee Directors and Stock Option Terms and Conditions for Non-Employee Directors is incorporated herein by reference to...

  • Page 52
    ...the Company's Annual Cash Bonus Plan for Designated Corporate Officers and the Executive Incentive Bonus Plan is incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period (12 weeks) ended December 4, 2004.* 10.25 SUPERVALU INC. Long-Term...

  • Page 53
    ... to Exhibit 10.58 to the Current Report on Form 8-K of Albertson's, Inc. (Commission File Number 1-6187) filed with the SEC on December 20, 2004.* 10.32 Form of Albertson's, Inc. 2004 Equity and Performance Incentive Plan Non-Employee Director Deferred Share Units Agreement is incorporated herein by...

  • Page 54
    ...10.2 to the Company's Quarterly Report on Form 10-Q for the quarterly period (12 weeks) ended December 2, 2006.* 10.49 SUPERVALU INC. Directors Retirement Program, as amended, is incorporated herein by reference to Exhibit 10.18 to the Company's Annual Report on Form 10-K for the year ended February...

  • Page 55
    ...'s LLC, New Albertson's, Inc. and AB Acquisition LLC is incorporated herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the SEC on June 7, 2006. 10.60 Asset Purchase Agreement, dated as of January 22, 2006, among the Company, CVS Corporation, CVS Pharmacy...

  • Page 56
    ...reference to Exhibit 10.10.4 to the Annual Report on Form 10-K of Albertson's, Inc. (Commission File Number 1-6187) for the year ended January 29, 2004.* 10.72 Sixth Amendment to the Albertson's, Inc. 2000 Deferred Compensation Plan, dated as of April 28, 2006, is incorporated herein by reference to...

  • Page 57
    ... reference to Exhibit 10.13.7 to the Annual Report on Form 10-K of Albertson's, Inc. (Commission File Number 1-6187) for the year ended January 30, 2003.* 10.81 Second Amendment to the Albertson's, Inc. Executive Pension Makeup Plan, dated as of April 28, 2006, is incorporated herein by reference to...

  • Page 58
    ...) for the quarter ended May 4, 2006.* 10.100 Albertson's, Inc. Non-Employee Directors' Deferred Compensation Plan is incorporated herein by reference to Exhibit 10.21 to the Annual Report on Form 10-K of Albertson's, Inc. (Commission File Number 1-6187) for the year ended January 31, 1991.* 10.101...

  • Page 59
    ... herein by reference to Exhibit 10.23.1 to the Annual Report on Form 10-K of Albertson's, Inc. (Commission File Number 1-6187) for the year ended February 1, 2001.* 10.113 American Stores Company Supplemental Executive Retirement Plan 1998 Restatement is incorporated herein by reference to Exhibit...

  • Page 60
    ...(Commission File Number 1-5392) filed with the SEC on December 11, 1998.* 10.115 Sixth Amendment to the American Stores Company Supplemental Executive Retirement Plan, dated as of April 28, 2006, is incorporated herein by reference to Exhibit 10.30.2 to the Quarterly Report on Form 10-Q of Albertson...

  • Page 61
    .... (Registrant) /s/ By: DATE: April 25, 2007 JEFFREY NODDLE Jeffrey Noddle Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of SUPERVALU and in the capacities and on...

  • Page 62
    ..., process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: April 25, 2007 /s/ JEFFREY NODDLE Chief Executive Officer 56

  • Page 63
    ... financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer...

  • Page 64
    ... fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in that Annual Report on Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company for the period and as of...

  • Page 65
    ... fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in that Annual Report on Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company for the period and as of...

  • Page 66

  • Page 67
    SUPERVALU INC. Annual Report on Form 10-K Items 6, 8 and 15(a) Index of Selected Financial Data and Financial Statements and Schedules Page(s) Selected Financial Data: Five Year Financial and Operating Summary ...Financial Statements: Reports of Independent Registered Public Accounting Firm ......

  • Page 68
    ...Data (a) Inventories (FIFO) (b) Working capital (b) Property, plant and equipment, net Total assets Long-term debt (c) Stockholders' equity Other Statistics (a) Net earnings as a percent of net sales Return on average stockholders' equity Book value per common share Current ratio (b) Debt to capital...

  • Page 69
    ... data. (b) Inventories (FIFO), working capital and current ratio are calculated after adding back the LIFO reserve. The LIFO reserve for each year is as follows: $178 million for fiscal 2007, $160 for fiscal 2006, $149 for fiscal 2005, $136 for fiscal 2004 and $146 for fiscal 2003. (c) Long-term...

  • Page 70
    ... February 25, 2006, and the results of their operations and their cash flows for each of the fiscal years in the three-year period ended February 24, 2007, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered...

