Albertsons 2012 Annual Report Download - page 28

Download and view the complete annual report

Please find page 28 of the 2012 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

fiscal 2012 is primarily due to a net 30 basis point improvement due to store closure and exit costs, labor
buyouts, and labor disputes charges, net of a gain on the sale of Total Logistic Control recorded in fiscal 2011,
partially offset by a 10 basis point increase due to a $20 charge related to workforce reductions in fiscal 2012.
The remaining 10 basis point improvement in fiscal 2012 is primarily due to lower store support costs, employee
benefit costs and occupancy expenses. The 30 basis point improvement due to previously announced store
closures and market exits, was offset by a 30 basis point increase from reduced sales leverage in fiscal 2012.
Goodwill and Intangible Asset Impairment Charges
The Company applies a fair value based impairment test to the net book value of goodwill and intangible assets
with indefinite useful lives on an annual basis and on an interim basis if certain events or circumstances indicate
that an impairment loss may have occurred.
During the third and fourth quarters of fiscal 2012 the Company’s stock price experienced a significant and
sustained decline. As a result, the Company performed reviews of goodwill and intangible assets with indefinite
useful lives for impairment, which indicated that the carrying value of traditional retail stores’ goodwill and
certain intangible assets with indefinite useful lives exceeded their estimated fair values. The Company recorded
preliminary non-cash impairment charges of $907, comprised of $661 of goodwill and $246 of intangible assets
with indefinite useful lives during the third quarter of fiscal 2012.
The finalization of third quarter impairment charges and the results of the fourth quarter impairment review
resulted in an additional non-cash impairment charge of $525 including an immaterial finalization to the third
quarter preliminary charge. The fourth quarter charge is comprised of $460 of goodwill and $65 of intangible
assets with indefinite useful lives. The impairments were due to the significant and sustained decline in the
Company’s market capitalization as of and subsequent to the end of the end of the fourth quarter of fiscal 2012
and updated future cash flows. All fiscal 2012 goodwill and intangible asset impairment charges were recorded in
the Retail food segment.
As a result of the third and fourth quarter reviews total non-cash impairment charges of $1,432 were recorded in
the Retail food segment, comprised of $1,121 of goodwill and $311 of intangible assets with indefinite useful
lives. During fiscal 2011 the Company recorded non-cash impairment charges of $1,870, comprised of a $1,619
of goodwill and $251 of intangible assets with indefinite useful lives, in the Retail food segment due to the
significant decline in its market capitalization and the impact of the challenging economic environment on the
Company’s operations.
The calculation of the impairment charges contains significant judgments and estimates including weighted
average cost of capital, future revenue, profitability, cash flows and fair values of assets and liabilities.
Operating Loss
The operating loss for fiscal 2012 was $519 compared with an operating loss of $976 last year. Retail food
operating loss for fiscal 2012 was $698, or negative 2.5 percent of Retail food net sales compared with an
operating loss of $1,212 or negative 4.2 percent of Retail food net sales last year. The $514 decrease in 2012
Retail food operating loss primarily reflects $438 of lower goodwill and intangible asset impairment charges, and
$128 of lower net charges related to store closure and exit costs, labor buyouts, and labor disputes than recorded
in fiscal 2011.
Independent business operating earnings for fiscal 2012 were $243, or 3.0 percent of Independent business net
sales, compared with $337, or 3.9 percent of Independent business net sales, last year. The decrease in
Independent business operating earnings of $94 is primarily attributable to the $62 gain on sale from the
divestiture of Total Logistic Control recorded in fiscal 2011, primarily offset by a higher LIFO charge and
impacts of reduced volume from a national retail customer’s previously announced plans to transition certain
volume to self-distribution in fiscal 2012.
24