Albertsons 2009 Annual Report Download - page 34

Goodwill and intangible assets with indefinite useful lives were $3,748 and $1,069 as of February 28, 2009,
respectively, and $6,957 and $1,370 as of February 23, 2008, respectively. For the third quarter of fiscal 2009,
the Company’s stock price had a significant and sustained decline and book value per share substantially
exceeded the stock price. Consistent with SFAS No. 142, the Company recorded impairment charges of
$3,524, comprised of $3,223 to goodwill at certain Retail food reporting units and $301 to indefinite-lived
trademarks and tradenames related to the Acquired Trademarks and other intangible assets. The impairment of
goodwill and indefinite-lived intangible assets reflects the significant decline in the market price of the
Company’s common stock as of the end of the third quarter of fiscal 2009 as well as the impact of the
unprecedented decline in the economy on the Company’s plan. The Company did not record any impairment
losses related to goodwill or intangible assets during 2008.
Self-Insurance Liabilities
The Company is primarily self-insured for workers’ compensation, healthcare for certain employees and
general and automobile liability costs. It is the Company’s policy to record its self-insurance liabilities based
on management’s estimate of the ultimate cost of reported claims and claims incurred but not yet reported and
related expenses, discounted at a risk-free interest rate.
In determining its self-insurance liabilities, the Company performs a continuing review of its overall position
and reserving techniques. Since recorded amounts are based on estimates, the ultimate cost of all incurred
claims and related expenses may be more or less than the recorded liabilities. Any projection of losses
concerning workers’ compensation, healthcare and general and automobile liability is subject to a degree of
variability. Among the causes of this variability are unpredictable external factors affecting future inflation
rates, discount rates, litigation trends, legal interpretations, regulatory changes, benefit level changes and actual
claim settlement patterns. The majority of the self-insurance liability for workers’ compensation is related to
claims occurring in California. California workers’ compensation has received intense scrutiny from the state’s
politicians, insurers, and providers. In recent years, there has been an increase in the number of legislative
reforms and judicial rulings affecting the handling of claim activity. The impact of many of these variables on
ultimate costs is difficult to estimate. The effects of changes in such estimated items are included in results of
operations in the period in which the estimates are changed. Such changes may be material to the results of
operations and could occur in a future period. If, in the future, the Company was to experience significant
volatility in the amount and timing of cash payments compared to its earlier estimates, the Company would
assess whether to continue to discount these liabilities. The Company had self-insurance liabilities of
approximately $1,142, net of the discount of $223, and $1,132, net of the discount of $226, as of February 28,
2009 and February 23, 2008, respectively. As of February 28, 2009, each 25 basis point change in the discount
rate would impact the self-insurance liabilities by approximately $2.
Benefit Plans
The Company sponsors pension and other postretirement plans in various forms covering substantially all
employees who meet eligibility requirements. The determination of the Company’s obligation and related
expense for Company-sponsored pension and other postretirement benefits is dependent, in part, on
management’s selection of certain actuarial assumptions used in calculating these amounts. These assumptions
include, among other things, the discount rate, the expected long-term rate of return on plan assets and the
rates of increase in compensation and healthcare costs. The discount rate is based on current investment yields
on high-quality fixed-income investments. The expected long-term rate of return on plan assets is based on the
historical experience of the Company’s investment portfolio and the projected returns by asset category. Over
the 10-year period ended February 28, 2009 and February 23, 2008, the average rate of return on plan assets
was approximately 2 percent and 8 percent, respectively. The decrease in the 10-year average rate of return on
pension assets was due to the unprecedented decline in the economy and continuing credit market turmoil
during fiscal 2009. The Company expects that the markets will eventually recover to the assumed long-term
rate of return used by the Company. In accordance with generally accepted accounting principles, actual results
that differ from the Company’s assumptions are accumulated and amortized over future periods and, therefore,
affect expense and obligation in future periods.
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