  • Page 71
    ...of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of SUPERVALU INC. and subsidiaries as of February 24, 2007 and February 25, 2006, and the related consolidated statements of earnings, cash flows and stockholders' equity for each of the fiscal years in...

  • Page 72
    ... by the Company. Supply chain services operations include results of sales to affiliated food stores, mass merchants and other customers and logistics arrangements. Substantially all of the Company's operations are domestic. Management utilizes more than one measurement and multiple views of data to...

  • Page 73
    SUPERVALU INC. and Subsidiaries CONSOLIDATED STATEMENTS OF EARNINGS (In millions, except per share data) February 24, 2007 (52 weeks) February 25, 2006 (52 weeks) February 26, 2005 (52 weeks) Net sales Costs and expenses Cost of sales Selling and administrative expenses Gain on sale of WinCo Foods,...

  • Page 74
    ... EQUITY Current liabilities Accounts payable Accrued vacation, compensation and benefits Current maturities of long-term debt Current obligations under capital leases Income taxes currently payable Other current liabilities Total current liabilities Long-term debt Long-term obligations under capital...

  • Page 75
    ...of tax of $71 and $17, respectively) (2) Stock, options and restricted stock units issued in connection with acquisition of New Albertsons Sales of common stock under option plans Cash dividends declared on common stock $0.6575 per share Compensation under employee incentive plans Purchase of shares...

  • Page 76
    ... from issuance of long-term debt Repayment of long-term debt Payment of Albertsons standalone drug business payables Reduction of obligations under capital leases Dividends paid Proceeds from the sale of common stock under option plans Payment for purchase of treasury shares Net cash provided...

  • Page 77
    SUPPLEMENTAL CASH FLOW INFORMATION The Company's non-cash activities were as follows: Capital lease asset additions and related obligations Interest and income taxes paid: Interest paid (net of amount capitalized) Income taxes paid (net of refunds) $545 $310 $117 $172 $122 $217 $ 73 $ 57 $ 63 See ...

  • Page 78
    ... and Southern California regions, the related in-store pharmacies under the Osco and Sav-On banners, 10 distribution centers, certain regional offices and certain corporate offices in Boise, Idaho; Glendale, Arizona and Salt Lake City, Utah. As of February 24, 2007, the Company conducted its retail...

  • Page 79
    ... and amounts earned have little or no credit risk, the Company generally records the net amounts as management fees earned. Cost of Sales Cost of sales includes cost of inventory sold during the period, including purchasing and distribution costs and shipping and handling fees. Advertising expenses...

  • Page 80
    ... for estimated losses on retail stores, distribution warehouses and other properties that are no longer being utilized in current operations. The Company provides for closed property operating lease liabilities using a discount rate to calculate the present value of the remaining noncancellable...

  • Page 81
    ...-insured for workers' compensation, health care for certain employees and general and automobile liability costs. It is the Company's policy to record its self-insurance liabilities based on claims filed and an estimate of claims incurred but not yet reported, discounted at a risk free interest rate...

  • Page 82
    ...long-lived assets that are classified as Assets held for sale, the Company recognizes impairment charges for the excess of the carrying value plus estimated costs of disposal over the estimated fair value. These estimates can be significantly impacted by factors such as changes in real estate market...

  • Page 83
    ... 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. See Note 19 - Subsequent Events. Stock-based Compensation The Company's stock based compensation plans along with the adoption of...

  • Page 84
    ... effect on reported earnings. NOTE 3-BUSINESS ACQUISITION On the Acquisition Date, the Company, CVS Corporation ("CVS"), an investment group led by Cerberus Capital Management, L.P. (the "Cerberus Group") and Albertsons entered into a series of agreements providing for the sale of Albertsons to the...

  • Page 85
    ... Standalone Drug and the Non-Core Businesses historically operated by Albertsons. The fair value of SUPERVALU common stock issued was $32.73 per share, which represented the average closing price of the Company's common stock beginning two days before and ending two days after the January 23, 2006...

  • Page 86
    ... market price of the security. The fair value for the remaining debt was estimated based on the market yields of publicly traded debt with similar credit ratings, interest rates, and maturity dates. Cash Settlement of Stock Options and Restricted Stock Units As of the Acquisition Date, Albertsons...

  • Page 87
    ... Total assets acquired Current liabilities Long-term debt Deferred income taxes Other liabilities Total liabilities assumed Net assets acquired Reconciliation to total purchase price for Albertsons: Cash funding provided by New Albertsons Cash proceeds from the sale of the Standalone Drug Business...

