Albertsons 2007 Annual Report Download - page 115

SU
PERVAL
U
IN
C
. and
S
ubsidiaries
N
OTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
T
he Compan
y
is part
y
to a s
y
nthetic leasin
g
pro
g
ram for one of its ma
j
or warehouses. The lease expires in April
2
008 and it may be renewed with the lessor’s consent through April 2013, and has a purchase option of
$
60. On
F
e
b
ruary 8, 2007, t
h
e Company approve
d
ap
l
an to ex
i
tt
hi
s
f
ac
ili
ty. As a resu
l
to
f
t
h
e
d
ec
i
s
i
on to ex
i
tt
hi
s
f
acilit
y
, the Compan
y
has recorded the difference between the purchase option and the estimated market value o
f
the property underlying the lease as a residual value guarantee. The residual value guarantee is included in Othe
r
current assets on t
h
e Company’s Conso
lid
ate
d
Ba
l
ance S
h
eet as o
f
Fe
b
ruary 24, 2007 an
d
w
ill b
e amort
i
ze
d
ove
r
the remainin
g
term of the lease.
I
nt
h
eor
di
nary course o
fb
us
i
ness, t
h
e Company enters
i
nto supp
l
y contracts to purc
h
ase pro
d
ucts
f
or resa
l
e
.
T
hese contracts t
y
picall
y
include either volume commitments or fixed expiration dates, termination provisions
a
nd other standard contractual considerations. The Compan
y
has approximatel
y
$2,372 of non-cancelable futur
e
purc
h
ase o
bli
gat
i
ons pr
i
mar
il
yre
l
ate
d
to supp
l
y contracts.
T
he Compan
y
had $412 of outstandin
g
letters of credit as of Februar
y
24, 2007, of which $347 were issued unde
r
the credit facility and
$
65 were issued under separate agreements with financial institutions. These letters of credi
t
pr
i
mar
il
y support wor
k
ers’ compensat
i
on, merc
h
an
di
se
i
mport programs an
d
payment o
bli
gat
i
ons. T
h
e Company
pa
y
s fees, which var
y
b
y
instrument, of up to 1.7
5
percent on the outstandin
g
balance of the letters of credit.
Th
e Company
i
s a party to a var
i
ety o
f
contractua
l
agreements un
d
er w
hi
c
h
t
h
e Company may
b
eo
bli
gate
d
to
indemnif
y
the other part
y
for certain matters, which indemnities ma
y
be secured b
y
operation of law o
r
o
therwise, in the ordinary course of business. These contracts primarily relate to the Company’s commercia
l
contracts, operat
i
ng
l
eases an
d
ot
h
er rea
l
estate contracts,
fi
nanc
i
a
l
agreements, agreements to prov
id
e serv
i
ces t
o
the Compan
y
, and a
g
reements to indemnif
y
officers, directors and emplo
y
ees in the performance of their work
.
While the Company’s aggregate indemnification obligation could result in a material liability, the Company is
a
ware o
f
no current matter t
h
at
i
t expects to resu
l
t
i
n a mater
i
a
lli
a
bili
ty
.
L
e
g
al Proceedin
g
s
Th
e Compan
yi
ssu
bj
ect to var
i
ous
l
awsu
i
ts, c
l
a
i
ms an
d
ot
h
er
l
e
g
a
l
matters t
h
at ar
i
se
i
nt
h
eor
di
nar
y
course o
f
conductin
g
business, includin
g
certain matters of the Acquired Operations, none of which, in mana
g
ement’s
o
p
i
n
i
on,
i
s expecte
d
to
h
ave a mater
i
a
l
a
d
verse
i
mpact on t
h
e Company’s
fi
nanc
i
a
l
con
di
t
i
on, resu
l
ts o
f
operat
i
ons
o
r cas
hfl
ows. Accrua
l
s
f
or certa
i
n pre-acqu
i
s
i
t
i
on
l
e
g
a
l
cont
i
n
g
enc
i
es re
l
ate
d
to t
h
e Acqu
i
re
d
Operat
i
ons were
included in liabilities assumed due to the Acquisition. Certain chan
g
es to accruals related to pre-acquisition le
g
a
l
cont
i
ngenc
i
es may
b
ea
dj
uste
d
t
h
roug
h
purc
h
ase account
i
ng
f
or up to one year
f
rom t
h
e
d
ate o
f
Acqu
i
s
i
t
i
on.
I
n April 2000, a class action complaint was filed a
g
ainst Albertsons, Inc., as well as American Stores Compan
y
,
American Drug Stores, Inc., Sav-on Drug Stores, Inc. and Lucky Stores, Inc., wholly-owned subsidiaries o
f
A
lb
ertsons, Inc.,
i
nt
h
e Super
i
or Court
f
or t
h
e County o
f
Los Ange
l
es, Ca
lif
orn
i
a (Gar
d
ner, et a
l
. v. Amer
i
ca
n
Stores Compan
y
, et al.) b
y
assistant mana
g
ers seekin
g
recover
y
of overtime based on plaintiffs’ alle
g
ation that
they were improperly classified as exempt under California law. In May 2001, the court certified a class wit
h
respect to Sav-on Drug Stores ass
i
stant managers. A case w
i
t
h
very s
i
m
il
ar c
l
a
i
ms,
i
nvo
l
v
i
ng t
h
e Sav-on Dru
g
Stores assistant mana
g
ers and operatin
g
mana
g
ers, was also filed in April 2000 a
g
ainst Albertsons, Inc.’s
subsidiary Sav-on Drug Stores, Inc. in the Superior Court for the County of Los Angeles, California (Rocher
,
Da
hli
n, et a
l
. v. Sav-on Drug Stores, Inc.), an
d
was cert
ifi
e
d
as a c
l
ass act
i
on
i
n June 2001 w
i
t
h
respect to
a
ssistant mana
g
ers and operatin
g
mana
g
ers. The two cases were consolidated in December 2001. Ne
w
Albertsons, Inc. was added as a named defendant in November 2006. Plaintiffs seek overtime wages, meal an
d
rest
b
rea
k
pena
l
t
i
es, ot
h
er statutory pena
l
t
i
es, pun
i
t
i
ve
d
amages,
i
nterest,
i
n
j
unct
i
ve re
li
e
f
,an
d
attorneys’
f
ees an
d
costs. The Compan
y
is vi
g
orousl
y
defendin
g
this lawsuit. Althou
g
h this lawsuit is sub
j
ect to the uncertaintie
s
inherent in the litigation process, based on the information presently available to the Company, management does
not expect t
h
at t
h
eu
l
t
i
mate reso
l
ut
i
on o
f
t
hi
s
l
awsu
i
tw
ill h
ave a mater
i
a
l
a
d
verse e
ff
ect on t
h
e Company’s
f
inancial condition, results of o
p
erations or cash flows.
F-
49