SVU » Topics » UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF EARNINGS

This excerpt taken from the SVU 8-K filed Aug 17, 2006.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF EARNINGS

The unaudited pro forma condensed combined statements of earnings for the fiscal year ended February 25, 2006 and the 16 weeks ended June 17, 2006 assume that the mergers and simultaneous sale of the standalone drug and non-core businesses occurred on February 27, 2005, the first day of SUPERVALU’s fiscal year for the fiscal year ended February 25, 2006. Therefore, the accompanying unaudited pro forma condensed combined statement of earnings for the fiscal year ended February 25, 2006 combines the 52 weeks of SUPERVALU’s fiscal year ended February 25, 2006 with the 52 weeks of New Albertsons’ fiscal year ended February 2, 2006. The unaudited pro forma condensed combined statement of earnings for the 16 weeks ended June 17, 2006 combines the 16 weeks ended June 17, 2006 for SUPERVALU with the 13 weeks ended May 4, 2006 for New Albertsons. SUPERVALU’s fiscal year ends on the last Saturday of February, while Albertsons’ fiscal year historically ended on the Thursday nearest to January 31.

The unaudited pro forma condensed combined statements of earnings should be read in conjunction with the historical consolidated financial statements and notes thereto of SUPERVALU included in its Annual Report on Form 10-K for the fiscal year ended February 25, 2006, and Quarterly Report on Form 10-Q for the 16 weeks ended June 17, 2006; the historical consolidated financial statements and notes thereto of Albertsons included in its Annual Report on Form 10-K for the fiscal year ended February 2, 2006, and Quarterly Report on Form 10-Q for the 13 weeks ended May 4, 2006, which are incorporated by reference in this Form 8-K/A; and the accompanying Notes to the Unaudited Pro Forma Condensed Combined Statements of Earnings.

The unaudited pro forma condensed combined statements of earnings reflect adjustments for pro forma events that are (1) directly attributable to the Acquisition, (2) factually supportable, and (3) expected to have a continuing impact on the combined results. Substantially all of the holders of the Corporate Units did not elect to early settle the purchase contracts in connection with the Acquisition. Therefore, the pro forma adjustments do not reflect the effects of early settlements. The unaudited pro forma condensed combined statements of earnings were prepared using the purchase method of accounting with SUPERVALU treated as the acquiring entity. Accordingly, the consideration paid by SUPERVALU to complete the Acquisition has been allocated preliminarily to the assets and liabilities acquired based upon their estimated fair values as of the date of the Acquisition.

The allocation of purchase price is dependent upon certain valuations and other studies that have not progressed to a stage where there is sufficient information to make a definitive allocation. Additionally, a final determination of the fair value of the acquired Albertsons assets and liabilities will be based on the actual net tangible and intangible assets of New Albertsons that exist as of the date of the Acquisition. Accordingly, the pro forma purchase price adjustments are preliminary, subject to future adjustments and have been made solely for the purpose of providing the unaudited pro forma condensed combined statements of earnings.

The allocation of the purchase price to the acquired Albertsons assets includes an assigned fair value to identifiable intangible assets. Provisions of Statement of Financial Accounting Standards No. 141, “Business Combinations,” establish criteria for determining when intangible assets should be recognized separately from goodwill. Statement of Financial Accounting Standard No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”) also provides, among other guidelines, that goodwill and intangible assets with indefinite lives will not be amortized, but rather tested for impairment on at least an annual basis. Management of SUPERVALU believes that certain trade names owned by Albertsons have indefinite lives based upon a preliminary analysis utilizing the criteria in paragraph 11 of SFAS 142.

The unaudited pro forma condensed combined statements of earnings were derived from SUPERVALU’s and Albertsons’ most recent quarterly and fiscal year filings with the Securities and Exchange Commission. The pro forma condensed combined statements of earnings columns entitled “Albertsons as adjusted” represent Albertsons historical financial statements adjusted for the simultaneous sale of the standalone drug business and the non-core business. The disposition of the standalone drug business and the non-core business provided approximately $4.9 billion in proceeds that were available to complete the Acquisition.

Management expects that the benefits of the business combination will generate an estimated $150 to $175 million pre-tax of cost synergies to be fully realized by the end of the third year after closing. Management expects to realize annual synergies of approximately $75 to $85 million pre-tax related to leveraging the retail businesses and other operating efficiencies, $50 to $60 million pre-tax from consolidation of corporate functions including redundant public company overhead, and $25 to $30 million pre-tax from supply chain optimization. Management also expects to incur an estimated $145 million pre-tax of one-time transaction-related costs during the three years following the closing of the Acquisition. The accompanying unaudited pro forma condensed combined statements of earnings do not include any synergies which may be achievable subsequent to the Acquisition or the impact of the one-time transaction-related costs, except for one-time transaction-related costs incurred during the 16 weeks ended June 17, 2006.

 

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The full costs of providing support services to the standalone drug and non-core businesses, and the payments that will be made by the Cerberus Group and CVS for transition services are included in the unaudited pro forma condensed combined statements of earnings. See Note (b2) to the Unaudited Pro Forma Condensed Combined Statements of Earnings for more detail.

The unaudited pro forma condensed combined statements of earnings are presented for illustrative purposes only and are not necessarily indicative of what SUPERVALU’s actual results of operations would have been had the Acquisition been completed on the dates indicated above. Further, the unaudited pro forma condensed combined financial statements do not reflect one-time transaction-related costs, except for one-time transaction-related costs incurred during the 16 weeks ended June 17, 2006, to fully merge and operate the combined organization more efficiently, or anticipated synergies expected to result from the combination. You should not rely on the unaudited pro forma condensed combined statements of earnings as being indicative of the historical results that would have been achieved had the companies always been combined or the future results that SUPERVALU will experience.

 

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