Albertsons 2008 Annual Report Download - page 37

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Capital spending for fiscal 2008 was $1,273, including $36 of capital leases. Capital spending primarily included
retail store expansion and store remodeling. The Company’s capital spending for fiscal 2009 is projected to be
approximately $1,300, including capital leases.
COMMITMENTS, CONTINGENCIES AND OFF-BALANCE SHEET ARRANGEMENTS
The Company has guaranteed certain leases, fixture financing loans and other debt obligations of various retailers
at February 23, 2008. These guarantees were generally made to support the business growth of affiliated retailers.
The guarantees are generally for the entire terms of the leases or other debt obligations with remaining terms that
range from less than one year to 19 years, with a weighted average remaining term of approximately 11 years.
For each guarantee issued, if the affiliated retailer defaults on a payment, the Company would be required to
make payments under its guarantee. Generally, the guarantees are secured by indemnification agreements or
personal guarantees of the affiliated retailer. At February 23, 2008, the maximum amount of undiscounted
payments the Company would be required to make in the event of default of all guarantees was approximately
$196 and represented approximately $140 on a discounted basis. Due to indemnification agreements and personal
guarantees, the Company believes the likelihood that it will be required to assume a material amount of these
obligations is remote.
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.
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.
The Company is a party to various legal proceedings arising from the normal course of business as described in
Part I, Item 3, under the caption “Legal Proceedings” and in Note 15 – Commitments, Contingencies and
Off-Balance Sheet Arrangements in the Notes to Consolidated Financial Statements, 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.
Insurance Contingencies
As previously reported, the Company had outstanding workers’ compensation and general liability claims for
specific years of coverage with a former insurance carrier that was experiencing financial difficulties. On
January 3, 2008, the carrier agreed to pay the Company to assume the obligations covered under the previous
policy. The Company has recorded these obligations in its self-insurance liabilities and has obtained additional
policies where required. The resolution of this matter did not have a material adverse effect on the Company’s
financial condition, results of operations or cash flows.
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