Albertsons 2013 Annual Report Download - page 66

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The reserves for self-insurance are included in Other current liabilities and the long-term portion is included in
Other long-term liabilities in the Consolidated Balance Sheets. The self-insurance liabilities as of the end of the
fiscal year are net of discounts of $7 and $8 as of February 23, 2013 and February 25, 2012, respectively.
Benefit Plans
The Company recognizes the funded status of its Company sponsored defined benefit plans in its Consolidated
Balance Sheets and gains or losses and prior service costs or credits not yet recognized as a component of other
comprehensive income (loss), net of tax, in the Consolidated Statements of Comprehensive Loss and
Consolidated Statement of Stockholders’ Equity. 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 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. These assumptions are disclosed in
Note 12—Benefit Plans in the accompanying Notes to Consolidated Financial Statements. Actual results that
differ from the assumptions are accumulated and amortized over future periods in accordance with accounting
standards.
The Company contributes to various multiemployer pension plans under collective bargaining agreements,
primarily defined benefit pension plans. Pension expense for these plans is recognized as contributions are
funded. Refer to Note 12—Benefit Plans in the accompanying Notes to Consolidated Financial Statements for
additional information on the Company’s participation in those multiemployer plans.
The Company also contributes to several employee 401(k) retirement savings plans. Benefit expense for these
multiemployer plans is recognized as contributions are made to these plans.
Derivatives
The Company’s limited involvement with derivatives is primarily to manage its exposure to changes in energy
prices utilized in the shipping process, and in the Company’s stores and warehouses. The Company uses
derivatives only to manage well-defined risks. The Company does not use financial instruments or derivatives for
any trading or other speculative purposes. The Company enters into energy commitments that it expects to utilize
in the normal course of business. The fair value of the Company’s derivatives was insignificant as of
February 23, 2013 and February 25, 2012.
Stock-Based Compensation
The Company uses the straight-line method to recognize compensation expense based on the fair value on the
date of grant, net of the estimated forfeiture rate, over the requisite service period related to each award.
The fair value of stock options are estimated as of the date of grant using the Black-Scholes option pricing model
using Level 3 inputs. The estimation of the fair value of stock options incorporates certain assumptions, such as
risk-free interest rate and expected volatility, dividend yield and life of options.
The fair value of performance awards granted under the Company’s long-term incentive program (“LTIP”), are
estimated as of the date of the grant using the Monte Carlo option pricing model using Level 3 inputs. Refer to
Note 9—Stock-Based Awards in the accompanying Notes to the Consolidated Financial Statements for further
discussion of LTIP performance awards. The fair value of certain performance awards contain a variable cash
settlement feature that is measured at fair value on a recurring basis using Level 3 inputs. The estimation of the
fair value of each performance award, including the cash settlement feature, incorporates certain assumptions
such as risk-free interest rate and expected volatility, dividend yield and life of the awards. The fair value of the
cash settlement features that is measured at fair value on a recurring basis was insignificant as of February 23,
2013 and February 25, 2012.
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