Albertsons 2007 Annual Report Download - page 31

Net Earn
i
n
gs
Net earnings were
$
206 for fiscal 2006 compared with Net earnings of
$
386 in fiscal 2005. Results for fiscal
2006 include charges of
$
61 after tax related to Chicago and
$
38 after tax related to Pittsburgh. Results for fiscal
2005 include a net after-tax
g
ain on the sale of the Compan
y
’s minorit
y
interest in WinCo of $68 after tax.
Wei
g
hted avera
g
e basic shares increased to 136 for fiscal 2006 compared with 13
5
in fiscal 200
5
and wei
g
hted
a
verage diluted shares increased to 146 for fiscal 2006 compared with 145 shares in fiscal 2005, reflecting the net
i
mpact o
f
stoc
k
act
i
v
i
t
yi
nc
l
u
di
n
g
stoc
k
opt
i
on act
i
v
i
t
y
,s
h
are repurc
h
ases un
d
er t
h
e treasur
y
p
l
an an
d dil
ut
i
o
n
im
p
acts
.
CRITICAL ACCOUNTING POLICIE
S
Th
e preparat
i
on o
f
conso
lid
ate
dfi
nanc
i
a
l
statements
i
n con
f
orm
i
ty w
i
t
h
account
i
ng pr
i
nc
i
p
l
es genera
ll
y accepte
d
in the United States of America requires mana
g
ement to make estimates and assumptions that affect the reporte
d
a
mounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financia
l
statements an
d
t
h
e reporte
d
amounts o
f
revenues an
d
expenses
d
ur
i
ng t
h
e report
i
ng per
i
o
d
. Actua
l
resu
l
ts cou
ld
d
iffer from those estimates
.
Si
g
nificant accountin
g
policies are discussed in the Summar
y
of Si
g
nificant Accountin
g
Policies in th
e
a
ccompany
i
ng Notes to Conso
lid
ate
d
F
i
nanc
i
a
l
Statements. Management
b
e
li
eves t
h
e
f
o
ll
ow
i
ng cr
i
t
i
ca
l
a
ccountin
g
policies reflect its more sub
j
ective or complex
j
ud
g
ments and estimates used in the preparation of the
C
ompan
y
’s consolidated financial statements
.
V
endor Fund
s
Th
e Company rece
i
ves
f
un
d
s
f
rom many o
f
t
h
e ven
d
ors w
h
ose pro
d
ucts t
h
e Company
b
uys
f
or resa
l
e
i
n
i
ts
stores. These vendor funds are provided to increase the sell-throu
g
h of the related products. The Compan
y
receives vendor funds for a variety of merchandising activities: placement of the vendors’ products in the
C
ompany’s a
d
vert
i
s
i
ng;
di
sp
l
ay o
f
t
h
e ven
d
ors’ pro
d
ucts
i
n prom
i
nent
l
ocat
i
ons
i
nt
h
e Company’s stores
;
introduction of new products into the Compan
y
’s distribution s
y
stem and retail stores; exclusivit
y
ri
g
hts in
certain categories that have slower-turning products; and to compensate for temporary price reductions offered t
o
customers on pro
d
ucts
h
e
ld f
or sa
l
e at reta
il
stores. T
h
e Company a
l
so rece
i
ves ven
d
or
f
un
d
s
f
or
b
uy
i
ng act
i
v
i
t
i
es
such as volume commitment rebates, credits for purchasin
g
products in advance of their need and cash discount
s
f
or the early payment of merchandise purchases. As of February 24, 2007, the terms of the Company’s vendor
f
un
d
s arrangements var
i
e
di
n
l
engt
hf
rom pr
i
mar
il
ys
h
ort-term arrangements t
h
at are to
b
e comp
l
ete
d
w
i
t
hi
na
quarter to lon
g
-term arran
g
ements that are primaril
y
expected to be completed within three
y
ears.
T
he Compan
y
reco
g
nizes vendor funds for merchandisin
g
activities as a reduction of Cost of sales when th
e
related products are sold in accordance with Emerging Issues Task Force (“EITF”) Issue 02-1
6
, “Accounting b
y
a
Customer (Includin
g
a Reseller) for Certain Consideration Received from a Vendor.
”
Inventorie
s
I
nventories are valued at the lower of cost or market. Substantially all of the Company’s inventory consists of
fi
n
i
s
h
e
d
goo
d
s.
Approximatel
y
82 percent and 65 percent of the Compan
y
’s inventories are valued usin
g
the last-in, first-ou
t
(“LIFO”) method for fiscal 2007 and 2006, respectivel
y
. The first-in, first-out method (“FIFO”) is used t
o
d
eterm
i
ne cost
f
or some o
f
t
h
e rema
i
n
i
ng
hi
g
hl
y per
i
s
h
a
bl
e
i
nventor
i
es. I
f
t
h
e FIFO met
h
o
dh
a
db
een use
d
t
o
d
etermine cost of inventories for which the LIFO method is used, the Compan
y
’s inventories would have been
h
i
g
her b
y
approximatel
y
$178 at Februar
y
24, 2007 and $160 at Februar
y
25, 2006.
Th
e Company uses a com
bi
nat
i
on o
f
t
h
e reta
il i
nventory met
h
o
d
(“RIM”) an
d
rep
l
acement cost met
h
o
d
t
o
d
eterm
i
ne t
h
e cost o
fi
ts
i
nventor
y
.T
h
e RIM va
l
uat
i
on o
fi
nventor
i
es
i
s at cost an
d
t
h
e
g
ross mar
gi
ns ar
e
25