Albertsons 2007 Annual Report Download - page 30

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Supply chain services sales for fiscal 2006 were
$
9,229 compared with
$
8,994 in fiscal 2005, an increase of 2.6
percent, pr
i
mar
il
yre
fl
ect
i
ng new
b
us
i
ness
f
rom t
h
e tra
di
t
i
ona
lf
oo
ddi
str
ib
ut
i
on
b
us
i
ness, t
h
e acqu
i
s
i
t
i
on o
f
Tota
l
Lo
g
istics and temporar
y
new business of approximatel
y
three percent, three percent and two percent,
respectively, partially offset by customer attrition, which includes the fiscal 2006 impact of cycling three larg
e
customer trans
i
t
i
ons to ot
h
er supp
li
ers
i
nt
h
epr
i
or year.
G
ross Pro
fit
Gross profit, as a percent of Net sales, was 14.5 percent for fiscal 2006 compared with 14.6 percent in fisca
l
200
5
. Gross profit, as a percent of Net sales, primaril
y
reflects the benefits of retail merchandisin
g
execution an
d
the acquisition of Total Logistics, which was more than offset by the impact of Supply chain services costs of
a
pproximately
$
22 related to costs for new growth initiatives for supply chain technology and the launch of our
specialt
y
produce distribution business, W. Newell and Co. and approximatel
y
$1 of losses related to minorit
y
o
wned investments in contrast to
$
14 of earnings in fiscal 2005
.
S
ellin
g
and Administrative Expense
s
Selling and administrative expenses, as a percentage of Net sales, were 12.3 percent for fiscal 2006 compare
d
with 11.4 percent in fiscal 2005. The increase primarily reflects approximately
$
174 of pre-tax costs primaril
y
related to char
g
es for Chica
g
o and Pittsbur
g
h
.
R
estructure and Other Char
g
es
For fiscal 2006 and fiscal 2005, the Compan
y
incurred $4 and $26, respectivel
y
, in pre-tax restructure and othe
r
charges. These charges primarily reflect changes in estimates on exited real estate for fiscal 2006 and the
i
ncrease
dli
a
bili
t
i
es assoc
i
ate
d
w
i
t
h
emp
l
oyee
b
ene
fi
ts re
l
ate
d
costs
f
rom prev
i
ous
l
yex
i
te
ddi
str
ib
ut
i
on
f
ac
ili
t
i
es
a
s well as chan
g
es in estimates on exited real estate for fiscal 200
5
.
O
peratin
g
Earnin
g
s
Operatin
g
earnin
g
s for fiscal 2006 were $435 compared with $716 in fiscal 2005. Results for fiscal 2006 includ
e
charges of approximately
$
174 pre-tax primarily related to Chicago and Pittsburgh. Fiscal 2005 includes a
pre-tax gain of approximately
$
109 on the sale of WinCo and
$
26 of restructure and other charges. Retail food
Operatin
g
earnin
g
s were $269, or 2.5 percent of Retail food Net sales, compared to fiscal 2005 Retail food
Operating earnings of
$
446, or 4.2 percent of Retail food Net sales. The decrease in Retail food Operating
earnings, as a percent of Retail food Net sales, reflects charges of approximately
$
174 pre-tax primarily related t
o
C
hica
g
o and Pittsbur
g
h. Suppl
y
chain services Operatin
g
earnin
g
s were $214, or 2.3 percent of Suppl
y
chain
services Net sales compared to fiscal 2005 Supply chain services Operating earnings of
$
235, or 2.6 percent o
f
Supp
l
yc
h
a
i
n serv
i
ces Net sa
l
es. T
h
e
d
ecrease
i
n Supp
l
yc
h
a
i
n serv
i
ces Operat
i
ng earn
i
ngs, as a percent o
f
Suppl
y
chain services Net sales, primaril
y
reflects the start-up costs related to
g
rowth initiatives and losses fro
m
minority owned investments, which more than offset the benefit of the higher margin third party logistic
s
business acquired in 2005.
N
et
I
nterest
E
xpens
e
Net interest expense decreased to
$
106 for fiscal 2006 compared with
$
115 in fiscal 2005. The decreas
e
primaril
y
reflects lower borrowin
g
levels partiall
y
offset b
y
hi
g
her borrowin
g
rates and the absence of the $6
early redemption costs relating to the
$
250 notes redeemed in the first quarter of fiscal 2005.
I
n
co
m
e
T
a
x
es
T
he effective tax rate was 37.4 percent and 3
5
.8 percent for fiscal 2006 and fiscal 200
5
, respectively. The fiscal
2005 tax rate reflects the impact of net favorable tax settlements.
24