  • Page 88
    ... financial information presents the combined historical results of the operations of SUPERVALU and the Acquired Operations as if the Acquisition had occurred at the beginning of fiscal 2007 and 2006, respectively. Certain adjustments have been made to reflect changes in depreciation, income taxes...

  • Page 89
    ... share-based compensation transactions using the intrinsic value method in accordance with Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB Opinion No. 25"). Instead, companies are required to account for such transactions using a fair-value method...

  • Page 90
    ..., prior service costs or credits, and transition asset or obligation. SFAS No. 158 is effective for the Company's fiscal year ending February 24, 2007. The adoption of SFAS No. 158 and its effects are described in Note 15-Benefit Plans. In September 2006, the SEC issued Staff Accounting Bulletin No...

  • Page 91
    ... on exited real estate. Additions include approximately $19 of reserves for closed properties acquired from Albertsons, which were recorded in purchase accounting. Adjustments in the table below include approximately $62 related to the fair value of liabilities recognized in purchase accounting at...

  • Page 92
    ...and customer relationships. The Company also recorded $4,333 of Goodwill based on preliminary purchase price allocations (see Note 3 - Business Acquisition). At February 24, 2007, the Company had approximately $5,103 of Goodwill related to Retail food and $818 related to Supply chain services. F-26

  • Page 93
    SUPERVALU INC. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) A summary of changes in the Company's Goodwill and other acquired intangible assets during fiscal 2007 and fiscal 2006 follows: February 26, AmortiOther net February 25, AmortiOther net February 24, 2005 zation ...

  • Page 94
    ... assumed $5,183 of the Acquired Operations' outstanding long-term debt, excluding capital leases (see Note 3 - Business Acquisition). In accordance with the application of the purchase method of accounting, the Company estimated the fair value of the debt assumed from New Albertsons as a result of...

  • Page 95
    ... secured by real estate with a net book value of $50, due June 2007 - April 2019 (face amounts $38) 6.64% Medium Term Notes due June 2006 (face amounts $65) 8.28% - 9.46% Notes due 2006 - 2010 (face amounts $10) 8.02% - 8.57% Notes due 2006 (face amounts $2) Other Total Less current maturities Long...

  • Page 96
    ... under the new credit facility. Borrowings under Term Loan A and Term Loan B may be repaid, in full or in part, at any time without penalty. Term Loan A has required repayments, payable quarterly, equal to 2.50 percent of the initial drawn balance for the first four quarterly payments (year one) and...

  • Page 97
    ... elect by giving the Company 30-days notice. Mandatory Convertible Securities The Company assumed 46,000,000 of 7.25 percent mandatory convertible securities ("Corporate Units") upon the Acquisition of New Albertsons. Each Corporate Unit consisted of a forward stock purchase contract and, initially...

  • Page 98
    ... the Company's common stock for the 20-day trading period preceding the end of the reporting period is lower than the average price of the Company's common stock for the full reporting period. For the year ended February 24, 2007, the Corporate Units were dilutive by approximately 0.09 shares. F-32

  • Page 99
    ... fair value adjustments) and capital leases at February 24, 2007 were as follows: Operating Leases Capital Leases Fiscal Years: 2008 2009 2010 2011 2012 Later Total future minimum obligations Less interest Present value of net future minimum obligations Less current obligations Long-term...

  • Page 100
    ... 24, 2007, are as follows: Direct Financing Lease Receivables Direct Financing Capital Lease Obligations Fiscal Years: 2008 2009 2010 2011 2012 Later Total minimum lease p payments y Less unearned income Less interest Present value of net minimum lease payments p y Less current portion Long-term...

  • Page 101
    SUPERVALU INC. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) NOTE 11-INCOME TAXES The provision for income taxes consists of the following: 2007 2006 2005 Current Federal State Tax credits Total current Deferred Total provision p $187 38 (2) 223 72 $295 $148 22 (2) 168 (...

  • Page 102
    ... at prices not less than 100 percent of the fair market value on the date of grant. The Company's 1997 Stock Plan allows the granting of non-qualified stock options to purchase common shares to salaried employees at fair market value on the date of grant. In April 2005, the Board of Directors...

  • Page 103
    ... 26, 2006, the Company applied APB Opinion No. 25 and related interpretations in accounting for stock option and stock unit awards made under the 2002 Stock Plan and other plans. Stock options previously granted under these plans had an exercise price equal to not less than the fair market value of...

  • Page 104
    ... of the Company's stock options for the 52-week periods ended February 24, 2007 and February 25, 2006 were as follows: February 24, 2007 52 Weeks Ended February 25, 2006 February 26, 2005 Dividend yield Volatility rate Risk-free interest rate Expected option life (years) Compensation Expense...

