Safeway 2006 Annual Report Download - page 73

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SAFEWAY INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
At December 30, 2006, certain undistributed earnings of the Company’s foreign operations totaling $1,084.9 million
were considered to be permanently reinvested. No deferred tax liability has been recognized for the remittance of such
earnings to the U.S., 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.
U.S. and Canadian tax authorities notified the Company during 2005 that they have concluded their transfer pricing
negotiations with respect to a bilateral Advance Pricing Agreement for the years 2000 through 2006. The agreement
established arm’s length charges for intercompany sales of goods and services and use of property by the Company
and its Canadian subsidiary which are eliminated in consolidation. As a result of this agreement, foreign income before
tax expense for 2005 was reduced, and domestic income before tax expense for 2005 was increased by the amount of
the charges.
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.
Safeway’s adoption of SFAS No. 158 required the Company to recognize the funded status of its retirement plans on
its consolidated balance sheet beginning as of fiscal 2006 year end. Under SFAS No. 158, the benefit obligation for
pension plans was measured as the projected benefit obligation. The benefit obligation for postretirement benefit
plans was measured as the accumulated benefit obligation.
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 December 30, 2006 and a statement of the funded status as of year-end 2006
and 2005 (in millions):
2006 2005
Change in projected benefit obligation:
Beginning balance $2,110.1 $2,005.5
Service cost 101.1 108.0
Interest cost 129.3 125.5
Plan amendments 29.7 57.0
Actuarial gain (40.0) (99.2)
Benefit payments (143.8) (107.9)
Currency translation adjustment (4.8) 21.2
Ending balance $2,181.6 $2,110.1
2006 2005
Change in fair value of plan assets:
Beginning balance $2,102.8 $2,029.7
Actual return on plan assets 235.1 146.6
Employer contributions 25.0 16.7
Benefit payments (143.8) (107.9)
Currency translation adjustment (4.4) 17.7
Ending balance $2,214.7 $2,102.8
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