Albertsons 2008 Annual Report Download - page 106

Download and view the complete annual report

Please find page 106 of the 2008 Albertsons annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 116

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116

SUPERVALU INC. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The Company is contingently liable for leases that have been assigned to various third parties in connection with
facility closings and dispositions. The Company could be required to satisfy the obligations under the leases if
any of the assignees are unable to fulfill their lease obligations. Due to the wide distribution of the Company’s
assignments among third parties, and various other remedies available, the Company believes the likelihood that
it will be required to assume a material amount of these obligations is remote.
The Company was party to a synthetic leasing program for one of its major warehouses, which had a purchase
option of $60. On February 8, 2007, the Company approved a plan to exit this facility. As a result of the decision
to exit this facility, the Company has recorded the difference between the purchase option and the estimated
market value of the property underlying the lease as a residual value guarantee. The residual value guarantee is
included in Other current assets on the Company’s Consolidated Balance Sheet as of February 23, 2008 and is
being amortized over the remaining term of the lease. The Company executed the purchase option in April 2008.
In the ordinary course of business, the Company enters into supply contracts to purchase products for resale.
These contracts typically include either volume commitments or fixed expiration dates, termination provisions
and other standard contractual considerations. The Company has approximately $2,732 of non-cancelable future
purchase obligations primarily related to supply contracts.
The Company is a party to a variety of contractual agreements under which the Company may be obligated to
indemnify the other party for certain matters, which indemnities may be secured by operation of law or
otherwise, in the 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 of their work.
While the Company’s aggregate indemnification obligation could result in a material liability, the Company is
aware of no current matter that it expects to result in a material liability.
Legal Proceedings
The Company is subject to various lawsuits, claims and other legal matters that arise in the ordinary course of
conducting business, including certain matters of the Acquired Operations, none of which, in management’s
opinion, is expected to have a material adverse impact on the Company’s financial condition, results of
operations or cash flows. Accruals for certain pre-acquisition legal contingencies related to the Acquired
Operations were included in liabilities assumed due to the acquisition of New Albertsons.
In April 2000, a class action complaint was filed against Albertsons, as well as American Stores Company,
American Drug Stores, Inc., Sav-on Drug Stores, Inc. and Lucky Stores, Inc., wholly-owned subsidiaries of
Albertsons, in the Superior Court for the County of Los Angeles, California (Gardner, et al. v. American Stores
Company, et al.) by assistant managers seeking recovery of overtime based on the plaintiffs’ allegation that they
were improperly classified as exempt under California law. In May 2001, the Court certified a class with respect
to Sav-on Drug Stores assistant managers. A case with very similar claims, involving the Sav-on Drug Stores
assistant managers and operating managers, was also filed in April 2000 against Sav-on Drug Stores in the
Superior Court for the County of Los Angeles, California (Rocher, Dahlin, et al. v. Sav-on Drug Stores, Inc.),
and was certified as a class action in June 2001 with respect to assistant managers and operating managers. The
two cases were consolidated in December 2001. New Albertsons was added as a named defendant in November
2006. Plaintiffs seek overtime wages, meal and rest break penalties, other statutory penalties, punitive damages,
interest, injunctive relief and the attorneys’ fees and costs. The Company is vigorously defending this lawsuit.
Although this lawsuit is subject to the uncertainties inherent in the litigation process, based on the information
presently available to the Company, management does not expect that the ultimate resolution of this lawsuit will
have a material adverse effect on the Company’s financial condition, results of operations or cash flows.
F-40