  • Page 105
    ...TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Other Stock-Based Awards The Company awards restricted stock to employees under various plans. The restrictions on these awards generally lapse between one and five years from the date of grant and the expense is recognized over the vesting period. As...

  • Page 106
    ... exercise of employee stock options by the former employees of Albertsons who became employees of the Company. The term of this program is from June 2, 2006 to June 1, 2007, and shall not exceed 10 shares. During fiscal 2007, the Company purchased 8 shares under the program at an average cost of $29...

  • Page 107
    ... contribution pension plans, the Company provides health care and life insurance benefits for eligible retired employees under postretirement benefit plans, and short-term and long-term disability benefits to former and inactive employees prior to retirement under post-employment benefit plans. F-41

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    ... Benefit Pension Plans February 24, February 25, 2007 2006 Other Postretirement Benefits February 24, February 25, 2007 2006 Change in Benefit Obligation (1) Benefit obligation at beginning of year Acquired Operations benefit obligation at acquisition June 2, 2006 Service cost Interest cost Plan...

  • Page 109
    ... February 25, 2007 2006 Changes in Plan Assets Fair value of plan assets at beginning of year Acquired Operations fair value of plan assets at acquisition June 2, 2006 Actual return on plan assets Employer contributions Plan participants' contributions Benefits paid Fair value of plan assets at end...

  • Page 110
    ... for the legacy SUPERVALU's sponsored defined benefit pension plans for primarily non-union eligible participants are generally based on years of eligible service and the participants' highest compensation during five consecutive years of employment. Benefits paid to Acquired Operation retirees are...

  • Page 111
    ...3.00% (1) Legacy SUPERVALU benefit obligations and the fair value of plan assets are measured as of November 30, 2006. The Acquired Operations benefit obligations and the fair value of plan assets are measured as of February 22, 2007. (2) The Company reviews and selects the discount rate to be used...

  • Page 112
    ... invested in separately managed accounts and publicly traded mutual funds holding equity, fixed income securities and alternative investment classes. The Company employs a total return approach whereby a mix of equities and fixed income investments are used to maximize the long-term return of plan...

  • Page 113
    SUPERVALU INC. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Other Postretirement Benefits The Company offers health and life insurance to retirees under multiple programs. The terms of these plans vary based on employment history, age, and date of retirement. For most ...

  • Page 114
    ... Company's common stock at February 24, 2007 and February 25, 2006, respectively. Post-Employment Benefits The Company recognizes an obligation for benefits provided to former or inactive employees. The Company is self-insured for certain of its employees' short-term and long-term disability plans...

  • Page 115
    ... 2000, a class action complaint was filed against Albertsons, Inc., as well as American Stores Company, American Drug Stores, Inc., Sav-on Drug Stores, Inc. and Lucky Stores, Inc., wholly-owned subsidiaries of Albertsons, Inc., in the Superior Court for the County of Los Angeles, California (Gardner...

  • Page 116
    ... and Dennis Taber filed a complaint, later certified as a class action, in California Superior Court in and for the County of San Diego, alleging that Albertson's Inc. failed to pay wages for time worked during meal breaks to its non-exempt employees employed in key carrier positions. The lawsuit...

  • Page 117
    ... Law, Business and Professions Code Section 17200 et seq. The lawsuit seeks recovery of all wages, compensation and/or penalties owed the members of the class certified, including compensation of one hour of pay for rest or meal period violations and wages for all time worked while employees were...

  • Page 118
    ... resulted in the rates on the outstanding Term Loan A and Term Loan B balances changing to LIBOR plus 1.375 percent and LIBOR plus 1.50 percent, respectively. On April 18, 2007, the Company's Board of Directors adopted a new share repurchase program authorizing the Company to purchase up to $235...

  • Page 119
    ...fiscal 2006 fourth quarter weighted average shares-diluted is primarily due to the antidilutive impact of 8 of contingently convertible debentures. (b) On June 2, 2006, the Company acquired New Albertsons. No operating results of New Albertsons are included in the first quarter financial information...

  • Page 120
    SUPERVALU INC. and Subsidiaries SCHEDULE II-Valuation and Qualifying Accounts (In millions) Balance at Beginning of Year Balance at End of Year Description Additions Deductions Adjustments Allowance for doubtful accounts: Year ended: February 24, 2007 February 25, 2006 February 26, 2005 ...

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    ..., Retail East Investor Inquiries Copies of annual reports, Forms 10-K and 10-Q and other SUPERVALU publications, are available via our Web site at Pamela K. Knous Executive Vice President & Chief Financial Officer www.supervalu.com or contact: Edwin C. Gage (b, c) Chairman & CEO GAGE Marketing...

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    P.O. Box 990 Minneapolis, MN 55445 (952) 828-4000 www.SUPERVALU.com