Safeway 2004 Annual Report Download - page 48

SAFEWAY INC. AND SUBSIDIARIES
46 SAFEWAY INC. 2004 ANNUAL REPORT
2004 2003
Deferred tax liabilities:
Property $(514.6) $(440.4)
Prepaid pension costs (121.1) (176.5)
Inventory (193.9) (175.3)
Investments in foreign operations (123.6) (114.8)
(953.2) (907.0)
Net deferred tax liability (480.7) (502.6)
Less: current liability (17.1) (80.7)
Long-term portion $(463.6) $(421.9)
At January 1, 2005, certain undistributed earnings of the
Company’s foreign operations totaling $1,190.7 million were
considered to be permanently reinvested. No deferred tax
liability has been recognized for the remittance of such
earnings to the United States, since it is the Company’s
intention to utilize those earnings in the foreign operations
for an indefinite period of time, or to repatriate such
earnings only when tax efficient to do so. Determination of
the amount of unrecognized deferred U.S. income tax
liability is not practicable; however, unrecognized foreign
tax credits may be available to reduce some portion of the
U.S. income tax liability.
At January 1, 2005, GroceryWorks had net operating
loss (“NOL”) carryforwards for federal income tax purposes
of approximately $209 million and net operating loss
carryforwards for state income tax purposes of approximately
$38 million. The NOL carryforwards expire at various dates
from 2006 to 2024. Until sufficient evidence exists that
GroceryWorks will have future taxable income to absorb the
NOL carryforwards, Safeway will provide a valuation
allowance for the entire deferred tax asset relating to these
carryforwards. In the case of any subsequent reversal of
this valuation allowance, approximately $22.3 million of the
tax benefit realized will result in a reduction of GroceryWorks’
goodwill or other noncurrent intangible assets.
At January 1, 2005 the Company had federal and certain
state charitable contribution tax carryforwards of $78.8
million which expire in 2008.
Note I: Employee Benefit Plans and
Collective Bargaining Agreements
RETIREMENT PLANS The Company maintains defined
benefit, non-contributory retirement plans for substantially
all of its employees not participating in multi-employer
pension plans.
In connection with the Genuardi’s acquisition in 2001,
the Randall’s acquisition in 1999 and the Vons merger in
1997, the Company assumed the sponsorship and
obligations of Genuardi’s, Randall’s and Vons’ retirement
plans. During 2003, the Randall’s plan was merged with the
Safeway plan. The actuarial assumptions for the existing
Genuardi’s and Vons retirement plans are comparable to
those for the Safeway retirement plan. Genuardi’s and Vons’
retirement plans have been combined with Safeway’s for
financial statement presentation.
The following tables provide a reconciliation of the
changes in the retirement plans’ benefit obligation and fair
value of assets over the two-year period ended January 1,
2005 and a statement of the funded status as of year-end
2004 and 2003 (in millions):
2004 2003
Change in benefit obligation:
Beginning balance $ 1,820.6 $ 1,519.2
Service cost 109.9 95.8
Interest cost 107.8 102.2
Plan amendments 11.4 7.3
Actuarial loss 34.1 129.1
Benefit payments (101.7) (93.5)
Currency translation adjustment 23.4 60.5
Ending balance $ 2,005.5 $ 1,820.6
2004 2003
Change in fair value of plan assets:
Beginning balance $ 1,905.5 $ 1,572.4
Actual return (loss) on plan assets 190.3 357.1
Employer contributions 15.4 14.2
Benefit payments (101.7) (93.5)
Currency translation adjustment 20.2 55.3
Ending balance $ 2,029.7 $ 1,905.5
2004 2003
Funded status:
Fair value of plan assets $ 2,029.7 $ 1,905.5
Projected benefit obligation (2,005.5) (1,820.6)
Funded status 24.2 84.9
Adjustment for difference in
book and tax basis of assets (165.1) (165.1)
Unamortized prior service cost 90.7 95.9
Unrecognized loss 372.0 403.0
Other comprehensive loss (0.8) –
Prepaid pension cost $ 321.0 $ 418.7